<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark one): [X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
[ ] 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 0-14087
FIRST COASTAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1177661
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
36 Thomas Drive, Westbrook, Maine 04092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (207) 774-5000
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 each of the registrant's classes of
common stock, as of the latest practicable date, is:
Class: Common Stock, Par Value $1.00 per share
Outstanding at April 27, 1995: 6,006,745 shares
<PAGE>
INDEX
FIRST COASTAL CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
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<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1995
(Unaudited) and December 31, 1994; 3
Condensed Consolidated Statements of Operations (Unaudited) for
the three months ended March 31, 1995 and 1994; 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for
the three months ended March 31, 1995 and 1994; 5
Notes to Condensed Consolidated Financial Statements
(Unaudited), March 31, 1995 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 22
Item 4. Submission of Matters to a Vote of Security Holders. 22
Item 6. Exhibits and Reports on Form 8-K. 23
SIGNATURES 24
</TABLE>
2
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
First Coastal Corporation and Subsidiary
<TABLE>
<CAPTION>
- - - - - - ---------------------------------------------------------------------------------------
(Unaudited)
(in thousands) March 31,1995 December 31,1994
- - - - - - ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Noninterest earning deposits and cash $ 3,088 $ 4,701
Interest earning deposits 3,145 6,636
Federal funds sold 10,000 10,000
Trading securities -- 915
Investment securities:
Held-to-Maturity 6,849 6,822
Available-for-Sale 10,049 9,924
--------- ---------
16,898 16,746
Federal Home Loan Bank stock-at cost 1,315 1,315
Loans held for sale 238 185
Loans 107,628 109,656
Less:Deferred loan fees, net (19) (31)
Allowance for loan losses (3,620) (4,042)
--------- ---------
103,989 105,583
Premises and equipment 2,879 2,941
Real estate owned and in-substance repossessions 2,732 2,925
Other assets 2,321 2,265
--------- ---------
TOTAL ASSETS $ 146,605 $ 154,212
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 127,027 $ 130,037
Advances from Federal Home Loan Bank 7,667 12,612
Note payable to the FDIC 9,000 9,000
Accrued expenses and other liabilities 500 549
--------- ---------
TOTAL LIABILITIES 144,194 152,198
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value; Authorized
1,000,000 shares; none outstanding
Common Stock, $1 par value; Authorized 6,700,000 shares;
issued and outstanding 1995 and 1994 - 6,006,745 6,007 6,007
Paid-in Capital 23,968 23,968
Retained earnings deficit (27,451) (27,676)
Unrealized loss on available for sale securities (113) (285)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 2,411 2,014
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 146,605 $ 154,212
========= =========
</TABLE>
See Notes to condensed consolidated financial statements.
3
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
First Coastal Corporation and Subsidiary
<TABLE>
<CAPTION>
- - - - - - -------------------------------------------------------------------------------------
(in thousands, except per share amounts) Three Months Ended March 31,
- - - - - - -------------------------------------------------------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Interest and Dividend Income
Interest and fees on loans $ 2,430 $ 2,537
Interest and dividends on investment securities 269 86
Other interest income 218 205
----------- -----------
Total Interest and Dividend Income 2,917 2,828
----------- -----------
Interest Expense
Deposits 1,154 1,161
Borrowings from Federal Home Loan Bank 172 328
FDIC Note 73 --
----------- -----------
Total Interest Expense 1,399 1,489
----------- -----------
Net Interest Income Before Provision for
Loan Losses 1,518 1,339
Provision for Loan Losses 100 67
----------- -----------
Net Interest Income After Provision for
Loan Losses 1,418 1,272
Other Income
Service charges on deposit accounts 58 73
Gain on investment securities transactions -- 29
Gain on sales of mortgage loans -- 43
Other 110 86
----------- -----------
168 231
----------- -----------
Other Expenses
Salaries and employee benefits 542 523
Occupancy 112 168
Net cost of operation or real estate owned
and in-substance repossessions (7) 133
Other 714 933
----------- -----------
1,361 1,757
----------- -----------
Income(Loss)Before Income Taxes and Minority Interest 225 (254)
Income Tax -- --
Minority Interest in Net Loss -- (11)
----------- -----------
NET INCOME (LOSS) $ 225 $ (243)
=========== ===========
PER SHARE AMOUNTS
Weighted Average Shares Outstanding 6,006,745 6,006,745
Income(Loss) Per Share $ .04 $ (.04)
=========== ===========
</TABLE>
See Notes to condensed consolidated financial statements
4
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
First Coastal Corporation and Subsidiary
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------
(in thousands) 1995 1994
- - - - - - ------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net Income (loss) $ 225 $ (243)
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 100 66
Writedowns of REO and ISR 14 15
Provision for depreciation and amortization 73 77
Amortization of investment security (discounts) (93) (10)
Realized investment securities gains -- (29)
Gains from assets held in trading accounts (33) --
Realized gains on assets held for sale -- (40)
Decrease in trading account securities 948 --
Net change in loans held for sale (53) 1,969
Decrease (increase) in interest receivable 58 (7)
Increase in interest payable 72 7
Net change in other assets 648 366
Net change in other liabilities (121) 24
-------- --------
Net cash provided by operating activities 1,838 2,195
-------- --------
Investing Activities
Proceeds from sales and maturities of investment securities
available for sale 1,049 51
Purchases of investment securities available for sale -- (5,968)
Purchases of investment securities held to maturity (936) (963)
Net change in loans 911 2,873
Net purchases of premises and equipment (11) (10)
-------- --------
Net cash provided (used) by investing activities 1,013 (4,017)
-------- --------
Financing Activities
Net change in deposits (3,010) (1,784)
Proceeds from borrowings -- --
Payments on borrowings (4,945) (1,154)
-------- --------
Net cash used by financing activities (7,955) (2,938)
-------- --------
Decrease in cash and cash equivalents (5,104) (4,760)
Cash and cash equivalents at beginning of period 11,337 33,539
-------- --------
Cash and cash equivalents (interest and noninterest bearing) at
end of period $ 6,233 $ 28,779
======== ========
Noncash Investing Activities
Change in unrealized holding losses on investment securities
available for sale $ 172 $ 49
Securities available for sale collateralized by portfolio
mortgage loans -- 1,003
Transfer of loans to real estate owned and in-substance
repossessions 583 --
</TABLE>
See Notes to consolidated financial statements.
5
<PAGE>
FIRST COASTAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
NOTE A - REGULATORY MATTERS
On September 6, 1991, First Coastal Corporation (the "Corporation") announced
that its Connecticut subsidiary, Suffield Bank, was placed into receivership by
the Connecticut Banking Department and the Federal Deposit Insurance Corporation
("FDIC") was appointed as the receiver. Under the Federal Deposit Insurance Act
("FDIA"), as amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), commonly-controlled depository institutions
such as Suffield Bank and Coastal Savings Bank ("Coastal" or the "Bank") are
liable for any loss incurred by the FDIC, or any loss which the FDIC reasonably
anticipates incurring, in connection with the default of one or more of the
commonly-controlled institutions. The FDIC had up to two years from September 6,
1991 to assert a cross guaranty claim against the Bank.
On September 3, 1991, the Corporation announced that Coastal had filed an
application with the FDIC for a waiver of any cross guaranty liability arising
from Suffield Bank. On September 9, 1992, the FDIC notified Coastal that it had
denied this request. The FDIC also indicated that it had authorized the issuance
of an assessment of liability under the cross guaranty provision and claimed an
anticipated loss to the Bank Insurance Fund resulting from the failure of
Suffield Bank in an amount which, if successfully asserted, would likely result
in the appointment of a receiver for Coastal. The FDIC delegated to the Director
of Supervision the authority to negotiate a settlement of the cross guaranty
liability prior to issuing a notice of assessment. On September 1, 1993, the
FDIC notified Coastal that it had until February 14, 1994 or such later date as
may be extended by the FDIC, to reach a settlement with the FDIC over the FDIC's
cross guaranty claim against Coastal resulting from the September 1991 failure
of Suffield Bank. In establishing a February 14, 1994 deadline for payment of
the cross guaranty liability, the FDIC indicated that its intention was to
negotiate a reasonable settlement of the cross guaranty claim, which would
enable the FDIC to maximize its recovery of losses incurred as a result of the
failure of the affiliated Suffield Bank.
