<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
or the transition period from to
Commission file number 0-18443
MEDICIS PHARMACEUTICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-1574808
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4343 East Camelback Road
Phoenix, Arizona 85018-2700
(Address of principal executive offices)
(602) 808-8800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 3, 1999
----- --------------------------
<S> <C>
Class A Common Stock $.014 Par Value 28,219,931
Class B Common Stock $.014 Par Value 422,962
</TABLE>
<PAGE> 2
MEDICIS PHARMACEUTICAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
Item 1 -- Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets as of
March 31, 1999, and June 30, 1998 3
Condensed Consolidated Statements of
Operations for the Three Months and Nine Months
Ended March 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
March 31, 1999 and 1998 6
Notes to the Condensed Consolidated Financial Statements 7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K 21
SIGNATURE 21
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $112,180,344 $147,411,127
Short-term investments 139,497,770 90,510,029
Accounts receivable, net 25,270,163 18,899,868
Inventories, net 10,608,323 9,208,384
Deferred tax assets 2,843,167 3,300,000
Accrued interest income 2,156,688 2,050,264
Other current assets 5,637,218 6,750,170
------------ ------------
Total current assets 298,193,673 278,129,842
------------ ------------
Property and equipment, net 1,407,512 1,343,603
Intangible assets:
Intangible assets related to
acquisitions 143,666,115 70,386,665
Other intangible assets 4,168,144 6,874,626
Less accumulated amortization 9,335,634 5,977,399
------------ ------------
Net intangible assets 138,498,625 71,283,892
------------ ------------
Other non-current assets 1,245,684 1,592,907
------------ ------------
$439,345,494 $352,350,244
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE> 4
MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 6,486,124 $ 5,496,526
Notes payable 11,546 11,364
Accrued incentives 1,867,431 1,786,392
Accrued royalties 742,705 1,040,993
Short-term contract obligation 22,000,000 --
Other accrued liabilities 6,832,282 6,838,397
------------- -------------
Total current liabilities 37,940,088 15,173,672
------------- -------------
Long-term liabilities:
Notes payable 88,783 94,556
Other non-current liabilities 128,512 124,115
Long-term contract obligation 33,994,948 --
Deferred tax liability 6,522,281 10,502,416
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,010,934 1,960,000
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value, 5,000,000
shares authorized; no shares issued -- --
Class A Common Stock, $0.014 par value;
shares authorized: 50,000,000; issued and
outstanding: 28,218,806 and 27,712,837 at
March 31, 1999 and at June 30,
1998, respectively 395,063 387,980
Class B Common Stock, $0.014 par value;
shares authorized: 1,000,000; issued and
outstanding: 422,962 at March 31, 1999
and June 30, 1998 5,921 5,921
Additional paid-in capital 353,246,370 343,976,037
Accumulated deficit 5,012,594 (19,874,453)
------------- -------------
Total stockholders' equity 358,659,948 324,495,485
------------- -------------
$ 439,345,494 $ 352,350,244
============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue $ 30,182,792 $ 22,526,851 $ 82,980,347 $ 53,365,759
------------ ------------ ------------ ------------
Operating costs and expenses:
Cost of product revenue 5,024,787 3,991,792 15,048,458 9,541,034
Selling, general and administrative 9,455,013 8,069,996 27,188,347 19,648,557
Research and development 710,195 874,483 1,914,813 2,337,139
In-process research and development -- -- 9,500,000 35,400,000
Depreciation and amortization 1,573,834 926,857 3,879,629 2,018,564
------------ ------------ ------------ ------------
Operating costs and expenses 16,763,829 13,863,128 57,531,247 68,945,294
------------ ------------ ------------ ------------
Operating income (loss) 13,418,963 8,663,723 25,449,100 (15,579,535)
Interest income 2,762,959 1,898,225 8,720,165 4,025,190
Interest expense (726,120) (3,313) (1,096,731) (18,202)
Gain on sale of assets 7,135,932 -- 7,135,932 --
------------ ------------ ------------ ------------
Income (loss) before taxes 22,591,734 10,558,635 40,208,466 (11,572,547)
Income tax expense (8,616,983) (4,124,444) (14,963,088) (9,296,217)
------------ ------------ ------------ ------------
Net income (loss) $ 13,974,751 $ 6,434,191 $ 25,245,378 $(20,868,764)
============ ============ ============ ============
Basic net income (loss) per common
share $ 0.49 $ 0.25 $ 0.89 $ (0.92)
============ ============ ============ ============
Diluted net income (loss) per common
share $ 0.47 $ 0.24 $ 0.86 $ (0.92)
============ ============ ============ ============
Shares used in computing basic net
income (loss) per common share 28,575,688 25,326,399 28,336,602 22,764,699
============ ============ ============ ============
Shares used in computing diluted net
income (loss) per common share 29,811,235 26,328,760 29,471,262 22,764,699
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
March 31, March 31,
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 25,245,378 $ (20,868,764)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
In-process research and development 9,500,000 35,400,000
Gain on sale of intangible assets (7,135,932)
Minority interest 50,934 --
Depreciation and amortization 3,879,629 2,018,564
Provision for doubtful accounts 150,000 750,000
Deferred income tax (benefit) expense (3,523,302) 9,714,000
Other non-cash expenses 10,000 56,500
Gain (loss) on sale of available-for-sale securities 14,682 (23,863)
Accretion of discount on investments (259,271) (171,727)
Accretion of discount on contract obligation 1,080,377 --
Change in operating assets and liabilities:
Inventories (1,549,939) (3,353,830)
Accounts receivable (6,370,295) (9,093,939)
Accounts payable 989,598 884,989
Accrued incentives 81,039 (157,436)
Other current liabilities (554,402) (5,880,795)
Other current assets 4,655,677 (844,911)
------------- -------------
Net cash provided by operating activities 26,264,173 8,428,788
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (585,303) (612,312)
Proceeds from sale of intangible assets 9,849,970 3,000,000
Purchase of common stock of GenDerm, net of cash
acquired -- (57,982,386)
Purchase of intangible assets (25,726,678) (1,010,000)
Payment of license agreement -- (3,783,752)
Decrease in other assets 347,224 500,000
Purchase of available-for-sale investments (162,579,569) (80,800,841)
Sale of available-for-sale securities 33,415,086 49,021,703
Maturity of available-for-sale securities 80,150,000 23,500,000
------------- -------------
Net cash used in investing activities (65,129,270) (68,167,588)
------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of stock options 3,735,843 803,520
Payments of notes payable -- (5,245)
(Decrease) increase in other non-current liabilities (1,194) 37,359
Proceeds from common stock sale, net -- 198,071,432
------------- -------------
Net cash provided by financing activities 3,734,649 198,907,066
------------- -------------
Effect of foreign currency exchange rate
on cash and cash equivalents (100,335) --
------------- -------------
Net (decrease) increase in cash and cash equivalents (35,230,783) 139,168,266
Cash and cash equivalents at beginning of period 147,411,127 33,623,397
------------- -------------
Cash and cash equivalents at end of period $ 112,180,344 $ 172,791,663
============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE> 7
MEDICIS PHARMACEUTICAL CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Medicis Pharmaceutical Corporation ("Medicis" or the "Company") is the
leading independent pharmaceutical company in the United States
focusing primarily on the treatment of dermatological conditions. The
Company offers prescription, over-the-counter ("OTC"), and cosmetic
dermatology products emphasizing the clinical effectiveness, quality,
affordability and cosmetic elegance of its products. Medicis has
achieved a leading position in branded products for the treatment of
acne, acne-related conditions, psoriatic conditions and anti-pruritic
conditions while also offering the leading OTC Capsaicin and fade cream
products line in the United States. The Company has built its business
by successfully introducing prescription pharmaceuticals such as the
DYNACIN(R) and TRIAZ(R) products for the treatment of acne, and
LUSTRA(R) for the treatment of dyschromia and other discolorations of
the skin. The Company's business has also been built by acquiring and
successfully marketing prescription pharmaceuticals such as the
LIDEX(R) and SYNALAR(R) corticosteroid products for the treatment of
psoriasis and eczema; LOPROX(R) for the treatment of fungal infections;
NOVACET(R) for the treatment of acne rosacea and the OTC fade cream
product, ESOTERICA(R).
