<PAGE>
--------------------------------------------------------------
--------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
-------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission file number 000-18908
-------------------
WHOLESOME & HEARTY FOODS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0886359
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
975 SE Sandy Blvd., Portland, Oregon 97214
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-238-0109
-------------------
The index to exhibits appears on page 9 of this document.
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.
Common stock without par value 8,566,456
(Class) (Outstanding at July 26, 1996)
--------------------------------------------------------------
--------------------------------------------------------------
<PAGE>
WHOLESOME & HEARTY FOODS, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Balance Sheets - June 30, 1996 and December 31, 1995 2
Statements of Operations - Three Month and Six Month
Periods Ended June 30, 1996 and 1995 3
Statements of Cash Flows - Six Months Ended June 30, 1996
and 1995 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
1
<PAGE>
PART -1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHOLESOME AND HEARTY FOODS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,905,000 $ 9,247,000
Accounts receivable, net of allowances of
$145,000 and $120,000 4,355,000 2,941,000
Inventories, net 2,456,000 1,562,000
Prepaid expenses 417,000 197,000
Income taxes receivable 1,201,000 -
Deferred income tax benefit 237,000 156,000
------------- -------------
Total Current Assets 16,571,000 14,103,000
Property, Plant and Equipment, net of accumulated
depreciation of $1,018,000 and $828,000 5,775,000 4,937,000
Other Assets, net 1,319,000 285,000
------------- -------------
Total Assets $ 23,665,000 $ 19,325,000
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Income taxes payable $ - $ 269,000
Accounts payable 1,528,000 1,039,000
Payroll and related liabilities payable 641,000 408,000
Other current liabilities 640,000 409,000
------------- -------------
Total Current Liabilities 2,809,000 2,125,000
Deferred Income Taxes 298,000 245,000
Commitments and Contingencies (Note 4)
Shareholders' Equity:
Preferred stock, 5,000,000 shares authorized;
none issued - -
Common stock, 30,000,000 shares authorized;
shares issued and outstanding: 8,566,456
and 7,647,123 9,218,000 7,603,000
Additional paid-in capital 3,455,000 2,053,000
Retained earnings 7,885,000 7,299,000
------------- -------------
Total Shareholders' Equity 20,558,000 16,955,000
------------- -------------
Total Liabilities and Shareholders' Equity $ 23,665,000 $ 19,325,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
WHOLESOME AND HEARTY FOODS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 11,005,000 $ 9,453,000 $ 20,169,000 $ 17,734,000
Cost of goods sold 5,473,000 4,495,000 10,114,000 8,768,000
------------- ------------- ------------- -------------
Gross margin 5,532,000 4,958,000 10,055,000 8,966,000
Operating expenses:
Sales and marketing 3,197,000 2,711,000 6,130,000 5,006,000
General and administrative 1,589,000 1,066,000 2,589,000 1,762,000
Acquired in-process research & development - - 612,000 -
------------- ------------- ------------- -------------
4,786,000 3,777,000 9,331,000 6,768,000
------------- ------------- ------------- -------------
Operating income 746,000 1,181,000 724,000 2,198,000
Other income (expense):
Interest income 83,000 67,000 196,000 111,000
Other, net - (25,000) (1,000) (17,000)
------------- ------------- ------------- -------------
83,000 42,000 195,000 94,000
------------- ------------- ------------- -------------
Income before provision for income taxes 829,000 1,223,000 919,000 2,292,000
Provision for income taxes 308,000 477,000 340,000 894,000
------------- ------------- ------------- -------------
Net income $ 521,000 $ 746,000 $ 579,000 $ 1,398,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per share $ 0.06 $ 0.09 $ 0.07 $ 0.16
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares used in per share calculations 8,946,066 8,623,740 8,792,773 8,624,536
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
WHOLESOME AND HEARTY FOODS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 579,000 $ 1,398,000
Effect of exchange rate on operating accounts 7,000 -
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 242,000 155,000
Acquired in-process research and development, net of tax 386,000 -
(Gain) loss on sale of fixed assets - 9,000
(Increase) decrease in:
Investments - 507,000
Accounts receivable, net (1,414,000) (1,021,000)
Inventories, net (894,000) (77,000)
Prepaid expenses (220,000) (250,000)
Income taxes receivable (1,470,000) 2,051,000
Increase (decrease) in:
Accounts payable 489,000 413,000
Payroll and related liabilities payable 233,000 214,000
Accrued liabilities 231,000 169,000
Deferred income taxes (28,000) -
------------- -------------
Net cash provided by operating activities (1,859,000) 3,568,000
Cash flows from investing activities:
Payments for purchase of property and equipment (1,027,000) (406,000)
Proceeds from sale of equipment - 1,000
Cash paid for Gorilla Foods and Whole Food Marketing (419,000) -
Other assets, net (64,000) (15,000)
------------- -------------
Net cash provided by (used in) investing activities (1,510,000) (420,000)
Cash flows from financing activities:
Proceeds from exercise of common stock options 625,000 66,000
Income tax benefit of non-qualified stock option
exercises and disqualifying dispositions 1,402,000 86,000
------------- -------------
Net cash provided by (used in) financing activities 2,027,000 152,000
Increase (decrease) in cash and cash equivalents (1,342,000) 3,300,000
Cash and cash equivalents:
Beginning of period 9,247,000 3,732,000
------------- -------------
End of period $ 7,905,000 $ 7,032,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
WHOLESOME & HEARTY FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three month and six month
periods ended June 30, 1996 and 1995 and the financial information as of June
30, 1996 is unaudited; however, such information reflects all adjustments
consisting only of normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. The financial information
as of December 31, 1995 is derived from Wholesome & Hearty Foods, Inc.'s (the
Company's) Annual Report to Shareholders which is incorporated by reference into
the Company's 1995 Form 10-K. The interim financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's 1995 Annual Report to Shareholders. The results of operations for
the interim periods presented are not necessarily indicative of the results to
be expected for the full year.
NOTE 2. INVENTORIES
Inventories are valued at standard cost, which approximates the lower of cost
(using the first-in, first-out (FIFO) method), or market, and include materials,
labor and manufacturing overhead.
June 30, 1996 December 31, 1995
------------- -----------------
Raw materials $ 514,000 $ 391,000
Supplies 226,000 171,000
Finished goods 1,716,000 1,000,000
------------ ------------
$ 2,456,000 $ 1,562,000
------------ ------------
------------ ------------
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Supplemental disclosure of cash flow information is as follows: Six Months Ended June 30,
1996 1995
----------- ----------
<S> <C> <C>
Cash paid during the period for income taxes $ 1,094,000 $ 113,000
Issuance of Common Stock in exchange for the assets of
Gorilla Foods, Inc. $ 990,000 $ --
</TABLE>
NOTE 4. LITIGATION
During 1995 and 1996, the Company and certain of its officers were named
defendants in complaints filed by Dwight Sinclair, a former employee of the
Company. The complaints allege numerous claims based on breach of fiduciary
duty, negligent misrepresentation, oppression of minority shareholder, unlawful
retaliation, unjust enrichment, interference with business relations, improper
wasting of corporate assets by certain officers and management's concealment of
their inexperience. Mr. Sinclair is seeking $3 million in actual damages on
each of his claims for breach of contract, fraud/deceit, breach of fiduciary
duty, negligent misrepresentation and unlawful retaliation, $10 million in
actual damages on each of his claims for unjust enrichment and oppression of a
minority shareholder, and over $12 million in punitive damages. Also, Mr.
Sinclair continues to seek certain injunctive relief. During the entire course
of this litigation, the Company's assessment has been that Mr. Sinclair's claims
lack merit. The Company intends to continue its vigorous defense against these
claims. At this time, no prediction can be made as to the outcome of this case.
See Part II - Other Information, Item 1. Legal Proceedings for additional
information.
NOTE 5. ACQUISITION OF GORILLA FOODS, INC. AND WHOLE FOOD MARKETING, INC.
