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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from _________ to __________
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Commission File Number: 0-15938
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Farmstead Telephone Group, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 06-1205743
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
22 Prestige Park Circle
East Hartford, CT 06108
(Address of principal executive offices) (Zip Code)
(860) 610-6000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 1998, there were 3,264,579 shares of the issuer's $.001 par
value Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands, except number of shares) 1998 1997
- ------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,176 $ 1,102
Accounts receivable, less allowance for doubtful accounts 4,787 5,077
Inventories 3,354 2,583
Net assets of discontinued operations (Note 3) 486 560
Other current assets 274 181
-------------------------
Total current assets 10,077 9,503
Property and equipment, net 926 935
Other assets 345 391
-------------------------
Total assets $ 11,348 $ 10,829
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,199 $ 1,560
Borrowings under inventory financing agreement (Note 2) 689 889
Current portion of long-term debt 70 69
Accrued compensation and benefits 415 480
Other current liabilities 122 65
-------------------------
Total current liabilities 3,495 3,063
Long-term debt (Note 2) 2,273 1,997
-------------------------
Total liabilities 5,768 5,060
-------------------------
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares authorized;
no shares issued or outstanding -- --
Common stock, $0.001 par value; 30,000,000 shares authorized;
3,264,579 shares issued and outstanding 3 3
Additional paid-in capital 12,200 12,196
Accumulated deficit (6,623) (6,430)
-------------------------
Total stockholders' equity 5,580 5,769
-------------------------
Total liabilities and stockholders' equity $ 11,348 $ 10,829
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 5,620 $ 4,455
Cost of revenues 4,259 3,396
------------------
Gross profit 1,361 1,059
Selling, general and administrative expenses 1,355 1,149
------------------
Operating income (loss) 6 (90)
Interest expense 61 39
Equity in losses of unconsolidated subsidiaries -- 33
Other income (31) (36)
------------------
Loss from continuing operations before income taxes (24) (126)
Provision for income taxes 11 5
------------------
Loss from continuing operations (35) (131)
------------------
Discontinued operations (Note 3):
Loss from operations (83) (249)
Provision for estimated costs of disposal (75) --
------------------
Loss from discontinued operations (158) (249)
------------------
Net loss $ (193) $ (380)
==================
Basic net loss per common share:
From continuing operations $ (.01) $ (.04)
From discontinued operations (.05) (.08)
------------------
Basic net loss per common share $ (.06) $ (.12)
==================
Diluted net loss per common share:
From continuing operations $ (.01) $ (.04)
From discontinued operations (.05) (.08)
------------------
Diluted net loss per common share $ (.06) $ (.12)
==================
Basic and diluted weighted average common shares 3,263 3,262
==================
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (193) $ (380)
Adjustments to reconcile net loss to net cash flows provided by
(used in) operating activities:
Depreciation and amortization 72 43
Provision for estimated costs of disposal of discontinued
operation 75 --
Equity in undistributed losses of unconsolidated subsidiaries -- 33
Changes in operating assets and liabilities:
Decrease in accounts receivable 290 192
(Increase) decrease in inventories (771) 278
(Increase) decrease in other assets (48) 20
Increase (decrease) in accounts payable, accrued expenses
and other current liabilities 631 (351)
Increase in net assets of discontinued operations (1) (34)
-------------------
Net cash provided by (used in) operating activities 55 (199)
-------------------
Cash flows from investing activities:
Purchases of property and equipment (62) (584)
Redemptions of coupons -- 25
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Net cash used in investing activities (62) (559)
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Cash flows from financing activities:
Bank and inventory finance borrowings 95 --
Repayments of bank borrowings -- (533)
Repayments of capital lease obligation (18) --
Proceeds from exercise of stock options 4 --
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Net cash provided by (used in) financing activities 81 (533)
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Net increase (decrease) in cash and cash equivalents 74 (1,291)
Cash and cash equivalents at beginning of period 1,102 3,161
-------------------
Cash and cash equivalents at end of period $ 1,176 $ 1,870
===================
Supplemental disclosure of cash flow information: Cash paid during
the period for:
Interest $ 62 $ 39
Income taxes 6 15
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The interim financial statements are presented on a consolidated basis,
consisting of the accounts of Farmstead Telephone Group, Inc. and its
majority-owned subsidiaries (the "Company"). The interim financial statements
presented herein are unaudited, however in the opinion of management reflect
all adjustments, consisting of adjustments that are of a normal recurring
nature, which are necessary for a fair statement of results for the interim
periods presented. As further described in Note 3 contained herein, the Company
has presented its voice processing products business as a discontinued
operation, and certain amounts previously reported for accompanying prior year
periods have been restated for comparison purposes. This Form 10-QSB should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
Note 2. Debt Obligations
Inventory Financing Agreement
-----------------------------
On April 30, 1998 the original one year term of the Company's $2 million
inventory finance agreement with Finova Capital Corporation expired. This
agreement is, however, being continued on a demand basis, and all other terms
and conditions remain the same as the original agreement.