The financial information is unaudited but reflects all adjustments,
consisting only of normal recurring accruals, which are, in the opinion
of the Company's management, necessary to a fair statement of the
results for the interim periods presented. Interim results are not
necessarily indicative of results for a full year. The financial
statements should be read in conjunction with the Company's audited
financial statements and notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations relating
thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998 ("fiscal 1998"). Certain immaterial
amounts on the face of the balance sheet have been reclassified to
conform with the current period's presentation.
Except as otherwise specified herein, all information in this Form 10-Q
has been adjusted to reflect a 3-for-2 stock split in the form of a 50%
stock dividend paid on February 16, 1999 to holders of record on
January 29, 1999.
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information," ("SFAS No. 131").
SFAS No. 131 establishes a new method by which companies will report
operating segment information. This method is based on the manner in
which management organizes the segments within a company for making
operating decisions and assessing performance. The Company is
evaluating the provisions of SFAS No. 131 and, upon adoption, may
report operating segments. The adoption of
7
<PAGE> 8
SFAS No. 131 will have no impact on the Company's consolidated results
of operations, financial position or cash flows.
As of July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130"). SFAS No. 130 establishes new
rules for the reporting and display of comprehensive income and
shareholders' equity. SFAS No. 130 requires certain items such as
unrealized foreign currency exchange gains or losses and unrealized
gains or losses on the Company's available-for-sale securities to be
included in other comprehensive income as separately presented portions
of other comprehensive income in shareholders equity. During the third
quarter of fiscal 1999 and fiscal 1998, the amounts of unrealized
foreign currency exchange gains and losses and unrealized gains or
losses on securities were not material.
3. SALE OF PRODUCTS TO BIOGLAN PHARMA PLC
In February 1999, the Company sold a portfolio of nine dermatological
products to Bioglan, Inc., an American subsidiary of Bioglan Pharma,
PLC ("Bioglan"), for a net payment of $10.85 million in cash and
certain technologies that may further enhance the Company's research
and development pipeline. The products included in the sale were
A-FIL(TM), AFIRM(R), BEZASHAVE(R), BETA-LIFTx(R), METED(R),
PRAMEGEL(R), PACKER'S TAR SOAP(R), THERAMYCIN Z(R), and TEXACORT(R).
Under a separate agreement, the Company licensed to Bioglan three
additional products for a period of three years with a buyout option of
$15.5 million at the end of the third term. Medicis will receive
quarterly license payments for three years from Bioglan. The licensed
products include OCCLUSAL(R), PENTRAX(R) and SALAC(R).
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 13,975 $ 6,434 $ 25,245 $(20,869)
-------- -------- -------- --------
Denominator for basic
earnings per common
share 28,576 25,326 28,337 22,765
Effect of dilutive securities:
Stock options 1,235 1,003 1,134 --
-------- -------- -------- --------
Denominator for diluted
earnings per common
share 29,811 26,329 29,471 22,765
======== ======== ======== ========
Basic net income (loss) per
common share $ 0.49 $ 0.25 $ 0.89 $ (0.92)
======== ======== ======== ========
Diluted net income (loss) per
common share $ 0.47 $ 0.24 $ 0.86 $ (0.92)
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
Options to purchase 91,913 and 127,038 shares of common stock at prices
ranging from $39.38 to $44.67 and $33.33 to $44.67 per share were
outstanding for the three and nine months ended March 31, 1999,
respectively. These were not included in the computation of diluted
earnings per share because the option exercise price was greater than
the average market price of the Company's common shares and, therefore,
the effect would be anti-dilutive. The Company also had no dilutive
securities for the 1998 nine month period given that inclusion of such
securities would be dilutive to net loss.
5. CONTINGENCIES
The Company and certain of its subsidiaries, from time to time, are
parties to certain actions and proceedings incident to their business.
Liability in the event of final adverse determinations in any of these
matters is either covered by insurance and/or established reserves or,
in the opinion of management, after consultation with counsel, should
not, in the aggregate, have a material adverse effect on the
consolidated financial position or results of operations of the Company
and its subsidiaries.
6. INVENTORIES
Although the Company utilizes third parties to manufacture and package
inventories held for sale, the Company takes title to certain
inventories and records the associated liability once inventories are
manufactured. Inventories are valued at the lower of cost or market as
determined by net realizable value using the first-in-first-out method.
Inventories, net of reserves, at March 31, 1999, and June 30, 1998,
consist of the following:
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
<S> <C> <C>
Raw materials $ 2,935,717 $ 1,086,585
Finished goods 7,672,606 8,121,799
----------- -----------
Total inventories $10,608,323 $ 9,208,384
=========== ===========
</TABLE>
7. INCOME TAXES
Income taxes have been provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." The
provision for income taxes reflects management's estimation of the
effective tax rate expected to be applicable for the full fiscal year.
This estimate is reevaluated by management each quarter based on
estimated tax expenses for the year.
At March 31,1999 the Company took advantage of additional tax
deductions available relating to the exercise of non-qualified stock
options and disqualified dispositions of incentive stock options.
Accordingly, the Company recorded a $1.3 million increase to equity
with a corresponding $1.3 million reduction to taxes payable. Quarterly
adjustments for the exercise of non-qualified stock options and
disqualified dispositions of incentive stock options may vary as they
relate to the actions of the option holder or stockholder.
9
<PAGE> 10
8. SUBSEQUENT EVENT
On April 19, 1999 the Company purchased Ucyclyd Pharma, Inc.
("Ucyclyd"), a privately held pharmaceutical company based in
Baltimore, Maryland for approximately $23.4 million in cash. Ucyclyd's
primary product is the orphan drug BUPHENYL(TM), which is indicated in
the treatment of Urea Cycle Disorders.
Under terms of the agreement, Medicis paid $15.1 million at the close
of the transaction and will pay $5.7 million on the first anniversary
of the closing date subject to certain manufacturing conditions and
$2.7 million upon regulatory approval of a product line extension.
Medicis will also receive certain technologies that will further
enhance the Company's research and development pipeline.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto
and with the Company's audited financial statements, notes to the
consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations relating
thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998 (the "1998 Form 10-K").
This report on Form 10-Q contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. In addition, from time to time, the Company or its
representatives have made or may make forward-looking statements,
orally or in writing. Forward-looking statements involve known and
unknown risks and uncertainties. The Company's actual actions or
results could differ materially from those anticipated in
forward-looking statements as a result of certain factors including,
but not limited to, those factors discussed in the documents filed by
the Company with the Securities and Exchange Commission from time to
time, including the prospectus dated February 6, 1998, which is set
forth in the Company's Registration Statement on Form S-3 and the 1998
Form 10-K. The Company undertakes no obligation to update any forward
looking statements.
OVERVIEW
Medicis was founded in 1987 to develop and market prescription and
over-the-counter ("OTC") products to treat dermatological conditions.