On April 26, 1994, the Corporation, Coastal Bancorp ("Bancorp") and the Bank
entered into a definitive Settlement Agreement with the FDIC (the "Original
Settlement Agreement"). The Original Settlement Agreement provided that in
consideration for the waiver of the FDIC's cross guaranty claim against the
Bank, the FDIC would receive shares of a new class of convertible preferred
stock of Coastal, representing on conversion a 95% ownership position in the
Bank. The waiver of the cross guaranty claim was conditional and would become
final and unconditional upon the earlier of the date on which no shares of the
convertible preferred stock were outstanding or three years after the closing
date of the settlement, provided there had been no judicial determinations (or
pending actions asserting) that the stock was not validly issued, fully paid or
non-assessable.
6
<PAGE>
Pursuant to the Original Settlement Agreement, the preferred stock would
automatically convert to common stock upon its sale by the FDIC to any third
party. The outstanding common stock of Coastal, representing a 5% ownership
interest in the Bank on a post conversion basis, would continue to be held by
the Corporation. While the preferred stock was to be voting stock, the FDIC
agreed to grant a revocable proxy to Coastal so that such shares would be voted
in proportion to the votes cast by the other holders of the Bank's common stock,
subject to certain exceptions and limitations.
In connection with the execution of the Original Settlement Agreement, Bancorp
paid the FDIC $200,000 and the FDIC delivered to Bancorp the shares of preferred
and common stock it held in Bancorp as receiver of Suffield Bank and a waiver
and release with respect to any rights related to the stock. As a result of
Bancorp's purchase of the stock, First Coastal became the owner of 100% of the
outstanding capital stock of Bancorp.
The Original Settlement Agreement contemplated the occurrence of certain
additional transactions, including the merger of Bancorp into the Corporation or
the dissolution and liquidation of Bancorp and the distribution of its assets to
the Corporation. On July 26, 1994, Bancorp filed articles of dissolution with
the Secretary of State of the State of Maine effecting the dissolution and
liquidation of Bancorp, pursuant to which all of its remaining assets were
distributed to, and all of its remaining liabilities were assumed by, the
Corporation with the effect that the Bank became a direct wholly-owned
subsidiary of the Corporation. The Original Settlement Agreement also
contemplated the dissolution and liquidation of the Corporation in order to
facilitate the distribution of its assets (and those acquired from Bancorp) to
its stockholders. The Original Settlement Agreement provided that the only
assets of the Corporation that could be distributed to the stockholders of the
Corporation were the shares of Coastal (or cash proceeds from the sale of such
shares) representing a 5% ownership interest in the Bank (and cash in lieu of
fractional shares), subject to the satisfaction by the Corporation of all of its
debts and liabilities.
On July 20, 1994, prior to the Corporation submitting the Original Settlement
Agreement to its stockholders for approval, the United States Court of Federal
Claims issued an opinion in a case captioned Branch v. United States, No.
93-133C ("Branch"), which raised significant taking issues under the U.S.
Constitution adverse to the FDIC in connection with its assertion of cross
guaranty claims. After considering the Branch decision, the Boards of Directors
of the Corporation and the Bank concluded that it was in the best interests of
the Corporation, the Bank and the Corporation's stockholders to seek to modify
the terms of the Original Settlement Agreement.
Following extensive negotiations by the parties, the FDIC, the Corporation and
the Bank entered into the Amended and Restated Settlement Agreement dated as of
November 23, 1994 (the "Amended and Restated Settlement Agreement"), providing
for the settlement of the FDIC's cross guaranty claim against the Bank.
On January 31, 1995, following the receipt of stockholder approval, the
Corporation, Coastal and the FDIC consummated the Amended and Restated
Settlement Agreement, pursuant to which
7
<PAGE>
the Corporation issued to the FDIC a non-recourse promissory note (the "Note")
in the principal amount of $9 million in consideration of the unconditional and
irrevocable waiver and release of the cross guaranty claim. The Corporation's
obligations under the Note are secured by a pledge by the Corporation of 100,000
shares of common stock, par value $1.00 per share, of the Bank ("CSB Common
Stock"), representing 100% of the outstanding CSB Common Stock, pursuant to a
Stock Pledge Agreement between the Corporation and the FDIC dated January 31,
1995 (the "Stock Pledge Agreement"). The Stock Pledge Agreement provides that
the Corporation retains the right to receive all cash dividends declared and
paid on the pledged shares of CSB Common Stock and to exercise all voting rights
with respect to such shares for so long as no event of default exists
thereunder. Payment of principal and interest under the Note is deferred until
the "Maturity Date," which is January 31, 1997. If prior to such Maturity Date
the Corporation and the Bank have entered into a definitive agreement regarding
either an acquisition or recapitalization of the Corporation and the Bank that,
in either case, provides the Corporation with proceeds sufficient to pay the
FDIC the unpaid principal amount and interest under the Note, the Maturity Date
will be extended until the earlier of (i) July 31, 1997, (ii) the first business
day following January 31, 1997 on which such definitive agreement is terminated
or (iii) the date of closing of the acquisition or recapitalization of the
Corporation and the Bank.
The Note bears interest (i) at a rate per annum equal to 5% from January 31,
1995 through February 1, 1996 and at a rate per annum equal to 6.5% thereafter
(compounded quarterly) to and including the earlier of (x) the date on which the
FDIC receives payment of the unpaid principal amount and accrued interest in
full or (y) the day prior to the Maturity Date; or alternatively, in the event
that there is an acquisition of the Bank by a third party, (ii) in an aggregate
amount equal to one half of any proceeds over $11.5 million received by the
Corporation from the sale of the Bank. The Amended and Restated Settlement
Agreement provides that if the Bank is sold prior to the Maturity Date, the
aggregate consideration paid by the acquiror in connection with such transaction
will be distributed in satisfaction of the Corporation's obligations under the
Note as follows: the first $9 million will be paid to the FDIC, the next $2.5
million of such consideration will be paid to the Corporation, and any
consideration over $11.5 million will be divided equally between the FDIC and
the Corporation.
As a result of the consummation of the Amended and Restated Settlement Agreement
on January 31, 1995, including the issuance of the Note in the principal amount
of $9 million to the FDIC, the Corporation recognized an extraordinary charge to
earnings of $9 million in the financial statements for the year ended December
31, 1994. In addition, as a result of the settlement, the Corporation no longer
complies with the Federal Reserve's capital adequacy guidelines. The Corporation
received a letter from the Federal Reserve Bank of Boston dated November 3,
1994, which, among other things, confirmed that the Federal Reserve has no
objection to the settlement between the Corporation and the FDIC. In such
letter, the Federal Reserve further states that in determining whether any
supervisory response is warranted on a going forward basis, the Federal Reserve
will closely monitor the efforts of the Corporation in fulfilling its
obligations under the terms of the Amended and Restated Settlement Agreement and
the attendant effect such actions will have on restoring the capital of the
Corporation.
8
<PAGE>
The Corporation is exploring various options to satisfy its obligations to the
FDIC under the Note, including a possible recapitalization or sale of the Bank.
Management currently has no definitive plans relating to either a
recapitalization or a sale of the Bank and there can be no assurance that any
such transaction will occur or if pursued, what the terms of such transaction
might ultimately be.
