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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 SEPTEMBER 30, 1999.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number: 0-21184
MICROCHIP TECHNOLOGY INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 86-0629024
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2355 W. CHANDLER BLVD., CHANDLER, AZ 85224-6199
(480) 786-7200
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's
Principal Executive Offices)
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 the filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, as of October 29,
1999:
COMMON STOCK, $.001 PAR VALUE: 50,935,314 SHARES
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<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 and March 31, 1999............................3
Condensed Consolidated Statements of Income -
Three and Six Months Ended September 30, 1999
and September 30, 1998...........................................4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended September 30, 1999 and September 30, 1998.......5
Notes to Condensed Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................9
PART II. OTHER INFORMATION.
Item 4. Submission of Matters to a Vote of Security Holders.............18
Item 6. Exhibits and Reports on Form 8-K................................18
SIGNATURES....................................................................19
EXHIBITS
3.1 By-Laws of Registrant as Amended through August 20, 1999
2
<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
ASSETS
September 30, March 31,
--------- ---------
1999 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 43,943 $ 30,826
Accounts receivable, net 69,673 62,545
Inventories 62,273 67,975
Prepaid expenses 4,508 2,982
Deferred tax asset 35,995 37,129
Other current assets 2,287 1,958
--------- ---------
Total current assets 218,679 203,415
Property, plant and equipment, net 337,484 293,663
Other assets 7,484 8,152
--------- ---------
Total assets $ 563,647 $ 505,230
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term lines of credit $ -- $ 1,509
Accounts payable 55,772 28,489
Current maturities of long-term debt -- 1,403
Current maturities of capital lease obligations 108 413
Accrued liabilities 45,313 49,699
Deferred income on shipments to distributors 33,012 28,607
--------- ---------
Total current liabilities 134,205 110,120
Long-term lines of credit -- 25,000
Long-term pension accrual 888 --
Deferred tax liability 11,313 11,313
Stockholders' equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares;
no shares issued or outstanding -- --
Common stock, $.001 par value; authorized 100,000,000 shares;
issued 53,881,342 and outstanding 50,836,187 shares at September 30, 1999; 54 54
issued 53,881,342 and outstanding 51,232,157 shares at March 31, 1999
Additional paid-in capital 209,227 161,242
Retained earnings 307,568 264,281
Less shares of common stock held in treasury at cost; 3,045,155 shares
at September 30, 1999 and 2,649,185 at March 31, 1999 (99,608) (66,780)
--------- ---------
Net stockholders' equity 417,241 358,797
Total liabilities and stockholders' equity $ 563,647 $ 505,230
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 118,021 $ 103,780 $ 225,731 $ 203,269
Cost of sales 57,244 52,307 110,199 102,538
--------- --------- --------- ---------
Gross profit 60,777 51,473 115,532 100,731
Operating expenses:
Research and development 10,652 10,572 20,959 20,788
Selling, general and administrative 19,076 16,237 35,942 32,291
Special charge -- -- -- 5,500
--------- --------- --------- ---------
29,728 26,809 56,901 58,579
Operating income 31,049 24,664 58,631 42,152
Other income (expense):
Interest income 418 215 660 420
Interest expense (206) (1,049) (468) (1,562)
Other, net 365 229 472 548
--------- --------- --------- ---------
Income before income taxes 31,626 24,059 59,295 41,558
Income taxes 8,538 6,496 16,008 11,221
--------- --------- --------- ---------
Net income $ 23,088 $ 17,563 $ 43,287 $ 30,337
========= ========= ========= =========
Basic net income per share $ 0.45 $ 0.34 $ 0.85 $ 0.59
========= ========= ========= =========
Diluted net income per share $ 0.43 $ 0.33 $ 0.80 $ 0.56
========= ========= ========= =========
Weighted average common
shares outstanding 50,787 50,963 50,879 51,546
========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding 53,916 53,358 53,842 53,940
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
September 30,
----------------------
1999 1998
--------- ---------
Cash flows from operating activities: (Unaudited)
Net income $ 43,287 $ 30,337
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for doubtful accounts 222 201
Provision for inventory valuation 1,120 1,316
Provision for pension accrual 193 476
Depreciation and amortization 31,178 32,336
Amortization of purchased technology 150 150
Deferred income taxes 1,134 (3,263)
Increase in accounts receivable (7,350) (7,806)
Decrease/(increase) in inventories 4,582 (6,363)
Increase in accounts payable and accrued liabilities 22,897 1,104
Change in other assets and liabilities 3,763 825
--------- ---------
Net cash provided by operating activities 101,176 49,313
--------- ---------
Cash flows from investing activities:
Capital expenditures (74,999) (24,157)
--------- ---------
Net cash used in investing activities (74,999) (24,157)
--------- ---------
Cash flows from financing activities:
Net proceeds from (repayments of) lines of credit (26,509) 23,800
Payments on long-term debt (1,403) (1,191)
Payments on capital lease obligations (305) (1,306)
Repurchase of common stock -- (57,890)
Proceeds from sale of stock and put options 15,157 7,038
--------- ---------
Net cash used in financing activities (13,060) (29,549)
--------- ---------
Net increase (decrease) in cash and cash equivalents 13,117 (4,393)
Cash and cash equivalents at beginning of period 30,826 32,188
--------- ---------
Cash and cash equivalents at end of period $ 43,943 $ 27,795
========= =========
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Microchip Technology Incorporated and its wholly-owned subsidiaries
(the "Company"). All intercompany balances and transactions have been eliminated
in consolidation.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the Company's opinion, the
accompanying financial statements include all adjustments of a normal recurring
nature which are necessary for a fair presentation of the results for the
interim periods presented. Certain information and footnote disclosures normally
included in financial statements have been condensed or omitted pursuant to such
rules and regulations. It is suggested that these financial statements be read
in conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended March
31, 1999. The results of operations for the six months ended September 30, 1999
and 1998 are not necessarily indicative of the results to be expected for the
full fiscal year.
(2) ACCOUNTS RECEIVABLE
Accounts receivable consists of the following (amounts in thousands):
September 30, March 31,
1999 1999
------- -------
(unaudited)
Trade accounts receivable $71,175 $64,335
Other 433 570
------- -------
71,608 64,905
Less allowance for doubtful accounts 1,935 2,360
------- -------
$69,673 $62,545
======= =======
(3) INVENTORIES
The components of inventories are as follows (amounts in thousands):
September 30, March 31,
1999 1999
------- -------
(unaudited)
Raw materials $ 6,611 $ 4,491
Work in process 40,156 46,947
Finished goods 22,908 26,531
------- -------
69,675 77,969
Less allowance for inventory valuation 7,402 9,994
------- -------
$62,273 $67,975
======= =======
6
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (amounts in
thousands):
September 30, March 31,
1999 1999
-------- --------
(unaudited)
Land $ 11,545 $ 11,545
Building and building improvements 86,030 77,600
Machinery and equipment 372,564 365,947
Projects in process 74,988 41,143
-------- --------
545,127 496,235
Less accumulated depreciation
and amortization 207,643 202,572
-------- --------
$337,484 $293,663
======== ========
(5) LINES OF CREDIT
The Company has an unsecured line of credit with a syndicate of U.S. banks
for up to $90,000,000, bearing interest at LIBOR (5.38% at September 30, 1999)
plus 0.325%, expiring in October 2000. At September 30, 1999, the Company had no
borrowings against this line of credit. The Company had utilized $25,000,000 of
the line of credit at March 31, 1999. The agreement between the Company and the
bank syndicate requires the Company to achieve certain financial ratios and
operating results. The Company was in compliance with these covenants as of
September 30, 1999.
The Company has an additional unsecured line of credit with various Taiwan
financial institutions for up to $33,200,000 (U.S. Dollar equivalent). These
borrowings are predominantly denominated in New Taiwan Dollars, bearing interest
at SIBOR (5.33% at September 30, 1999) plus 0.60%, and expiring on various dates
through October 2000. There were no borrowings against this line of credit as of
September 30, 1999, but an allocation of $2,300,000 of the available line was
made, relating to import guarantees associated with the Company's business in
Thailand. At March 31, 1999, the Company had utilized $1,509,000 of this line of
credit.