Long-term Debt
--------------
As of March 31, 1998, long-term debt obligations consisted of the
following (in thousands):
<TABLE>
<S> <C>
Bank revolving credit agreement $ 1,992
Obligation under capital lease 351
-------
2,343
Less current portion (70)
-------
Long-term debt $ 2,273
=======
</TABLE>
As of March 31, 1998, the unused portion of the Company's revolving
credit facility was $1,508,000, of which approximately $561,000 was available
under the borrowing formula. The average and highest amounts borrowed under
this credit facility during the three months ended March 31, 1998 were
approximately $2,023,000 and $2,483,000, respectively. Borrowings are dependent
upon the continuing generation of collateral, subject to the credit limit. The
weighted average interest rate on this outstanding debt was 9.9 % for the three
months ended March 31, 1998. As of March 31, 1998, the Company was in violation
of its debt service coverage financial covenant, principally as a result of the
net loss for the period. On May 6, 1998 the Company received a waiver of this
violation from the bank.
Note 3. Discontinued Operations
In December 1997, the Company began actively pursuing divesting itself of
its Cobotyx voice processing products business. Assets expected to be sold
during 1998 include inventories, fixed assets, and certain other current assets
which, as of March 31, 1998 aggregated approximately $486,000, plus all related
technologies developed by the Company, tradenames, and other contract rights.
For the three months ended March 31, 1998 and 1997, voice processing product
revenues approximated $196,000 and $414,000, respectively. The Company recorded
a $158,000 loss for the three months ended March 31, 1998 related to its voice
processing products business, consisting of an $83,000 operating loss and a
$75,000 charge to accrue estimated costs of discontinuing the business.
The $249,000 loss from discontinued operations for the three months ended
March 31, 1997 consisted of a $92,000 loss from the voice processing products
business, and a $157,000 loss from the operations of Farmstead Asset Management
Services, LLC which was sold in December 1997.
The operations of the Cobotyx business unit through its expected second
or third quarter 1998 disposal date are not expected to have a material impact
on the Company's future operating results, and the Company expects to sell
assets at approximately book value. The Company has restated prior year
information contained in the consolidated financial statements and notes
thereto as a result of the discontinued operations presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net Loss
The Company recorded a net loss of $193,000 for the three months ended
March 31, 1998, consisting of a $35,000 loss from continuing operations, and a
$158,000 loss from discontinued operations. This compares to a net loss of
$380,000 for the three months ended March 31, 1997, consisting of a $131,000
loss from continuing operations, and a $249,000 loss from discontinued
operations.
The loss from discontinued operations in the 1998 period consisted of an
$83,000 operating loss from the voice processing products business, due to
declining revenues, and a $75,000 charge to accrue estimated costs of
discontinuing the business. The $249,000 loss from discontinued operations for
the three months ended March 31, 1997 consisted of a $92,000 loss from the
voice processing products business, and a $157,000 loss from the operations of
Farmstead Asset Management Services, LLC which was sold in December 1997.
In December 1997, the Company began actively pursuing divesting itself of
its Cobotyx voice processing products business. Assets expected to be sold
during 1998 include inventories, fixed assets, and certain other current assets
which, as of March 31, 1998 aggregated approximately $486,000, plus all related
technologies developed by the Company, tradenames, and other contract rights.
For the three months ended March 31, 1998 and 1997, voice processing product
revenues approximated $196,000 and $414,000, respectively.
The operations of the Cobotyx business unit through its expected second
or third quarter 1998 disposal date are not expected to have a material impact
on the Company's future operating results, and the Company expects to sell
assets at approximately book value.