Effective as of January 23, 1992, Coastal consented to an Order to Cease and
Desist (the "Order") issued by the FDIC and concurred with by the Maine
Superintendent of Banking (the "Maine Superintendent"). The Order required
Coastal to cease and desist from operating with an excessive volume of adversely
classified assets, engaging in any lending or management practices which are
detrimental to the Bank, engaging in violations of applicable laws and
regulations, operating with inadequate loan documentation, engaging in practices
which produce inadequate operating income and excessive loan losses, operating
with inadequate allowance for loan losses for the kind and quality of loans
held, failing to submit Reports of Condition and Income to the FDIC in
accordance with instructions, operating with inadequate liquidity and operating
with excessive interest rate risk exposure. The Order also required that certain
affirmative actions be taken relating to the preparation of certain plans and
analyses and the maintenance of specified capital ratios.
Effective December 8, 1994, the Regional Director of the Boston Regional Office
of the FDIC terminated the Order. The Order was replaced with a Memorandum of
Understanding ("Memorandum") among the Board of Directors of the Bank, the FDIC
and the Maine Superintendent effective as of November 22, 1994. The Memorandum
provides, among other things, that (i) the Bank continue to maintain its
allowance for loan and lease losses in accordance with applicable regulatory
requirements, (ii) the Board of Directors of the Bank continue to review the
adequacy of the Bank's loan and lease loss reserves and provide for adequate
reserves, (iii) the Bank continue to have tier 1 capital at or in excess of 6%
of the Bank's total assets, (iv) the Bank continue to comply with the FDIC's
Statement of Policy on Risk-Based Capital, (v) the Bank provide monthly progress
reports regarding substandard or doubtful assets, (vi) the Bank agree not to
extend or renew credit to, or for the benefit of, any borrower who or which has
a loan or other extension of credit with the Bank that has been charged off or
classified in whole or in part, loss, doubtful or substandard and is uncollected
unless certain conditions are met, (vii) the Bank not declare or pay any
dividends without the prior written consent of the FDIC and the Maine
Superintendent, and (viii) the Bank continue to furnish written progress reports
detailing the form and manner of any action taken to seek to secure compliance
with the Memorandum. In addition, the Board of Directors is required to develop
a written plan of action to reduce the Bank's risk position with respect to each
borrower who had outstanding principal debt owing to the Bank in excess of
$500,000 and for the formulation of a strategic plan and policies covering
investments, funds management and various lending policies.
In March 1988 the Corporation entered into a Memorandum of Understanding with
the Federal Reserve Bank of Boston which provides, among other things, for the
formulation of plans and policies covering capital adequacy, funds management,
the Corporation's management information system and the adoption of a written
dividend policy consistent with Federal Reserve
9
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Board policies regarding the payment of cash dividends by bank holding
companies. Management originally addressed these matters by developing plans and
policies which were submitted to the Federal Reserve in 1988, and updated such
plans and policies in 1992 and 1995. Effective March 13, 1995, the Federal
Reserve Bank of Boston terminated the Memorandum of Understanding.
NOTE B - ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the
Corporation have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles ("GAAP") for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1994.
Most of the Corporation's commercial real estate loans as of March 31, 1995 are
collateralized by real estate in Maine, which has experienced a significant
decline in value since the market peak in the late 1980s. In addition, all the
real estate owned ("REO") and in-substance repossessions ("ISR") are located in
this same market. Accordingly, the ultimate collectibility of a substantial
portion of the Corporation's loan portfolio and the recovery of a substantial
portion of the carrying amount of REO and ISRs is particularly susceptible to
changes in market conditions in Maine.
While management uses available information to recognize losses on loans, REO
and ISRs, future additions to the allowance or write-downs may be necessary
based on changes in economic conditions. In addition, various regulatory
authorities, as an integral part of their examination process, periodically
review the Corporation's allowance for loan losses and the carrying value of REO
and ISRs. Such authorities may require the Corporation to recognize additions to
the allowance and/or write down the carrying value of REO or ISRs based on their
judgments of information available to them at the time of their examination.
Given the current real estate environment, additions to non-performing assets
are anticipated; however, management believes that such additions will be at
levels below those experienced in prior years. Because of uncertainties that
continue to exist in the current real estate environment, the effect of these
non-performing assets on interest income, liquidity and capital resources cannot
be adequately assessed.
10
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Investment Securities
Effective January 1, 1994, with the implementation of Financial Accounting
Standards Board ("FASB") Statement No. 115, investment securities classified as
available for sale are reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of stockholders'
equity. Investment securities held to maturity are stated at cost adjusted for
amortization of bond premiums and accretion of bond discounts. There was no
effect to the Corporation's Financial Statements on January 1, 1994 as a result
of implementing FASB Statement No. 115. For the three months ended March 31,
1995, investment securities decreased in fair value by $113,000 from December
31, 1994 as a result of declining interest rates.
As of December 31, 1994, the Corporation's Investment Accounting Policy states
that all securities purchased with an original maturity of over one year, other
than mortgage backed securities originated by the Bank with current loan
production, will be classified as available for sale. Securities purchased with
an original maturity of one year or less will be considered heldto-maturity.
Mortgage backed securities originated by the Bank with current loan productions
will be classified as trading securities.
Assets Held for Sale Stated at Market Value
Assets held for sale, consisting primarily of residential mortgages originated
for the purpose of potential sale, are valued at the lower of cost or market.
Loans
Interest on loans is accrued and credited to operations based on the principal
amount outstanding. The accrual of interest income is discontinued when a loan
becomes delinquent and, in management's opinion, borrowers may be unable to meet
contractual obligations. Such accrual is discontinued where interest or
principal is 90 days or more past due, unless the loans are deemed to be
adequately secured and in the process of collection. In these instances,
interest is recognized only when received. When interest accruals are
discontinued, unpaid interest credited to income in the current year is reversed
and interest accrued in prior years is charged to the allowance for loan losses.
Loan origination fees and certain direct loan origination costs are deferred and
the new amount amortized as an adjustment to the related loan yield over the
estimated contractual life of the loan.
Allowance for Loan Losses
The Corporation adopted FASB Statement No. 114, Accounting by Creditors for
Impairment of a Loan, on January 1, 1995. Under the new standard, a loan is
considered impaired, based on current information and events, if it is probable
that the Corporation will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of
11
<PAGE>
the loan agreement. The measurement of impaired loans is generally based on the
present value of expected future cash flows discounted at the historical
effective interest rate, except that all collateral-dependent loans are measured
for impairment based on the fair value of the collateral. The adoption of FASB
Statement No. 114 resulted in no additional provision for loan losses as
determined at January 1, 1995.
Income Taxes
During 1993 Coastal adopted FASB Statement No. 109, Accounting for Income Taxes.
Statement No. 109 requires a change from the deferred method of accounting for
income taxes of APB Opinion 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. At December 31, 1994, the Corporation estimated that net operating loss
(NOL) carryforwards for federal income tax return purposes of $6.9 million were
available to offset future taxable income. Due to the uncertainty that the NOL
carryforwards will be realized, no deferred tax asset and liability accounts
have been recorded at December 31, 1994 and March 31, 1995.
12
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PART I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total Assets
At March 31, 1995, total assets were $146.6 million, representing a decrease of
$7.6 million, or 4.9%, from total assets of $154.2 million at December 31, 1994.
This continued decrease, primarily related to (i) a decrease in borrowings, as
all maturing advances are paid off, and (ii) a steady decline in deposits, which
is attributable to the historically low level of deposit interest rates which
has caused depositors to seek alternative investment options. Given the decrease
in interest rates experienced during the first three months of 1995, it is
anticipated that these deposit outflows may continue. However, there can be no
certainty that the current trend in market conditions will continue.