In January 1996, the Company acquired Gorilla Foods, Inc. ("Gorilla") and Whole
Food Marketing, Inc. ("Whole Food"). The assets of Gorilla were acquired for
240,000 restricted shares of the Company's Common Stock and $68,750 in cash. In
addition, 200,000 shares of the Company's Common Stock were placed in escrow to
be distributed to Gorilla shareholders upon the Company achieving certain gross
revenues from the sale of gluten products over the next five years. The assets
of Whole Food were acquired for $350,000 in cash. Pro forma results of
operations, if the
5
<PAGE>
acquisition of Gorilla and Whole Food had occurred at the beginning of the year,
are not materially different from actual results of operations reported for the
six months ended June 30, 1996 or the prior year.
In connection with the acquisition of Gorilla Foods, the Company recorded a one-
time pretax charge of $612,000 ($386,000, net of taxes) related to acquired in-
process research and development. The value assigned to the in-process research
and development was determined by an independent appraisal and represents those
efforts in process at the acquisition date that had not yet established
technological feasibility and that had no alternative future uses. Accounting
rules require that such costs be charged to expense as incurred. The Company
currently believes that these research and development efforts will result in
commercially viable products over the next one to three years.
NOTE 6. RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales increased to $11.0 million in the second quarter of 1996 from $9.5
million in the second quarter of 1995 and to $20.2 million for the first half of
1996 compared to $17.7 million for the first half of 1995. The Company has
increased its sales levels in each of its major channels, including food
service, retail and club stores, such as PriceCostco. Such increases are
primarily a result of increased marketing and public relations activities which
have increased awareness of the Company's products throughout its channels of
distribution. At the beginning of the second quarter of 1996, the Company
started selling to additional large retail chains in Southern California, which
the Company is promoting with increased sales and marketing activities.
Gross margins decreased to 49.9 percent in the first half of 1996 from 50.6
percent in the first half of 1995 primarily as a result of continued competitive
pressures on pricing and capacity constraints, offset by process improvements at
the Company's manufacturing plant, increased food service sales, which have
higher margins, and start-up costs associated with a new food service product-
type in 1995 that were not duplicated in 1996.
Sales and marketing expense increased to $3.2 million and $6.1 million,
respectively (29 percent and 30 percent of net sales, respectively) for the
three month and six month periods ended June 30, 1996 compared to $2.7 million
and $5.0 million, respectively (29 percent and 28 percent of net sales,
respectively) for the three month and six month periods ended June 30, 1995.
The increase is primarily attributable to increased expenditures during the
first half of 1996 related to the promotion of sales for additional retail
chains that the Company began selling to during the first half of 1996 and
increased promotional activities in general to support the growth of the
Company.
General and administrative expense increased to $1.6 million and $2.6 million,
respectively (14 percent and 13 percent of net sales, respectively) for the
three month and six month periods ended June 30, 1996 compared to $1.1 million
and $1.8 million, respectively (11 percent and 10 percent of net sales,
respectively) for the three and six month periods ended June 30, 1995. The
increase is primarily a result of increased costs to defend current litigation,
increased personnel to support the growth of the Company and approximately
$400,000 for management transition costs during the second quarter of 1996.
6
<PAGE>
In connection with the acquisition of Gorilla Foods, Inc., the Company recorded
a one-time pretax charge of $612,000 ($386,000 net of taxes) related to acquired
in-process research and development costs. The value assigned to the in-process
research and development was determined by an independent appraisal and
represents those efforts in process at the acquisition date that had not yet
established feasibility and that had no alternative future uses. Accounting
rules require that such costs be charged to expense as incurred. The Company
currently believes that these research and development efforts will result in
commercially viable products within the next year.
Operating income decreased to $0.7 million and $1.3 million ($0.7 million with
the effect of acquired in process research and development), respectively (7
percent and 7 percent of net sales, respectively) for the three month and six
month periods ended June 30, 1996 from $1.2 million and $2.2 million,
respectively (13 percent and 13 percent of net sales) as a result of the
individual line item changes discussed above.
Income taxes are based on an estimated rate of 37 percent which is slightly
higher than the 34.8 percent for the year ended December 31, 1995. The increase
from the 34.8 percent rate achieved for fiscal 1995 is primarily a result of a
one-time tax benefit received in 1995 from the State of Oregon.
Net income decreased to $521,000 and $965,000 ($579,000 with the after tax
effect of the acquired in-process research and development), respectively (5
percent and 5 percent of net sales, respectively) for the three month and six
month periods ended June 30, 1996 from $746,000 and $1,398,000 (8 percent and 8
percent of net sales, respectively) for the comparable periods of 1995.
Earnings per share decreased to $0.06 and $0.11 ($0.07 with the after tax effect
of the acquired in-process research and development), respectively (on 8,946,066
and 8,792,773 shares, respectively) for the three month and six month periods
ended June 30, 1996 from $0.09 and $0.16 (on 8,623,740 and 8,624,536 shares) for
the comparable periods of 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 working capital was $13.8 million, including $7.9 million of
cash and cash equivalents. In the first half of 1996, working capital increased
by $1.8 million and the current ratio decreased to 5.9:1 from 6.6:1.
Cash and cash equivalents decreased $1.3 million to $7.9 million at June 30,
1996 from $9.2 million at December 31, 1995 primarily due to $1.9 million used
in operations, $0.4 million for the acquisition of Gorilla Foods, Inc. and Whole
Food Marketing, Inc. and $1.0 million for the purchase of property and
equipment, offset by $2.0 million received from the exercise of employee stock
options and associated tax benefits.
Accounts receivable increased $1.4 million to $4.4 million at June 30, 1996 from
$2.9 million at December 31, 1995 due primarily to growth in revenues and
significant sales at the end of the quarter. Days sales outstanding increased
to 36.0 at June 30, 1996 from 34.6 at December 31, 1995.
Inventories increased $0.9 million to $2.5 million at June 30, 1996 from $1.6
million at December 31, 1995 due primarily to the building of finished goods in
order to help ensure the Company's ability to meet anticipated demand during the
third quarter of 1996. Inventory turned approximately 10 times on an annualized
basis for the first six months of 1996 compared to approximately 8 times for
1995.
The $1.5 million increase in income taxes receivable, net of income taxes
payable, is primarily a result of a $1.4 million benefit which resulted from the
exercise of non-qualified stock options and payments made in the first half of
1996.
7
<PAGE>
The $231,000 increase in other current liabilities is primarily attributable to
approximately $150,000 of accrued costs related to management transition.
Capital expenditures of $1.0 million during the first half of 1996 primarily
resulted from the purchase of equipment which allows the Company to manufacture
the gardenDog-TM- at its facility and packaging equipment to streamline the
Company's retail manufacturing process.
Future capital requirements, other than normal operating expenses, could
include, among other things, the possible construction of a new manufacturing
facility, the purchase of manufacturing equipment to equip such a new facility
or a co-packing facility, the funding of regional or national marketing
campaigns, the implementation of a new information systems infrastructure and
amounts required to defend and/or settle any judgments or settlements resulting
from continuing litigation described in Note 4. If the Company builds a new
manufacturing facility, it would expect to spend between $15 and $18 million,
including all production equipment. The Company is currently researching
funding options including various combinations of cash and conventional debt,
lease and equity financings. At June 30, 1996, the Company had firm obligations
of $150,000 related to such facility. The Company has incurred approximately
$379,000 in expenditures to date on its information systems project and expects
the entire project to cost approximately $500,000, all of which is expected to
be paid out of existing cash balances. The Company does not have an estimate of
total expenditures related to current litigation, but has incurred approximately
$415,000 related to the Sinclair litigation through June 30, 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SINCLAIR V. WHOLESOME & HEARTY FOODS, INC., ET. AL., U.S. DISTRICT COURT CASE
NO. 95-1938 MA
When the United States District Court for the District of Oregon granted defense
motions to dismiss many of plaintiff's claims on January 12, 1996, the Court
granted plaintiff leave to amend and file a second amended complaint.
The Second Amended Complaint was filed on February 16, 1996, naming all
defendants previously named in the First Amended Complaint; the Company; Michael
Meek ("Meek"); Paul Wenner ("Wenner"); Matthew Palmer ("Palmer"); Richard Dietz
("Dietz"); Charles Monahan ("Monahan") and Michael Rubic ("Rubic"). The claims
pleaded in the Second Amended Complaint were essentially the same as those
contained in the First Amended Complaint, described in a Form 8-K dated February
16, 1996 and filed by the Company with the Securities and Exchange Commission.