Discussion of the Results of Continuing Operations
Revenues
Revenues from continuing operations for the three months ended March 31,
1998 were $5,620,000, an increase of $1,165,000 or 26% from the comparable 1997
period. The increase was attributable to a 33% increase in end user parts and
system sales, principally as a result of expanded sales territories in
connection with the Company's appointment by Lucent technologies as an
Authorized Refurbisher of Classic LucentTM business telephone equipment. The
revenue increase was partially offset by a 32% decline in service revenues.
Parts and system sales comprised 94% of consolidated revenues from continuing
operations for the three months ended March 31, 1998 (90% in the comparable
1997 period), while service revenues accounted for 6% of consolidated revenues
from continuing operations in 1998 (10% in 1997).
Gross Profit
The gross profit from continuing operations for the three months ended
March 31, 1998 was $1,361,000, an increase of $302,000 or 29% from the
comparable 1997 period. The gross profit margin was 24% of revenues in both the
1998 and 1997 periods. Increased sales of new equipment to the Company's
associated dealers had the effect of lowering gross profit margins on parts and
systems sales, however the overall 24% gross profit margin was maintained as a
result of lower labor and other overhead costs per revenue dollar.
Selling, General & Administrative Expenses ("SG&A")
SG&A expenses for the three months ended March 31, 1998 were $1,355,000,
an increase of $206,000 or 18% over the comparable 1997 period. SG&A expenses
were 24% of revenues for the three months ended March 31, 1998, compared to 26%
for the comparable 1997 period. The increase in SG&A during the current year
period was principally attributable to (i) higher levels of employment and
associated employee costs, as the Company increased its sales, marketing,
customer and technical support resources and expanded its sales territories,
and (ii) higher facility rental and occupancy costs, including increased
depreciation expense from fixed assets purchased in connection with the
Company's March 1997 relocation to a larger headquarters in East Hartford,
Connecticut.
Interest Expense
Interest expense for the three months ended March 31, 1998 was $61,000,
an increase of $22,000 or 56% over the comparable 1997 period. The increase was
attributable to higher average bank borrowings, and interest payments under a
capital lease entered into in May, 1997. The increase in interest expense was
partially offset by a lower effective interest rate on the Company's bank
borrowings, which was 9.9% in the current year as compared to 10.5% in 1997.
The effective interest rate on the Company's capital lease obligation was
13.3%.
Other Income
Other income for the three months ended March 31, 1998 was $31,000, as
compared to $36,000 for the three months ended March 31, 1997. Other income in
each period consisted principally of interest earned on the Company's
investments.
Liquidity and Capital Resources
Working capital at March 31, 1998 was $6,582,000 a 2% increase from
$6,440,000 at December 31, 1997. The working capital ratio at each date was
approximately 3 to 1.
Operating activities generated $55,000 during the three months ended
March 31, 1998 principally due to a reduction in accounts receivable and an
increase in accounts payable.
Investing activities used $62,000 during the three months ended March 31,
1998 from the purchase of telecommunications and computer equipment as the
Company expanded and upgraded certain of its fixed assets.
Financing activities generated $81,000 during the three months ended
March 31, 1998, principally from advances under its revolving loan agreement
with First Union National Bank. As of March 31, 1998, the unused portion of the
credit facility was $1,508,000, of which approximately $561,000 was available
under the borrowing formula. The average and highest amounts borrowed under
this credit facility during the three months ended March 31, 1998 were
approximately $2,023,000 and $2,483,000, respectively. Borrowings are dependent
upon the continuing generation of collateral, subject to the credit limit. The
weighted average interest rate on this outstanding debt was 9.9 % for the three
months ended March 31, 1998. As of March 31, 1998, the Company was in violation
of its debt service coverage financial covenant, principally as a result of the
net loss for the period. On May 6, 1998 the Company received a waiver of this
violation from the bank.
On April 30, 1998 the original one year term of the Company's $2 million
inventory finance agreement with Finova Capital Corporation expired. This
agreement is, however, being continued on a demand basis, and all other terms
and conditions remain the same as the original agreement.
The Company believes that it has sufficient capital resources, in the
form of cash and availability under its credit facilities, to satisfy its
present working capital requirements. The Company does not currently have any
material commitments for capital expenditures.
Forward Looking Statements
The Company's prospects are subject to certain uncertainties and risks.
