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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
Commission file number 0-22332
INSITE VISION INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-3015807
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
965 ATLANTIC AVENUE
ALAMEDA, CA 94501
(Address of Principal Executive Offices, including Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 865-8800
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 of Registrant's common stock, $.01 par value,
outstanding as of March 31, 1997: 12,936,651.
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QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1997
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
March 31, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
For the three months ended March 31, 1997 and 1996 . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 and 1996 . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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ITEM 1. Financial Statements
INSITE VISION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
(in thousands, except share and per share amounts) 1997 1996
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(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents $ 7,820 $ 10,518
Prepaid expenses and other current assets 225 195
-------- --------
Total current assets 8,045 10,713
Property and equipment, at cost:
Laboratory and other equipment 4,443 4,416
Leasehold improvements 1,671 1,671
Furniture and fixtures 355 355
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6,469 6,442
Accumulated depreciation 4,463 4,335
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2,006 2,107
Other assets 46 -
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Total assets $ 10,097 $ 12,820
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 393 $ 562
Accrued liabilities 92 247
Accrued compensation and related expense 366 300
Current portion of notes payable - 92
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Total current liabilities 851 1,201
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued and outstanding
Common stock, $.01 par value, 30,000,000 shares
authorized; 12,936,651 issued and outstanding at
March 31, 1997; 12,935,927 issued and
outstanding at December 31, 1996 129 129
Additional paid-in-capital 77,147 77,146
Accumulated deficit (68,030) (65,656)
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Stockholders' equity 9,246 11,619
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Total liabilities and stockholders' equity $ 10,097 $ 12,820
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INSITE VISION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended March 31,
(in thousands, except per share amounts) 1997 1996
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Royalty revenues $ 16 $ 15
Operating expenses:
Research and development 1,650 1,331
General and administrative 845 673
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Total 2,495 2,004
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Loss from operations (2,479) (1,989)
Interest and other income 110 67
Interest expense (5) (16)
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Net loss $(2,374) $(1,938)
======= =======
Net loss per share $ (0.18) $ (0.18)
Shares used to calculate net loss per share 12,937 10,492
No dividends were declared or paid during the periods.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INSITE VISION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
(in thousands, except per share amounts) 1997 1996
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OPERATING ACTIVITIES
Net loss $(2,374) $(1,938)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 128 169
Changes in:
Prepaid expenses and other current assets (30) 58
Accounts payable and accrued liabilities 242 (584)
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Net cash used in operating activities (2,034) (2,295)
INVESTING ACTIVITIES
Maturity of short-term cash investments - 3,000
Purchases of property and equipment (527) (51)
Increase in other assets (46) -
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Net cash provided (used) by investing activities (573) 2,949
FINANCING ACTIVITIES
Principal payments on notes payable (92) (74)
Issuance of common stock, net 1 5,368
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Net cash provided (used) by financing activities (91) 5,294
Net increase (decrease) in cash and cash equivalents (2,698) 5,948
Cash and cash equivalents, beginning of period 10,518 871
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Cash and cash equivalents, end of period $ 7,820 $ 6,819
======= =======
Supplemental disclosures:
Interest paid in cash $ 5 $ 17
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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INSITE VISION INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accrual
adjustments, considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
These financial statements and notes should be read in conjunction
with the Company's audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE 2 - LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The Company
does not anticipate that this change will impact its calculated loss per share
as the Company currently excludes stock options and warrants from per share
computations because their effect is antidilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes thereto included in this Quarterly Report and in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Except for the historical information contained herein, the
discussion in this Quarterly Report contains certain forward-looking
statements, such as statements of the Company's plans, objectives,
expectations and intentions, that involve risks and uncertainties. The
cautionary statements made in this Quarterly Report, including those set forth
below under the heading "Risk Factors," should be read as being applicable to
all related forward-looking statements wherever they appear in this Quarterly
Report. The Company's actual results could differ materially from those
discussed herein.
OVERVIEW
InSite Vision is developing ophthalmic pharmaceutical products based
on its proprietary DuraSite(R) eyedrop-based drug delivery technology and on
the development of genetically based tools for the diagnosis and prognosis of
glaucoma. DuraSite technology is designed to improve the safety, efficacy and
medical value of existing ophthalmic products and potentially permit the novel
ophthalmic application of drugs that are currently used or being developed for
non-ophthalmic indications. The DuraSite delivery system can be customized to
deliver a variety of potential drug candidates with a range of molecular
weights and other properties.
Other than a small amount of royalties from the sale of products
using the Company's technology, to date, InSite Vision has not received any
revenues from the sale of products. The Company has been unprofitable since its
inception and expects to continue to incur substantial losses for at least the
next several years, due to continuing research and development efforts,
including preclinical studies, clinical trials and manufacturing of its product
candidates. The Company has financed its research and development activities
and operations primarily through private and public offerings of its equity
securities and, to a lesser extent, from collaborative agreements.
As of March 31, 1997, the Company's accumulated deficit was
approximately $68 million. There can be no assurance that InSite Vision will
achieve either significant revenues from product sales or profitable
operations.