Thus, in his Second Amended Complaint, plaintiff merely attempted to replead his
previous claims in conformity with the Federal Rules of Civil Procedure.
Since the Second Amended Complaint was also inadequate and defective, on March
19, 1996, all defendants filed new motions to dismiss all but one of its claims.
On June 19, 1996, the United States District Court for the District of Oregon
favorably ruled on most of defendants' motions and dismissed most of the claims.
Plaintiff is now under Court order to file a third amended complaint by August
21, 1996. Importantly, the Court's Order of June 19, 1996 prohibits plaintiff
from refiling any of the dismissed claims without leave of court. Based on
information currently available, the Company believes it is unlikely that such
leave will be granted.
All but one claim, oppression of a minority shareholder, which was not the
subject of a motion to dismiss, were dismissed in their entirety against Wenner,
Palmer, Dietz, Monahan and Rubic.
8
<PAGE>
Except for small parts, the fraud claim and negligent misrepresentation claim
were dismissed against the Company. Also dismissed in their entirety against
the Company were the claims of defamation and breach of fiduciary duty.
As to Meek, the Court dismissed in its entirety the defamation claim and granted
his motion to make more definite and certain the breach of fiduciary duty claim.
The parties also engaged in discovery efforts during the months of April, May
and June, 1996. Defendants were forced to seek the assistance of the Court to
compel Plaintiff's production of documents previously sought through discovery
requests.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on May 29, 1996
at which the following actions were taken:
1. A majority of the shareholders elected the eight nominees for director
to the Board of Directors of the Company. The eight directors elected and the
voting results follow:
Director Name Shares Voted For Shares Withheld
------------- ---------------- ---------------
Thomas D. Henrion 7,829,449 57,820
Ralph M. Kovel 7,829,243 58,046
John A. Lee 7,828,776 58,513
Mary O. McWilliams 7,822,302 64,987
Michael L. Ray 7,828,969 58,320
E. Kay Stepp 7,825,397 61,892
Michael D. Wagoner 7,830,692 56,597
Paul F. Wenner 7,829,823 57,466
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this report are listed below:
Exhibit No. and Description
---------------------------
3 1995 Restated Bylaws of Wholesome & Hearty Foods, Inc.
11 Calculations of Net Income Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
1. Form 8-K under item 5., Other Events, dated April 25, 1996.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 4, 1996 WHOLESOME & HEARTY FOODS, INC.
By:/s/ LYLE G. HUBBARD
---------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
By:/s/ RICHARD C. DIETZ
---------------------------------------
Richard C. Dietz
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
10
<PAGE>
1995 RESTATED BYLAWS
OF
WHOLESOME & HEARTY FOODS, INC.
<PAGE>
CONTENTS
SECTION 1. OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Notice of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Fixing of Record Date for Determining Shareholders . . . . . . . . . 2
2.7 Shareholders' List . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Voting for Directors . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Action by Shareholders Without a Meeting . . . . . . . . . . . . . . 4
2.14 Voting of Shares by Corporation. . . . . . . . . . . . . . . . . . . 4
2.14.1 Shares Held by Another Corporation . . . . . . . . . . . . 4
2.14.2 Shares Held by the Corporation . . . . . . . . . . . . . . 4
2.15 Acceptance or Rejection of Shareholder Votes,
Consents, Waivers and Proxy Appointments. . . . . . . . . . . . . . 5
2.15.1 Documents Bearing Name of Shareholders . . . . . . . . . . 5
2.15.2 Documents Bearing Name of Third Parties. . . . . . . . . . 5
2.15.3 Rejection of Documents . . . . . . . . . . . . . . . . . . 5
2.16 Subject of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3. BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Number, Tenure and Qualifications. . . . . . . . . . . . . . . . . . 7
3.3 Nominations of Directors . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Annual and Regular Meetings. . . . . . . . . . . . . . . . . . . . . 8
3.5 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 Meetings by Telecommunications . . . . . . . . . . . . . . . . . . . 8
3.7 Notice of Special Meetings . . . . . . . . . . . . . . . . . . . . . 8
3.7.1 Personal Delivery. . . . . . . . . . . . . . . . . . . . . 9
3.7.2 Delivery by Mail . . . . . . . . . . . . . . . . . . . . . 9
3.7.3 Delivery by Telegraph. . . . . . . . . . . . . . . . . . . 9
3.7.4 Oral Notice. . . . . . . . . . . . . . . . . . . . . . . . 9
3.7.5 Notice by Facsimile Transmission . . . . . . . . . . . . . 9
-i-
<PAGE>
3.7.6 Notice by Private Courier. . . . . . . . . . . . . . . . . 9
3.8 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8.1 Written Waiver . . . . . . . . . . . . . . . . . . . . . . 9
3.8.2 Waiver by Attendance . . . . . . . . . . . . . . . . . . . 9
3.9 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 Presumption of Assent. . . . . . . . . . . . . . . . . . . . . . . 10
3.12 Action by Board or Committees Without a Meeting. . . . . . . . . . 10
3.13 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.16 Minutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.17 Executive and Other Committees . . . . . . . . . . . . . . . . . . .11
3.17.1 Creation of Committees . . . . . . . . . . . . . . . . . .11
3.17.2 Authority of Committees. . . . . . . . . . . . . . . . . .11
3.17.3 Quorum and Manner of Acting. . . . . . . . . . . . . . . .11
3.17.4 Minutes of Meetings. . . . . . . . . . . . . . . . . . . .12
3.17.5 Resignation. . . . . . . . . . . . . . . . . . . . . . . .12
3.17.6 Removal. . . . . . . . . . . . . . . . . . . . . . . . . .12
3.18 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 4. OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.1 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.2 Appointment and Term of Office . . . . . . . . . . . . . . . . . . .12
4.3 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.4 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.5 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.6 Chair of the Board . . . . . . . . . . . . . . . . . . . . . . . . .13
4.7 President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.8 Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.9 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.10 Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.11 Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . . . . . . . . . . .14
5.1 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.2 Loans to the Corporation . . . . . . . . . . . . . . . . . . . . . .14
5.3 Loans to Directors . . . . . . . . . . . . . . . . . . . . . . . . .14
5.4 Checks, Drafts, Etc. . . . . . . . . . . . . . . . . . . . . . . . .15
5.5 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
-ii-
<PAGE>
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER. . . . . . . . . . . . .15
6.1 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . .15
6.2 Escrow for Shares. . . . . . . . . . . . . . . . . . . . . . . . . .15
6.3 Certificates for Shares. . . . . . . . . . . . . . . . . . . . . . .15
6.4 Stock Records. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
6.5 Restriction on Transfer. . . . . . . . . . . . . . . . . . . . . . .16
6.5.1 Securities Laws. . . . . . . . . . . . . . . . . . . . . .16
6.5.2 Other Restrictions . . . . . . . . . . . . . . . . . . . .16
6.6 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . .16
6.7 Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . .16
6.8 Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . .16
6.9 Officer Ceasing to Act . . . . . . . . . . . . . . . . . . . . . . .16
6.10 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7. BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . .16
SECTION 8. FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 9. SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 10. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .17
10.1 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . .17
10.2 Employees and Other Agents. . . . . . . . . . . . . . . . . . . . .17
10.3 No Presumption of Bad Faith . . . . . . . . . . . . . . . . . . . .17
10.4 Advances of Expenses. . . . . . . . . . . . . . . . . . . . . . . .17
10.5 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
10.6 Nonexclusivity of Rights. . . . . . . . . . . . . . . . . . . . . .18
10.7 Survival of Rights. . . . . . . . . . . . . . . . . . . . . . . . .18
10.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
10.9 Amendments to Law . . . . . . . . . . . . . . . . . . . . . . . . .18
10.10 Savings Clause. . . . . . . . . . . . . . . . . . . . . . . . . . .19
10.11 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 11. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
-iii-
<PAGE>
1995 RESTATED BYLAWS
OF
WHOLESOME & HEARTY FOODS, INC.
SECTION 1
OFFICES
The principal office of the Corporation shall be located at the principal
place of business or such other place as the Board of Directors (the "Board")
may designate. The Corporation may have such other offices, either within or
without the State of Oregon, as the Board may designate or as the business of
the Corporation may require from time to time.