(6) STOCKHOLDERS' EQUITY
In April 1998, the Company completed a costless collar transaction
comprising call options on 500,000 shares priced at $25.95 and put options on
665,000 shares priced at $25.19. The expiration date of the transaction was
April 28, 1999, resulting in the Company receiving $4,660,000 in cash which was
credited to additional paid-in capital during the three month period ended June
30, 1999. Also in connection with the Company's stock repurchase program, the
Company completed a net share settled forward contract for 2,000,000 shares at
an average price of $29.24. During the six months ended September 30, 1999, the
Company received 1,129,096 shares in conjunction with the net share settled
forward contract. The expiration date of this transaction is May 2000, with
quarterly interim settlement dates.
The Company expects, from time to time, to purchase shares of Common Stock
in connection with its authorized Common Stock repurchase plan.
7
<PAGE>
(7) NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net
income per share (in thousands except per share amounts):
Three Months Ended Six Months Ended
September 30, September 30,
----------------- -----------------
(Unaudited) (Unaudited)
1999 1998 1999 1998
------- ------- ------- -------
Net income $23,088 $17,563 $43,287 $30,337
======= ======= ======= =======
Weighted average common
shares outstanding 50,787 50,963 50,879 51,546
Dilutive effect of stock options 3,129 2,395 2,963 2,394
------- ------- ------- -------
Weighted average common and common
equivalent shares outstanding 53,916 53,358 53,842 53,940
======= ======= ======= =======
Basic net income per share $ 0.45 $ 0.34 $ 0.85 $ 0.59
======= ======= ======= =======
Diluted net income per share $ 0.43 $ 0.33 $ 0.80 $ 0.56
======= ======= ======= =======
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a percentage of
net sales for the periods indicated:
Three Months Ended Six Months Ended
September 30, September 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- -----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 48.5% 50.4% 48.8% 50.4%
----- ----- ----- -----
Gross profit 51.5% 49.6% 51.2% 49.6%
Research and development 9.0% 10.2% 9.3% 10.2%
Selling, general and administrative 16.2% 15.6% 15.9% 15.9%
Special charges -- -- -- 2.7%
----- ----- ----- -----
Operating income 26.3% 23.8% 26.0% 20.7%
===== ===== ===== =====
NET SALES
Microchip's net sales for the quarter ended September 30, 1999 were $118.0
million, an increase of 13.7% over sales of $103.8 million for the corresponding
quarter of the previous fiscal year, and an increase of 9.6% from the previous
quarter's sales of $107.7 million. Net sales for the six months ended September
30, 1999 were $225.7 million, an increase of 10.9% from sales of $203.3 million
in the corresponding period of the previous fiscal year.
The Company's microcontroller product line represents the largest component
of Microchip's total net sales. Microcontrollers and associated application
development systems accounted for 81% and 75% of total net sales in the three
months ended September 30, 1999 and 1998, respectively. The remaining component
of the Company's product sales consists primarily of Serial EEPROM memory
products which accounted for 19% and 25% of net sales in the three months ended
September 30, 1999 and 1998, respectively.
Microcontrollers and associated application development systems accounted
for 80% and 75% of net sales in the six months ended September 30, 1999 and
1998, respectively, while the remaining component consisting of primarily Serial
EEPROM memory products accounted for 20% and 25%, respectively, for the same
periods.
The Company's net sales in any given quarter are dependent upon a
combination of orders received in that quarter for shipment in that quarter
("turns orders") and shipments from backlog. The Company has emphasized its
ability to respond quickly to customer orders as part of its competitive
strategy. From fiscal 1994 through fiscal 1999, this strategy resulted in
customers placing orders with increasingly shorter delivery schedules. Order
visibility began to improve at the end of fiscal 1999 and continued to improve
dramatically during the six months ended September 30, 1999. Opening backlog for
the third quarter of fiscal 2000 grew 61% from opening backlog for the
immediately preceding second quarter of fiscal 2000. As a result of the strong
bookings performance experienced by the Company, the turns order percentage
dropped to 25% for the third fiscal quarter of fiscal 2000 from 65% in the
fourth quarter of fiscal 1999. Notwithstanding the recent improvement in the
turns orders requirement, turns orders are difficult to predict, and there can
be no assurance that the combination of turns orders and
9
<PAGE>
shipments from backlog in any quarter will be sufficient to achieve anticipated
growth in net sales. If the Company does not achieve a sufficient level of turns
orders in a particular quarter, the Company's revenues and operating results
would be adversely affected.
The Company's overall average selling prices for its microcontroller
products have remained relatively constant, while average selling prices of its
memory products have declined over time. While average selling prices for
microcontrollers have remained relatively constant, the Company has experienced,
and expects to continue to experience, pricing pressure in certain
microcontroller product lines, due primarily to competitive conditions. There
can be no assurance that average selling prices for the Company's
microcontroller or other products can be maintained due to pricing pressure in
the future which could adversely affect the Company's operating results.
THE FOREGOING STATEMENTS REGARDING BOOKINGS, TURNS ORDERS, AVERAGE SELLING
PRICES AND PRICING PRESSURES ARE FORWARD LOOKING STATEMENTS. ACTUAL RESULTS
COULD DIFFER MATERIALLY BECAUSE OF THE FOLLOWING FACTORS, AMONG OTHERS: THE
LEVEL OF ORDERS THAT ARE RECEIVED AND CAN BE SHIPPED IN A QUARTER; INVENTORY MIX
AND TIMING OF CUSTOMER ORDERS; COMPETITION AND COMPETITIVE PRESSURES ON PRICING
AND PRODUCT AVAILABILITY; CUSTOMERS' INVENTORY LEVELS, ORDER PATTERNS AND
SEASONALITY; THE CYCLICAL NATURE OF BOTH THE SEMICONDUCTOR INDUSTRY AND THE
MARKETS ADDRESSED BY THE COMPANY'S PRODUCTS; MARKET ACCEPTANCE OF THE PRODUCTS
OF BOTH THE COMPANY AND ITS CUSTOMERS; DEMAND FOR THE COMPANY'S PRODUCTS;
FLUCTUATIONS IN PRODUCTION YIELDS, PRODUCTION EFFICIENCIES AND OVERALL CAPACITY
UTILIZATION; THE COMPANY'S ABILITY TO INCREASE WAFER FABRICATION, TEST AND
ASSEMBLY CAPACITY TO MEET DEMAND; CHANGES IN PRODUCT MIX; AND ABSORPTION OF
FIXED COSTS, LABOR AND OTHER FIXED MANUFACTURING COSTS.
Foreign sales represented 69% and 66% of net sales in the three months
ended September 30, 1999 and 1998, respectively, and 68% and 67% for the six
months ended September 30, 1999 and 1998, respectively. The Company's foreign
sales have been predominantly in Asia and Europe, which the Company attributes
to the manufacturing strength in those areas for consumer, automotive, office
automation, communications and industrial products. The majority of foreign
sales are U.S. Dollar denominated. The Company has entered into and, from time
to time will enter into, hedging transactions in order to minimize exposure to
currency rate fluctuations. Although none of the countries in which the Company
conducts significant foreign operations have had a highly inflationary economy
in the last five years, there is no assurance that inflation rates or
fluctuations in foreign currency rates in countries where the Company conducts
operations will not adversely affect the Company's operating results in the
future.
ADDITIONAL FACTORS AFFECTING OPERATING RESULTS
The Company believes that future growth in net sales of its microcontroller
products and related memory products will depend largely upon the Company's
success in having its current and new products designed into future customer
applications. Design wins typically precede the Company's volume shipment of
products by 15 months or more. The Company also believes that shipment levels of
its proprietary application development systems are an indicator of potential
future design wins and microcontroller sales. The Company continues to achieve a
high volume of design wins and is shipping increased numbers of application
development systems. There can be no assurance that any particular development
system shipment will result in a product design win or that any particular
design win will result in future product sales.