Innovative Therapeutics, Inc. (the predecessor of the Company) was
incorporated under the laws of the District of Columbia on July 1,
1987, subsequently changed its name to Medicis Corporation and was
merged with and into Medicis Corporation, which was incorporated in
July 29, 1988 under the laws of Delaware, pursuant to an Agreement of
Merger dated July 29, 1988. Medicis Corporation subsequently changed
its name to Medicis Pharmaceutical Corporation.
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<PAGE> 11
Medicis Pharmaceutical Corporation ("Medicis" or the "Company") is the
leading independent pharmaceutical company in the United States
focusing primarily on the treatment of dermatological conditions. The
Company offers prescription, over-the-counter ("OTC"), and cosmetic
dermatology products emphasizing the clinical effectiveness, quality,
affordability and cosmetic elegance of its products. Medicis has
achieved a leading position in branded products for the treatment of
acne, acne-related conditions, psoriatic conditions and anti-pruritic
conditions while also offering the leading OTC Capsaicin and fade cream
products line in the United States. The Company has built its business
by successfully introducing prescription pharmaceuticals such as the
DYNACIN(R) and TRIAZ(R) products for the treatment of acne, and
LUSTRA(R) for the treatment of dyschromia and other discolorations of
the skin. The Company's business has also been built by acquiring and
successfully marketing prescription pharmaceuticals such as the
LIDEX(R) and SYNALAR(R) corticosteroid products for the treatment of
psoriasis and eczema; LOPROX(R) for the treatment of fungal infections;
NOVACET(R) for the treatment of acne rosacea and the OTC fade cream
product, ESOTERICA(R).
Prescription pharmaceuticals accounted for 77.0%, 86.5% and 83.2% of
net revenue in the fiscal years ending June 30, 1998 ("fiscal 1998"),
June 30, 1997 ("fiscal 1997") and June 30, 1996 ("fiscal 1996"),
respectively. Although DYNACIN(R) accounted for a majority of the
Company's total revenue in fiscal 1997 and fiscal 1996, the Company no
longer derives the majority of its net revenue from DYNACIN(R).
The Company derives a majority of its revenue from sales of DYNACIN(R),
LIDEX(R), TRIAZ(R), LUSTRA(R), ZOSTRIX(R) and the recently acquired
LOPROX(R) product (the "Key Products"). The Company believes that sales
of the Key Products will constitute the majority of net revenue for the
foreseeable future. Accordingly, any factor adversely affecting the
sale of the Key Products individually or collectively would have a
material adverse effect on the Company's business, financial condition
and results of operations. Each of the Key Products could be rendered
obsolete or uneconomical by regulatory or competitive changes. The sale
of the Key Products could also be affected adversely by other factors
including manufacturing or supply interruptions; the development of new
competitive pharmaceuticals to treat the conditions addressed by the
Key Products; technological advances; factors affecting the cost of
production, marketing or pricing actions by one or more of the
Company's competitors; changes in the prescribing practices of
dermatologists; changes in the reimbursement policies of third-party
payors; product liability claims or other factors.
The Company's results of operations may vary from period to period due
to a variety of factors including expenditures incurred to acquire,
license and promote pharmaceuticals; expenditures and timing relating
to divestitures, acquisition and integration of businesses; changes in
prescribing practices of dermatologists; the introduction of new
products by the Company or its competitors; cost increases from
third-party manufacturers; supply interruptions; the availability and
cost of raw materials; the mix of products sold by the Company; changes
in marketing and sales expenditures; market acceptance of the Company's
products; competitive pricing pressures; general economic and industry
conditions that affect customer demand; and the Company's level of
research and
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<PAGE> 12
development activities. In addition, the Company's business has
historically been subject to seasonal fluctuations, with lower sales
generally being experienced in the first quarter of each fiscal year.
As a result of customer buying patterns, a substantial portion of the
Company's revenues has been in the last month of each quarter. The
Company schedules its inventory purchases to meet anticipated customer
demand. As a result, relatively small delays in the receipt of
manufactured products by the Company could result in revenues being
deferred or lost. The Company's operating expenses are based on
anticipated sales levels, and a high percentage of the Company's
expenses are relatively fixed in the short term. Consequently,
variations in the timing of recognition of revenue could cause
significant fluctuations in operating results from period to period and
may result in unanticipated periodic earnings shortfalls or losses.
There can be no assurance that the Company will maintain or increase
revenues or profitability or avoid losses in any future period.
The Company's strategy for growth is substantially dependent upon its
continued ability to acquire products primarily targeted at the skin
care market. The Company engages in limited proprietary research and
development of new products and must rely upon the willingness of other
companies to sell or license product lines or technologies. Other
companies, including those with substantially greater financial,
marketing and sales resources, compete with the Company to acquire such
products. There can be no assurance that the Company will be able to
acquire rights to additional products on acceptable terms, or at all.
The failure of the Company to acquire additional products or
successfully introduce new products could have a material adverse
effect on the Company's business, financial condition and results of
operations. Further, any new internally developed or acquired products
may have different distribution channels, pricing resources and levels
or competition than the Company's current products. Consequently, there
can be no assurance that the Company will be able to compete favorably
and attain market acceptance in any new product category or
successfully integrate any acquired products or businesses. In
addition, any such products may require the Company to significantly
increase its sales force and incur commensurate expense levels in
anticipation of a new product introduction. Failure of the Company to
successfully introduce and market new products, whether internally
developed or acquired from third parties, would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company has recently experienced, and will continue to experience,
a period of significant expansion of its operations that has placed a
significant strain upon its management system and resources. The
Company's ability to compete effectively and to manage future growth,
if any, will require the Company to continue to improve its financial
and management controls; reporting systems and procedures on a timely
basis; and expand, hire, train and manage an increasing number of
employees. The Company's failure to do so would have a material adverse
effect upon the Company's business, financial condition and results of
operations. The Company's business strategy includes potential
acquisitions of products and businesses and introductions of new
products. The Company anticipates that the integration of additional
new businesses or potential products, if any, would require significant
expense and management time and attention.
12
<PAGE> 13
Failure to manage such change effectively would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company recognizes revenues from sales upon shipment to its
customers. At the time of sale, the Company records reserves for
returns based upon estimates using historical experience. Revenue is
reported net of actual and estimated product returns and net of pricing
adjustments and/or discounts. The Company applies royalty obligations
to the cost of revenues in the period the corresponding revenues are
recognized.
The Company's customers include the nation's leading wholesale
pharmaceutical distributors, such as McKesson Drug Company
("McKesson"), Bergen Brunswig Drug Company ("Bergen Brunswig"),
Cardinal Health, Inc. ("Cardinal"), and other major drug chains. In
fiscal 1998, McKesson, Bergen Brunswig and Cardinal accounted for
16.9%, 13.2% and 12.6%, respectively, of the Company's revenue. In
fiscal 1997, McKesson, Cardinal and Bergen Brunswig accounted for
20.6%, 16.3% and 10.9%, respectively, of the Company's revenue. The
loss of, or deterioration in, any of these customer accounts could have
a material adverse effect upon the Company's business, financial
condition or results of operations.
To enable Medicis to focus on its core marketing and sales activities,
the Company selectively out-sources certain non-sales and non-marketing
functions, such as laboratory research, manufacturing and warehousing.
As the Company expands its activities in these areas, additional
financial resources are expected to be utilized. The Company typically
does not enter into long-term manufacturing contracts with third-party
manufacturers. Whether or not such contracts exist, there can be no
assurance that the Company will be able to obtain adequate supplies of
such products in a timely fashion, or at all.