SECTION 2
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be held
in the month of April each year, or in such other month as fixed by the Board,
on such date and at such time as fixed by the Board, at the principal office of
the Corporation or at such other place as fixed by the Board, for the purpose of
electing Directors and transacting such other business as may properly come
before the meeting.
2.2 SPECIAL MEETINGS. The Board, or the Chair of the Board may call
special meetings of the shareholders for any purpose. The holders of not less
than one-tenth of all the outstanding shares of the Corporation entitled to vote
on any issue proposed to be considered at the proposed special meeting, if they
date, sign and deliver to the Corporation's Secretary a written demand for a
special meeting describing the purpose(s) for which it is to be held, may call a
special meeting of the shareholders for such stated purpose(s).
2.3 PLACE OF MEETING. All meetings shall be held at the principal office
of the Corporation or at such other place as designated by the Board, by any
persons entitled to call a meeting hereunder, or in a waiver of notice signed by
all of the shareholders entitled to vote at the meeting.
2.4 NOTICE OF MEETING.
2.4.1 The Corporation shall cause to be delivered to each
shareholder entitled to notice of or to vote at an annual or special meeting of
shareholders, either personally or by mail, not less than ten (10) nor more than
sixty (60) days before the meeting, written notice stating the date, time and
place of the meeting and, in the case of a special meeting, the purpose(s) for
which the meeting is called.
2.4.2 Notice to a shareholder of an annual or special shareholder
meeting shall be in writing. Such notice, if in comprehensible form, is
effective (a) when mailed, if it
Page 1 - 1995 RESTATED BYLAWS
<PAGE>
is mailed postpaid and is correctly addressed to the shareholder's address shown
in the Corporation's current record of shareholders; or (b) when received by the
shareholder, if it is delivered by telegraph, facsimile transmission or private
courier.
2.4.3 If an annual or special shareholders' meeting is adjourned
to a different date, time, or place, notice need not be given of the new date,
time, or place if the new date, time, or place is announced at the meeting
before adjournment, unless a new record date for the adjourned meeting is or
must be fixed under Section 2.6.1 of these Bylaws or the Oregon Business
Corporation Act.
2.5 WAIVER OF NOTICE.
2.5.1 Whenever any notice is required to be given to any
shareholder under the provisions of these Bylaws, the Articles of Incorporation
or the Oregon Business Corporation Act, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, and delivered to the Corporation for inclusion in the minutes
for filing with the corporate records, shall be deemed equivalent to the giving
of such notice.
2.5.2 The attendance of a shareholder at a meeting waives
objection to lack of, or defect in, notice of such meeting or of consideration
of a particular matter at the meeting, unless the shareholder, at the beginning
of the meeting or prior to consideration of such matter, objects to holding the
meeting, transacting business at the meeting, or considering the matter when
presented at the meeting.
2.6 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS.
2.6.1 For the purpose of determining shareholders entitled to
notice of, or to vote at, any meeting of shareholders or any adjournment
thereof, or shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other purpose, the Board
may fix in advance a date as the record date for any such determination. Such
record date shall be not more than seventy (70) days, and in case of a meeting
of shareholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination is to be taken. If no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting, or to receive payment of a dividend, the date on which the
notice of meeting is mailed or on which the resolution of the Board declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination. Such determination shall apply to any adjournment of the
meeting, provided such adjournment is not set for a date more than 120 days
after the date fixed for the original meeting.
2.6.2 The record date for the determination of shareholders
entitled to demand a special shareholder meeting shall be the date the first
shareholder signs the demand.
Page 2 - 1995 RESTATED BYLAWS
<PAGE>
2.7 SHAREHOLDERS' LIST.
2.7.1 Beginning two (2) business days after notice of a meeting of
shareholders is given, a complete alphabetical list of the shareholders entitled
to notice of such meeting shall be made, arranged by voting group, and within
each voting group by class or series, with the address of and number of shares
held by each shareholder. This record shall be kept on file at the
Corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. On written demand, this record shall
be subject to inspection by any shareholder at any time during normal business
hours. Such record shall also be kept open at such meeting for inspection by
any shareholder.
2.7.2 A shareholder may, on written demand, copy the shareholders'
list at such shareholder's expense during regular business hours, provided that:
(a) Such shareholder's demand is made in good faith and for a
proper purpose;
(b) Such shareholder has described with reasonable particularity
such shareholder's purpose in the written demand; and
(c) The shareholders' list is directly connected with such
shareholder's purpose.
2.8 QUORUM. A majority of the votes entitled to be cast on a matter at a
meeting by a voting group, represented in person or by proxy, shall constitute a
quorum of that voting group for action on that matter at a meeting of the
shareholders. If a quorum is not present for a matter to be acted upon, a
majority of the shares represented at the meeting may adjourn the meeting from
time to time without further notice. If the necessary quorum is present or
represented at a reconvened meeting following such an adjournment, any business
may be transacted that might have been transacted at the meeting as originally
called. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.9 MANNER OF ACTING.
2.9.1 If a quorum exists, action on a matter (other than the
election of Directors) by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the affirmative vote of a greater number is required by these Bylaws, the
Articles of Incorporation or the Oregon Business Corporation Act.
2.9.2 If a matter is to be voted on by a single group, action on
that matter is taken when voted upon by that voting group. If a matter is to be
voted on by two or more
Page 3 - 1995 RESTATED BYLAWS
<PAGE>
voting groups, action on that matter is taken only when voted upon by each of
those voting groups counted separately. Action may be taken by one voting group
on a matter even though no action is taken by another voting group entitled to
vote on such matter.
2.10 PROXIES. A shareholder may vote by proxy executed in writing by the
shareholder or by his or her attorney-in-fact. Such proxy shall be effective
when received by the Secretary or other officer or agent authorized to tabulate
votes at the meeting. A proxy shall become invalid eleven (11) months after the
date of its execution, unless otherwise expressly provided in the proxy. A
proxy for a specified meeting shall entitle the holder thereof to vote at any
adjournment of such meeting but shall not be valid after the final adjournment
thereof.
2.11 VOTING OF SHARES. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
2.12 VOTING FOR DIRECTORS. Each shareholder may vote, in person or by
proxy, the number of shares owned by such shareholder that are entitled to vote
at an election of Directors, for as many persons as there are Directors to be
elected and for whose election such shares have a right to vote. Unless
otherwise provided in the Articles of Incorporation, Directors are elected by a
plurality of the votes cast by shares entitled to vote in the election at a
meeting at which a quorum is present.
2.13 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action which could be
taken at a meeting of the shareholders may be taken without a meeting if a
written consent setting forth the action so taken is signed by all shareholders
entitled to vote with respect to the subject matter thereof. The action shall
be effective on the date on which the last signature is placed on the consent,
or at such earlier or later time as is set forth therein. Such written consent,
which shall have the same force and effect as a unanimous vote of the
shareholders, shall be inserted in the minute book as if it were the minutes of
a meeting of the shareholders.
2.14 VOTING OF SHARES BY CORPORATION.
2.14.1 SHARES HELD BY ANOTHER CORPORATION. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such other corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine;
provided, however, such shares are not entitled to vote if the Corporation owns,
directly or indirectly, a majority of the shares entitled to vote for directors
of such other corporation.
2.14.2 SHARES HELD BY THE CORPORATION. Authorized but unissued
shares shall not be voted or counted for determining whether a quorum exists at
any meeting or counted in determining the total number of outstanding shares at
any given time. Notwithstanding the foregoing, shares of its own stock held by
the Corporation in a fiduciary capacity may be
Page 4 - 1995 RESTATED BYLAWS
<PAGE>
counted for purposes of determining whether a quorum exists, and may be voted by
the Corporation.
2.15 ACCEPTANCE OR REJECTION OF SHAREHOLDER VOTES, CONSENTS, WAIVERS AND
PROXY APPOINTMENTS.
2.15.1 DOCUMENTS BEARING NAME OF SHAREHOLDERS. If the name signed
on a vote, consent, waiver or proxy appointment corresponds to the name of a
shareholder, the Secretary or other agent authorized to tabulate votes at the
meeting may, if acting in good faith, accept such vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder.