The Company's operating results are affected by a wide variety of other
factors that could adversely impact its net sales and profitability, many of
which are beyond the Company's control. These factors include the Company's
ability to design and introduce new products on a timely basis, market
acceptance of products of both the Company and its customers, customer order
patterns and seasonality,
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<PAGE>
changes in product mix, whether the Company's customers buy from a distributor
or directly from the Company, product performance and reliability, product
obsolescence, the amount of any product returns, availability and utilization of
manufacturing capacity, fluctuations in manufacturing yield, the availability
and cost of raw materials, equipment and other supplies, the cyclical nature of
the semiconductor industry and the markets addressed by the Company's products,
technological changes, competition and competitive pressures on prices, and
economic, political or other conditions in the United States, and other
worldwide markets served by the Company. The Company's products are incorporated
into a wide variety of end products. A slowdown in demand for products which
utilize the Company's products as a result of economic or other conditions in
the worldwide markets served by the Company could adversely affect the Company's
operating results.
GROSS PROFIT
The Company's gross profit was $60.8 million and $51.5 million in the three
months ended September 30, 1999 and 1998, respectively, and $115.5 million and
$100.7 million in the six months ended September 30, 1999 and 1998,
respectively. Gross profit as a percent of sales was 51.5% and 49.6% in the
three months ended September 30, 1999 and 1998, respectively and 51.2% and 49.6%
in the six months ended September 30, 1999 and 1998, respectively. The most
significant factor affecting gross profit percentage was the continued growth of
microcontrollers and associated application development systems versus Serial
EEPROM memory products. The Company continues to transition products to smaller
geometries and to larger wafer sizes to reduce future manufacturing costs. The
Company is continuing to increase its manufacturing capacity for 8-inch wafers
and to transition products to its 0.7 micron process. For fiscal 2000, the
Company expects that products produced on 8-inch wafers will grow from 37% as of
the beginning of the period to 55% at the end of the fiscal year. The Company
anticipates that gross product margins will fluctuate over time, driven
primarily by the product mix of microcontroller products and related memory
products, manufacturing yields, fixed cost absorption, wafer fab loading levels
and competitive and economic conditions.
THE FOREGOING STATEMENTS RELATING TO ANTICIPATED GROSS PRODUCT MARGINS, AND
THE TRANSITION TO HIGHER YIELDING MANUFACTURING PROCESSES AND 8-INCH WAFER
PRODUCTION ARE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER
MATERIALLY BECAUSE OF THE FOLLOWING FACTORS, AMONG OTHERS: FLUCTUATIONS IN
PRODUCTION YIELDS, PRODUCTION EFFICIENCIES AND OVERALL CAPACITY UTILIZATION;
COST AND AVAILABILITY OF RAW MATERIALS; ABSORPTION OF FIXED COSTS, LABOR AND
OTHER DIRECT MANUFACTURING COSTS; THE TIMING AND SUCCESS OF MANUFACTURING
PROCESS TRANSITION; DEMAND FOR THE COMPANY'S PRODUCTS; COMPETITION AND
COMPETITIVE PRESSURE ON PRICING; CHANGES IN PRODUCT MIX; AND OTHER ECONOMIC
CONDITIONS.
Currently the majority of Microchip's assembly operations, and a portion of
its test requirements, are performed by third-party contractors. Reliance on
third parties involves some reduction in the Company's level of control over
these portions of its business. While the Company reviews the quality, delivery
and cost performance of these third-party contractors, there can be no assurance
that reliance on third-party contractors will not adversely impact results in
future reporting periods if any third-party contractor is unable to maintain
assembly and test yields and costs at approximately their current levels.
Third-party assembly and test companies are experiencing high demand and
utilization of their current capacity which could lead to capacity shortages in
the industry. Accordingly, Microchip is in the process of implementing in-house
assembly operations during the current fiscal year and will shift a portion of
its assembly operations from third-party contractors to fill this capacity. By
the end of the current fiscal year, approximately 50% of the Company's assembly
requirements will be performed in its own facilities and the Company will
continue to be dependent on third-party contractors for the balance of its
requirements.
11
<PAGE>
THE FOREGOING STATEMENTS RELATED TO THE COMPANY'S IMPLEMENTATION OF
IN-HOUSE ASSEMBLY OPERATIONS DURING THE CURRENT FISCAL YEAR AND CAPACITY AT
THIRD-PARTY ASSEMBLY AND TEST COMPANIES ARE FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS COULD DIFFER MATERIALLY BECAUSE OF THE FOLLOWING FACTORS, AMONG OTHERS:
TIMING AND SUCCESS OF THE TRANSITION FROM THIRD PARTY ASSEMBLY SERVICES
PROVIDERS TO COMPANY-OWNED ASSEMBLY OPERATIONS; DELAY IN THE FACILITATION OF THE
COMPANY'S IN-HOUSE ASSEMBLY OPERATIONS; DIFFICULTIES IN THE TRANSITION OF THE
ASSEMBLY FUNCTION FROM THIRD PARTIES TO THE COMPANY; AVAILABILITY OF SUFFICIENT
CAPACITY OF THIRD-PARTIES; SUPPLY DISRUPTION; LABOR UNREST; CHANGES IN PRODUCT
MIX; COMPETITIVE PRESSURES ON PRICES; AND OTHER ECONOMIC CONDITIONS.
The Company's reliance on facilities in Thailand and other foreign
countries, and maintenance of substantially all of its finished goods in
inventory overseas, entails certain political and economic risks, including
political instability and expropriation, supply disruption, currency controls
and exchange fluctuations, as well as changes in tax laws, tariff and freight
rates. To date, the Company has not experienced any significant interruptions in
its foreign business operations. Nonetheless, the Company's business and
operating results could be adversely affected if foreign operations or
international air transportation were disrupted.
RESEARCH AND DEVELOPMENT
The Company is committed to continued investment in new and enhanced
products, including its development systems software and in its design and
manufacturing process technology, which are significant factors in maintaining
the Company's competitive position. The dollar investment in research and
development in the current quarter remained constant as compared to the
corresponding quarter of the previous fiscal year, and increased by 3.4% from
the previous quarter. The Company will continue to invest in research and
development, including an investment in process and product development.
The Company's future operating results will depend to a significant extent
on its ability to continue to develop and introduce new products on a timely
basis which can compete effectively on the basis of price and performance and
which address customer requirements. The success of new product introductions
depends on various factors, including proper new product selection, timely
completion and introduction of new product designs, development of support tools
and collateral literature that make complex new products easy for engineers to
understand and use and market acceptance of customers' end products. Because of
the complexity of its products, the Company has experienced delays from time to
time in completing development of new products. In addition, there can be no
assurance that any new products will receive or maintain substantial market
acceptance. If the Company were unable to design, develop and introduce
competitive products on a timely basis, its future operating results would be
adversely affected.
The Company's future success will also depend upon its ability to develop
and implement new design and process technologies. Semiconductor design and
process technologies are subject to rapid technological change, requiring large
expenditures for research and development. Other companies in the industry have
experienced difficulty in effecting transitions to smaller geometry processes
and to larger wafers and, consequently, have suffered reduced manufacturing
yields or delays in product deliveries. The Company believes that its transition
to smaller geometries and to larger wafers will be important for the Company to
remain competitive, and operating results could be adversely affected if the
transition is substantially delayed or inefficiently implemented.
12
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
The Company increased its level of selling, general and administrative
costs to $19.1 million in the current quarter as compared to $16.2 million and
$16.9 million in the corresponding quarters of the previous fiscal year and the
previous quarter, respectively. Selling, general and administrative costs
represented 16.2% of sales in the current fiscal quarter as compared to 15.6% of
sales in both the corresponding quarter of the previous fiscal year and the
previous quarter. As the Company continues to invest in incremental worldwide
sales and technical support resources to promote the Company's embedded control
products, selling, general and administrative costs are expected to rise over
time.
OTHER INCOME (EXPENSE)
Interest income in the three and six months ended September 30, 1999
increased from the corresponding periods of the previous fiscal year as a result
of higher invested cash balances. Interest expense in the three and six months
ended September 30, 1999 decreased from the corresponding periods of the
previous fiscal year as a result of lower borrowing levels of the Company's
credit lines. Other income represents numerous immaterial non-operating items.