The Company may increase total expenditures for research and
development and expects that research and development expenditures as a
percentage of net revenue will fluctuate from period to period. Actual
expenditures will depend on a variety of factors, including the
Company's financial condition, as well as the results of clinical
testing, delays or changes in government-required testing and approval
procedures, technological and competitive developments and strategic
marketing decisions. There can be no assurance that any product or
technology under development will result in the successful introduction
of any new product.
The Year 2000 issue results from the inability of some computer
programs to identify the year 2000 properly, potentially leading to
errors or system failure. A company's business may be adversely
affected if it, or any of its suppliers and customers or others with
whom it transacts business (including its banks and governmental
agencies), have not timely resolved the year 2000 issue. In response to
its rapid growth, the Company selected a new management information
system in fiscal 1997, which was implemented in fiscal 1998, that is
expected to meet its presently anticipated needs. In selecting a
system, Year 2000 compliance was one of the criteria. The Company
continues to review the areas within its business and operations which
could be adversely affected by Year 2000 issues and to evaluate the
costs of modifying and testing its systems for the Year 2000.
13
<PAGE> 14
Although the Company is not yet able to estimate its incremental cost
for the Year 2000 issues, within its internal information systems,
based on its preliminary review to date, the Company does not believe
Year 2000 issues will have a material adverse effect on the Company's
business, financial condition and results of operations. The Company
continues to work with critical third parties to determine the impact
of Year 2000 issues on their business and operations and potential
collateral impact on the business and operations of the Company and to
determine such third parties' plans to remediate Year 2000 issues where
their systems interface with the Company's systems. The assessment and
necessary modification for the Year 2000 issue should be completed in
late 1999.
RESULTS OF OPERATIONS
The following table sets forth certain data as a percentage of net
revenue for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenue ................ 100.0% 100.0% 100.0% 100.0%
Gross profit ............... 83.4 82.3 81.9 82.1
In-process research and
development ............. -- -- (11.4) (66.3)
Operating expenses (1) ..... (38.9) (43.8) (39.7) (45.0)
Operating income (loss) .... 44.5 38.5 30.8 (29.2)
Net interest income ........ 6.7 8.4 9.2 7.5
Gain on sale of assets ..... 23.6 -- 8.6 --
Income tax benefit (expense) (28.5) (18.3) (18.0) (17.4)
----- ----- ----- -----
Net income (loss) .......... 46.3% 28.6% 30.6% (39.1)%
===== ===== ===== =====
</TABLE>
(1) Excludes in-process research and development
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1998
Net Revenue
Net revenue for the three months ended March 31, 1999 (the "third
quarter of fiscal 1999") increased 34.0%, or $7.7 million, to $30.2
million from $22.5 million for the three months ended March 31, 1998
(the "third quarter of fiscal 1998"). The Company's net revenue
increased in the third quarter of fiscal 1999 primarily as a result of
the effect of revenue associated with the acquisition of the LOPROX(R)
and TOPICORT(R) products which were acquired in November 1998 and the
continued unit and dollar sales growth of the Company's LUSTRA(R),
DYNACIN(R), and TRIAZ(R) products. The Company's prescription products
accounted for 76.6% of net revenue in the third quarter of fiscal 1999
and 80.5% of net revenue in the third quarter of fiscal 1998. The OTC
products and contract revenue accounted for 23.4% and 19.5% of net
revenue in the third quarter of fiscal 1999 and 1998, respectively. The
Company expects the majority of revenue in the future to be
attributable to the Company's prescription brands.
14
<PAGE> 15
Gross Profit
Gross profit during the third quarter of fiscal 1999 increased 35.7%,
or $6.6 million, to $25.2 million from $18.6 million in the third
quarter of fiscal 1998. As a percentage of net revenue, gross profit
increased to 83.4% in the third quarter of fiscal 1999 from 82.3% in
the third quarter of fiscal 1998. This increase was primarily due to
sales associated with LOPROX(R), TOPICORT(R), LUSTRA(R) and TRIAZ(R),
which enjoy higher gross profit percentages than the Company's other
products. Gross profit percentage also increased due to the sale of
nine products to Bioglan which consisted primarily of products which
have a lower gross profit percentage than the Company's prescription
products, and the license of three products to Bioglan which the
Company recorded as contract revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the third quarter of
fiscal 1999 increased 17.2%, or $1.4 million, to $9.5 million from $8.1
million in the third quarter of fiscal 1998, primarily due to the
expenses associated with an increase in variable costs commensurate
with increased sales volume, the expansion of the Company's sales force
and additional personnel costs attributable to the hiring of additional
full-time equivalent employees and cost-of-living salary adjustments.
Selling, general and administrative costs, as a percentage of net
revenue decreased 4.5 percentage points in the third quarter of fiscal
1999 relative to the third quarter of fiscal 1998.
Research and Development Expenses
Research and development expenses in the third quarter of fiscal 1999
decreased 18.8%, or $164,000, to $710,000 from $874,000 in the third
quarter of fiscal 1998. This decrease was due primarily to the timing
of various research and development projects.
Depreciation and Amortization Expenses
Depreciation and amortization expenses in the third quarter of fiscal
1999 increased 69.8%, or $647,000, to $1,574,000 from $927,000 in the
third quarter of fiscal 1998. This income was due primarily to
amortization of intangible assets associated with the Company's
acquisition of the LOPROX(R) and TOPICORT(R) products in November 1998.
Operating Income
Operating income during the third quarter of fiscal 1999 increased
54.9%, or $4.8 million, to $13.4 million from $8.6 million in the third
quarter of fiscal 1998. This increase was primarily a result of higher
sales volume, a 1.1 percentage point increase in gross profit
percentage, and a 4.5 percentage point decrease in operating costs as a
percentage of net revenue.
15
<PAGE> 16
Interest Income
Interest income in the third quarter of fiscal 1999 increased 45.6%, or
$0.9 million, to $2.8 million from approximately $1.9 million in the
third quarter of fiscal 1998. This increase was due primarily to higher
cash equivalent and short-term investment balances in the third quarter
of fiscal 1999. These balances are primarily the result of the
Company's cash flow from operations.
Interest Expense
Interest expense in the third quarter of fiscal 1999 increased
approximately $723,000 to $726,000 from $3,000 in the third quarter of
fiscal 1998 primarily as a result of interest expense of $720,000
related to the acquisition of the LOPROX(R) and TOPICORT(R) products.
Gain on Sale of Intangible Assets
The Company recognized a gain of $7.1 million, $4.3 million net of tax,
on the sale of nine products to Bioglan for $10.85 million in cash and
certain technologies that may further enhance the Company's research
and development pipeline. The products included in the sale were
A-FIL(TM), AFIRM(R), BENZASHAVE(R), BETA-LIFTx(R), METED(R),
PRAMEGEL(R), PACKER'S TAR SOAP(R), THERAMYCIN Z(R), and TEXACORT(R).
Income Tax Expense
Income tax expense during the third quarter of fiscal 1999 increased
$4.5 million to $8.6 million from $4.1 million in the third quarter of
fiscal 1998. The provision for income taxes recorded for the third
quarter of fiscal 1999 reflects management's estimate of the effective
tax rate expected to be applicable for the full fiscal year. This
estimate is reevaluated by management each quarter based upon forecasts
of income before taxes for the year. The increase in income tax
expense, as compared to the third quarter of fiscal 1998, is due to an
increase in pre-tax income. The decrease in the effective tax rate, as
compared to the third quarter of fiscal 1998, is primarily attributable
to an increase in tax exempt interest income.