2.15.2 DOCUMENTS BEARING NAME OF THIRD PARTIES. If the name signed
on a vote, consent, waiver or proxy appointment does not correspond to the name
of its shareholder, the Secretary or other agent authorized to tabulate votes at
the meeting may nevertheless, if acting in good faith, accept such vote,
consent, waiver or proxy appointment and give it effect as the act of the
shareholder if:
(a) The shareholder is an entity and the name signed purports to
be that of an officer or an agent of the entity;
(b) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Secretary or other agent requests, acceptable evidence of fiduciary status has
been presented;
(c) The name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder, and, if the Secretary or other agent requests,
acceptable evidence of this status has been presented;
(d) The name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the Secretary or other
agent requests, acceptable evidence of the signatory's authority to sign has
been presented; or
(e) Two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all co-
owners.
2.15.3 REJECTION OF DOCUMENTS. The Secretary or other agent
authorized to tabulate votes at the meeting is entitled to reject a vote,
consent, waiver or proxy appointment if such agent, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
2.16 SUBJECT OF MEETINGS. To be properly brought before an annual meeting
of shareholders, business must be either (i) specified in the notice of the
meeting (or any
Page 5 - 1995 RESTATED BYLAWS
<PAGE>
supplement or amendment thereto) given by or at the direction of the Board,
(ii) otherwise brought before the meeting by or at the direction of the Board,
or (iii) otherwise brought before the meeting by a shareholder who is a
shareholder of record at the time of giving of the notice provided for in this
Section 2.16, who shall be entitled to vote at such meeting and who complies
fully with all of the notice procedures and other requirements set forth in this
Section 2.16. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting of shareholders by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) calendar days nor more than ninety (90)
calendar days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is changed by more than thirty (30) calendar days from such anniversary
date, notice by the shareholder to be timely must be so received not later than
the close of business on the tenth (10th) calendar day following the earlier of
the day on which notice of the date of the meeting was mailed or public
disclosure was made. A shareholder's notice to the Corporation's Secretary of
business proposed to be conducted at any annual or special meeting of
shareholders shall set forth as to each matter the shareholder proposes to bring
before such meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of the shareholder proposing such
business and the name and address of the beneficial owner, if any, on whose
behalf the proposal is made, (iii) the class, series and number of shares of the
capital stock of the Corporation which are owned beneficially and of record by
such shareholder and by the beneficial owner, if any, on whose behalf the
proposal is made, and (iv) any material interest of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of shareholders except in accordance with the procedures
set forth in this Section 2.16. The officer of the Corporation presiding at a
meeting of shareholders (the "Presiding Officer") shall determine whether the
proposed business is properly brought before the meeting in accordance with the
provisions of this Section 2.16. If the Presiding Officer should determine that
the proposed business is not properly brought before the meeting, the Presiding
Officer shall state such determination to the meeting, whereupon any such
business not properly brought before the meeting shall not be transacted or
otherwise brought before the meeting. Notwithstanding the foregoing provisions
of this Section 2.16, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth herein.
SECTION 3
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the Corporation shall be
managed by the Board, except as may be otherwise provided in these Bylaws, the
Articles of Incorporation or the Oregon Business Corporation Act.
Page 6 - 1995 RESTATED BYLAWS
<PAGE>
3.2 NUMBER, TENURE AND QUALIFICATIONS. The Board shall consist of no less
than three and no more than nine Directors, the specific number to be set by
resolution of the Board. The number of Directors may be changed from time to
time by amendment to these Bylaws, but no decrease in the number of Directors
shall shorten the term of any incumbent Director. The terms of the Directors
expire at the next annual shareholder's meeting following their election.
Despite the expiration of a Director's term, however, the Director continues to
serve until the Director's successor is elected and qualifies or until there is
a decrease in the number of Directors. Directors need not be shareholders of
the Corporation or residents of the State of Oregon.
3.3 NOMINATIONS OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of the Corporation
at any meeting of shareholders may be made by or at the direction of the Board,
by any committee of persons appointed by the Board or at the meeting by any
shareholder of the Corporation who is a shareholder of record at the time of
giving notice provided for in this Section 3.3, who shall be entitled to vote
for the election of directors at the meeting and who complies fully with all of
the notice procedures and other requirements set forth in this Section 3.3 and
the procedures and requirements set forth in the Oregon Business Corporation
Act. Nominations by any shareholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting, not less than
sixty (60) calendar days nor more than ninety (90) calendar days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is changed by more than
thirty (30) calendar days from such anniversary date, notice by the shareholder
to be timely must be so received not later than the close of business on the
tenth (10th) calendar day following the earlier of the day on which notice of
the date of the meeting was mailed or public disclosure was made, and (b) in the
case of a special meeting at which Directors are to be elected, not later than
the earlier of (i) the close of business on the tenth (10th) calendar day
following the earlier of the day on which notice of the date of the meeting was
mailed or public disclosure was made or (ii) the close of business on the fifth
(5th) calendar day before the date of the meeting. Such shareholder's notice to
the Secretary or a written demand from shareholders pursuant to Section 60.204
of the Oregon Revised Statutes shall set forth (i) as to each person whom such
shareholders propose to nominate for election or reelection as a Director, (a)
the name, age, business address and residence address of the person, (b) the
principal occupation or employment of the person, (c) the class and number of
shares of capital
Page 7 - 1995 RESTATED BYLAWS
<PAGE>
stock of the Corporation which are beneficially owned by the person, and (d) all
other information relating to the person that is or would be required to be
disclosed in a solicitation for proxies for election of Directors pursuant to
the Rules and Regulations of the Securities and Exchange Commission under
Section 14 of the Securities Exchange Act of 1934, as amended (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected); (ii) as to the shareholders giving such
notice or demand (a) the name and record address of the shareholders, (b) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by each such shareholder and also which are owned of record
by each such shareholder and (c) any material interest or relationship each such
shareholder has in or with the proposed nominee; and (iii) as to each beneficial
owner, if any, on whose behalf the nomination is made, (a) the name and address
of such person, (b) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such person and (c) any material
interest or relationship such person has in or with the proposed nominee. 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 a 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 Presiding Officer shall
determine whether the nomination is made in accordance with the foregoing
procedures. If the Presiding Officer should determine that the nomination was
not made in accordance with the foregoing procedures, the Presiding Officer
shall state such determination to the meeting, whereupon any such defective
nomination shall be disregarded and not otherwise brought before the meeting.
Notwithstanding the foregoing provisions of this Section 3.3, a shareholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder with respect
to the matters set forth herein.
3.4 ANNUAL AND REGULAR MEETINGS. An annual Board meeting shall be held
without further notice immediately after and at the same place as the annual
meeting of shareholders. By resolution, the Board, or any committee thereof,
may specify the time and place for holding regular meetings thereof without
other notice than such resolution.
3.5 SPECIAL MEETINGS. Special meetings of the Board or any committee
designated by the Board may be called by or at the request of the Chair of the
Board, or the President or any two Directors, and, in the case of any special
meeting of any committee designated by the Board, by the Chair thereof. The
person or persons authorized to call special meetings may fix any place either
within or without the State of Oregon as the place for holding any special Board
or committee meeting called by them.
3.6 MEETINGS BY TELECOMMUNICATIONS. Members of the Board or any
committee designated by the Board may participate in a meeting of such Board or
committee by use of any means of communication by which all persons
participating may simultaneously hear each other during the meeting.
Participation by such means shall be deemed presence in person at the meeting.
3.7 NOTICE OF SPECIAL MEETING. Notice of a special Board or committee
meeting stating the date, time and place of the meeting shall be given to a
Director in writing or orally by telephone or in person as set forth below.
Neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice of such meeting.
Page 8 - 1995 RESTATED BYLAWS
<PAGE>
3.7.1 PERSONAL DELIVERY. If delivery is by personal service, the
notice shall be effective if delivered at such address at least one day before
the meeting.
3.7.2 DELIVERY BY MAIL. If notice is delivered by mail, the
notice shall be deemed effective if deposited in the official government mail at
least five days before the meeting properly addressed to a Director at his or
her address shown on the records of the Corporation with postage prepaid.