PROVISION FOR INCOME TAXES
Provisions for income taxes reflect tax on foreign earnings and federal and
state tax on U.S. earnings. The Company had an effective tax rate of 27% for
each of the six months ended September 30, 1999 and 1998, due primarily to lower
tax rates at its foreign locations. The Company believes that its tax rate for
the foreseeable future will be approximately 27%. THE FOREGOING STATEMENT
REGARDING THE COMPANY'S ANTICIPATED FUTURE TAX RATE IS A FORWARD-LOOKING
STATEMENT. ACTUAL RESULTS COULD DIFFER MATERIALLY BECAUSE OF THE FOLLOWING
FACTORS, AMONG OTHERS: CURRENT TAX LAWS AND REGULATIONS; TAXATION RATES IN
GEOGRAPHIC REGIONS WHERE THE COMPANY HAS SIGNIFICANT OPERATIONS; AND CURRENT TAX
HOLIDAYS AVAILABLE IN FOREIGN LOCATIONS.
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue is the result of various computer programs
being written using two digits rather than four to define the year, thus
potentially rendering them incapable of properly managing and manipulating data
that includes 21st century dates. The potential for Y2K issues which could
reasonably affect the Company could arise from any combination of: a) the
Company's own internal information processing and embedded systems, b) external
systems used by providers of critical goods or services to the Company, c)
customer failures resulting from Y2K problems leading to reductions in demand
from the customer, and d) Y2K issues arising within the products manufactured by
the Company.
THE COMPANY'S CURRENT STATE OF YEAR 2000 READINESS
The Company has implemented a Y2K readiness program and has, as of
September 30, 1999, taken substantial efforts to reasonably insure that its
operations are not subject to substantial adverse Y2K-related impact. This
program began in 1997 with a comprehensive documentation of potential sources of
Y2K exposure which could reasonably impact the Company's business. This initial
source identification phase has been completed.
The subsequent step in the program has been to systematically analyze each
identified potential source of Y2K exposure as to its likelihood of material
effect on the Company's operations and the range of available remediation
actions. In the case of identified systems internal to the Company, analysis
13
<PAGE>
generally involved performing physical tests which simulated performance of the
systems with post-year 2000 dates. For potential sources of Y2K risk which are
external to the Company, such as with the Company's external vendors and
suppliers, the Company has typically relied upon written assurances of Y2K
compliance from those various parties in lieu of physical testing by the
Company's employees. To date, the Company has not identified any Y2K issues
inherent in the products manufactured by the Company. The Company's products,
for the most part, involve hardware integrated circuits which, at the time of
sale to customers, have no inherent date sensitive features. The analysis phase
of the Y2K readiness program has been substantially completed.
The final phase of the Y2K readiness program involves the modification,
replacement or elimination of systems identified in the analysis phase as being
in need of remediation. The Company has completed the remediation process for
substantially all of its identified internal systems, with the primary effort
centered around the total replacement of information systems related to the
Company's sales order process, planning, physical distribution and finance
functions. The majority of this task was completed during the quarter ended
September 30, 1998. The Company has received letters of Y2K compliance from 100%
of its key external vendors, subcontractors and suppliers.
COSTS TO ADDRESS THE YEAR 2000 ISSUE
The total cost associated with required modifications to become Y2K
compliant is not expected to be material to the Company's financial position.
The amount expended through September 30, 1999 was approximately $16.1 million,
primarily associated with the total replacement of the information systems
related to the Company's sales order process, planning, physical distribution
and finance functions which was completed during the quarter ended September 30,
1998. The Company had intended to replace such systems in the ordinary course of
its business and the implementation was not substantially accelerated due to the
Y2K issue. The Company believes that the cost of its Y2K readiness program, as
well as currently anticipated costs to be incurred with respect to Y2K issues of
third parties, will not exceed $16.5 million, inclusive of the costs described
above. It is anticipated that all such expenditures will be funded from
operating cash flows and absorbed as part of the Company's ongoing operations.
MOST REASONABLY LIKELY WORST CASE SCENARIO(S)
Having reasonably determined that the Company's own hardware and software
systems will be substantially Y2K compliant and that its products inherently
have no date code-related issues, management believes that the worst case
scenarios would most likely involve massive, simultaneous Y2K-related
disruptions from the Company's key external raw material suppliers and/or
service providers. For these worst case scenarios to have maximum adverse impact
on the Company, the vendors in question would either need to be sole-source
providers or their peer companies, who would otherwise be potential
second-source suppliers, would also need to undergo similar Y2K-related
disruption. Examples on the material supplier side would include extended and
substantial disruptions of the Company's key raw material suppliers of silicon
wafers, leadframes, specialty chemicals and gasses. Examples on the service
provider side would include extended, substantial disruptions of the Company's
third-party semiconductor assembly firms, telecommunications and
datacommunications services, airfreight and delivery services, or the worldwide
banking system. Examples on the customer side would include Y2K problems
encountered by such customer adversely impacting that customer's business and
reducing the customer's purchases from the Company. The Company believes that
such massive and simultaneous disruptions of the supply of basic goods and
services due to Y2K-related issues are highly unlikely to occur.
14
<PAGE>
CONTINGENCY PLANS
The Company believes that the steps it has taken to assess its own hardware
and software systems and those of its key vendors and suppliers are adequate to
ensure minimal disruption to its business processes. In addition, the Company
has developed contingency plans for selected areas, such as qualification of
alternative suppliers, diesel electrical generation for major factories and
computing resources and redundant data communication methods. The Company
believes that the steps it has taken to assess its own hardware and software
systems and those of its key vendors and suppliers are adequate to ensure
minimal disruption to its business processes. In the event of random, unforeseen
Y2K problems (such as the failure of specific pieces of process equipment, or
the temporary inability of certain vendors to provide materials or services),
the Company believes that these types of issues will most likely be resolved in
the normal course of business, including the potential use of alternate
suppliers, in most cases.
THE FOREGOING STATEMENTS RELATED TO MATERIALITY OF Y2K COSTS, THE COSTS TO
ADDRESS Y2K ISSUES AND THE FUNDING AND ABSORPTION OF SUCH COSTS, WORST-CASE
SCENARIO(S) AND CONTINGENCY PLANS ARE FORWARD LOOKING STATEMENTS. ACTUAL RESULTS
COULD DIFFER MATERIALLY BECAUSE OF THE FOLLOWING FACTORS, AMONG OTHERS: THE
FAILURE TO CORRECTLY TIMELY IDENTIFY AND CORRECT Y2K PROBLEMS, EITHER BY THE
COMPANY OR ITS KEY SUPPLIERS OR CUSTOMERS.
EURO CONVERSION ISSUES
The Company operates in the European Market and currently generates
approximately 30% of its total net sales from customers located in Europe. The
Company's commercial headquarters in Europe are located in the United Kingdom,
which is not currently one of the eleven member states of the European Union
converting to a common currency.
The Company currently conducts 96% of its business in Europe in U.S.
Dollars and 2% of its business in Europe in Pounds Sterling. The balance of its
net sales are conducted in currencies which will eventually be replaced by the
Euro. The Company will be monitoring the potential commercial impact of
converting a portion of its current business to the Euro, but does not expect
any material impact to its business based on this transition.
The Company does not currently anticipate any material impact to its
business related to Euro matters from information technology, derivative
transactions, tax issues and accounting software issues.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $43.9 million in cash and cash equivalents at September 30,
1999, an increase of $13.1 million from the March 31, 1999 balance. The Company
has an unsecured line of credit with a syndicate of domestic banks totaling
$90.0 million. There were no borrowings under the domestic line of credit as of
September 30, 1999. The domestic line of credit requires the Company to achieve
certain financial ratios and operating results. The Company was in compliance
with these covenants at September 30, 1999. The Company also has an unsecured
short term line of credit totaling $33.2 million with certain foreign banks.