The discussions set forth in this Form 10-QSB contain certain statements which
are not historical facts and are considered forward-looking statements within
the meaning of the Federal Securities laws. The Company's actual results could
differ materially from those projected in the forward-looking statements as a
result of, among other factors, general economic conditions and growth in the
telecommunications industry, competitive factors and pricing pressures, changes
in product mix, product demand, risk of dependence on third party suppliers,
and other risk factors detailed in this report, described from time to time in
the Company's other Securities and Exchange Commission filings, or discussed in
the Company's press releases. In addition, other written or oral statements
which constitute forward-looking statements may be made by or on behalf of the
Company. All forward-looking statements included in this document are based
upon information available to the Company on the date hereof. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities:
The Company hereby incorporates by reference the information set forth in
Note 3 of the consolidated financial statements contained in Part I, Item 1 of
this Form 10-QSB and the discussion contained in Part I, Item 2 of this Form
10-QSB regarding the default under the loan agreement with First Union.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
3c By-laws, as amended April 30, 1998
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FARMSTEAD TELEPHONE GROUP, INC.
Dated: May 7, 1998 /s/ ROBERT G. LAVIGNE
---------------------------------------
Robert G. LaVigne
Executive Vice President,
Chief Financial Officer
Farmstead Telephone Group, Inc.
* * * * *
BY-LAWS
* * * * *
Article I
Offices
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may require.
Article II
Meeting of Stockholders
Section 1. All meetings of the stockholders for the election of
Directors shall be held in the State of Connecticut, at such place as may be
fixed from time to time by the Board of Directors, or at such other 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.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, shall be held during the
month of June on a day other than a legal holiday, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which they shall elect by
written ballot a Board of Directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. 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 ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of the
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of no less than one-third of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the 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 notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period,
or the proxy (a) states that it is irrevocable and (b) is coupled with an
interest sufficient in law to support an irrevocable power. Proxies shall be
signed and dated and filed with the Secretary of the Corporation.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of the stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
Article III
Directors
Section 1. The number of directors, which shall constitute the whole
Board, shall not be less than three nor more than twelve. The first Board shall
consist of three directors. Thereafter, within the limits above specified, the
number of directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified, or until such director's earlier death or resignation or
removal. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the director so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified or until
their earlier death or resignation or removal. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the Corporation shall be managed by or under
the direction of its 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 By-Laws directed or required to
be exercised or done by the stockholders.
Meetings of the Board of Directors
Section 4. The Chairman of the Board, who shall be a director and
designated by the Board of Directors, shall preside at all meetings of the
Board of Directors and have such other power and duties as may be delegated to
the Chairman from time to time by the Board of Directors.
Section 5. The Board of Directors of the Corporation may hold meetings
both regular and special, either within or without the State of Delaware.
Section 6. The first meeting of each newly elected Board of Directors
shall be held as soon as practicable following each annual meeting of
stockholders. The meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the Directors.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 8. Special meetings of the Board of Directors may be called by
the Chairman of the Board or the Chief Executive Officer on at least one day's
notice to each director, either personally or by telephone, by mail, by
telecopy, or by telegram; special meetings shall be called by the Chairman of
the Board or Secretary in like manner and on like notice on the written request
of two directors unless the Board consists of only one Director; in which case
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of the sole director.
Section 9. At all meetings of the Board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum 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 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any Committee thereof may be taken
without a meeting if all members of the Board or Committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or Committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
Committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any Committee, by means of conference telephone or
similar communications equipment, by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Committees of Directors
Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more Committees, each Committee
to consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any Committee, who may
replace any absent or disqualified member at any meeting of the Committee and
may define the number and qualifications, which shall constitute a quorum of
such Committee.
In the absence or disqualification of a member of a Committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
Any such Committee, to the extent provided in the resolution of the Board
of Directors, 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; but no such Committee shall have the power or
authority in reference to amending the Certificate of Incorporation, (except
that a Committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a), fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation) adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease, or exchange of all or substantially all of the Corporation's
property or assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-Laws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such Committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
Certificate of ownership and merger. Such Committee or Committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. The Board of Directors shall have the power to
change the members of any Committee at any time, to fill vacancies and to
discharge any such Committee, either with or without cause, at any time.
Section 13. Each Committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
Compensation of Directors
Section 14. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing Committees may be allowed like
compensation for attending Committee meetings.
Removal of Directors
Section 15. Unless otherwise restricted by the Certificate of
Incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
Article IV
Notices
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, unless otherwise specified, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon pre-paid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telecopy, telegram, and telephone.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, 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.