3.7.3 DELIVERY BY TELEGRAPH. If notice is delivered by telegraph,
the notice shall be deemed effective if the content thereof is delivered to the
telegraph company by such time that telegraph company guarantees delivery at
least one day before the meeting.
3.7.4 ORAL NOTICE. If notice is delivered orally, by telephone or
in person, the notice shall be effective if personally given to a Director at
least one day before the meeting.
3.7.5 NOTICE BY FACSIMILE TRANSMISSION. If notice is delivered by
facsimile transmission, the notice shall be deemed effective if the content
thereof is transmitted to the office of a Director, at the facsimile number
shown on the records of the Corporation, at least one day before the meeting,
and receipt is either confirmed by confirming transmission equipment or
acknowledged by the receiving office.
3.7.6 NOTICE BY PRIVATE COURIER. If notice is delivered by
private courier, the notice shall be deemed effective if delivered to the
courier, properly addressed and prepaid, by such time that the courier
guarantees delivery at least one day before the meeting.
3.8 WAIVER OF NOTICE.
3.8.1 WRITTEN WAIVER. Whenever any notice is required to be given
to any Director under the provisions of these Bylaws, the Articles of
Incorporation or the Oregon Business Corporation Act, a waiver thereof in
writing, executed at any time, specifying the meeting for which notice is
waived, signed by the person or persons entitled to such notice, and filed with
the minutes or corporate records, shall be deemed equivalent to the giving of
such notice.
3.8.2 WAIVER BY ATTENDANCE. The attendance of a Director at a
Board or committee meeting shall constitute a waiver of notice of such meeting,
unless the Director, at the beginning of the meeting, or promptly upon such
Director's arrival, objects to holding the meeting or transacting any business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting.
3.9 QUORUM. A majority of the number of Directors fixed by or in the
manner provided by these Bylaws shall constitute a quorum for the transaction of
business at any Board meeting.
Page 9 - 1995 RESTATED BYLAWS
<PAGE>
3.10 MANNER OF ACTING. The act of the majority of the Directors present
at a Board or committee meeting at which there is a quorum shall be the act
of the Board or committee, unless the vote of a greater number is required by
these Bylaws, the Articles of Incorporation or the Oregon Business
Corporation Act.
3.11 PRESUMPTION OF ASSENT. A Director of the Corporation present at a
Board or committee meeting at which action on any corporate matter is taken
shall be deemed to have assented to the action taken unless such Director
objects at the beginning of the meeting, or promptly upon such Director's
arrival, to holding the meeting or transacting business at the meeting; or such
Director's dissent is entered in the minutes of the meeting; or such Director
delivers a written notice of dissent or abstention to such action with the
presiding officer of the meeting before the adjournment thereof; or such
Director forwards such notice by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. A Director who
voted in favor of such action may not thereafter dissent or abstain.
3.12 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING. Any action which
could be taken at a meeting of the Board or of any committee appointed by the
Board may be taken without a meeting if a written consent setting forth the
action so taken is signed by each Director or by each committee member. The
action shall be effective when the last signature is placed on the consent,
unless the consent specifies an earlier or later date. Such written consent,
which shall have the same effect as a unanimous vote of the Directors or such
committee, shall be inserted in the minute book as if it were the minutes of a
Board or committee meeting.
3.13 RESIGNATION. Any Director may resign at any time by delivering
written notice to the Chair of the Board, the Board, or to the registered office
of the Corporation. Such resignation shall take effect at the time specified in
the notice, or if no time is specified, upon delivery. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Once delivered, a notice of resignation is irrevocable
unless revocation is permitted by the Board.
3.14 REMOVAL. One or more members of the Board (including the entire
Board) may be removed at a meeting of shareholders called expressly for that
purpose, provided that the notice of such meeting states that the purpose, or
one of the purposes, of the meeting is such removal. A member of the Board may
be removed with or without cause, unless the Articles of Incorporation permit
removal for cause only, by a vote of the holders of a majority of the shares
then entitled to vote on the election of the Director(s). A Director may be
removed only if the number of votes cast to remove the Director exceeds the
number of votes cast to not remove the Director. If a Director is elected by a
voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove such Director.
3.15 VACANCIES. Any vacancy occurring on the Board, including a vacancy
resulting from an increase in the number of Directors, may be filled by the
shareholders, by the Board,
Page 10 - 1995 RESTATED BYLAWS
<PAGE>
by the affirmative vote of a majority of the remaining Directors though less
than a quorum of the Board, or by a sole remaining Director. A Director elected
to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office; except that the term of a Director elected by the Board
to fill a vacancy expires at the next shareholders' meeting at which Directors
are elected. Any Directorship to be filled by reason of an increase in the
number of Directors may be filled by the affirmative vote of a majority of the
number of Directors fixed by the Bylaws prior to such increase for a term of
office continuing only until the next election of Directors by the shareholders.
Any Directorship not so filled by the Directors shall be filled by election at
the next annual meeting of shareholders or at a special meeting of shareholders
called for that purpose. If the vacant Directorship is filled by the
shareholders and was held by a Director elected by a voting group of
shareholders, then only the holders of shares of that voting group are entitled
to vote to fill such vacancy. A vacancy that will occur at a specific later
date by reason of a resignation effective at such later date or otherwise may be
filled before the vacancy occurs, but the new Director may not take office until
the vacancy occurs.
3.16 MINUTES. The Board shall keep minutes of its meetings and shall cause
them to be recorded in books kept for that purpose.
3.17 EXECUTIVE AND OTHER COMMITTEES.
3.17.1 CREATION OF COMMITTEES. The Board, by resolution adopted by
a majority of the number of Directors fixed in the manner provided by these
Bylaws, may appoint standing or temporary committees, including an Executive
Committee, from its own number and consisting of no less than two (2) Directors.
The Board may invest such committee(s) with such powers as it may see fit,
subject to such conditions as may be prescribed by the Board, these Bylaws, the
Articles of Incorporation and the Oregon Business Corporation Act.
3.17.2 AUTHORITY OF COMMITTEES. Each committee shall have and may
exercise all of the authority of the Board to the extent provided in the
resolution of the Board designating the committee and any subsequent resolutions
pertaining thereto and adopted in like manner, except that no such committee
shall have the authority to: (a) authorize distributions, except as may be
permitted by Section 3.17.2(g) of these Bylaws; (b) approve or propose to
shareholders actions required by the Oregon Business Corporation Act to be
approved by shareholders; (c) fill vacancies on the Board or any committee
thereof; (d) adopt, amend or repeal these Bylaws; (e) amend the Articles of
Incorporation; (f) approve a plan of merger not requiring shareholder approval;
or (g) authorize or approve reacquisition of shares, except within limits
prescribed by the Board.
3.17.3 QUORUM AND MANNER OF ACTING. A majority of the number of
Directors composing any committee of the Board, as established and fixed by
resolution of the Board, shall constitute a quorum for the transaction of
business at any meeting of such committee.
Page 11 - 1995 RESTATED BYLAWS
<PAGE>
3.17.4 MINUTES OF MEETINGS. All committees so appointed shall keep
regular minutes of their meetings and shall cause them to be recorded in books
kept for that purpose.
3.17.5 RESIGNATION. Any member of any committee may resign at any
time by delivering written notice thereof to the Board, the Chair of the Board
or the Corporation. Any such resignation shall take effect at the time
specified in the notice, or if no time is specified, upon delivery. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Once delivered, a notice of resignation is
irrevocable unless revocation is permitted by the Board.
3.17.6 REMOVAL. The Board may remove from office any member of any
committee elected or appointed by it, but only by the affirmative vote of not
less than a majority of the number of Directors fixed by or in the manner
provided by these Bylaws.