Investments
Investment securities of $16.9 million at March 31, 1995 remained relatively
unchanged as compared to $16.7 million at December 31, 1994. Investment
securities classified as available for sale are reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders' equity. Investment securities held to maturity are
stated at cost adjusted for amortization of bond premiums and accretion of bond
discounts.
The following table sets forth the amortized cost and fair value of investment
securities for each major security type at March 31, 1995.
<TABLE>
<CAPTION>
March 31, 1995
--------------------------------------------
Amortized Fair Unrealized
(in thousands) Cost Value Loss
- - - - - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Available for Sale:
U.S. Government Agency and Obligations $4,994 $4,939 $(55)
Mortgage backed Securities 848 840 (8)
Equity 4,000 3,950 (50)
Other 320 320 -
------- ------- -----
$10,162 $10,049 $(113)
======= ======= =====
Held to Maturity:
U.S. Government Agency and Obligations 6,849 6,846 (3)
------ ------ -----
$6,849 $6,846 $ (3)
====== ====== =====
</TABLE>
13
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The unrealized loss on investment securities classified as available for sale
decreased by $172,000 at March 31, 1995 compared to December 31, 1994. This
reduction in unrealized security losses is attributable to the slight decline in
yields on the treasury securities throughout the first three months of 1995. The
Corporation will continue to give consideration to further investments in U.S.
Government Agency and Obligations and Mortgage backed securities, after giving
consideration to the potential impact on the fair value of these securities that
may result from interest rate fluctuations in comparison to alternative
investment securities.
The following table represents the contractual maturities for investments in
debt securities for each major security type at March 31, 1995.
<TABLE>
<CAPTION>
March 31, 1995
------------------------------------------------
Maturing
------------------------------------------------
Within After One But After
(in thousands) One Year Within Five Years Five Years
- - - - - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Available for Sale:
U.S. Government Agency and Obligations $1,972 $2,967 -
Mortgage backed Securities - - 840
------ ------ -----
$1,972 $2,967 $ 840
====== ====== =====
Held to Maturity:
U.S. Government Agency and Obligations 6,849
$6,849
</TABLE>
Nonperforming Assets
Nonperforming assets were as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1995 1994
- - - - - - --------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans $3,086 $4,340
Accruing loans past due 90 days or more 243 258
Restructured loans 2,055 1,483
Real estate owned 2,139 2,222
In-substance repossessions 593 703
------ ------
Total $8,116 $9,006
====== ======
</TABLE>
The peak level in nonperforming assets relating to the recent economic downturn
was reached on July 31, 1992 at $29.2 million. While the downward trend in
nonperforming assets that has developed since that time is significant, the
Corporation continues to hold a large concentration of commercial real estate
loans that remain vulnerable to default. Many of these loans were made at or
near the peak in the commercial real estate market in the late 1980's and the
collateral coverage
14
<PAGE>
for many loans may not be adequate to protect the Bank from potential losses in
the event such loans become nonperforming. Deterioration in the local economy or
real estate market, or upward movements in interest rates, could have an adverse
impact on currently performing commercial real estate loan relationships. These
factors could result in an increased incidence of loan defaults and, as a
result, an increased level of nonperforming loans.
At March 31, 1995, the recorded investment in loans for which impairment has
been recognized in accordance with FASB Statement No. 114 totaled $6.3 million,
of which $1 million related to loans with no allocated reserve because the loans
have been partially written down through charge-offs and $5.3 million related to
loans with a corresponding allocated reserve of $1.4 million for the three
months ended March 31, 1995. Included in the impairment loans total is $3.1
million in nonaccrual and $2.1 million in restructured loans.
Impaired loans consisted of the following:
(in thousands) March 31, 1995
- - - - - - --------------------------------------------------------------------------------
Real estate mortgage loans:
Residential $ 230
Commercial 5,624
Real estate construction loans -
Commercial and industrial loans 154
Consumer and other loans 263
------
$6,271
REO consists of properties acquired through mortgage loan foreclosure
proceedings or in satisfaction of loans. At March 31, 1995, REO consisted of 12
commercial and residential real estate properties.
ISR consists of properties where the borrower has little or no remaining equity
in the property considering its fair value; where repayment can only be expected
to come from the operation or sale of the property; and where the borrower has
effectively abandoned control of the property or it is doubtful that the
borrower will be able to rebuild equity in the property. At March 31, 1995, ISR
consisted of 4 commercial real estate loans secured by apartment buildings and
one land loan.
Both REO and ISR are initially recorded at the lower of cost or fair value
(minus estimated costs to sell) at the date of foreclosure or in-substance
foreclosure and any difference is charged to the allowance for loan losses at
the time of reclassification. Subsequently, the values of such properties are
reviewed by management and writedowns, if any, are charged to expense. Costs
relating to the development and improvement of properties are capitalized;
holding costs are charged to expense.
15
<PAGE>
Allowance for Loan Losses
The Corporation's allowance for loan losses was $3.6 million at March 31, 1995
compared to $4 million at December 31, 1994. The allowance for loan losses
represented 3.4% and 3.7% of total loans, and 67.2% and 66.5% of nonperforming
loans at March 31, 1995 and December 31, 1994, respectively.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb potential losses inherent in the current loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past and expected loan loss experience, current
economic conditions, growth and diversification of the loan portfolio, the
results of the most recent regulatory examinations, the nature and level of
nonperforming assets and loans that have been identified as potential problems,
the adequacy of collateral and other relevant factors. The allowance is
increased by provisions for loan losses charged against income and recoveries on
loans previously charged off.
While the current level of allowance for loan losses is believed to be adequate,
the Corporation continues to hold a large concentration of commercial real
estate loans that remain vulnerable to loan default. Deterioration in the local
economy or real estate market, or upward movements in interest rates, could have
an adverse impact on the loan portfolio that could result in the need for an
increased allowance for loan losses. Conversely, further improvement in overall
asset quality, favorable local economic conditions or a favorable local real
estate market, could all positively impact the allowance for loan losses.
Liquidity - Coastal
Deposits totaled $127 million at March 31, 1995, a decrease of $3 million (or
2.3%) from deposits of $130 million at December 31, 1994. This continued
decrease is primarily attributable to the historically low level of deposit
interest rates which have caused depositors to seek alternative investment
options. However, deposit rates do not reprice at exactly the same time as
market interest rate levels change, and therefore the decrease in deposit levels
experienced during the first three months of 1995 should not be relied upon as a
sole indicator of how the Corporation will be affected by subsequent changes in
interest rate levels.
Coastal's liquidity ratio within a one-year timeframe was 26.8% at March 31,
1995 compared to 29.1% at December 31, 1994. An integral part of the
Corporation's liquidity plan is the immediate availability of funds if and when
unforeseen events should so dictate. Coastal has the capability of borrowing
additional funds from the Federal Home Loan Bank ("FHLB") with three-day advance
notice when adequately secured by qualified collateral. Effective as of June 8,
1993, the FHLB notified Coastal that due to "uncertainty regarding the impact of
the FDIC's cross guaranty rights on the future viability of the institution",
FHLB advances to Coastal have been restricted to maturities of six months or
less. As a result of the consummation of the Amended and Restated Settlement
Agreement and the unconditional and irrevocable waiver and release of the cross
guaranty claim, the Corporation requested the removal of the foregoing
restrictions imposed by the FHLB. On May 1, 1995, the Corporation received a
letter from the FHLB stating that it will lengthen the
16
<PAGE>
maturity restriction on new fixed term and fixed rate advances from six months
to one year. Management believes liquidity is adequate as of March 31, 1995.