Net Income
Net income during the third quarter of fiscal 1999 increased 117.2%, or
$7.6 million, to $14.0 million from $6.4 million in the third quarter
of fiscal 1998. This increase is primarily attributable to an increase
in sales volume, higher gross profits, lower operating expenses as a
percentage of net revenue, and interest income generated by higher cash
and cash equivalent balances.
16
<PAGE> 17
NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE NINE MONTHS ENDED
MARCH 31, 1998
Net Revenue
Net revenue for the nine months ended March 31, 1999 (the "1999 nine
months") increased 55.5% or $29.6 million, to $83.0 million from $53.4
million for the nine months ended March 31, 1998 (the "1998 nine
months") primarily as a result of the LOPROX(R) and TOPICORT(R) product
acquisition in November 1998 and the unit and dollar sales growth of
the LUSTRA(R) and DYNACIN(R) products. The Company's prescription
products accounted for 74.3% of net revenue in the 1999 nine months as
compared to 77.0% of net revenue in the 1998 nine months. The OTC
products accounted for 25.7% of net revenue in the 1999 nine months as
compared to 23.0% of net revenue for the 1998 nine months.
Gross Profit
Gross Profit in the 1999 nine months increased 55.0%, or $24.1 million,
to $67.9 million from $43.8 million in the 1998 nine months. As a
percentage of net revenue, gross profit decreased 0.2 percentage points
to 81.9% in the 1999 nine months from 82.1% in the 1998 nine months,
primarily as a result of greater OTC revenue as a percentage of total
net revenue. OTC products have a lower gross profit percentage than the
Company's prescription products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the 1999 nine months
increased 38.4%, or $7.5 million, to $27.1 million from $19.6 million
in the 1998 nine months. This increase is primarily due to an increase
in selling, general and administrative expenses associated with the
promotion and administration of the LOPROX(R) and TOPICORT(R) products
acquired in November 1998, and the sampling and advertising of the
Company's existing products.
Additionally, selling, general and administrative expenses increased
due to variable compensation commensurate with increased sales volume,
personnel costs attributable to an increase in full-time equivalent
employees, and cost-of-living salary adjustments. Selling, general and
administrative costs, as a percentage of net revenue, have decreased
4.0 percentage points in the 1999 nine months compared to the 1998 nine
months.
Research and Development Expenses
Research and development expenses in the 1999 nine months decreased
18.1% or $0.4 million to approximately $1.9 million, from $2.3 million
in the 1998 nine months primarily due to the timing of various research
and development projects.
17
<PAGE> 18
Depreciation and Amortization Expenses
Depreciation and amortization expenses in the 1999 nine months
increased 92.2%, or $1.9 million, to $3.9 million from $2.0 million in
the 1998 nine months. This increase was due primarily to amortization
of the intangible assets associated with the Company's acquisition of
the LOPROX(R) and TOPICORT(R) products in November 1998, and a full
nine months of amortization as a result of the GenDerm Corporation
("Genderm") acquisition in December 1997.
In-Process Research and Development
The Company recorded a $9.5 million charge to operations as in-process
research and development during the 1999 nine months as part of the
allocated purchase price on the acquisition of the LOPROX(R) and
TOPICORT(R) products. In the 1998 nine months, the Company recorded a
$35.4 million charge to operations as in-process research and
development as part of the allocated purchase price of GenDerm. The
amounts allocated to in-process research and development were based
upon independent appraisals.
Operating Income
Operating income in the 1999 nine months increased $41.0 million to
$25.4 million from a net operating loss of $15.6 million in the 1998
nine months primarily as a result of the $35.4 charge for in-process
research and development to operating expenses relating to the
Company's purchase of GenDerm in December 1997. Absent special charges,
operating income in the 1999 nine months increased 76.3%, or $15.1
million, to $34.9 from $19.8 million in the 1998 nine months as a
result of higher sales volume, coupled with an 4.0 percentage point
decrease in the Company's selling, general and administrative expenses
as a percentage of net revenue.
Interest Income
Interest income in the 1999 nine months increased 116.6%, or $4.7
million to $8.7 million from approximately $4.0 million in the 1998
nine months. This increase was due primarily to higher cash and
short-term investment balances in the 1999 nine months which were
generated from cash flow from operations and the public offering
completed by the Company in February 1998.
Interest Expense
Interest expense in the 1999 nine months increased approximately $1.1
million to $1.1 million from approximately $18,000 primarily as a
result of interest expense of approximately $1.1 million related to the
acquisition of the LOPROX(R) and TOPICORT(R) products.
18
<PAGE> 19
Gain on Sale of Intangible Assets
The Company recognized a gain of $7.1 million, $4.3 million net of tax,
on the sale of nine products to Bioglan for $10.85 million in cash and
certain technologies that may further enhance the Company's research
and development pipeline. The products included in the sale were
A-FIL(TM), AFIRM(R), BENZASHAVE(R), BETA-LIFTx(R), METED(R),
PRAMEGEL(R), PACKER'S TAR SOAP(R), THERAMYCIN Z(R), and TEXACORT(R).
Income Tax Expense
Income tax expense in the 1999 nine months increased 61.0%, or $5.7
million to $15.0 million from $9.3 million in the 1998 nine months. The
provision for income taxes recorded for the 1999 nine months reflects
management's estimate of the effective tax rate expected to be
applicable for the full fiscal year. This estimate is reevaluated by
management each quarter based upon forecasts of income before taxes for
the year. The increase in income tax expense in the 1999 nine months,
as compared to the 1998 nine months, is due to a increase in pre-tax
income offset by the special charge for in-process research and
development in fiscal 1998 for which no tax benefit was realized. A tax
benefit is associated with the charge for in-process research and
development incurred in the 1999 nine months as a result of the
LOPROX(R) and TOPICORT(R) product acquisition. No income tax benefit is
associated with the charge for in-process research and development
incurred in the 1998 nine months as a result of the GenDerm
acquisition. The decrease in the effective tax rate in the 1999 nine
months, as compared to the 1998 nine months, is primarily attributable
to an increase in tax exempt interest income.
Net Income
Net income in the 1999 nine months increased approximately $46.1
million to $25.2 million from a net loss of $20.9 million in the 1998
nine months. This increase is a result of the $35.4 million charge for
in-process research and development to operating expenses relating to
the Company's purchase of GenDerm in the 1998 nine months. Absent
special charges, net income in the 1999 nine months increased 139.1%,
or $20.2 million, to $34.7 million from $14.5 million in the 1998 nine
months as a result of an increase in sales volume and a decrease in
selling, general and administrative costs as a percentage of sales.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 and June 30, 1998, the Company had cash equivalents
and short-term investments of approximately $251.7 million and $237.9
million, respectively. The Company's working capital was $260.3 million
and $263.0 million at March 31, 1999 and June 30, 1998, respectively.
The decrease in working capital is primarily attributable to a $22.0
million payment and a short-term obligation of $22.0 million incurred
by the Company as a result of the LOPROX(R) and TOPICORT(R) product
acquisition offset by the Company's cash flow from operations of
approximately $26.3 million, and the $9.8 million proceeds received as
a result of the sale of products to Bioglan.
19
<PAGE> 20
At March 31, 1999 and June 30, 1998, the Company had inventories of
$10.6 million and $9.2 million, respectively. The increase in the
Company's inventory balances is primarily related to inventory
associated with the LOPROX(R) and TOPICORT(R) products acquired by the
Company in November 1998 and an increase in the Company's inventory
held by third parties which the Company is required to record in its
inventory balance and which fluctuates due to the timing of the third
parties' manufacturing cycles which the Company does not control.