RESULTS OF OPERATIONS
The Company earned royalty revenues of $16,000 and $15,000 for the
quarters ended March 31, 1997 and 1996, respectively, from sales of AquaSite(R)
by CIBA Vision. To date, the Company has not relied on royalty revenues to
fund its activities. The Company does not expect to receive significant
product revenue or royalties for several years, if at all.
The Company has re-prioritized its earlier stage development
activities, and now focuses its research and development on (i) ISV-900 for
prognosis and diagnosis of glaucoma, (ii) ISV-208, a glaucoma treatment product
which is being developed in partnership with Bausch & Lomb Pharmaceuticals,
Inc., (iii) ISV-205 for the prevention of steroid-induced glaucoma, (iv)
ISV-611 for allergic conjunctivitis, and (v) ISV-120 for prevention of
pterygium recurrence. Later stage product development is expected to be
conducted through corporate partnering arrangements. However, there can be no
assurance that the Company will be able to enter into such arrangements on
acceptable terms, or at all, or that any such arrangements will be successful.
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Research and development expenses increased 24% in the first quarter
of 1997 to $1.7 million from $1.3 million in the first quarter of 1996. This
increase is due to an increase in research and development personnel, to 34 as
of March 31, 1997 from 25 as of March 31, 1996 (36 as of December 31, 1996),
and expenditures related to the development of ISV-900 and ISV-208.
General and administrative expenses increased 26% during the quarter
ended March 31, 1997 to $845,000 from $673,000 during the first quarter of
1996. This increase was primarily due to the cost of replacing outside
contractors with employees in the area of accounting and finance.
The Company incurred net losses of $2.4 million and $1.9 million for
the three month periods ended March 31, 1997 and 1996, respectively. The
Company expects to incur substantial additional losses over the next several
years. These losses are expected to fluctuate from period to period based
primarily on the level of the Company's product development and clinical
activities.
LIQUIDITY AND CAPITAL RESOURCES
InSite Vision has financed its operations primarily through private
placements of preferred stock totaling approximately $32.0 million, an October
1993 public offering of common stock which resulted in net proceeds of
approximately $30.0 million, a January 1996 private placement of common stock
and warrants resulting in net proceeds of approximately $4.8 million and an
April 1996 public offering which raised net proceeds of approximately $7.9
million. At March 31, 1997, the Company had cash and cash equivalents totaling
$7.8 million compared to $10.5 million as of December 31, 1996. It is the
Company's policy to invest these funds in highly liquid securities, such as
interest bearing money market funds, Treasury and federal agency notes and
corporate debt.
The Company's future capital expenditures and requirements will
depend on numerous factors, including the progress of its research and
development programs and preclinical and clinical testing, the time and costs
involved in obtaining regulatory approvals, the cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, changes in the Company's
existing collaborative and licensing relationships, the ability of the Company
to establish additional collaborative arrangements, acquisition of new products
and technologies, the completion of commercialization activities and
arrangements, and the purchase of additional property and equipment.
The Company anticipates no material capital expenditures to be
incurred for environmental compliance in fiscal year 1997. Based on the
Company's good environmental compliance record to date, and its current
compliance with applicable environmental laws and regulations, environmental
compliance is not expected to have a material adverse effect on the Company's
operations.
The Company believes that its cash and cash equivalents will be
sufficient to meet its operating expenses and cash requirements through 1997.
The Company expects to incur substantial additional development costs prior to
reaching profitability. As a result, InSite Vision will require substantial
additional funds and the Company may seek research funding, private or public
equity investments, and possible future collaborative agreements to meet such
needs. Even if the Company does not have an immediate need for additional
cash, it may seek access to the public equity markets if and when it believes
conditions are favorable. There is no assurance that such additional funds
will be available for the Company to finance its operations on acceptable
terms, or at all.
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RISK FACTORS
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
InSite is at an early stage of development. Only one product
utilizing the Company's DuraSite technology, an over-the-counter ("OTC") dry
eye treatment, is currently being marketed. Most of the potential products
currently under development by the Company will require significant additional
research and development, and preclinical and clinical testing, prior to
submission to regulatory authorities for marketing approval. The Company's
potential products are subject to the risks of failure inherent in the
development of products based on new technologies. These risks include the
possibilities that the Company's technology or any or all of its potential
products will be found to be unsafe, ineffective, or otherwise fail to receive
necessary marketing clearance; that the potential products, if safe and
effective, will be difficult to manufacture or market; that proprietary rights
of third parties will preclude the Company from marketing products; or that
third parties will market superior, equivalent or more cost-effective products.
As a result, there can be no assurance that the Company's research and
development activities will result in any commercially viable products.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funds to conduct the
development and testing of its potential products and to manufacture and market
any products that may be developed. The Company's future capital requirements
will depend on numerous factors, including the progress of its research and
development programs, the progress of preclinical and clinical testing, the
time and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, changes in
the Company's existing collaborative and licensing relationships, the ability
of the Company to establish corporate partnerships for the manufacture and
marketing of its potential products, and the purchase of additional capital
equipment. The Company intends to seek additional funding through public or
private financings, collaborative or other arrangements, or from other sources.