Liquidity - Parent
On a parent company only ("parent") basis, the Corporation conducts no separate
operations. Its business consists of the business of its banking subsidiary. In
addition to the Note in the principal amount of $9 million issued by the
Corporation to the FDIC on January 31, 1995 in connection with the settlement of
the cross guaranty claim and the consummation of the Amended and Restated
Settlement Agreement, the Corporation's expenses primarily include Delaware
franchise taxes associated with the Corporation's authorized capital stock,
certain legal and various other expenses. Expenses, including certain audit and
professional fees, insurance and other expenses, are allocated to Coastal based
upon the relative benefits derived. At March 31, 1995, the parent's assets
(other than its investment in subsidiaries) consisted of $186,000 in cash and
fixed assets of $11,000.
Payment of dividends by the Corporation on its stock is subject to various
restrictions. Among these restrictions is a requirement under Delaware corporate
law that dividends may be paid by the Corporation out of its surplus or, in the
event there is no surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year.
The Amended and Restated Settlement Agreement, which was consummated on January
31, 1995, prohibits the payment of dividends by the Corporation to its
stockholders on any class of stock (except for a dividend paid in shares of the
Corporation's common stock, or in any other stock of the Corporation) until the
unpaid principal amount and interest under the Note are paid in full in
accordance with the terms thereof.
The principal source of cash for the parent company would normally be a dividend
from Coastal; however, certain restrictions also exist regarding the ability of
Coastal to transfer funds to the Corporation in the form of cash dividends,
loans or advances. The most significant of these are described below.
Maine corporate law generally provides that dividends may only be paid out of
unreserved and unrestricted earned surplus or unreserved and unrestricted net
earnings of the current fiscal year and the next preceding fiscal year taken as
a single period. Maine banking law also imposes certain restrictions, including
the requirement that the Bank establish and maintain adequate levels of capital
as set forth in rules adopted by the Maine Superintendent.
The Amended and Restated Settlement Agreement provides that the Bank may not
declare any dividends, except as necessary to pay the operating expenses of the
Corporation as approved from time to time by both the FDIC and the Maine
Superintendent. The Amended and Restated Settlement Agreement further provides
that such operating expenses may not include any amounts for accrued interest on
the Note.
The Memorandum (effective November 22, 1994) provides that the Bank may not pay
or declare any dividends without the prior written consent of the FDIC and the
Maine Superintendent.
17
<PAGE>
On November 30, 1994 following the receipt of appropriate regulatory approvals,
Coastal paid the Corporation a cash dividend of $175,000 for certain current and
anticipated operating expenses of the Corporation.
Capital
The following table sets forth the various capital requirements and capital
ratios of each of the Corporation and Coastal at March 31, 1995.
<TABLE>
<CAPTION>
First Coastal
Coastal Savings
(dollars in thousands) Corporation Bank
- - - - - - -------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 Leverage Ratio
Qualifying capital $ 2,474 $ 11,381
Actual % 1.66% 7.63%
Minimum requirement % 4.00% - 5.00% 6.00%
Average assets for first quarter $149,354 $149,206
Risk Based Capital - Tier 1
Qualifying capital $ 2,474 $ 11,381
Actual % 2.52% 11.56%
Minimum requirement % 4.00% 4.00%
Risk Based Capital - Total
(Tier 1 and Tier 2)
Qualifying capital $ 3,733 $ 12,641
Actual % 3.80% 12.85%
Minimum requirement % 8.00% 8.00%
Gross risk weighted assets $98,344 $98,409
</TABLE>
The Memorandum of Understanding among the Board of Directors of Coastal, the
Regional Director of the Boston Region of the FDIC and the Maine Superintendent
requires that Coastal maintain a leverage capital ratio of 6% or greater.
Coastal's leverage capital ratio at March 31, 1995 was 7.63%. As a result of the
consummation of the Amended and Restated Settlement Agreement on January 31,
1995, including the issuance of the Note in the principal amount of $9 million
to the FDIC, the Corporation recognized an extraordinary charge to earnings of
$9 million in the financial statements for the year ended December 31, 1994. In
addition, as a result of the settlement the Corporation no longer complies with
the Federal Reserve's capital adequacy guidelines. The Corporation received a
letter from the Federal Reserve Bank of Boston dated November 3, 1994, which,
among other things, confirmed that the Federal Reserve has no objection to the
settlement between the Corporation and the FDIC. In such letter, the Federal
Reserve further states that in determining whether any supervisory response is
warranted on a going forward basis, the Federal Reserve will closely monitor the
18
<PAGE>
efforts of the Corporation in fulfilling its obligations under the terms of the
Amended and Restated Settlement Agreement and the attendant effect such actions
will have on restoring the capital of the Corporation.
The stockholders of the Corporation have approved a proposal to effect a one for
ten reverse stock split with respect to the issued and outstanding common stock
of the Corporation and to provide for the payment of cash in lieu of fractional
shares otherwise issuable in connection therewith.
Upon consummation of the reverse stock split, the number of outstanding shares
of common stock of the Corporation will be reduced from 6,006,745 shares
(determined at the close of business on April 27, 1995) to approximately 600,675
shares (subject to adjustment due to the purchase of fractional shares).
Fractional shares which would otherwise be issued as a result of the reverse
stock split will be purchased by the Corporation.
The effective date of the reverse stock split has not yet been determined;
however, management currently expects the reverse stock split to be effected
during the second quarter of 1995.
The following table reflects the effect of the reverse stock split on historical
earnings per share for the three months ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1995 1994
- - - - - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average shares outstanding (historical) 6,006,745 6,006,745
Approximate weighted average shares outstanding after
reverse stock split 600,675 600,675
Net income (loss) per share $.42 $(.40)
</TABLE>
The Corporation's stockholders' equity at March 31, 1995 was $2.4 million
compared to $2 million at December 31, 1994. The $397,000 increase is
attributable to (i) net income for the three months ended March 31, 1995 of
$225,000, and (ii) the decrease in the unrealized loss on investment securities
which are classified "Available for Sale," totaling $172,000. The Corporation
suspended the quarterly payment of cash dividends to its stockholders in the
fourth quarter of 1989 and has not paid any cash dividends to its stockholders
since that time. Pursuant to the Amended and Restated Settlement Agreement, no
dividends may be paid to the Corporation's stockholders until the unpaid
principal and interest under the Note payable to the FDIC is paid in full.
19
<PAGE>
RESULTS OF OPERATIONS
Net Income(Loss)
The net income for the three months ended March 31, 1995 was $225,000, as
compared to a loss of $243,000 for the same period last year. Excluding $73,000
in interest expense associated with the Corporation's $9 million Note to the
FDIC, net income for the period would have been $297,000. A contributing factor
to the Corporation's improved earnings is the increase in the Corporation's net
interest income of $178,000 for the three months ended March 31, 1995 as
compared to the same period last year. For the quarter ended March 31, 1994,
Other Expenses included $355,000 of non-recurring expenses associated with the
settlement of the FDIC's cross guaranty claim against the Bank. Excluding these
settlement related expenses, the Corporation would have reported a $112,000
profit for the quarter ended March 31, 1994.
Net Interest Income
Net interest income for the three months ended March 31, 1995 was $1.5 million,
an increase of $.2 million as compared to $1.3 million for the three months
ended March 31, 1994. This increase is mainly attributable to a rising interest
rate environment throughout 1994 and which resulted in an increase in rates on
existing adjustable rate loans and investments. Notwithstanding the increased
rate environment that was experienced throughout 1994, the Corporation's rates
paid on deposit transaction accounts remained relatively unchanged, thereby
increasing the spread on Earning Assets versus Sources of Funds, positively
impacting net interest income. However, Earning Assets and Sources of Funds do
not reprice in exactly the same manner as interest levels change. Because
interest rate increases on deposit accounts tend to lag behind increases in
market rates, management expects an increase in rates paid on deposit
transaction accounts throughout 1995. Another factor contributing to the
increase in net interest income was the investment of interest earning deposits
in higher earning securities of approximately $8 million.