There were no borrowings under the foreign line of credit as of September 30,
1999. There are no covenants related to the foreign line of credit. At September
30, 1999, an aggregate of $120.9 million of these facilities was available,
subject to financial covenants and ratios with which the Company was in
compliance. The Company's ability to fully utilize these facilities is dependent
on the Company remaining in compliance with such covenants and ratios.
15
<PAGE>
During the six months ended September 30, 1999, the Company generated
$101.2 million of cash from operating activities an increase of $51.9 million as
compared to the six months ended September 30, 1998. The increase in cash flow
from operations was primarily due to a reduction in inventories and an increase
in accounts payable and accrued liabilities and increased profitability for the
six months ended September 30, 1999.
The Company's level of capital expenditures varies from time to time as a
result of actual and anticipated business conditions. Capital expenditures in
the six months ended September 30, 1999 and 1998 were $75.0 million and $24.2
million, respectively. Capital expenditures were primarily for the expansion of
production capacity and the addition of research and development equipment in
each of these periods. The Company currently intends to spend approximately $190
million during the next 12 months for additional capital equipment to increase
capacity at its existing wafer fabrication facilities, to expand product test
operations, to develop in-house assembly capability and add incremental
infrastructure to support the growth of the business. The Company expects to
finance capital expenditures through cash flows from operations, available debt
arrangements and other sources of financing. The Company believes that the
capital expenditures anticipated to be incurred over the next 12 months will
provide sufficient additional manufacturing capacity to meet its currently
anticipated needs.
THE FOREGOING STATEMENTS REGARDING THE ANTICIPATED LEVEL OF CAPITAL
EXPENDITURES OVER THE NEXT 12 MONTHS AND THE FINANCING OF SUCH CAPITAL
EXPENDITURES ARE FORWARD LOOKING STATEMENTS. ACTUAL CAPITAL EXPENDITURES COULD
DIFFER MATERIALLY BECAUSE OF THE FOLLOWING FACTORS, AMONG OTHERS: THE CYCLICAL
NATURE OF THE SEMICONDUCTOR INDUSTRY AND THE MARKETS ADDRESSED BY THE COMPANY'S
PRODUCTS; MARKET ACCEPTANCE OF THE PRODUCTS OF BOTH THE COMPANY AND ITS
CUSTOMERS; UTILIZATION OF CURRENT MANUFACTURING CAPACITY; THE AVAILABILITY AND
COST OF RAW MATERIALS, EQUIPMENT AND OTHER SUPPLIES; AND THE ECONOMIC, POLITICAL
AND OTHER CONDITIONS IN THE MARKETS SERVED BY THE COMPANY.
Net cash used in financing activities was $13.1 million and $29.6 million
for the six months ended September 30, 1999 and 1998, respectively. Proceeds
from sale of stock and put options were $15.1 million and $7.0 million for the
six months ended September 30, 1999 and 1998, respectively. Payments on long
term debt and capital lease obligations were $1.7 million and $2.5 million for
the six months ended September 30, 1999 and 1998, respectively. Repayments on
lines of credit were $26.5 million for the six months ended September 30, 1999.
Net proceeds from lines of credit were $23.8 million for the six months ended
September 30, 1998. Cash expended for the purchase of the Company's Common Stock
was $57.9 million for the six months ended September 30, 1998.
The Company has outstanding a net share settled forward contract and
received 1,129,096 shares in the six months ended September 30, 1999 in
connection with this transaction. See Note 6 to "Condensed Consolidated
Financial Statements." The net share settled forward contract could obligate the
Company to purchase shares of the Company's Common Stock in the future if the
price of the Company's Common Stock is below the strike price of the
instruments.
The Company expects from time to time to purchase shares of Common Stock in
connection with its authorized stock repurchase program.
The Company believes that its existing sources of liquidity combined with
cash generated from operations will be sufficient to meet the Company's
currently anticipated cash requirements for at least the next 12 months.
However, the semiconductor industry is capital intensive. In order to remain
competitive, the Company must continue to make significant investments in
capital equipment, for both production and research and development. The Company
may seek additional equity or debt financing during the next 12 months for the
capital expenditures required to maintain or expand the Company's
16
<PAGE>
wafer fabrication and product test facilities or for other purposes. The timing
and amount of any such capital requirements will depend on a number of factors,
including demand for the Company's products, product mix, changes in industry
conditions, market conditions and competitive factors. There can be no assurance
that such financing will be available on acceptable terms, and any additional
equity financing could result in additional dilution to existing investors.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on August
20, 1999 (the "Meeting").
(b) Steve Sanghi, Albert J. Hugo-Martinez, L.B. Day, Matthew W. Chapman
and Wade Meyercord were elected as Directors of the Meeting.
(c) The results of the vote on the matters voted upon at the meeting were
as follows:
(i) ELECTION OF DIRECTORS:
For Withheld
--- --------
Steve Sanghi 46,108,139 117,443
Albert J. Hugo-Martinez 46,108,139 117,443
L.B. Day 46,108,139 117,443
Matthew W. Chapman 46,108,139 117,443
Wade Meyercord 45,760,864 464,708
(ii) RATIFICATION OF PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK
PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED
THEREUNDER:
For Against Abstain
--- ------- -------
45,124,925 1,061,188 39,459
(iii) RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2000:
For Against Abstain
--- ------- -------
46,107,454 71,276 46,842
The foregoing matters are described in more detail in the Registrant's
definitive proxy statement dated July 14, 1999 relating to the Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 3.1 - By-Laws of Registrant as amended through August 20, 1999
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K on October 12, 1999 to
report the adoption of an Amended and Restated Preferred Shares Rights
Agreement between the Company and Norwest Bank, Minnesota, N.A., as Rights
Agent, effective October 11, 1999 (the "Amended Rights Agreement"). The
Amended Rights Agreement was filed as Exhibit 4.1 to the current report on
Form 8-K.
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<PAGE>
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.