There can be no assurance that additional financing will be available from any
of these sources or, if available, that it will be available on acceptable
terms. Any failure by the Company to obtain additional funding on acceptable
terms, or at all, would have a material adverse effect on the Company's
business, financial condition and results of operations. If additional funds
are raised by issuing equity securities, significant dilution to existing
stockholders may result. If adequate funds are not otherwise available, the
Company may be required to delay, scale back or eliminate one or more of its
research, discovery or development programs, or to obtain funds through
entering into arrangements with collaborators or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products, or to cease operations.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE FINANCIAL RESULTS
The Company has incurred significant operating losses since its
inception in 1986 and it expects to continue to incur significant operating
losses for at least the next several years. As of March 31, 1997, the Company's
accumulated deficit was approximately $68 million. The amount of net losses
and the time required by the Company to reach profitability are uncertain. The
Company's ability to achieve profitability depends upon its ability, alone or
with others, to complete successful development of its potential products,
conduct clinical trials, obtain required regulatory approvals and successfully
manufacture and market its products. There can be no assurance that the
Company will ever achieve significant revenue or profitability.
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DEPENDENCE ON THIRD PARTIES
In connection with its restructuring in November 1995, the Company
elected not to proceed with plans to establish a dedicated sales and marketing
organization. In order to successfully commercialize its product candidates,
the Company will be required to enter into arrangements with one or more
companies that will: provide for Phase III clinical testing, commercial
scale-up and manufacture of the Company's potential products; obtain or assist
the Company in other activities associated with obtaining regulatory approvals
for its product candidates; and market and sell the Company's products, if
approved.
To date, the Company has entered into agreements with CIBA Vision for
co-exclusive rights with the Company in the U.S. to manufacture and market
AquaSite, MethaSite(TM), ToPreSite(TM) and ISV-205 for certain
non-glaucoma-related indications. Of these, only AquaSite, an OTC product for
which regulatory approval is not required, has been marketed. Through the
Company's agreement with CIBA Vision in May 1996, the Company regained full
U.S. marketing rights to the Company's PilaSite(R) product candidate for
glaucoma, which was subsequently licensed on a worldwide basis to B&L. In
exchange, CIBA Vision received royalty-bearing, co-exclusive U.S. marketing
rights to ToPreSite product candidate for ocular inflammation/infection. CIBA
Vision assumed all subsequent product development, clinical and regulatory
responsibility for ToPreSite. In addition, CIBA Vision received
royalty-bearing, co-exclusive U.S. marketing rights to the Company's ISV-205
product candidate for certain non-glaucoma-related indications. CIBA Vision
has no obligation to fund the further development of MethaSite or ISV-205.
In July 1996, the Company entered into agreements with B&L pursuant
to which: (i) B&L has agreed to manufacture InSite product candidates at B&L's
facility in Tampa, Florida using equipment owned by InSite; B&L and InSite have
agreed to share the cost of certain leasehold improvements in connection with
the installation and operation of the equipment; (ii) B&L will receive, for a
license fee of $500,000, an exclusive worldwide royalty-bearing license to
manufacture and market PilaSite; (iii) B&L and InSite have agreed to
collaborate to develop and sell a new DuraSite based eyedrop formulation; and
(iv) B&L has agreed to make a $2 million equity investment in the Company, $1
million of which was received by the Company in August 1996, with the remaining
amount, subject to certain conditions, due in August 1997. The Company is
currently in the process of determining whether it will file a New Drug
Application ("NDA") with the U. S. Food and Drug Administration ("FDA") for
PilaSite.
There can be no assurance that, even if regulatory approvals are
obtained, the Company's products will be successfully marketed, or that the
Company will be able to conclude arrangements with other companies to support
the commercialization of such products on acceptable terms, if at all.
The Company's strategy for research, development and commercialization
of certain of its products requires the Company to enter into various
arrangements with corporate and academic collaborators, licensers, licensees
and others, and is dependent on the subsequent success of these outside parties
in performing their responsibilities. For example, the Company is dependent
upon British Biotech for the supply of batimastat and lexipafant, the active
drugs incorporated into the Company's ISV-120 and ISV-611 product candidates,
respectively. British Biotech is conducting clinical testing of lexipafant
for non-ophthalmic indications, but it has discontinued clinical testing of
batimastat and informed the Company that it will no longer manufacture the
product. The Company may have no source of ongoing raw materials for such
product candidates and its business may be adversely affected. In addition,
there can be no assurance that the Company's collaborators will not take the
position that they are free to compete using the Company's technology without
compensating or entering into agreements with the Company, or will not pursue
alternative technologies or develop alternative products either on their own or
in collaboration with others, including the Company's competitors, as a means
for developing treatments for the diseases or disorders targeted by these
collaborative programs.