At March 31, 1999 and June 30, 1998, the Company had accounts
receivable of $25.3 million and $18.9 million, respectively. The
increase in the Company's accounts receivable balance is primarily
related to a 24.7% increase in revenue for the three months ended March
31, 1999 as compared to the three months ended June 30, 1998.
At March 31, 1999 and June 30, 1998, the Company had current
liabilities of $37.9 million and $15.2 million, respectively. The
increase is primarily due to the $22.0 million short-term obligation
incurred by the Company as a result of the acquisition of the LOPROX(R)
and TOPICORT(R) products.
In accordance with various manufacturing agreements, the Company is
required to provide manufacturers with pro forma estimated production
requirements by product and in accordance with minimum production runs.
From time to time, the Company may not take possession of all
merchandise which has been produced by the manufacturer. However, the
Company records its obligation to the manufacturer at the time finished
inventory is produced.
In November 1998, the Company agreed to license, with an option to
purchase the LOPROX(R), TOPICORT(R) and A/T/S(R) products from Hoechst
Marion Roussel. The Company, using cash reserves, paid $22.0 million
and will make two additional annual payments of $22.0 million. Medicis
then has the option to purchase the products for $16.5 million after
three years. The $22.0 million due on the first anniversary of the
transaction is recorded as a short-term obligation and the remaining
$33.3 million is recorded as a long-term obligation. For accounting
purposes, the Company has recorded the transaction as an acquisition.
On January 12, 1999, the Company announced that its Board of Directors
had approved a 3-for-2 stock split to be effected in the form of a 50%
stock dividend. The dividend was paid on February 16, 1999 to holders
of record of the Class A and Class B Common Stock on January 29, 1999.
Holders of the Company's Class A and Class B Common Stock received one
additional share of Common Stock for each two shares held. Adjustments
due to the stock split were made under the Company's stock option plans
and the Company's Shareholder Rights Plan.
Inflation did not have a significant impact upon the results of the
Company during the nine months ended March 31, 1999.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K
(a) Exhibits
No. 3.3 (a) AMENDED and RESTATED BY-LAWS of the COMPANY
No. 27.1 Financial Data Schedule
(see Note 3 to the Notes to the Condensed Consolidated Financial
Statements incorporated herein for computation of Per Common Share
results.)
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K:
(i) Current report on Form 8-K dated April 23, 1999 reporting under
Item 5 that the Company acquired all the issued and outstanding common
stock of Ucyclyd Pharma, Inc.
SIGNATURE
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.
MEDICIS PHARMACEUTICAL CORPORATION
Date: 5/24/99 By: /s/ Jonah Shacknai
--------------------------
Jonah Shacknai
Chairman and Chief
Executive Officer
Date: 5/24/99 By: /s/ Mark A. Prygocki, Sr.
--------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
Secretary and Treasurer
21
<PAGE> 1
Exhibit 3.3(a)
AMENDED AND RESTATED
BY-LAWS OF
MEDICIS PHARMACEUTICAL CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, either within or
without the State of Delaware, on such date and at such time as the Board of
Directors may by resolution provide, or, if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 9:00 AM on the second Friday in November of each year or if such
date is a legal holiday, on the next succeeding business day. The Board of
Directors may specify by resolution prior to any special meeting of stockholders
held within the year that such meeting shall be in lieu of the annual meeting.
Any business to be conducted at an annual meeting, including, without
limitation, any nomination for election to the Board of Directors, must be (a)
specified in the notice of meeting given by or at the direction of the Board of
Directors; (b) brought before the annual meeting by or at the direction of the
chair of the meeting, the Board of Directors, or a committee thereof; or (c)
brought before the annual meeting, in compliance with the notice procedures set
forth in this Section, by any stockholder of the Corporation who is a
stockholder of record on the record date for the determination of stockholders
entitled to vote at such meeting.
A stockholder intending to nominate a candidate for election to the
Board of Directors or to bring any other business before an annual meeting must
give timely written notice thereof to the Secretary of the Corporation. In order
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 [75] days
nor more than [105] days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within the 30 days
before or after such anniversary date, notice by the
1
<PAGE> 2
stockholder in order to be timely must be so received not later than the close
of business on the 15th day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
meeting was made, whichever first occurs.
A stockholder's notice to the Secretary shall set forth:
a) as to each nominee for election or reelection to the Board of
Directors, (i) that person's consent to such nomination, (ii) the name, age,
business address and residence address of the proposed nominee, (iii) the
principal occupation or employment of the proposed nominee, (iv) the class and
number of shares of stock of the Corporation which are beneficially owned by the
proposed nominee;
b) as to each matter of any other business, (i) a brief description of
the business desired to be brought before the annual meeting and (ii) the
reasons for conducting such business at the annual meeting; and
c) as to the stockholder proposing any such nomination or other
business, (i) the name and record address of the stockholder, (ii) the class and
number of shares of the Corporation which are beneficially owned by the
stockholder, (iii) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of the stockholder in such nomination or business, and (iv) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting.
The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as director of the Corporation. No
person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein.
The chair of the meeting shall, if the facts warrant, determine and
declare to the meeting that the nomination was not made in accordance with the
foregoing procedure, and if he should so determine, shall so declare to the
meeting and the nomination shall be disregarded.
Section 2. Special Meeting. Special meetings of the stockholders (i)
may be called at any time by the Chairman of the Board of Directors or the
President or (ii) shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors. Such written request shall
specify the time and purpose of the proposed meeting. Such meeting shall be held
at such place, either within or without the State of Delaware, as is stated in
the call and notice thereof.
Section 3. Notice of Meeting. Written notice of each meeting of
stockholders, stating the time and place of the meeting, and the purpose of any
special meeting, shall be mailed to each stockholder entitled to vote at or to
notice of such meeting at the address shown on the books of the Corporation not
less than ten nor more than 60 days prior to such meeting unless such
2
<PAGE> 3
stockholder waives notice of the meeting. If an agreement of merger or
consolidation or a sale, lease, exchange, or other disposition of all or
substantially all the property and assets of the Corporation is to be considered
at any annual or special meeting, the written notice shall state the purpose of
such meeting and shall be given to each stockholder, whether or not entitled to
vote thereon, not less than 20 days before such meeting. Any stockholder may
execute a waiver of notice, in person or by proxy, either before or after any
meeting, and shall be deemed to have waived notice if he or she is present at
such meeting in person or by proxy. If such notice is for a special meeting, the
purpose of such meeting shall be stated in the waiver of notice of such meeting
and the business transacted at such meeting shall be limited to the matters so
stated in said notice and any matters reasonably related thereto.
Notice of any meeting may be given by the Chairman of the Board of
Directors, the President or the Secretary.
Section 4. Adjournments. Any meeting of the stockholders may be
adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum; Required Stockholder Vote. A quorum for the
transaction of business at any annual or special meeting of stockholders shall
exist when the holders of a majority of the outstanding shares entitled to vote
are represented either in person or by proxy at such meeting. When a quorum is
once present to organize a meeting, the stockholders present may continue to do
business at the meeting or at any adjournment thereof notwithstanding withdrawal
of enough stockholders to leave less than a quorum. The holders of a majority of
the voting shares represented at a meeting, whether or not a quorum is present,
may adjourn such meeting from time to time.
If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, unless a
3
<PAGE> 4
greater vote is required by law, by the Certificate of Incorporation or by these
By-laws. Unless otherwise provided in the Certificate of Incorporation, each
stockholder shall be entitled to one vote in person or by proxy at every
stockholders meeting for each share of capital stock held by such stockholder.