MICROCHIP TECHNOLOGY INCORPORATED
Date: November 8, 1999 By: /s/ C. Philip Chapman
------------------------------ ------------------------------------
C. Philip Chapman
Vice President, Chief Financial
Officer and Secretary (Duly
Authorized Officer, and Principal
Financial and Accounting Officer)
19
AMENDED AND RESTATED BYLAWS
OF
MICROCHIP TECHNOLOGY INCORPORATED
AMENDED THROUGH AUGUST 20, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - CORPORATE OFFICES..................................................1
1.1 Registered Office........................................................1
1.2 Other Offices............................................................1
ARTICLE II - STOCKHOLDERS......................................................1
2.1 Place of Meetings........................................................1
2.2 Annual Meeting...........................................................1
2.3 Special Meeting..........................................................1
2.4 Advance Notice of Stockholder Nominees and Stockholder Business..........2
2.5 Notice of Stockholders Meetings..........................................3
2.6 Manner of Giving Notice; Affidavit of Notice.............................3
2.7 Quorum...................................................................3
2.8 Adjourned Meeting; Notice................................................4
2.9 Voting...................................................................4
2.10 Waiver of Notice.........................................................4
2.11 Stockholder Action by Written Consent Without a Meeting..................5
2.12 Record Date for Stockholder Notice; Voting; Giving Consents..............5
2.13 Proxies..................................................................6
2.14 List of Stockholders Entitled to Vote....................................6
2.15 Conduct of Business......................................................7
2.16 Inspectors of Election...................................................7
2.17 Inspectors of Election and Procedures for Counting Written Consents......7
2.18 Election Not To Be Subject to Arizona Control Share Acquisitions
Statute..................................................................9
ARTICLE III - DIRECTORS........................................................9
3.1 Powers...................................................................9
3.2 Number of Directors......................................................9
3.3 Election, Qualification and Term of Office of Directors..................9
3.4 Resignation and Vacancies...............................................10
3.5 Place of Meetings; Meetings by Telephone................................11
3.6 Regular Meetings........................................................11
3.7 Special Meetings; Notice................................................11
3.8 Quorum..................................................................11
3.9 Waiver of Notice........................................................12
3.10 Adjourned Meeting; Notice...............................................12
3.11 Board Action by Written Consent Without a Meeting.......................12
3.12 Fees and Compensation of Directors......................................12
3.13 Approval of Loans to Officers...........................................12
3.14 Removal of Directors....................................................13
3.15 Conduct of Business.....................................................13
3.16 Presumption of Assent...................................................13
ARTICLE IV - COMMITTEES.......................................................13
4.1 Committees of Directors.................................................13
4.2 Committee Minutes.......................................................14
4.3 Meetings and Action of Committees.......................................14
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ARTICLE V - OFFICERS..........................................................14
5.1 Officers................................................................14
5.2 Appointment of Officers.................................................15
5.3 Subordinate Officers....................................................15
5.4 Removal and Resignation of Officers.....................................15
5.5 Vacancies in Offices....................................................15
5.6 Chairman of the Board...................................................15
5.7 President...............................................................15
5.8 Vice Presidents.........................................................15
5.9 Secretary...............................................................16
5.10 Chief Financial Officer.................................................16
5.11 Treasurer...............................................................16
5.12 Assistant Secretary.....................................................17
5.13 Assistant Treasurer.....................................................17
5.14 Authority and Duties of Officers........................................17
5.15 Representation of Shares of Other Corporations..........................17
ARTICLE VI - INDEMNITY........................................................17
6.1 Indemnification of Directors and Officers...............................17
6.2 Indemnification of Others...............................................18
6.3 Insurance...............................................................18
ARTICLE VII - RECORDS AND REPORTS.............................................18
7.1 Maintenance and Inspection of Records...................................18
7.2 Inspection by Directors.................................................18
ARTICLE VIII - GENERAL MATTERS................................................19
8.1 Checks..................................................................19
8.2 Execution of Corporate Contracts and Instruments........................19
8.3 Stock Certificates; Partly Paid.........................................19
8.4 Special Designation on Certificates.....................................19
8.5 Lost Certificates.......................................................20
8.6 Construction; Definitions...............................................20
8.7 Dividends...............................................................20
8.8 Fiscal Year.............................................................20
8.9 Seal....................................................................20
8.10 Transfer of Stock.......................................................21
8.11 Stock Transfer Agreements...............................................21
8.12 Registered Stockholders.................................................21
8.13 Notices.................................................................21
ARTICLE IX - AMENDMENTS.......................................................21
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AMENDED AND RESTATED BYLAWS OF
MICROCHIP TECHNOLOGY INCORPORATED
AS AMENDED THROUGH AUGUST 20, 1999
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE. The registered office of the corporation shall be in
the City of Dover, County of Kent, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 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 or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Meetings of stockholders shall be held at any place,
within or outside the State of Delaware, designated by the board of directors.
In the absence of any such designation, stockholders' meetings shall be held at
the registered office of the corporation.
2.2 ANNUAL MEETING. The annual meeting of stockholders shall be held, each
year, on a date and at a time designated by the board of directors. At the
meeting, directors shall be elected and any other proper business may be
transacted.
2.3 SPECIAL MEETING. A special meeting of the stockholders may be called at
any time by the board of directors or by the chairman of the board or by one or
more stockholders owning in the aggregate not less than fifty percent (50%) of
the entire capital stock of the corporation issued and outstanding and entitled
vote.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.5
and 2.6, that a meeting will be held at the time requested by the person or
persons who
<PAGE>
called the meeting, not less than thirty-five (35) nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty (20)
days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS .
(a) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting business must be (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 stockholder. For business to be properly brought before an
annual meeting by a stockholder, the secretary of the corporation must have
received timely notice in writing from the stockholder. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than ninety (90)
calendar days before the date on which the corporation first mailed its proxy
statement to stockholders in connection with the previous year's annual meeting
of stockholders; PROVIDED, HOWEVER, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the prior year, notice by the stockholder to be
timely must be so received not later than the close of business on the later of
ninety (90) calendar days in advance of such annual meeting or ten (10) calendar
days following the date on which public announcement of the date of the meeting
is first made. Such written notice to the secretary shall set forth, as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of stock of the
corporation beneficially owned by such stockholder, (iv) any material interest
of such stockholder in such business, and (v) any other information that is
required to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding any provision in the Bylaws to the contrary, no business shall
be conducted at an annual meeting except in accordance with the procedures set
forth in this paragraph (a). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (a), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(b) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (b) shall be eligible for election as directors.
Nominations of persons for election to
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the board of directors of the corporation may be made at a meeting of
stockholders by or at the direction of the board of directors or by any
stockholder of the corporation entitled to vote in the election of directors at
the meeting who complies with the notice procedures set forth in this paragraph
(b). 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 in accordance with the provisions of paragraph (a)
of this Section 2.4. Such stockholder's notice shall set forth (i) as to each
person, if any, whom the stockholder proposes to nominate for election or
re-election as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for
elections of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such person's
written consent to being named in the proxy statement, if any, as a nominee and
to serving as a director if elected); and (ii) as to such stockholder giving
notice, the information required to be provided pursuant to paragraph (a) of
this Section 2.4. At the request of the board of directors, any person nominated
by a stockholder for election as a director shall furnish to the secretary of
the corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph (b). The chairman of the meeting
shall, if the facts warrants, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
2.5 NOTICE OF STOCKHOLDERS MEETINGS. All notices of meetings of
stockholders shall be in writing and shall be sent or otherwise given in
accordance with Section 2.6 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the General
Corporation Law of Delaware or the certificate of incorporation of the
corporation). The notice shall specify the place, date, and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Written notice of any
meeting of stockholders, if mailed, is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation. An affidavit of the secretary or an assistant
secretary or of the transfer agent of the corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
2.7 QUORUM. At any meeting of the stockholders, the holders of a majority,
present in person or by proxy, of all of the shares of the stock entitled to
vote at the meeting shall constitute a
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quorum for all purposes, unless or except to the extent that the presence of a
larger number may be required by law. Where a separate vote by a class or
classes is required, a majority, present in person or by proxy, of the shares of
such class or classes entitled to take action with respect to that vote on that
matter shall constitute a quorum. If a quorum shall fail to attend any meeting,
the chairman of the meeting may adjourn the meeting to another place, date or
time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, those present at such adjourned meeting shall
constitute a quorum (but in no event shall a quorum consist of less than
one-third of the shares entitled to vote at the meeting), and all matters shall
be determined by a majority of the votes cast at such meeting, except as
otherwise required by law.
2.8 ADJOURNED MEETING; NOTICE. When a meeting is adjourned to another time
or place, unless these bylaws otherwise require, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.9 VOTING. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
Each stockholder shall have one (1) vote for every share of stock entitled
to vote that is registered in his or her name on the record date for the meeting
(as determined in accordance with Section 2.12 of these bylaws), except as
otherwise provided herein or required by law.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or provided herein, all other matters shall
be determined by a majority of the votes cast affirmatively or negatively.
2.10 WAIVER OF NOTICE. Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
bylaws.
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2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or able to be taken at any annual or special meeting of stockholders
may be taken without a meeting, without prior notice, and without a vote if a
consent or consents 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 and
shall be delivered to the corporation at its registered office in Delaware, its
principal place of business, or to an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery to the corporation's registered office shall be made by hand
or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days after the
date the earliest dated consent is delivered to the corporation, a written
consent or consents signed by holders of a sufficient number of votes to take
action are delivered to the corporation in the manner prescribed in the first
paragraph of this section.
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. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the board of
directors may fix a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change,
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conversion or exchange of stock or for any other purpose shall be at the close
of business on the day on which the board of directors adopts the resolution
relating thereto.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall neither precede nor be more than
ten (10) days after the date upon which such resolution is adopted by the board
of directors. Any stockholder of record seeking to have the stockholders
authorize or take action by written consent shall, by written notice to the
secretary, request the board of directors to fix a record date. The board of
directors shall promptly, but in all events within ten (10) days after the date
on which such notice is received, adopt a resolution fixing the record date.