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UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its ability to
obtain patents, protect trade secrets and operate without infringing upon the
proprietary rights of others. A substantial number of patents in the field of
ophthalmology have been issued to pharmaceutical, biotechnology and
biopharmaceutical companies. Moreover, competitors may have filed patent
applications, may have been issued patents or may obtain additional patents and
proprietary rights relating to products or processes competitive with those of
the Company. There can be no assurance that the Company's patent applications
will be approved, that the Company will develop additional proprietary products
that are patentable, that any issued patents will provide the Company with
adequate protection for its inventions or will not be challenged by others, or
that the patents of others will not impair the ability of the Company to
commercialize its products. The patent position of firms in the pharmaceutical
industry generally is highly uncertain, involves complex legal and factual
questions, and has recently been the subject of much litigation. No consistent
policy has emerged from the U.S. Patent and Trademark Office or the courts
regarding the breadth of claims allowed or the degree of protection afforded
under pharmaceutical patents. There can be no assurance that others will not
independently develop similar products, duplicate any of the Company's products
or design around any patents of the Company.
A number of pharmaceutical and biotechnology companies and research
and academic institutions have developed technologies, filed patent
applications or received patents on various technologies that may be related to
the Company's business. Some of these technologies, applications or patents
may conflict with the Company's technologies or patent applications. Such
conflicts could limit the scope of the patents, if any, that the Company may be
able to obtain or result in the denial of the Company's patent applications.
In addition, if patents that cover the Company's activities have been or are
issued to other companies, there can be no assurance that the Company would be
able to obtain licenses to these patents, at all, or at a reasonable cost, or
be able to develop or obtain alternative technology. If the Company does not
obtain such licenses, it could encounter delays or be precluded from
introducing products to the market. Litigation may be necessary to defend
against or assert claims of infringement, to enforce patents issued to the
Company or to protect trade secrets or know-how owned by the Company, and could
result in substantial cost to and diversion of effort by, and may have a
material adverse effect on, the Company. In addition, there can be no
assurance that these efforts by the Company will be successful or, even if
successful, will not result in substantial cost to the Company.
The Company's competitive position is also dependent upon unpatented
trade secrets. There can be no assurance that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets, that such trade secrets
will not be disclosed or that the Company can effectively protect its rights to
unpatented trade secrets. To the extent that the Company or its consultants or
research collaborators use intellectual property owned by others in their work
for the Company, disputes also may arise as to the rights in related or
resulting know-how and inventions.
NO COMMERCIAL MANUFACTURING EXPERIENCE
The Company has no experience in the manufacture of products for
commercial purposes. The Company has a pilot facility licensed by the State of
California to manufacture certain of its products for Phase I and Phase II
clinical trials. In July 1996, the Company entered into an alliance under which
B&L has agreed to manufacture Company products. If the Company should
encounter delays or difficulties in establishing and maintaining its
relationship with B&L or other qualified manufacturers to produce, package and
distribute its finished products, then clinical trials, regulatory filings,
market introduction and subsequent sales of such products would be adversely
affected.
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Contract manufacturers must adhere to Good Manufacturing Practices
("GMP") regulations strictly enforced by the FDA on an ongoing basis through
its facilities inspection program. Contract manufacturing facilities must pass
a pre-approval plant inspection before the FDA will approve an NDA. Certain
material manufacturing changes that occur after approval are also subject to
FDA review and clearance or approval. There can be no assurance that the FDA
or other regulatory agencies will approve the process or the facilities by
which any of the Company's products may be manufactured. The Company's
dependence on third parties for the manufacture of products may adversely
affect the Company's ability to develop and deliver products on a timely and
competitive basis. Should the Company be required to manufacture products
itself, the Company will be subject to the regulatory requirements described
above, and to similar risks regarding delays or difficulties encountered in
manufacturing any such products and will require substantial additional
capital. There can be no assurance that the Company will be able to manufacture
any such products successfully or in a cost-effective manner. In addition,
certain of the raw materials the Company uses in formulating its DuraSite drug
delivery system are available from only one source. Any significant
interruption in the supply of these raw materials could delay the Company's
clinical trials, product development or product sales and could have a material
adverse effect on the Company's business.
GOVERNMENT REGULATION AND PRODUCT APPROVAL
FDA and comparable agencies in state and local jurisdictions and in
foreign countries impose substantial requirements upon preclinical and clinical
testing, manufacturing and marketing of pharmaceutical products. Lengthy and
detailed preclinical and clinical testing, validation of manufacturing and
quality control processes, and other costly and time-consuming procedures are
required. Satisfaction of these requirements typically takes several years and
the time needed to satisfy them may vary substantially, based on the type,
complexity and novelty of the pharmaceutical product. The effect of government
regulation may be to delay or to prevent marketing of potential products for a
considerable period of time and to impose costly procedures upon the Company's
activities. There can be no assurance that the FDA or any other regulatory
agency will grant approval for any products developed by the Company on a
timely basis, or at all. Success in preclinical or early stage clinical trials
does not assure success in later stage clinical trials. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent regulatory approval. If regulatory
approval of a product is granted, such approval may impose limitations on the
indicated uses for which a product may be marketed. Further, even if
regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product, including withdrawal
of the product from the market. Delay in obtaining or failure to obtain
regulatory approvals would have a material adverse effect on the Company's
business.