Section 7. Proxies. A stockholder may vote either in person or by proxy
which such stockholder has duly executed in writing. No proxy shall be valid
after three years from the date of its execution unless a longer period is
expressly provided in the proxy.
Section 8. Action of Stockholders Without Meeting. Any action required
to be, or which may be, taken at a meeting of stockholders, may be taken without
a meeting if a consent or consents in writing, setting forth the action so
taken, shall be (i) signed and dated 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 (ii) delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer of agent of the Corporation having custody of the book in which
proceedings of meetings, of stockholders are recorded. Delivery made to the
Corporation's registered office shall be 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 60 days of the
earliest dated consent delivered in the manner required by the Delaware General
Corporation Law to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Such consent shall have the same force and
effect as an affirmative vote of the stockholders and shall be filed with the
minutes of the proceedings of the stockholders. 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.
Section 9. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chair of any meeting of the stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chair of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at
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or participation in the meeting to stockholders of record of the Corporation,
their duly authorized and constituted proxies or such other persons as the chair
of the meeting shall determine; (v) restrictions on entry to the meeting after
the time fixed for the commencement thereof, and (vi) limitations on the time
allotted to questions or comments by participants.
Section 10. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 5 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 11. Inspection of Stockholder Consents. In the event of the
delivery to the Corporation of the requisite written stockholder consents to
take corporate action and/or any related revocation or revocations, the
Corporation shall engage nationally recognized independent inspectors of
elections for the purpose of promptly performing a ministerial review of the
validity of such consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without a
meeting shall be effective until such date as the independent inspectors certify
to the Corporation that the consents delivered to the Corporation constitute at
least the minimum number of votes that would be necessary to take the corporate
action. Nothing contained in this paragraph shall in any way be construed to
suggest or imply that the Board of Directors or any stockholder shall not be
entitled to contest the validity of any consent or revocation thereof, whether
before or after such certification by the independent inspectors, or to take any
other action (including, without limitation, the commencement, prosecution or
defense of any litigation with respect thereto, and the seeking of injunctive
relief in such litigation).
ARTICLE III
DIRECTORS
Section 1. Power of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of Directors
which may exercise all the powers of the Corporation, subject to any
restrictions imposed by law, by the Certificate of Incorporation or by these
By-laws.
Section 2. Composition of the Board. The number of directors which
shall constitute the whole Board of Directors shall be not more than twelve and
not less than three natural persons of the age of 18 or over and shall be
divided into three classes in the manner provided in the Certificate of
Incorporation. The exact number of directors within the specified maximum and
minimum range which shall constitute the whole Board of Directors shall be
determined from time to time by resolution of the Board of Directors passed by a
majority of the whole Board of Directors, except that no decrease shall shorten
the term of any incumbent director unless such director is specifically removed
pursuant to this Section 2 at the time of such decrease. Directors need not be
residents of the State of Delaware or stockholders of the Corporation. At each
annual meeting the stockholders shall elect the directors, who shall serve until
their successors are elected and qualified or until such director's earlier
resignation or removal.
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Section 3. Meetings of the Board; Notice of Meetings; Waiver of Notice.
The annual meeting of the Board of Directors for the purpose of electing
officers and transacting such other business as may be brought before the
meeting shall be held each year immediately following the annual meeting of
stockholders and no notice of such annual meeting need be given. The Board of
Directors may by resolution provide for the time and place of other regular
meetings and no notice of such regular meetings need be given. Special meetings
of the Board of Directors (i) may be called by the Chairman of the Board of
Directors, the President or by any two directors. Written notice of the time and
place of such meetings shall be given to each director by first class mail or
express delivery service at least 48 hours before the meeting or by telephone,
telegraph, facsimile or in person at least 24 hours before the meeting. Any
director may execute a waiver of notice, either before or after any meeting, and
shall be deemed to have waived notice if he or she is present at such meeting.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Board of Directors need be stated in the notice or waiver of notice of such
meeting. Any meeting may be held at any place within or without the State of
Delaware.
Section 4. Quorum; Vote Requirement. A majority of the number of
directors shall constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of the directors
present shall be the act of the Board of Directors, unless a greater vote is
required by law, by the Certificate of Incorporation or by these By-Laws. If a
quorum shall not be present at any meeting, a majority of the directors present
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.
Section 5. Action of Board without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee. Such consent shall have the same force and effect as a
unanimous affirmative vote of the Board of Directors or committee, as the case
may be.
Section 6. Committees. The Board of Directors, by resolution adopted by
a majority of all of the directors, may designate such committees as it deems
necessary or desirable, each composed of one or more of the directors. Any such
committee, to the extent provided in the resolution of the Board of Directors,
or in these By-laws, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided that no committee shall have the power or
authority of the Board of Directors in reference to (a) an amendment to the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 151(a) of the
Delaware General Corporation Law fix the designations 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 or any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation
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or fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (b) the adoption of an agreement of
merger or consolidation, (c) recommending to the stockholders the sale, lease or
exchange or other disposition of all or substantially all of the property and
assets of the Corporation, (d) recommending to the stockholders a dissolution of
the Corporation or a revocation thereof or (e) an amendment to the By-laws of
the Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provides, 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. Each committee shall keep regular minutes and report to
the Board of Directors when required.
Section 7. Alternate Members. 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 such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not the
member or members constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member.
Section 8. Procedures. Time, place and notice, if any, of meetings of a
committee shall be determined by such committee. At meetings of a committee, a
majority of the number of members designated by the Board shall constitute a
quorum for the transaction of business. The act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
committee, except as otherwise specifically provided by law, the certificate of
incorporation or these Bylaws. If a quorum is not present at a meeting of a
committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
and any newly created directorships resulting from any increase in the
authorized number of directors may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the Board of
Directors, or by the sole remaining director, as the case may be, or if the
vacancy is not so filled, or if no director remains, by the stockholders. A
director elected to fill a vacancy shall serve for the unexpired term of his
predecessor in office. A director elected to fill a newly created directorship
shall serve until the next election of directors by the stockholders and the
election and qualification of the successor.
Section 10. Telephone Conference Meetings. Unless the Certificate of
Incorporation otherwise provides, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board 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 participation in a meeting pursuant to this
section 8 shall constitute presence in person at such meeting.
Section 11. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director, payable in cash or
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securities. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 12. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof which authorizes
the contract or transaction, or solely because the director's or officer's vote
is counted for such purpose if (i) the material facts as to the director's or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to the director's or officer's relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
Section 1. Executive Structure of the Corporation. The officers of the
Corporation shall be elected by the Board of Directors and shall consist of a
Chairman of the Board of Directors, a Secretary, a Treasurer and such other
officers or assistant officers as may be elected by the Board of Directors. Each
officer shall hold office for the term for which such officer has been elected
or appointed or until such officer's successor has been elected or appointed and
has qualified, or until such officer's earlier resignation, removal from office
or death. Any two or more offices may be held by the same person. Officers need
not be stockholders or residents of the State of Delaware.
Section 2. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall also have the title of Chief Executive Officer, unless
the Board shall appoint a separate chief executive officer, and shall give
general supervision and direction to the affairs of the Corporation, subject to
the direction of the Board of Directors. The Chairman of the Board shall advise
and counsel the other officers and shall exercise such powers and perform such
duties as shall be assigned to or required of the Chairman from time to time by
the Board or these Bylaws. The Chairman of the Board of Directors shall preside
at all meetings of the Board of Directors and at all meetings of the
stockholders.