Provision for Loan Losses
The provision for loan losses for the three months ended March 31, 1995 was
$100,000 as compared to $67,000 for the three months ended March 31, 1994. In
1992 and 1991, significant provisions were made to recognize the perceived
deteriorating real estate market. In 1993, there was present a more stable
environment. Also, many of the previously recognized loan problems were worked
out or reclassified to a foreclosed status. In addition, loan balance levels
declined in 1993 and 1994 compared to prior years. There remains the continued
need to provide for the provision for loan losses primarily due to the
uncertainty in the Maine economy and the potential adverse effect on real estate
values and the ability of borrowers to repay loans.
The Corporation continues to hold a large concentration of commercial real
estate loans that remain vulnerable to loan default. Deterioration in the local
economy or real estate market, or
20
<PAGE>
upward movements in interest rates, could have an adverse impact on the loan
portfolio that could result in the need for increased provision for loan losses.
The Corporation's policy is to provide an allowance by charging operations for
estimated losses based on periodic evaluations of the loan portfolio and current
economic trends. All of the Corporation's commercial real estate loans are
located in the depressed markets in Maine. Accordingly, the ultimate
collectibility of a substantial portion of the Corporation's loan portfolio is
particularly susceptible to changes in local market conditions. Management has
seen indications that the depressed Maine real estate market and the economy in
general have stabilized.
Management believes that the allowance for losses on loans is adequate at March
31, 1995 and that foreclosed real estate is recorded at the lower of cost or
estimated fair value. While management uses available information to recognize
losses on loans, real estate owned and in-substance repossessions, future
additions to the allowance and writedowns may be necessary based on changes in
the financial condition of various borrowers, new information that becomes
available relative to various borrowers and loan and/or real estate collateral
and changes in economic conditions in New England. In addition, various
regulatory authorities, as an integral part of their examination process,
periodically review the Corporation's allowance for losses on loans and the
carrying value of real estate owned and in-substance repossessions. Such
authorities may require the Corporation to recognize additions to the allowance
for losses on loans and/or write down the carrying value of real estate owned
and in-substance repossessions based on their judgments of information available
to them at the time of their examination.
Other Operating Income
Other operating income for the three months ended March 31, 1995 was $168,000 as
compared to $231,000 for the same period in 1994. This decrease is primarily the
result of a decrease in gain on sales of mortgage loans as a result of a steady
reduction in loan origination volume caused by rising interest rates experienced
during 1994; consequently, fewer mortgage backed securities were sold.
Other Operating Expenses
Other operating expenses were $1.4 million and $1.8 million for the three months
ended March 31, 1995 and 1994, respectively. The $.4 million decrease is
attributable to three items: (i) a reduction in settlement agreement related
expenses of approximately $300,000, (ii) a reduction in occupancy expense of
$56,000 as a result of the closure of two banking offices in the second and
third quarters of 1994, and (iii) the reduction of other real estate owned
expense of $140,000, which includes a $50,000 expense accrual posted in the
fourth quarter of 1994 and reversed in the first quarter of 1995, and additional
revenues on REO properties being received in 1995 as compared to 1994.
21
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Information required by this Item is set forth under Note A -
Regulatory Matters on pages 6 to 8 hereof, which is incorporated herein
by reference.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1994 Annual Meeting of Stockholders of the Corporation was held on
January 31, 1995.
(b) Not applicable.
(c) The results of the voting at the Annual Meeting of Stockholders were as
follows:
(i) Amended and Restated Settlement Agreement, dated as of
November 23, 1994. For: 2,617,443; Against: 36,660; Abstain:
29,375; Broker Non-Votes: 1,896,646
(ii) One for Ten Reverse Stock Split pursuant to an amendment to
the Corporation's Certificate of Incorporation.
For: 3,810,596; Against: 76,921; Abstain: 23,867
(iii) Election of Directors:
Nominee For Withhold Authority
------- --- ------------------
Normand E. Simard 4,545,187 34,937
Edward K. Simensky 4,545,187 34,937
(iv) Ratification of Coopers & Lybrand as Independent Public
Accountants. For: 4,544,595; Against: 14,325; Abstain: 24,204
(d) Not applicable.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii) Amended and Restated Bylaws of the Corporation
27 Financial Data Schedule
(b) Reports on Form 8-K
(i) A report on Form 8-K dated January 31, 1995 was filed to
report that following stockholder approval, the Corporation,
the Bank and the FDIC consummated the Amended and Restated
Settlement Agreement with the FDIC pursuant to which the FDIC
unconditionally and irrevocably waived and released the cross
guaranty claim against the Bank. In connection with the
consummation of the Amended and Restated Settlement Agreement,
the Corporation issued to the FDIC a non-recourse promissory
note in the principal amount of $9 million.
(ii) A report on Form 8-K dated February 24, 1995 was filed to
report that James H. Whittaker informed the Boards of
Directors of the Corporation and the Bank of his intention to
resign as Chairman, President and Chief Executive Officer of
the Corporation and the Bank.
23
<PAGE>
FIRST COASTAL 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.
FIRST COASTAL CORPORATION
Date: May 12, 1995 By: /S/ Gregory T. Caswell
----------------------
Gregory T. Caswell
President and Chief
Executive Officer
Date: May 12, 1995 By: /S/ Dennis D. Byrd
------------------
Dennis D. Byrd
Treasurer
(Principal Financial and
Accounting Officer)
24
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
FIRST COASTAL CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the city of Wilmington, County of New Castle, State of Delaware.
Section 2. Other 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.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware, as shall be designated from time
to time by the board of directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of shareholders shall
be held at such date and hour as shall be designated from time to time by the
board of directors within thirteen months subsequent to the later of the date of
incorporation or the last annual meeting of shareholders and as shall be stated
in the notice of the meeting, at which meetings the shareholders shall elect by
a plurality vote a board of directors and transact such other business as may
properly be brought before the meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than 20 nor more than 50
days before the date of the meeting. The notice shall also set forth the purpose
or purposes for which the meeting is called.
Section 3. Business at Annual Meeting. At an annual meeting of the
shareholders, 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 (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a
shareholder.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 45 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder 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
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) 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, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. No later than the tenth day following the date of
receipt of a shareholder notice pursuant to this Section 3, the chairman of the
board of directors of the Corporation shall, if the facts warrant, determine and
notify in writing the shareholder submitting such notice that such notice was
not made in accordance with the time limits and/or other procedures prescribed
by the bylaws. If no such notification is mailed to such shareholder within such
ten-day period, such shareholder notice containing a matter of business shall be
deemed to have been made in accordance with the provisions of this Section 3.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 3.
<PAGE>
Section 4. Special Meetings. Special meetings of shareholders for any
purpose may be called only as provided in the Certificate of Incorporation.
Written notice of a special meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than 20 nor more than 50 days before the date of the meeting to
each shareholder entitled to vote at such meeting.
Section 5 Quorum. The holders of one-third of the capital 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 shareholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder entitled to vote at the
meeting.
Section 6. Voting. Except as otherwise required by law, the Certificate
of Incorporation or these bylaws, any matter brought before any meeting of
shareholders shall be decided by the affirmative vote of the majority of the
votes cast on the matter. Each shareholder represented at a meeting of
shareholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such shareholder.
Section 7. List of Shareholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of shareholders, a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the shareholders entitled to examine the list
required by Section 7 of this Article II or to vote in person or by proxy at any
meeting of shareholders.
- 2 -
<PAGE>
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. Proxies solicited on behalf of the board of directors shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
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.