The FDA's policies may change and additional government regulations
may be promulgated which could prevent or delay regulatory approval of the
Company's potential products. Moreover, increased attention to the containment
of health care costs in the U.S. could result in new government regulations
which could have a material adverse effect on the Company's business. The
Company is unable to predict the likelihood of adverse governmental regulation
which might arise from future legislative or administrative action, either in
the U.S. or abroad. See "Risk Factors - Uncertainty of Product Pricing,
Reimbursement and Related Matters."
COMPETITION
The Company's success depends upon developing and maintaining a
competitive position in the development of products and technologies in its
areas of focus. There are many competitors of the Company in the U.S. and
abroad, including pharmaceutical, biotechnology and other companies with
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varying resources and degrees of concentration on the ophthalmic
pharmaceuticals market. The Company's competitors may have existing products
or products under development which may be technically superior to those of the
Company or which may be less costly or more acceptable to the market.
Competition from such companies is intense and expected to increase as new
products enter the market and new technologies become available. The Company's
competitors, many of which have substantially greater financial, technical,
marketing and human resources than the Company, may also succeed in developing
technologies and products that are more effective, safer, less expensive or
otherwise more commercially acceptable than any which have been or are being
developed by the Company. The Company's competitors may obtain cost
advantages, patent protection or other intellectual property rights that would
block or limit the Company's ability to develop its potential products, or may
obtain regulatory approval for the commercialization of their products more
effectively or rapidly than the Company. To the extent that the Company
determines to manufacture and market its products by itself, it will also
compete with respect to manufacturing efficiency and marketing capabilities,
areas in which it has limited or no experience.
MARKETING AND SALES
The Company plans to market and sell its products through arrangements
with one or more pharmaceutical companies with expertise in the ophthalmic drug
industry. There can be no assurance that the Company will be able to enter
into such arrangements on acceptable terms, if at all. If the Company is not
successful in concluding such arrangements, it may be required to establish its
own sales and marketing organization, although the Company has no experience in
sales, marketing or distribution. There can be no assurance that the Company
will be able to build such a marketing staff or sales force, or that the
Company's sales and marketing efforts will be cost-effective or successful. To
the extent the Company has entered into or enters into co-marketing,
co-promotion or other licensing arrangements for the marketing and sale of its
products, any revenues received by the Company will be dependent on the efforts
of third parties (such as CIBA Vision and B&L), and there can be no assurance
that such efforts will be successful.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on Dr. Chandrasekaran and other
principal members of its scientific and management staff, the loss of whose
services might significantly delay the achievement of planned development
objectives. Furthermore, recruiting and retaining qualified personnel will be
critical to the Company's success. Competition for skilled individuals in the
biotechnology business is highly intense and there can be no assurance that the
Company will be able to continue to attract and retain personnel necessary for
the development of the Company's business. The loss of key personnel or the
failure to recruit additional personnel or to develop needed expertise could
have a material adverse effect on the Company's business, financial condition
and results of operations.
PRODUCT LIABILITY EXPOSURE; LIMITED INSURANCE COVERAGE
The Company's business exposes it to potential product liability risks
which are inherent in the development, testing, manufacturing, marketing and
sale of human therapeutic products. Product liability insurance for the
pharmaceutical industry generally is expensive. There can be no assurance that
the Company's present product liability insurance coverage is adequate. Such
existing coverage will not be adequate as the Company further develops its
products, and no assurance can be given that adequate insurance coverage
against potential claims will be available in sufficient amounts or at a
reasonable cost.
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<PAGE> 14
UNCERTAINTY OF PRODUCT PRICING, REIMBURSEMENT AND RELATED MATTERS
The Company's business may be materially adversely affected by the
continuing efforts of governmental and third party payers to contain or reduce
the costs of health care through various means. For example, in certain foreign
markets the pricing or profitability of health care products is subject to
government control. In the U.S., there have been, and the Company expects
there will continue to be, a number of federal and state proposals to implement
similar government control. While the Company cannot predict whether any such
legislative or regulatory proposals or reforms will be adopted, the
announcement of such proposals or reforms could have a material adverse effect
on the Company's ability to raise capital or form collaborations, and the
adoption of such proposals or reforms could have a material adverse effect on
the Company's business, financial condition or results of operations.
In addition, in the U.S. and elsewhere, sales of health care products
are dependent in part on the availability of reimbursement from third party
payers, such as government and private insurance plans. Significant uncertainty
exists as to the reimbursement status of newly approved health care products,
and third party payers are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that reimbursement from third
party payers will be available or will be sufficient to allow the Company to
sell its products on a competitive or profitable basis.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company's research, development and manufacturing processes
involve the controlled use of small amounts of hazardous and radioactive
materials. The Company is subject to federal, state and local laws,
regulations and policies governing the use, manufacture, storage, handling and
disposal of such materials and certain waste products. Although the Company
believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by such laws and regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result, and any such liability could exceed
the resources of the Company. Moreover, the Company may be required to incur
significant costs to comply with environmental laws and regulations, especially
to the extent that the Company manufactures its own products.