3.18 COMPENSATION. By Board resolution, Directors and committee members
may be paid their expenses, if any, of attendance at each Board or committee
meeting, or a fixed sum for attendance at each Board or committee meeting, or a
stated salary as Director or a committee member, or a combination of the
foregoing. No such payment shall preclude any Director or committee member from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 4
OFFICERS
4.1 NUMBER. The Officers of the Corporation shall be a President and a
Secretary, each of whom shall be appointed by the Board. One or more Vice
Presidents, a Treasurer and such other Officers and assistant Officers,
including a Chair of the Board, may be appointed by the Board; such Officers and
assistant Officers to hold office for such period, have such authority and
perform such duties as are provided in these Bylaws or as may be provided by
resolution of the Board. Any Officer may be assigned by the Board any
additional title that the Board deems appropriate. The Board may delegate to
any Officer or agent the power to appoint any such subordinate Officers or
agents and to prescribe their respective terms of office, authority and duties.
Any two or more offices may be held by the same person.
4.2 APPOINTMENT AND TERM OF OFFICE. The Officers of the Corporation shall
be appointed annually by the Board at the Board meeting held after the annual
meeting of the shareholders. If the appointment of Officers is not made at such
meeting, such appointment shall be made as soon thereafter as a Board meeting
conveniently may be held. Unless an Officer dies, resigns, or is removed from
office, he or she shall hold office until the next annual meeting of the Board
or until his or her successor is appointed.
4.3 RESIGNATION. Any Officer may resign at any time by delivering written
notice to the Corporation. Any such resignation shall take effect at the time
specified in the notice,
Page 12 - 1995 RESTATED BYLAWS
<PAGE>
or if no time is specified, upon delivery. Unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Once delivered, a notice of resignation is irrevocable unless revocation is
permitted by the Board.
4.4 REMOVAL. Any Officer or agent appointed by the Board may be removed
by the Board, with or without cause, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Appointment of an
Officer or agent shall not of itself create contract rights.
4.5 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, creation of a new office or any other cause may be
filled by the Board for the unexpired portion of the term, or for a new term
established by the Board. If a resignation is made effective at a later date,
and the Corporation accepts such future effective date, the Board may fill the
pending vacancy before the effective date, if the Board provides that the
successor does not take office until the effective date.
4.6 CHAIR OF THE BOARD. If appointed, the Chair of the Board shall
perform such duties as shall be assigned to him or her by the Board from time to
time and shall preside over meetings of the Board and shareholders unless
another Officer is appointed or designated by the Board as Chair of such
meeting.
4.7 PRESIDENT. The President shall be the chief executive Officer of the
Corporation unless some other Officer is so designated by the Board, shall
preside over meetings of the Board and shareholders in the absence of a Chair of
the Board and, subject to the Board's control, shall supervise and control all
of the assets, business and affairs of the Corporation. The President shall
have authority to sign deeds, mortgages, bonds, contracts, or other instruments,
except when the signing and execution thereof have been expressly delegated by
the Board or by these Bylaws to some other Officer or agent of the Corporation,
or are required by law to be otherwise signed or executed by some other Officer
or in some other manner. In general, the President shall perform all duties
incident to the office of President and such other duties as are prescribed by
the Board from time to time.
4.8 VICE PRESIDENT. In the event of the death of the President or his or
her inability to act, the Vice President (or if there is more than one Vice
President, the Vice President who was designated by the Board as the successor
to the President, or if no Vice President is so designated, the Vice President
first appointed to such office) shall perform the duties of the President,
except as may be limited by resolution of the Board, with all the powers of and
subject to all the restrictions upon the President. Vice Presidents shall have,
to the extent authorized by the President or the Board, the same powers as the
President to sign deeds, mortgages, bonds, contracts or other instruments. Vice
Presidents shall perform such other duties as from time to time may be assigned
to them by the President or by the Board.
4.9 SECRETARY. The Secretary shall: (a) prepare and keep the minutes of
meetings of the shareholders and the Board in one or more books provided for
that purpose; (b) see
Page 13 - 1995 RESTATED BYLAWS
<PAGE>
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be responsible for custody of the corporate
records and seal of the Corporation; (d) keep registers of the post office
address of each shareholder and Director; (e) have general charge of the stock
transfer books of the Corporation; and (f) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him or her by the President or by the Board. In the absence
of the Secretary, an Assistant Secretary may perform the duties of the
Secretary.
4.10 TREASURER. If required by the Board, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such amount and with such
surety or sureties as the Board shall determine. The Treasurer shall have
charge and custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in banks, trust companies or other depositories selected in
accordance with the provisions of these Bylaws; and in general perform all of
the duties incident to the office of the Treasurer and such other duties as from
time to time may be assigned to him or her by the President or by the Board. In
the absence of the Treasurer, an Assistant Treasurer may perform the duties of
the Treasurer.
4.11 SALARIES. The salaries of the Officers shall be fixed from time to
time by the Board or by any person or persons to whom the Board has delegated
such authority. No Officer shall be prevented from receiving such salary by
reason of the fact that he or she is also a Director of the Corporation.
SECTION 5
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS. The Board may authorize any Officer or Officers, or agent
or agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
5.2 LOANS TO THE CORPORATION. No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board. Such authority may be general
or confined to specific instances.
5.3 LOANS TO DIRECTORS. The Corporation shall not lend money to or
guarantee the obligation of a Director unless: (a) the particular loan or
guarantee is approved by a majority of the votes represented by the outstanding
voting shares of all classes, voting as a single voting group, excluding the
votes of the shares owned by or voted under the control of the benefitted
Director; or (b) the Board determines that the loan or guarantee benefits the
Corporation and either approves the specific loan or guarantee or a general plan
authorizing the loans and guarantees. The fact that a loan or guarantee is made
in violation of this provision shall not affect the borrower's liability on the
loan.
Page 14 - 1995 RESTATED BYLAWS
<PAGE>
5.4 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such Officer or Officers, or agent or agents,
of the Corporation and in such manner as is from time to time determined by
resolution of the Board.
5.5 DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board may select.
SECTION 6
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES. No shares of the Corporation shall be issued
unless authorized by the Board, which authorization shall include the maximum
number of shares to be issued and the consideration to be received for each
share. Before the Corporation issues shares, the Board shall determine that the
consideration received or to be received for such shares is adequate. Such
determination by the Board shall be conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid and nonassessable.
6.2 ESCROW FOR SHARES. The Board may authorize the placement in escrow of
shares issued for a contract for future services or benefits or a promissory
note, or may authorize other arrangements to restrict the transfer of shares,
and may authorize the crediting of distributions in respect of such shares
against their purchase price, until the services are performed, the note is paid
or the benefits received. If the services are not performed, the note is not
paid, or the benefits are not received, the Board may cancel, in whole or in
part, such shares placed in escrow or restricted and such distributions
credited.
6.3 CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as shall be determined by the Board. Such
certificates shall be signed by any two of the following officers: the Chair of
the Board, the President, any Vice President, the Treasurer, the Secretary or
any Assistant Secretary. Any or all of the signatures on a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Corporation itself or an employee of the
Corporation. All certificates shall be consecutively numbered or otherwise
identified.
6.4 STOCK RECORDS. The stock transfer books shall be kept at the
registered office or principal place of business of the Corporation or at the
office of the Corporation's transfer agent or registrar. The name and address
of each person to whom certificates for shares are issued, together with the
class and number of shares represented by each such certificate and the date of
issue thereof, shall be entered on the stock transfer books of the Corporation.
The person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
Page 15 - 1995 RESTATED BYLAWS
<PAGE>
6.5 RESTRICTION ON TRANSFER.
6.5.1 SECURITIES LAWS. Except to the extent that the Corporation
has obtained an opinion of counsel acceptable to the Corporation that transfer
restrictions are not required under applicable securities laws, or has otherwise
satisfied itself that such transfer restrictions are not required, all
certificates representing shares of the Corporation shall bear conspicuously on
the front or back of the certificate a legend or legends describing the
restriction or restrictions.
6.5.2 OTHER RESTRICTIONS. In addition, the front or back of all
certificates shall include conspicuous written notice of any further
restrictions which may be imposed on the transferability of such shares.
6.6 TRANSFER OF SHARES. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation pursuant to
authorization or document of transfer made by the holder of record thereof or by
his or her legal representative, who shall furnish proper evidence of authority
to transfer, or by his or her attorney-in-fact authorized by power of attorney
duly executed and filed with the Secretary of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificates for a like number of
shares shall have been surrendered and cancelled.
6.7 LOST OR DESTROYED CERTIFICATES. In the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such terms
and indemnity to the Corporation as the Board may prescribe.