Section 10. Voting of Shares in the Name of Two or More Persons. If
shares or other securities having voting power stand of record in the names of
two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the secretary of the Corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect: (1) if only one votes, his act binds
all; (2) if more than one vote, the act of the majority so voting binds all; (3)
if more than one vote, but the vote is evenly split on any particular matter,
each faction may vote the securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to the Court of Chancery
of the State of Delaware or such other court as may have jurisdiction to appoint
an additional person to act with the persons so voting the shares, which shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If the instrument so filed shows that any such tenancy
is held in unequal interests, a majority or even-split for the purposes of this
subsection shall be a majority or even-split in interest.
Section 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name. Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer into his name if authority so to do
is contained in an appropriate order of the court or other public authority by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. If the board of directors so appoints such inspectors, that appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, and on the request of
not less than ten percent of the votes represented at the meeting shall, make
such appointments at the meeting. In case any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting or by the
chairman of the board or the president.
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Unless otherwise prescribed by law, the duties of such inspectors shall
include: determining the number of shares of stock entitled to vote, the voting
power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or the vote with fairness to all shareholders.
Section 13. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules prescribed by the presiding officer of the
meeting, unless otherwise prescribed by law or these bylaws. The board of
directors shall designate, when present, either the chairman of the board or the
president to preside at such meetings.
ARTICLE III
DIRECTORS
Section 1. The number of directors shall be four. Directors need not be
residents of the State of Delaware.
Directors shall be elected only by shareholders at annual meetings of
shareholders, other than the initial board of directors and except as provided
in Section 2 of this Article III in the case of vacancies and newly created
directorships. Each director elected shall hold office for the term for which he
is elected and until his successor is elected and qualified or until his earlier
resignation or removal; provided, however, that no person of an age 70 years or
older shall be eligible for election, reelection, appointment or reappointment
to the board of directors and no director becoming 70 years of age shall
continue to serve as such beyond the earlier of the annual meeting of
shareholders immediately following his attainment of such age or the election of
his successor by the board of directors prior to such annual meeting of
shareholders.
Section 2. Classes; Terms of Office; Vacancies. The board of directors
shall divide the directors into three classes; and, when the number of directors
is changed, shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, further, that no
decrease in the number of' directors shall affect the term of any director then
in office. At each annual meeting of shareholders, directors elected to succeed
those whose terms are expiring shall be elected for a term of office to expire
at the third succeeding annual meeting of shareholders and when their respective
successors are elected and qualified; provided, however, that a director elected
by the board of directors pursuant to Section 1 of this Article III to succeed a
director who has attained 70 years of age shall serve until the annual meeting
of shareholders immediately following such election.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled, for the unexpired term, by
the concurring vote of a majority of the directors then in office, whether or
not a quorum, and any director so chosen shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the board of directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these bylaws
directed or required to be exercised or done by the shareholders. The board of
directors shall annually elect, from its members, a chairman of the board who
shall preside at its meetings and shall annually elect, from its members or
otherwise, a president.
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Section 4. Meetings. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The annual regular meeting of the board of directors shall be held
without other notice than this bylaw immediately after, and at the same place
as, the annual meeting of the shareholders. Additional regular meetings of the
board of directors may be held with or without notice at such time and at such
place as may from time to time be determined by the board of directors. Special
meetings of the board of directors may be called by the chairman of the board,
the president or a majority of directors then in office. Notice thereof stating
the place, date and hour of the meeting shall be given to each director either
by mail or by courier at the address at which the director is most likely to be
reached not less than 48 hours before the date of the meeting, or by telephone
or telegram on 24 hours notice.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these bylaws, 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. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions Without Meeting. 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 the members of the board of directors 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 of directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Members of the
board of directors of the Corporation, or any committee designated by the board
of directors, may participate in a meeting of the board of directors or such
committee by means of a 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 Section 7 shall constitute
presence in person at such meeting but shall not constitute attendance for the
purpose of compensation pursuant to Section 8 of this Article III.
Section 8. Compensation. The board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
reasonable expenses, if any, of attendance at each meeting of the board of
directors and may be paid a reasonable fixed sum for actual attendance at each
meeting of the board of directors. Directors, as such, may receive a stated
salary for their services. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 9. Interested Directors. 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 contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
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 (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) 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 shareholders. 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.
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Section 10. Corporate Books. The directors may keep the books of the
Corporation outside of the State of Delaware at such place or places as they may
from time to time determine.
Section 11. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any matter is
taken shall be presumed to have assented to the action taken unless his dissent
or abstention shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation within five days after the
date he receives a copy of the minutes of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
Section 12. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the chairman of the board or the
president of the Corporation. Unless otherwise specified therein such
resignation shall take effect upon receipt thereof by the chairman of the board
or the president. More than three consecutive absences from regular meetings of
the board of' directors, unless excused by resolution of the board of directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the board of directors.
Section 13. Nominees. Only persons who are nominated in accordance with
the procedures set forth in this Section 13 shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of shareholders by or at the direction of
the board of directors or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 13. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 45 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder 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 meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A, or any
successor regulation, under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected) and
(b) as to the shareholder giving notice (i) the name and address, as they appear
on the Corporation's books, of such shareholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such shareholder. At
the request of the board of directors, any person nominated by the board of
directors for election as a director shall furnish to the secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No later than the tenth day
following the date of receipt of a shareholder nomination submitted pursuant to
this Section 13, the chairman of the board of directors of the Corporation
shall, if the facts warrant, determine and notify in writing the shareholder
making such nomination that such nomination was not made in accordance with the
time limits and/or other procedures prescribed by the bylaws. If no such
notification is mailed to such shareholder within such ten-day period, such
nomination shall be deemed to have been made in accordance with the provisions
of this Section 13. No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Section 13.
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ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more other directors to constitute an executive committee. The chairman
of the board shall serve as the chairman of the executive committee, unless a
different director is designated as chairman by the board of directors. The
designation of any committee pursuant to this Article IV and the delegation of
authority thereto shall not operate to relieve the board of directors, or any
director, of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, 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 which may require it, except to the extent, if any, that
such powers and authority shall be limited by the resolution appointing the
executive committee; and except also that the executive committee shall not have
the power or authority of the board of directors with reference to amending the
Certificate of Incorporation; adopting an agreement of merger or consolidation;
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets; recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution;
amending the bylaws of the Corporation; filling a vacancy or creating a new
directorship; or approving a transaction in which any member of the executive
committee, directly or indirectly, has any material beneficial interest; and
unless the resolution or bylaws expressly so provide, the executive committee
shall not have the power or authority to declare a dividend or to authorize the
issuance of stock or securities convertible into or exercisable for stock.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next annual regular meeting of the board of directors following his designation
and until his successor is designated as a member of the executive committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by the chairman of the executive committee, any two members thereof or
the chief executive officer upon not less than 24 hours' notice stating the
place, date and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee and the writing or
writings are filed with the minutes of the proceedings of the committee.
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Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the chairman of the board or the president of the Corporation. Unless
otherwise specified therein, such resignation shall take effect upon receipt.
The acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee may fix its own rules of
procedure which shall not be inconsistent with these bylaws. It shall keep
regular minutes of its proceedings and report the same to the full board of
directors for its information at the meeting thereof held next after the
proceedings shall have been taken.
Section 10. Other Committees. The board of directors by resolution
shall establish an audit committee and a stock option committee, composed in
each case only of directors who are not employees of the Corporation or any
subsidiary thereof. The board of directors by resolution may also establish such
other committees composed of directors as they may determine to be necessary or
appropriate for the conduct of the business of the Corporation and may prescribe
the duties and powers thereof.