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
As of December 31, 1996, the Company's management and principal
stockholders in the aggregate owned beneficially approximately 22% of the
Company's outstanding shares of Common Stock. As a result, these stockholders,
acting together, would be able to effectively control most matters requiring
approval by the stockholders of the Company, including the election of a
majority of the directors and the approval or disapproval of business
combinations.
VOLATILITY OF STOCK PRICE; NO DIVIDENDS
The market prices for securities of biopharmaceutical and
biotechnology companies (including the Company) have historically been highly
volatile, and the market has from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of
particular companies. Future announcements concerning the Company, its
competitors or other biopharmaceutical companies including the results of
testing and clinical trials, technological innovations or new
14 of 16
<PAGE> 15
therapeutic products, governmental regulation, developments in patent or other
proprietary rights, litigation or public concern as to the safety of products
developed by the Company or others and general market conditions may have a
significant effect on the market price of the Common Stock. The Company has
not paid any cash dividends on its Common Stock and does not anticipate paying
any dividends in the foreseeable future.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BYLAWS PROVISIONS
Certain provisions of the Company's Certificate of
Incorporation and Bylaws may have the effect of making it more difficult for a
third party to acquire, or discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. The Company's Board of Directors has the authority to
issue up to 5,000,000 shares of Preferred Stock and to determine the price,
rights, preferences, privileges and restrictions of those shares without any
further vote or action by the stockholders. The rights of the holders of Common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue shares of Preferred Stock. Certain provisions of Delaware law applicable
to the Company could also delay or make more difficult a merger, tender offer
or proxy contest involving the Company, including Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for a period of
three years unless certain conditions are met.
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<PAGE> 16
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
3.2 Amended and Restated Bylaws, as amended February 6, 1996.
b) Reports on Form 8-K
No Reports on Form 8-K were filed in the quarter ended March 31, 1997.
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.
INSITE VISION INCORPORATED
Dated: April 25, 1997 by: /s/ S. Kumar Chandrasekaran
------------------------------
S. Kumar Chandrasekaran, Ph.D.
Chairman of the Board,
Chief Executive Officer
and Chief Financial Officer
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<PAGE> 1
AMENDED BYLAWS
OF
INSITE VISION INCORPORATED
(as Amended through March 17, 1997)
ARTICLE 1
Offices
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware is located at 1209 Orange Street in
the City of Wilmington, County of New Castle, State of Delaware and the
Corporation Trust Company is the registered agent.
Section 1.2. Additional Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE 2
Stockholders
Section 2.1. Annual Meetings. Annual meetings of stockholders shall
be held at such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of meeting. At the annual meeting
the stockholders shall elect the number of Directors equal to the number of
Directors of the class whose term expires at such meetings (or, if fewer, the
number of Directors properly nominated and qualified for election) to hold
office until the third succeeding annual meeting of stockholders after their
election.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
the Corporation, not less than fifty (50) days nor more than seventy-five (75)
days
<PAGE> 2
prior to the meeting; provided, however, that in the event that less than
sixty-five (65) days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2.1 by any stockholder of any business
properly brought before the annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section, and if
the Chairman should so determine, the Chairman shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section 2.2. Special Meetings. Special meetings of stockholders may
be called at any time by the Chairman of the Board or the Chief Executive
Officer or by a resolution adopted by the affirmative vote of a majority of the
Board of Directors to be held at such date, time and place either within or
without the State of Delaware as may be stated in the notice of the meeting.
Business transacted at any special meeting shall be limited to the purposes
stated in the notice.
Section 2.3. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state 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. Unless otherwise provided by law, the written notice of any meeting
shall be given 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.
Section 2.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such 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
which 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
2.
<PAGE> 3
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these Bylaws,
the holders of a majority of the outstanding shares entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum.
In the absence of a quorum the stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided by Section 2.4 of
these Bylaws until a quorum shall attend.
Section 2.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Chief Executive Officer, or in the absence of the
Chief Executive Officer by the President, or in the absence of the President by
a Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, or in the absence of the Secretary by an Assistant Secretary, or in
their absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders may authorize another
person or persons to act for such stockholder by proxy, but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date with the Secretary of the
Corporation. Voting at meetings of stockholders need not be by written ballot
and need not be conducted by inspectors unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting shall so determine. At all meetings of
stockholders for the election of directors a plurality of the votes cast shall
be sufficient to elect. With respect to other matters, unless otherwise
provided by law or by the certificate of incorporation or these Bylaws, the
affirmative vote of the holders of a majority of the shares of all classes of
stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders, provided that
(except as otherwise required by law or by the certificate of incorporation)
the Board of Directors may require a larger vote upon any such matter. Where a
separate vote by class is required, the affirmative vote of the holders of a
majority of the shares of each class present in person or represented by proxy
at the meeting shall be the act of such class, except as otherwise provided by
law or by the certificate of incorporation or these Bylaws.
3.