Article V
Officers
Section 1. The officers of the Corporation shall be chosen by the Board
of Directors and shall be a Chief Executive Officer, a President, a
Vice-President, a Secretary and a Treasurer. The Board of Directors may also
choose additional Vice-Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a Chief Executive Officer, President, one
or more Vice-Presidents, a Secretary and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors or an authorized Committee thereof.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
The Chief Executive Officer
Section 6. The Chief Executive Officer shall preside at all meetings of
the stockholders, shall see that all orders and resolutions of the Board of
Directors are carried into effect, and shall have such other authority and
exercise all of such other powers appertaining to a Chief Executive Officer of
a Corporation, except where otherwise provided for by law. The Chief Executive
Officer may, but need not be, the Chairman of the Board of Directors and/or the
President of the Corporation.
Section 7. The Chief Executive Officer shall execute bonds, mortgages,
and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation.
The President
Section 8. The President shall be the Chief Operating Officer of the
Corporation and shall have such other general and active responsibilities for
management of the business of the Corporation which may be delegated to him
from time to time by the Chief Executive Officer.
Section 8a. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
The Vice-Presidents
Section 9. In the absence of the President or in the event of his
inability or refusal to act in response to reasonable direction from the Board
of Directors after given opportunity to cure, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. The Vice-Presidents shall perform such other duties and
have such other powers as the Board of Directors or the President may from time
to time prescribe.
The Secretary and Assistant Secretary
Section 10. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the Corporation and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
Committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors;
shall be the custodian of all corporate records (other than financial),
including the record of stockholders and also of other books, records, and
papers of the Corporation relating to its organization as a Corporation; shall
see that the reports, statements, and other documents required by law are
properly kept and filed; and shall perform such other duties as may be
prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall have custody of the corporate seal of the Corporation and
he, or an Assistant Secretary, shall have authority to affix, or cause to be
affixed, the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 11. The Assistant Secretary, or if there be more than one,
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act
in response to reasonable direction from the Board of Directors or the
President after given opportunity to cure, perform the duties and exercise the
power of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors or the President may from time to time
prescribe.
The Treasurer and Assistant Treasurers
Section 12. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors.
Section 13. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
Section 14. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 15. The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act in response to reasonable direction from the Board of Directors or the
President after given opportunity to cure, perform the duties and exercise the
powers of the Treasurer and shall perform other such duties and have such other
powers as the Board of Directors may from time to time prescribe.
Article VI
Certificates for Shares
Section 1. The shares of the Corporation shall be represented by a
certificate in a form adopted by the Board of Directors, or shall be
uncertficated. Certificates shall be signed by, or in the name of the
Corporation by, the Chairman or the Vice-Chairman of the Board of Directors, or
the President or a Vice-President and the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the Corporation, and shall carry
the Corporate Seal.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations, or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the Corporation shall issue to represent such
class or series of stock, a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualification, limitations or restrictions of such preferences and/or
rights.
Section 2. 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, Transfer Agent or Registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, Transfer Agent or Registrar at the date of issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the Corporation alleged to have been
lost, stolen, destroyed, or mutilated, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen,
destroyed, or mutilated. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, destroyed, or mutilated certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it 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, destroyed,
or mutilated.
Transfer of Stock
Section 4. Upon surrender to the Corporation or the Transfer Agent
(designated by the Board of Directors) of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to Transfer, it shall be the duty of the Corporation
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Upon receipt of proper
transfer instructions from the registered owner of uncertificated shares such
uncertificated shares shall be cancelled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
Corporation.
Fixing The Record Date
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or 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 sixty nor less than ten days before the date
of such meeting which, for consent in writing without a meeting, shall not
precede nor be more than ten days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors, nor more than
sixty days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Registered Stockholders
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
Article VII
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for such other purposes as
the directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Checks
Section 3. All checks or demands for money and notes of the Corporation
shall be signed or endorsed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Fiscal Year
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
Seal
Section 5. 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 reproduced or otherwise.
Indemnification
Section 6. The Corporation shall indemnify its officers, directors,
employees, and agents, to the extent permitted by the General Corporation Law
of Delaware and the Certificate of Incorporation.
Article VIII
Amendments
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
CERTIFICATION
These By-Laws were adopted by the Corporation as of the 30th day of
April, 1998.
/s/ GEORGE J. TAYLOR, JR.
Chairman of the Board of Directors
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