If the board of directors has not fixed a record date within such time, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in the manner prescribed in the first paragraph of Section 2.11 of
these bylaws. If the board of directors has not fixed a record date within such
time and prior action by the board of directors is required by law, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the date on which
the board of directors adopts the resolution taking such prior action.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by a
written proxy, filed in accordance with the procedure established for the
meeting or taking of action in writing, but no such proxy shall be voted or
acted upon after three (3) years from its date, unless the proxy provides for a
longer period. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this Section
2.13 may be substituted or used in lieu of the original writing or transmission
for any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Section 212(c) of the General Corporation Law
of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has charge of
the stock ledger of a corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane
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to the meeting, during ordinary business hours, for a period of at least ten
(10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
2.15 CONDUCT OF BUSINESS. The Board of Directors will appoint a Chairman of
the meeting, and he/she shall be authorized to be the final authority on all
matters of procedure at the meeting. The rules provided below will govern the
conduct of the meeting of stockholders and will be strictly enforced to maintain
an orderly meeting. Robert's Rules of Order will not be applicable and will not
be utilized.
(i) METHOD OF OBTAINING THE FLOOR. Stockholders who desire to address
the meeting must raise their hands and wait to be recognized by the Chairman.
Only when a stockholder is recognized as having the floor may he or she address
the meeting.
(ii) DISCUSSION. Persons addressing the meeting must limit their
remarks to the issue then under consideration by the stockholders and to not
more than five minutes in duration. A stockholder will be permitted to address
the meeting on a particular issue not more than three times.
(iii) STOCKHOLDER PROPOSALS. Stockholders will only be permitted to
address the meeting on proposals that are included in the proxy statement and
proxy relating to that meeting.
2.16 INSPECTORS OF ELECTION. The corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting may, and to the
extent required by law, shall, appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability. Every vote taken by
ballots shall be counted by an inspector or inspectors appointed by the chairman
of the meeting.
2.17 INSPECTORS OF ELECTION AND PROCEDURES FOR COUNTING WRITTEN CONSENTS.
Within three (3) business days after receipt of the earliest dated consent
delivered to the corporation in the manner provided in Section 228(c) of the
Delaware General Corporation Law or the determination by the board of directors
of the corporation that the corporation should seek corporate action by written
consent, as the case may be, the secretary may engage nationally recognized
independent inspectors of elections for the purpose of performing a ministerial
review of the validity of the consents and revocations. The cost of retaining
inspectors of election shall be borne by the corporation.
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Consents and revocations shall be delivered to the inspectors upon receipt
by the corporation, the stockholder or stockholders soliciting consents or
soliciting revocations in opposition to action by consent proposed by the
corporation (the "Soliciting Stockholders") or their proxy solicitors or other
designated agents. As soon as consents and revocations are received, the
inspectors shall review the consents and revocations and shall maintain a count
of the number of valid and unrevoked consents. As soon as practicable after the
earlier of (i) sixty (60) days after the date of the earliest dated consent
delivered to the corporation in the manner provided in Section 228(c) of the
Delaware General Corporation Law or (ii) a written request therefor by the
corporation or the Soliciting Stockholders (whichever is soliciting consents)
(which request, except in the case of corporate action by written consent taken
pursuant to the solicitations of not more than ten (10) persons, may be made no
earlier than after such reasonable amount of time after the commencement date of
the applicable solicitation of consents as is necessary to permit the inspectors
to commence and organize their count, but in no event less than five (5) days
after such commencement date), notice of which request shall be given to the
party opposing the solicitation of consents, if any, which request shall state
that the corporation or Soliciting Stockholders, as the case may be, have a good
faith belief that the requisite number of valid and unrevoked consents to
authorize or take the action specified in the consents has been received in
accordance with these bylaws, the inspectors shall issue a preliminary report to
the corporation and the Soliciting Stockholders stating: (i) the number of valid
consents; (ii) the number of valid revocations; (iii) the number of valid and
unrevoked consents; (iv) the number of invalid consents; (v) the number of
invalid revocations; and (vi) whether, based on their preliminary count, the
requisite number of valid and unrevoked consents has been obtained to authorize
or take the action specified in the consents.
Unless the corporation and the Soliciting Stockholders shall agree to a
shorter or longer period, the corporation and the Soliciting Stockholders shall
have 48 hours to review the consents and revocations and to advise the
inspectors and the opposing party in writing as to whether they intend to
challenge the preliminary report of the inspectors. If no written notice of an
intention to challenge the preliminary report is received within 48 hours after
the inspectors' issuance of the preliminary report, the inspectors shall issue
to the corporation and the Soliciting Stockholders their final report containing
the information from the inspectors' determination with respect to whether the
requisite number of valid and unrevoked consents was obtained to authorize and
take the action specified in the consents. If the corporation or the Soliciting
Stockholders issue written notice of an intention to challenge the inspectors'
preliminary report within 48 hours after the issuance of that report, a
challenge session shall be scheduled by the inspectors as promptly as
practicable. A transcript of the challenge session shall be recorded by a
certified court reporter. Following completion of the challenge session, the
inspectors shall as promptly as practicable issue their final report to the
corporation and the Soliciting Stockholders, which report shall contain the
information included in the preliminary report, plus all changes made to the
vote totals as a result of the challenge and a certification of whether the
requisite number of valid and unrevoked consents was obtained to authorize or
take the action specified in the consents. A copy of the final report of the
inspectors shall be included in the book in which the proceedings of meetings of
stockholders are recorded.
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2.18 ELECTION NOT TO BE SUBJECT TO ARIZONA CONTROL SHARE ACQUISITIONS
STATUTE. The corporation elects not to be subject to Title 10, Chapter 23,
Article 2 of the Arizona Revised Statutes relating to "Control Share
Acquisitions."
ARTICLE III
DIRECTORS
3.1 POWERS. Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS. The number of directors of the corporation shall
be five (5). This number may be changed by a duly adopted amendment to the
certificate of incorporation or by an amendment to this bylaw adopted by
resolution of the board of directors or by the stockholders.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS. Except as
provided in Section 3.4 of these bylaws, at each annual meeting of stockholders,
directors of the corporation shall be elected to hold office until the
expiration of the term for which they are elected, and until their successors
have been duly elected and qualified; except that if any such election shall not
be so held, such election shall take place at a stockholders' meeting called and
held in accordance with the Delaware General Corporation Law.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed.
Nominations for election to the board of directors of the corporation at an
annual meeting of stockholders may be made by the board or on behalf of the
board by a nominating committee appointed by the board, or by any stockholder of
the corporation entitled to vote for the election of directors at such meeting.
Such nominations, other than those made by or on behalf of the board, shall be
made by notice in writing received by the secretary of the corporation not less
than thirty (30) days nor more than sixty (60) days prior to the date of the
annual meeting; PROVIDED, HOWEVER, that if less than thirty-five (35) days
notice of the meeting is given to stockholders, such nomination shall have been
received by the secretary not later than the close of business on the seventh
(7th) day following the day on which the notice was mailed. Such notice shall
set forth (i) the name and address of the stockholder who intends to make the
nomination; (ii) a representation that the nominating stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting and nominate the person or
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persons specified in the notice; (iii) the number of shares of stock held
beneficially and of record by the nominating stockholder; (iv) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice; (v) the principal occupation or employment of such nominee; (vi)
the number of shares of stock of the corporation beneficially owned by each such
nominee; (vii) a description of all arrangements or understandings between the
nominating stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the nominating stockholder; (viii) any other information concerning
the nominee that must be disclosed of nominees in proxy solicitations pursuant
to Regulation 14A under the Securities Exchange Act of 1934; and (ix) the
consent of such nominee to serve as a director of the corporation if so elected.
The chairman of the annual meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure. If such determination and declaration is made, the
defective nomination shall be disregarded.
3.4 RESIGNATION AND VACANCIES. Any director may resign at any time upon
written notice to the corporation. When one or more directors so resigns and the
resignation is effective at a future date, only a majority of the directors then
in office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled only by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled only by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
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If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE. The board of directors of the
corporation may hold meetings, both regular and special, either within or
outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS. Regular meetings of the board of directors shall be
held at such place or places, on such date or dates, and at such time or times
as shall have been established by the board of directors and publicized among
all directors. A notice of each regular meeting shall not be required.