<PAGE> 4
Section 2.8. Consent of Stockholders in Lieu of Meeting. No action
required or permitted to be taken at any annual or special meeting of the
stockholders of the Corporation may be taken without a meeting and the power of
the stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied.
ARTICLE 3
Board of Directors
Section 3.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The number of directors which shall constitute
the Board of Directors shall be not less than five (5) nor more than nine (9).
The exact number of directors shall be fixed from time to time, within the
limits specified in this Section 3.1 or in the certificate of incorporation, by
the Board of Directors, or by a Bylaw or amendment thereof duly adopted by a
vote of a majority of the shares entitled to vote and represented at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum). Directors need
not be stockholders.
Section 3.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until the next annual meeting of
stockholders at which the term of the class to which they have been elected
expires and until such director's successor is elected and qualified or until
such director's earlier resignation, removal from office, death or incapacity.
Any director may resign at any time upon written notice to the Board of
Directors or to the Chief Executive Officer or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. Any director or the entire Board of
Directors may be removed, but only for cause, by the holders of a majority of
the shares then entitled to vote at an election of directors. Unless otherwise
provided in the certificate of incorporation or these Bylaws, vacancies and
newly created directorships resulting from any increase in the authorized
number of directors or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director and each director so chosen shall hold office until the next annual
election at which the term of the class to which such director has been elected
expires and until such director's successor shall be duly elected and shall
qualify, or until such director's earlier resignation, removal from office,
death or incapacity.
Section 3.3. Nominations. Subject to the rights of holders of any
class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for election to the Board of
Directors of the Corporation at a meeting of stockholders may be made on behalf
of the Board of Directors by the Nominating Committee appointed by the Board of
Directors, or by any stockholder of the Corporation entitled to vote
4.
<PAGE> 5
for the election of directors at such meeting. Such nominations, other than
those made by the Nominating Committee on behalf of the Board of Directors,
shall be made by notice in writing delivered or mailed by first class United
States mail, postage prepaid, to the Secretary or Assistant Secretary of the
Corporation, and received by the Secretary or Assistant Secretary not less than
one hundred twenty (120) days prior to any meeting of stockholders called for
the election of directors; provided, however, that if less than one hundred
(100) days' notice of the meeting is given to stockholders, such nomination
shall have been mailed or delivered to the Secretary or the Assistant Secretary
of the Corporation not later than the close of business on the seventh (7th)
day following the day on which the notice of meeting was mailed. Such notice
shall set forth as to each proposed nominee who is not an incumbent director
(i) the name, age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee and by the nominating stockholder,
and (iv) any other information concerning the nominee that must be disclosed of
nominees in proxy solicitations regulated by Regulation 14A of the Securities
Exchange Act of 1934.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if the Chairman should so determine, the Chairman
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 3.4. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine.
Notice of a regular meeting need not be given provided that notice of any
change in the time or place of regular meetings shall be given to directors in
the same manner as notice for special meetings of the Board of Directors.
Section 3.5. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, Chief Executive Officer
or the President or, if the Chairman of the Board, the Chief Executive Officer
and the President are absent or are unable or refuse to act, by any Vice
President or by any two directors. Notice of the time and place of special
meetings shall be delivered personally or by telephone to each director, or
sent by first-class mail or telegram or facsimile transmission, charges
prepaid, addressed to such director at such director's address as it appears
upon the records of the Corporation or, if it is not so shown on the records
and is not readily ascertainable, at the place at which the meetings of the
directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail at least two (2) days prior to the time of
the holding of the meeting. In case such notice is telegraphed or sent by
facsimile transmission, it shall be delivered to a common carrier for
transmission to the director or actually transmitted by the person giving the
notice by electronic means to the director at least four (4) hours prior to the
time of the holding of the meeting. In case such notice is delivered
personally or
5.
<PAGE> 6
by telephone as above provided, it shall be so delivered at least four (4)
hours prior to the time of the holding of the meeting. Any notice given
personally or by telephone may be communicated to either the director or to a
person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. Such deposit
in the mail, delivery to a common carrier, transmission by electronic means or
delivery, personally or by telephone, as above provided, shall be due, legal
and personal notice to such directors. The notice need not specify the place
of the meeting if the meeting is to be held at the principal executive office
of the Corporation, and need not specify the purpose of the meeting.
Section 3.6. Participation in Meetings by Conference Telephone
Permitted. 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 of such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this Bylaw shall constitute presence in person at such meeting.
Section 3.7. Quorum; Vote Required for Action. At all meetings of
the Board of Directors, presence of a majority of the authorized number of
directors at a meeting of the Board of Directors constitutes a quorum for the
transaction of business. The vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors
unless the certificate of incorporation or these Bylaws shall require a vote of
a greater number. In case at any meeting of the Board of Directors a quorum
shall not be present, the members of the Board of Directors present may adjourn
the meeting from time to time until a quorum shall attend.
Section 3.8. Action by Directors 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 of Directors or of such 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 of Directors or committee.
Section 3.9. Compensation of Directors. The Board of Directors shall
have the authority to fix the compensation of directors.