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Section 3. President. If a President shall be appointed, the President
shall be the chief operating officer of the Corporation and shall be in charge
of the day-to-day affairs of the Corporation, subject to the direction of the
Board of Directors and the Chairman of the Board of Directors. The President
shall preside at all meetings of the stockholders in the absence of the Chairman
of the Board of Directors and shall act in the case of absence or disability of
the Chairman of the Board of Directors.
Section 4. Secretary. The Secretary shall attend all meetings of the
stockholders, the Board and (as required) committees of the Board and shall
record all the proceedings of such meetings in books to be kept for that
purpose. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board and shall perform such
other duties as may be prescribed by the Board or the Chairman. The Secretary
shall have custody of the corporate seal of the Corporation and the Secretary,
or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it, and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his or her signature.
Section 5. Treasurer. Unless the Board by resolution otherwise
provides, the Treasurer shall be the chief accounting and financial officer of
the Corporation. The Treasurer shall have the custody of the corporate funds and
securities, shall keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation and shall deposit all monies and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render to the Chairman and the Board, at its
regular meetings, or when the Board so requires, an account of all his or her
transactions as treasurer and of the financial condition of the Corporation.
Section 6. Other Duties and Authority. Each officer, employee and agent
of the Corporation shall have such other duties and authority as may be
conferred upon such officer, employee or agent by the Board of Directors or
delegated to such officer, employee or agent by the Chairman of the Board of
Directors or by the President.
Section 7. Removal of Officers; Vacancies. Any officer may be removed,
and such vacancy may be filled, at any time by a majority of the Board of
Directors. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect upon
any cause of action which any officer may have as a result of such officer's
removal in breach of a contract of employment.
Section 8. Compensation. The salaries of the officers shall be fixed
from time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the Corporation.
Section 9. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the
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Corporation may be executed in the name of and on behalf the Corporation by the
Chairman of the Board of Directors or the President or any other officer
authorized to do so by the Board of Directors and any such officer may, in the
name of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
ARTICLE V
STOCK
Section 1. Stock Certificates. The shares of stock of the Corporation
shall be represented by certificates unless and to the extent the Board of
Directors by resolution provides that any or all classes or series of stock
shall be uncertificated. Certificates shall be in such form as may be approved
by the Board of Directors, which certificates shall be issued to stockholders of
the Corporation in numerical order from the stock book of the Corporation, and
each of which shall bear the name of the stockholder, the number of shares
represented, and the date of issue; and which shall be signed by or in the name
of the Corporation by the Chairman of the Board of Directors, or the President
and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation. The signatures of the officers of the Corporation
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall
be transferred only on the books of the Corporation upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the shares to be transferred accompanied by an assignment in
writing of such shares properly executed by the stockholder's duly authorized
attorney-in-fact and with all taxes on the transfer having been paid. The
Corporation may refuse any requested transfer until furnished evidence
satisfactory to it that such transfer is proper. Upon the surrender of a
certificate for transfer of stock, such certificate shall at once be
conspicuously marked on its face "Canceled" and filed with the permanent stock
records of the Corporation and issuance of new equivalent certificated shares or
uncertificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation; provided,
however, that the Corporation shall not be so obligated unless such transfer was
made in compliance with applicable state and federal laws.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a
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condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or such owner's legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Registered Stockholder. The Corporation may deem and treat
the holder of record of any stock as the absolute owner for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
Section 5. Record Date.
(a) For the purpose of determining 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 the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action (except as provided in Subsection (b) below), the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than ten
days before the date of such action.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
(c) If no record date has been fixed by the Board of Directors within
ten (10) days of receipt of such written notice, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the meeting, when no prior
action by the Board of Directors is required by applicable law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of stockholders meetings are recorded, to the attention of the
Secretary of the corporation.
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Delivery shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by applicable law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the date on
which the Board of Directors adopts the resolution taking such prior action.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Depositories. All funds of the Corporation shall be
deposited in the name of the Corporation in such bank, banks or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn out an checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.
Section 2. Contracts and Deeds. All contracts, deeds and other
instruments shall be signed on behalf of the Corporation by the Chairman of the
Board of Directors, the President or by such other officer, officers, agent or
agents as the Board of Directors may from time to time by resolution provide.
Section 3. Seal. The seal of the Corporation shall be as follows:
If the seal is affixed to a document, the signature of the Secretary or
an Assistant Secretary shall attest the seal. The seal and its attestation may
be lithographed or otherwise printed on any document and shall have, to the
extent permitted by law, the same force and effect as if it had been affixed and
attested manually.
Section 4. Dividends. Dividends on the capital stock of the
Corporation, paid in cash, property or securities of the Corporation and as may
be limited by applicable law and applicable provisions of the Certificate of
Incorporation (if any), may be declared by the Board at any regular or special
meeting.
Section 5. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board from time to time, in its absolute discretion, determines
proper as a reserve or reserves to meet contingencies, for equalizing dividends,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board shall determine to be in the best interest of the
Corporation; and the Board may modify or abolish any such reserve in the manner
in which it was created.
Section 6. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 7. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
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ARTICLE VII
INDEMNITY
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or (if serving for another
corporation at the request of the Corporation) agent or in any other capacity
while serving as a director or officer or (if serving for another corporation at
the request of the corporation) agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts to be paid in settlement) incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director or officer, or (if serving for
another corporation at the request of the Corporation) agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in Section 2 hereof with respect to proceedings
seeking to enforce rights to indemnification, the Corporation shall indemnify
any such persons seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law so requires, the payment
of such expenses incurred by a director of officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of the proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article VI or
otherwise.
Section 2. Payment of Indemnification. If a claim under Section I of
this Article VII is not paid in full by the Corporation within 90 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required
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has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or stockholders) that the claimant has not met such applicable
standard of conduct, should be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 3. Indemnification Not Exclusive. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article VI shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE VIII
CORPORATE OPPORTUNITIES
In the event that a director or officer of the Corporation, who is also
a director or officer of another corporation which engages in the same or
similar activities or lines of businesses as the Corporation or has an interest
in the same areas of corporate opportunities as the Corporation (a "Competing
Corporation"), acquires knowledge of a potential transaction or matter which may
be a corporate opportunity for both the Corporation and the Competing
Corporation, such director or officer of the Corporation shall have fully
satisfied and fulfilled the fiduciary duty of such director or officer to the
Corporation and its stockholders with respect to such corporate opportunity and
shall not be liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of the fact that the Competing Corporation pursues or
acquires such corporate opportunity for itself or directs such corporate
opportunity to another person or does not communicate information regarding such
corporate opportunity to the Corporation, if such director or officer acts in a
manner consistent with the following policy:
(A) A corporate opportunity offered to any person who is an
officer of the Corporation, and who is also a director or officer of a
Competing Corporation, shall belong to the Corporation.
14
<PAGE> 15
(B) A corporate opportunity offered to any person who is a
director, but not an officer, of the Corporation, and who is also a
director or an officer of a Competing Corporation shall belong to the
Corporation unless such opportunity is expressly offered to such person
in writing solely in his or her capacity as a director or officer of
the Competing Corporation, as the case may be, in which event the
corporate opportunity shall belong to the Competing Corporation.
ARTICLE IX
AMENDMENT OF BY-LAWS
The Board of Directors shall have the power to alter, amend or repeal
the By-laws or adopt new by-laws, but any by-laws adopted by the Board of
Directors may be altered, amended or repealed and new by-laws adopted by the
stockholders. The stockholders may prescribe that any by-law or by-laws adopted
by them shall not be altered, amended or repealed by the Board of Directors.
15
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