3.7 SPECIAL MEETINGS; NOTICE. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the president or
secretary of the corporation, or by any two of the directors then in office and
shall be held at a place, on a date and at a time as such officer or such
directors shall fix. Notice of the place, date and time of special meetings,
unless waived, shall be given to each director by mailing written notice not
less than two (2) days before the meeting or by sending a facsimile transmission
of the same not less than two (2) hours before the time of the holding of the
meeting. If the circumstances warrant, notice may also be given personally or by
telephone not less than two (2) hours before the time of the holding of the
meeting. Oral notice given personally or by telephone may be communicated either
to the director or to a person at the office of the director who the person
giving the notice has reason to believe will promptly communicate it to the
director. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting.
3.8 QUORUM. At all meetings of the board of directors, a majority of the
authorized number of 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 is not present at any meeting of the board of
directors, then the directors
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present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE. Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.
3.10 ADJOURNED MEETING; NOTICE. If a quorum is not present at any meeting
of the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Unless otherwise
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors, or
of any committee thereof, may be taken without a meeting if all members of the
board or committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
3.12 FEES AND COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance of each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.13 APPROVAL OF LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a director of the corporation or its subsidiaries, whenever, in the judgment
of the directors, such loan, guaranty or assistance may reasonably be expected
to benefit the corporation. The loan, guaranty or other assistance may be with
or without interest and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing
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in this section contained shall be deemed to deny, limit or restrict the powers
of guaranty or warranty of the corporation at common law or under any statute.
3.14 REMOVAL OF DIRECTORS. Unless otherwise restricted by statute, by the
certificate of incorporation or by these bylaws, any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
3.15 CONDUCT OF BUSINESS. At any meeting of the board of directors,
business shall be transacted in such order and manner as the board may from time
to time determine, and all matters shall be determined by the vote of a majority
of the directors present, except as otherwise provided herein or required by
law.
3.16 PRESUMPTION OF ASSENT. A director of the corporation who is present at
a meeting of the board of directors at which action on any corporate matter is
taken shall be conclusively presumed to have assented to the action taken unless
his dissent 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 immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, with
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors or in the bylaws of the
corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of
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directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designation and 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 or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), (ii) adopt an agreement of merger or consolidation under Section
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the bylaws of the corporation; and, unless the board resolution establishing the
committee, a supplemental resolution of the board of directors, the bylaws or
the certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these bylaws, Section 3.5 (place of meetings and meetings by
telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and
notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10
(adjournment and notice of adjournment), and Section 3.11 (action without a
meeting), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members; provided, however, that the time of regular meetings of committees may
be determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
resolutions of the board of directors, and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS. The officers of the corporation shall be a president, a
secretary, and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents, one or more assistant secretaries, a controller, one or more
assistant controllers, a treasurer, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
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5.2 APPOINTMENT OF OFFICERS. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 5.3 or
5.5 of these bylaws, shall be appointed by the board of directors.
5.3 SUBORDINATE OFFICERS. The board of directors may appoint, or empower
the president to appoint, such other officers and agents as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these bylaws or as
the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS. Any officer may be removed, either
with or without cause, by an affirmative vote of the majority of the board of
directors at any regular or special meeting of the board or, except in the case
of an officer chosen by the board of directors, by any officer upon whom such
power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective.
5.5 VACANCIES IN OFFICES. Any vacancy occurring in any office of the
corporation shall be filled in the manner prescribed in these bylaws for regular
appointments to that office.
5.6 CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be
elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. If there is no president, then the chairman of the board shall also be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT. Subject to such supervisory powers, if any, as may be given
by the board of directors to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the corporation
and shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence or nonexistence of a chairman of the board, at all meetings of the board
of directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS. In the absence or disability of the president, the
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice
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presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY. The secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the board
of directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws. The duties of the
chief financial officer may be allocated by the board of directors among one or
more persons, in its discretion.
5.11 TREASURER. The treasurer shall have such powers and discharge such
duties relating to the financial aspects of the corporation's business as may be
prescribed by the board of directors or the chief financial officer.
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5.12 ASSISTANT SECRETARY. The assistant secretary, or, if there is more
than one, the assistant secretaries in the order determined by the stockholders
or board of directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.
5.13 ASSISTANT TREASURER. The assistant treasurer, or, if there is more
than one, the assistant treasurers in the order determined by the stockholders
or board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the treasurer or in the event of
his or her inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the board of directors or the stockholders may from time to time
prescribe.
5.14 AUTHORITY AND DUTIES OF OFFICERS. In addition to the foregoing
authority and duties, all officers of the corporation shall respectively have
such authority and perform such duties in the management of the business of the
corporation as may be designated from time to time by the board of directors or
the stockholders.
5.15 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the
board, the president, any vice president, the treasurer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
board of directors or the president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, indemnify each of its directors and executive officers against
expenses (including attorneys' fees), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.1, a "director" or "executive
officer" of the corporation includes any person (i) who is or was a director or
executive officer of the corporation, (ii) who is or was serving at the request
of the corporation as a director or executive officer of another corporation
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or executive officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
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<PAGE>
6.2 INDEMNIFICATION OF OTHERS. The corporation shall have the power, to the
extent and in the manner permitted by the General Corporation Law of Delaware,
to indemnify each of its employees and agents (other than directors and
executive officers) against expenses (including attorney's fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.2, an
"employee"or "agent" of the corporation (other than a director or executive
officer) includes any person (i) who is or was an employee or agent of the
corporation, (ii) who is or was serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was an employee or agent of a corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.3 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS. The corporation shall, either at
its principal executive office or at such place or places as designated by the
board of directors, keep a record of its stockholders listing their names and
addresses and the number and class of shares held by each stockholder, a copy of
these bylaws as amended to date, accounting books, and other records.
7.2 INSPECTION BY DIRECTORS. Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders, and its other books
and records for a purpose reasonably related to his position as a director. The
Court of Chancery is hereby vested with the exclusive jurisdiction to determine
whether a director is entitled to the inspection sought. The Court may summarily
order the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
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<PAGE>
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS. From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID. The shares of a corporation shall be
represented by certificates, provided that the board of directors of the
corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Notwithstanding the adoption of
such a resolution by the board of directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the chairman or vice-chairman of the board of directors, or the president or
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES. If the corporation is authorized
to issue more than one class of stock or more than one series of any class, then
the powers, the designations, the
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preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES. Except as provided in this Section 8.5, no new
certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and cancelled at
the same time. The corporation may issue a new certificate of stock or
uncertificated shares in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the General
Corporation Law of Delaware shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
8.7 DIVIDENDS. The directors of the corporation, subject to any
restrictions contained in (i) the General Corporation Law of Delaware or (ii)
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock. Dividends may be paid in cash, in property, or in shares
of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR. The fiscal year of the corporation shall be fixed by
resolution of the board of directors and may be changed by the board of
directors.
8.9 SEAL. The corporation may adopt a corporate seal, which may be altered
at pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
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<PAGE>
8.10 TRANSFER OF STOCK. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS. The corporation shall have power to enter
into and perform any agreement with any number of stockholders of any one or
more classes of stock of the corporation to restrict the transfer of shares of
stock of the corporation of any one or more classes owned by such stockholders
in any manner not prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, shall be entitled to
hold liable for calls and assessments the person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of another person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
8.13 NOTICES. Except as otherwise specifically provided herein or required
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance be effectively
given by hand delivery, by mail, postage paid, or by facsimile transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his last known address as it appears on the books of the
corporation. The time when such notice shall be deemed received, if hand
delivered, or dispatched, if sent by mail or facsimile, transmission, shall be
the time of the giving of the notice.
ARTICLE IX
AMENDMENTS
Any of these bylaws may be altered, amended or repealed by the affirmative
vote of a majority of the board of directors or, with respect to bylaw
amendments placed before the stockholders for approval and except as otherwise
provided herein or required by law, by the affirmative vote of the holders of a
majority of the shares of the corporation's stock entitled to vote in the
election of directors, voting as one class.
-21-
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