6.8 TRANSFER AGENT AND REGISTRAR. The Board may from time to time appoint
one or more Transfer Agents and one or more Registrars for the shares of the
Corporation, with such powers and duties as the Board shall determine by
resolution.
6.9 OFFICER CEASING TO ACT. In case any officer who has signed or whose
facsimile signature has been placed upon a stock certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if the signer were such officer at the date
of its issuance.
6.10 FRACTIONAL SHARES. The Corporation shall not issue certificates for
fractional shares.
SECTION 7
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its shareholders
and Board and such other records as may be necessary or advisable.
Page 16 - 1995 RESTATED BYLAWS
<PAGE>
SECTION 8
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year, provided
that if a different fiscal year is at any time selected for purposes of federal
income taxes, the fiscal year shall be the year so selected.
SECTION 9
SEAL
The seal of the Corporation, if any, shall consist of the name of the
Corporation and the state of its incorporation.
SECTION 10
INDEMNIFICATION
10.1 DIRECTORS AND OFFICERS. The Corporation shall indemnify its directors
and officers to the fullest extent not prohibited by law.
10.2 EMPLOYEES AND OTHER AGENTS. The Corporation shall have the power to
indemnify its employees and other agents to the fullest extent not prohibited by
law.
10.3 NO PRESUMPTION OF BAD FAITH. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of this Corporation, or, with respect to
any criminal proceeding, that the person had reasonable cause to believe that
the conduct was unlawful.
10.4 ADVANCES OF EXPENSES. The expenses incurred by a director or officer
in any proceeding shall be paid by the Corporation in advance at the written
request of the director or officer, if the director or officer:
10.4.1 Furnishes the Corporation a written affirmation of such
person's good faith belief that such person is entitled to be indemnified by the
Corporation; and
10.4.2 Furnishes the Corporation a written undertaking to repay
such advance to the extent that it is ultimately determined by a court that such
person is not entitled to be indemnified by the Corporation. Such advances
shall be made without regard to the person's ability to repay such expenses and
without regard to the person's ultimate entitlement to indemnification under
this Bylaw or otherwise.
10.5 ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances under this Bylaw shall be
deemed to be contractual
Page 17 - 1995 RESTATED BYLAWS
<PAGE>
rights and be effective to the same extent and as if provided for in a contract
between the Corporation and the director or officer who serves in such capacity
at any time while this Bylaw and any other applicable law, if any, are in
effect. Any right to indemnification or advances granted by this Bylaw to a
director or officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (a) the claim for
indemnification or advances is denied, in whole or in part, or (b) no
disposition of such claim is made within ninety (90) days of request thereof.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be also paid the expense of prosecuting the claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in connection with any proceeding in advance of its
final disposition when the required affirmation and undertaking have been
tendered to the Corporation) that the claimant has not met the standards of
conduct which makes it permissible under the law for the Corporation to
indemnify the claimant, 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 its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
10.6 NONEXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of articles of incorporation,
bylaws, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in the person's official capacity and as to action in another
capacity while holding office. The Corporation is specifically authorized to
enter into individual contracts with any or all of its directors, officers,
employees or agents respecting indemnification and advances to the fullest
extent not prohibited by law.
10.7 SURVIVAL OF RIGHTS. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
10.8 INSURANCE. To the fullest extent not prohibited by law, the
Corporation, upon approval by the Board of Directors, may purchase insurance on
behalf of any person required or permitted to be indemnified pursuant to this
Bylaw.
10.9 AMENDMENTS TO LAW. For purposes of this Bylaw, the meaning of "law"
within the phrase "to the fullest extent not prohibited by law" shall include,
but not be limited to, the Oregon Business Corporation Act, as the same exists
on the date hereof or as it may be amended; provided, however, that in the case
of any such amendment, such amendment shall apply only to the extent that it
permits the Corporation to provide broader
Page 18 - 1995 RESTATED BYLAWS
<PAGE>
indemnification rights than the Act permitted the Corporation to provide prior
to such amendment.
10.10 SAVINGS CLAUSE. If this Bylaw or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall indemnify each director, officer or other agent to the fullest
extent permitted by any applicable portion of this Bylaw that shall not have
been invalidated, or by any other applicable law.
10.11 CERTAIN DEFINITIONS. For purposes of this Section, the following
definitions shall apply:
10.11.1 The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether brought in the right of the Corporation or otherwise
and whether civil, criminal, administrative or investigative, in which the
director or officer may be or may have been involved as a party or otherwise by
reason of the fact that the director or officer is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
10.11.2 The term "expenses" shall be broadly construed and shall
include, without limitation, all costs, charges and expenses (including fees and
disbursements of attorneys, accountants and other experts) actually and
reasonably incurred by a director or officer in connection with any proceeding,
all expenses of investigations, judicial or administrative proceedings or
appeals, and any expenses of establishing a right to indemnification under these
Bylaws, but shall not include amounts paid in settlement, judgments or fines.
10.11.3 "Corporation" shall mean Wholesome & Hearty Foods, Inc. and
any successor corporation thereof.
10.11.4 Reference to a "director," "officer," "employee" or "agent"
of the Corporation shall include, without limitation, situations where such
person is serving at the request of the Corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
10.11.5 References to "other enterprises" shall include employee
benefit plans. References to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan. References to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants, or beneficiaries. A person who
acted in good faith and in a manner the person reasonably believed to be in the
interest of the participants and
Page 19 - 1995 RESTATED BYLAWS
<PAGE>
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Bylaw.
SECTION 11
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board at any regular or special meeting of the Board; provided,
however, that the shareholders, in amending or repealing a particular Bylaw, may
provide expressly that the Board may not amend or repeal that Bylaw. The
shareholders may also make, alter, amend and repeal the Bylaws of the
Corporation at any annual meeting or at a special meeting called for that
purpose. All Bylaws made by the Board may be amended, repealed, altered or
modified by the shareholders at any regular or special meeting called for that
purpose.
The foregoing Bylaws were adopted by the Board of Directors of the
Corporation on November 21, 1995, and the Secretary of the Corporation was
empowered to authenticate such Bylaws by his signature below.
/s/ Matthew J. Palmer
-------------------------------------
Matthew J. Palmer, Secretary
Page 20 - 1995 RESTATED BYLAWS
<PAGE>
WHOLESOME AND HEARTY FOODS, INC.
CALCULATIONS OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------------ -------------------------- -------------------------
1996 1995 1996 1995
------------------------- -------------------------- -------------------------- -------------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
------------------------- -------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Shares Outstanding
for the Period 8,566,456 8,566,456 7,655,002 7,655,002 8,343,346 8,343,346 7,650,559 7,650,559
Dilutive Common
Stock Options Using
the Treasury Stock
Method 379,610 379,610 968,738 968,931 449,427 447,602 973,703 973,977
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Shares Used
for Per Share
Calculations 8,946,066 8,946,066 8,623,740 8,623,933 8,792,773 8,790,948 8,624,262 8,624,536
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 521,000 $ 521,000 $ 746,000 $ 746,000 $ 579,000 $ 579,000 $1,398,000 $1,398,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income Per Share $ 0.06 $ 0.06 $ 0.09 $ 0.09 $ 0.07 $ 0.07 $ 0.16 $ 0.16
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,905,000
<SECURITIES> 0
<RECEIVABLES> 4,355,000
<ALLOWANCES> 145,000
<INVENTORY> 2,456,000
<CURRENT-ASSETS> 16,571,000
<PP&E> 5,775,000
<DEPRECIATION> 1,018,000
<TOTAL-ASSETS> 23,665,000
<CURRENT-LIABILITIES> 2,809,000
<BONDS> 0
0
0
<COMMON> 9,218,000
<OTHER-SE> 11,340,000
<TOTAL-LIABILITY-AND-EQUITY> 23,665,000
<SALES> 20,169,000
<TOTAL-REVENUES> 20,169,000
<CGS> 10,114,000
<TOTAL-COSTS> 10,114,000
<OTHER-EXPENSES> 9,331,000
<LOSS-PROVISION> 29,255
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 919,000
<INCOME-TAX> 340,000
<INCOME-CONTINUING> 579,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 579,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