ARTICLE V
OFFICERS
Section 1. Positions. The officers of the Corporation shall include a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may also
designate the chairman of the board as an officer. The president shall be the
chief executive officer unless the board of directors designates the chairman of
the board as the chief executive officer. The offices of the secretary and
treasurer may be held by the same person and a vice president may also be either
the secretary or the treasurer. The board of directors may designate one or more
vice presidents as executive vice president or senior vice president. The board
of directors may also elect or authorize the appointment of such other officers
as the business of the Corporation may require. The officers shall have such
authority and perform such duties as the board of directors may from time to
time authorize or determine. In the absence of action by the board of directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
Section 2. President. Except to the extent that the board of directors
shall have delegated all or a portion of such authority to the chairman of the
board or one or more other officers, the president, or in his absence a director
or other officer of the Corporation appointed by the board of directors, shall
preside at all meetings of the shareholders, and the president shall have
general charge and direction of the business of the Corporation and shall
perform such other duties as are properly required of him by the board of
directors, the certificate of incorporation or these bylaws.
Section 3. Vice Presidents. In the absence of the president or in the
event of his inability or refusal to act, the vice president (or in the event
there may be more than one vice president, the vice presidents in the order
designated, or in the absence of any designations, 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.
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Section 4. Secretary. The secretary shall keep the minutes of the
meetings of shareholders and the board of directors and shall give notice of all
such meetings as required by these bylaws. The secretary shall have custody of
such minutes, the corporate seal and the stock certificate records of the
Corporation, except to the extent some other person is authorized to have
custody and possession thereof by resolution of the board of directors.
Section 5. Treasurer. The treasurer shall keep the fiscal accounts of
the Corporation, including an account of all moneys received or disbursed.
Section 6. Election. The board of directors at its first meeting held
after the annual meeting of shareholders shall elect annually the officers of
the Corporation who shall exercise such powers and perform such duties as shall
be set forth in these bylaws and as determined from time to time by the board of
directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any vacancy occurring in any office of the Corporation shall be filled
by the board of directors. The salaries of all officers of the Corporation shall
be fixed by the board of directors.
Section 7. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal, other than for cause, shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 8. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the president or any vice president and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The board of directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE VI
STOCK
Section 1. Form of 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 (i) the chairman of the board or the president and (ii) by
the secretary or an assistant secretary of the Corporation, representing the
number of shares registered in certificate form.
Section 2. Signatures. Any or all of the signatures on a certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Section 3. Lost Certificates. The president or any vice president may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the president or any vice president may, in his discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as such officer may require and/or to give the Corporation a
bond in such sum as he may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
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Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Record Date. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, 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 50 days nor less than 20 days before the date
of such meeting, nor more than 50 days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders 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. Beneficial Owners. 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 shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not the Corporation shall
have express or other notice thereof, except as otherwise required by law.
ARTICLE VII
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these bylaws to be given to any director, member
of a committee or shareholder, such notice may be given by mail, addressed to
such director, member of a committee or shareholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when, the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these bylaws to be given to any director,
member of a committee or shareholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting with 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 shareholders, directors, or members of a committee of directors need be
specified in any other waiver of notice unless so required by the Certificate of
Incorporation or these bylaws.
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation and
the laws of the State of Delaware, may be declared by the board of directors at
any regular or special meeting, and may be paid in cash, in property or in
shares of capital stock of the Corporation.
Subject to the provisions of the General Corporation Law of the State
of Delaware, such dividends may be paid either out of surplus, out of the net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may from time to time designate.
Section 3. Fiscal Year; Annual Audit. The fiscal year of the
Corporation shall end on December 31 of each year. The Corporation shall be
subject to an annual audit as of the end of its fiscal year by independent
public accountants appointed by and responsible to the board of directors. The
appointment of such accountants shall be subject to annual ratification by the
shareholders.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The Seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
ARTICLE IX
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article IX, the Corporation shall indemnify, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended, any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, and any appeal therein, whether
civil, criminal, administrative, arbitrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact that he is
or was a director, officer, trustee, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
trustee, employee or agent of another corporation, association, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
and any appeal therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding, and any appeal therein, by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article IX, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, trustee, employee or agent of the
Corporation, or is or was
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serving at the request of the Corporation as a director, officer, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against amounts paid in settlement and expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; provided, however, that no indemnification shall be made
against expenses in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation or against
amounts paid in settlement unless and only to the extent that there is a
determination (as set forth in Section 3 of this Article IX) that despite the
adjudication of liability or the settlement, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses or amounts paid in settlement.
Section 3. Authorization of Indemnification. Any indemnification under
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because such director, officer, trustee, employee or agent
has met the applicable standard of conduct set forth in Section 1 or Section 2
of this Article IX and, if applicable, is fairly and reasonably entitled to
indemnity as set forth in the proviso in Section 2 of this Article IX, as the
case may be. Such determination shall be made (i) by the directors who were not
parties to such action, suit or proceeding, even though less than a quorum, (ii)
if there are no such directors, or, if such directors so direct, by independent
legal counsel in a written opinion, or (iii) by the shareholders. To the extent,
however, that a director, officer, trustee, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific cases. No director, officer, trustee, employee or
agent of the Corporation shall be entitled to indemnification in connection with
any action, suit or proceeding voluntarily initiated by such person unless the
action, suit or proceeding was authorized by a majority of the entire board of
directors.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article IX, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any association, partnership, joint venture, trust or
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent. The provisions
of this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article IX, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director,
officer, trustee, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 1 and 2 of this Article IX. The basis of
such indemnification by a court shall be a determination by such court that
indemnification of the director, officer, trustee, employee or agent is proper
in the circumstances because he has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IX, as the case may be. Notice of any
application for
- 12 -
<PAGE>
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. Notwithstanding any of the
foregoing, unless otherwise required by law, no director, officer, trustee,
employee or agent of the Corporation shall be entitled to indemnification in
connection with any action, suit or proceeding voluntarily initiated by such
person unless the action, suit or proceeding was authorized by a majority of the
entire board of directors.
Section 6. Expenses Payable in Advance. Expenses incurred in connection
with a threatened or pending action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee or agent to repay such amount if it shall be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 7. Contract, Non-exclusivity and Survival of Indemnification.
The indemnification provided by this Article IX shall be deemed to be a contract
between the Corporation and each director, officer, employee and agent who
serves in such capacity at any time while this Article IX is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. Further, the indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any certificate of incorporation,
bylaw, agreement, contract, vote of shareholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that, subject to the limitation in Section 3 of this Article IX
concerning voluntary initiation of actions, suits or proceedings,
indemnification of the persons specified in Sections 1 and 2 of this Article IX
shall be made to the fullest extent permitted by law. The provisions of this
Article IX shall not be deemed to preclude the indemnification of any person who
is not specified in Sections 1 or 2 of this Article IX but whom the Corporation
has the power or obligation to indemnify under the provisions of the law of the
State of Delaware. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, trustee,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, association, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against such liability
under the provisions of this Article IX.
Section 9. Meaning of Corporation for Purposes of Article IX. For
purposes of this Article IX, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
- 13 -
<PAGE>
ARTICLE X
AMENDMENTS
The board of directors or the shareholders may from time to time amend
the bylaws of the Corporation. Such action by the board of directors shall
require the affirmative vote of at least two thirds of the directors then in
office at a duly constituted meeting of the board of directors called for such
purpose. Such action by the shareholders shall require the affirmative vote of
at least two thirds of the total votes eligible to be voted at a duly
constituted meeting of shareholders called for such purpose.
* * * * * *
The Amended and Restated Bylaws of the Corporation were originally
approved and adopted by the board of directors of the Corporation on July 28,
1994.
Sections 1 and 3 of ARTICLE IX were amended on December 21, 1994.
Sections 1 and 3 of ARTICLE III and Section 1 of ARTICLE V were amended
effective as of March 31, 1995.
Section 1 of ARTICLE III was amended on April 26, 1995.
<PAGE>
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