Section 3.10. Chairman of the Board. As soon as practicable after
the annual meeting of stockholders in each year, the Board of Directors may, if
it so determines, elect from among its members a Chairman of the Board. If the
Board of Directors appoints a Chairman of the Board, the Chairman shall, if
present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to
the Chairman by the Board of Directors or prescribed by these Bylaws. Any
vacancy occurring in the office of Chairman of the Board by resignation,
removal from office, death or incapacity may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special
meeting.
6.
<PAGE> 7
ARTICLE 4
Committees
Section 4.1. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more directors of the
Corporation. The Board of Directors 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 such member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
Section 4.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
adopt, amend and repeal rules for the conduct of its business. In the absence
of a provision by the Board of Directors or a provision in the rules of such
committee to the contrary, a majority of the entire authorized number of
members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the
time of such vote if a quorum is then present shall be the act of such
committee, and in other respects each committee shall conduct its business in
the same manner as the Board of Directors conducts its business pursuant to
Article 3 of these Bylaws.
ARTICLE 5
Officers
Section 5.1. Officers; Election. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board. The Board of Directors may also elect a
Chief Executive Officer, one or more Vice Presidents, one or more Assistant
Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board of Directors may deem
desirable or appropriate and may give any of them such further designations or
alternate titles as it considers desirable. Any number of offices may be held
by the same person; provided, however, that the offices of President and
Secretary shall not be held by the same person.
Section 5.2. Term of Office; Resignation; Removal; Vacancies. Except
as otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding such
officer's election, and until such officer's successor is elected and qualified
or until such officer's earlier resignation, removal from office, death or
incapacity.
7.
<PAGE> 8
Any officer may resign at any time upon written notice to the Board of
Directors or to the Chief Executive Officer or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board of Directors may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special
meeting.
Section 5.3. Powers and Duties. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in these Bylaws or in a resolution of the Board of Directors which is
not inconsistent with these Bylaws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors. The Board of Directors may require any officer, agent or
employee to give security for the faithful performance of such person's duties.
Section 5.4. President. The President shall be the chief operating
officer of the Corporation. He shall also be the Chief Executive Officer
unless the Board of Directors otherwise provides. 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 one, and to the Chief Executive Officer, if other than
the President, and subject to the provisions of these Bylaws and to the
direction of the Board of Directors, the President shall have supervision over
and may exercise general executive powers of the business and affairs of the
Corporation and shall perform all duties and have all powers which are commonly
incident to the office of President or which are delegated to the President by
the Board of Directors. The President shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation. In the absence of the
Chairman of the Board, and the Chief Executive Officer, if other than the
President, the President shall preside at all meetings of the Board of
Directors.
Section 5.5. Vice President. In the absence of the President or in
the President's inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform 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 perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 5.6. Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board
8.
<PAGE> 9
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or Chief Executive Officer, under whose supervision the
Secretary shall be. The Secretary shall have custody of the corporate seal of
the Corporation and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by the Secretary's signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing
by such officer's signature.
Section 5.7. Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
the 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
the Secretary's 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 may from time to time prescribe.
Section 5.8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all such officer's transactions as Treasurer and of the financial
condition of the Corporation.
Section 5.9. Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the 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 the Treasurer's inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE 6
Stock
Section 6.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
certifying the number of shares owned by such holder in the Corporation. If
such certificate is manually signed by one officer or manually countersigned by
a transfer agent or by a registrar, any other signature on the certificate may
be a facsimile. In case any officer,
9.
<PAGE> 10
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the Corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, 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 which the Corporation shall
issue to represent such class or series of stock, provided 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 which 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, designations,
preferences and 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.
Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock 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 such owner's 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.
Section 6.3. 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 upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertified shares such uncertified shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall
be recorded upon the books of the Corporation.
Section 6.4. Fixing Record Date. 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 not be more than sixty (60) nor less
than ten (10)
10.
<PAGE> 11
days before the date of such meeting, nor more than sixty (60) days prior to
any other action. 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.
Section 6.5. 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, and to
hold liable for calls and assessments a 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 any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE 7
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 7.2. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision 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, 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.
Section 7.4. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the
11.
<PAGE> 12
contract or transaction, or solely because such person's or persons' votes are
counted for such purpose, if: (1) the material facts as to such person's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (2) the material facts as
to such person's relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by vote of
the stockholders; or (3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
Section 7.5. Amendment of Bylaws. The Board of Directors is
expressly empowered to adopt, amend or repeal the Bylaws of the Corporation,
provided, however, that any adoption, amendment or repeal of the Bylaws of the
Corporation by the Board of Directors shall require the approval of at least
sixty-six and two-thirds percent (66 2/3%) of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any resolution providing for adoption, amendment or
repeal is presented to the Board of Directors). The stockholders shall also
have power to adopt, amend or repeal the Bylaws of the Corporation, provided,
however, that in addition to any vote of the holders of any class or series of
stock of this Corporation required by law or by the certificate of
incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then outstanding
shares of the stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required for
such adoption, amendment or repeal by the stockholders of any provisions of the
Bylaws of the Corporation.
12.
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