<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------------- -------------
COMMISSION FILE NUMBER 0-20354
PHOENIX HEALTHCARE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2596710
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(State or other jurisdiction of incorporation of (I.R.S. Employer
organization) Identification No.)
4514 Travis Street, Suite 330
DALLAS, TEXAS 75205
(Address of principal executive offices) (Zip Code)
214-599-9777
-------------
(Registrant's telephone number, including area code)
IATROS HEALTH NETWORK, INC.
---------------------------
Former name or former address, if changed since last
report Securities registered pursuant to Section
12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
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 periods that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X YES NO
----- -----
As of May 14, 1999, there were 21,069,958 shares of Common Stock issued
or to be issued and outstanding, 533,333 shares of Series A Senior Convertible
Preferred Stock issued and outstanding, and 100,000 shares of Series B Preferred
Stock issued and outstanding.
1
<PAGE>
FORWARD LOOKING STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS FORM 10-Q INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS WITHIN
THEMEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE
COMPANY. WHEN USED HEREIN, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE" AND
"EXPECT" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY'S MANAGEMENT,
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT
SIGNIFICANT ASSUMPTIONS, RISKS AND SUBJECTIVE JUDGMENTS BY THE COMPANY'S
MANAGEMENT CONCERNING ANTICIPATED RESULTS. THESE ASSUMPTIONS AND JUDGMENTS
MAY OR MAY NOT PROVE TO BE CORRECT. MOREOVER SUCH FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS.
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS TO THE DATE HEREOF.
2
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Phoenix Healthcare Corporation
Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998......................... 4
Consolidated Statements of Operations for
the three months ended March 31, 1999 and 1998............... 5
Consolidated Statements of Cash Flows for
the three months ended March 31, 1999 and 1998.............. 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 18
Item 2. Changes in Securities and Use of Proceeds....................... 18
Item 3. Defaults upon Senior Securities................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 5. Other Information............................................... 18
Item 6. Exhibits and Reports on Form 8-K................................ 18
Signatures................................................................. 19
</TABLE>
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOENIX HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
ASSETS 1999 1998
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................... $ 248,505 $ 279,364
Accounts receivable, net ................................................ 4,566,919 2,470,416
Inventory ............................................................... 39,300 14,968
Prepaid expenses and other current assets................................ 46,625 --
----------- -----------
Total current assets .................................................... 4,901,349 2,764,748
PROPERTY AND EQUIPMENT, net .............................................. 8,324,679 8,392,222
OTHER ASSETS
Cash and cash equivalents, restricted .................................. 482,064 476,189
Intangible assets, net ................................................. 3,341,010 347,753
Other assets ........................................................... 82,038 --
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3,905,112 823,942
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TOTAL ASSETS ............................................................. $17,131,140 $11,980,912
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1999 1998
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable, banks and other ............................................ $ 8,458,777 $ 4,840,931
Accounts payable .......................................................... 4,130,004 3,214,597
Accrued expenses and other current liabilities ............................ 2,285,751 1,217,716
Current portion of long-term debt and capital lease obligations ........... 213,500 213,500
Long-term debt in technical default ....................................... 8,300,000 8,300,000
------------ ------------
Total current liabilities ................................................. 23,388,032 17,786,744
LONG-TERM DEBT ............................................................. 3,609,890 1,696,500
------------ ------------
26,997,922 19,483,244
COMMITMENTS AND CONTINGENCIES .............................................. -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $.001 par value, 5,000,000 shares authorized:
Series A, 533,333 shares issued and outstanding ........................... 533 533
Series B, 100,000 shares issued and outstanding ........................... 100 100
Common Stock, $.001 par value, 50,000,000 shares authorized;
21,070,958 and 20,869,958 issued and outstanding in 1999 and 1998,
respectively .............................................................. 21,070 20,970
Additional Paid-In Capital ................................................ 36,084,767 36,059,867
Accumulated Deficit ....................................................... (45,973,252) (43,583,802)
------------ ------------
(9,866,782) (7,502,332)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ....................... $ 17,131,140 $ 11,980,912
------------ ------------
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</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
PHOENIX HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
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<S> <C> <C>
Revenues
Nursing home operation services ................. $ 4,571,161 $ 4,599,197
Ancillary services .............................. 1,240,111 3,284,456
Management services ............................. 144,600 314,428
----------- -----------
5,955,872 8,198,081
Routine operating expenses
Nursing home operation services ................. 4,201,340 3,908,463
Ancillary services .............................. 2,207,519 2,875,853
Management services ............................. 206,356 246,370
General and administrative ...................... 763,158 731,698
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7,378,373 7,762,384
Property and capital related expenses
Interest expense ................................ 443,355 366,444
Facilities lease expense ........................ 292,500 262,500
Depreciation and amortization ................... 231,094 153,495
----------- -----------
966,949 782,439
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Loss from operations before other income (expense) (2,389,450) (346,742)
Other income (expense)
Interest and other income ....................... -- 50,315
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Net Loss ......................................... $(2,389,450) $ (296,427)
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Basic and diluted loss per
Common Share .................................... $ (.12) $ (.02)
----------- -----------
----------- -----------
Weighted average number of shares of
common stock and equivalents outstanding ........ 21,019,958 20,869,958
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
PHOENIX HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss ..................................................................... $(2,389,450) $ (296,427)
Adjustments to reconcile net loss to net cash provided (utilized) by operating
activities:
Depreciation and amortization ................................................ 231,094 153,495
Provision for doubtful accounts receivable ................................... 390,212 27,385
Changes in:
Accounts receivable .......................................................... 201,301 (290,708)
Notes and loans payable ...................................................... 617,652 (6,553)
Inventory .................................................................... (24,332) 71,428
Prepaid expenses and other .................................................. (46,625) (28,437)
Accounts payable ............................................................. 91,942 423,053
Accrued expenses and other ................................................... 723,774 (1,172,327)
----------- -----------
Net cash provided (utilized) by operating activities ......................... (204,432) (1,119,091)
----------- -----------
INVESTING ACTIVITIES
Purchase of property and equipment ........................................... (18,283) (111,823)
Changes in other assets ...................................................... (92,867) 204,412
Increase in restricted cash .................................................. (5,875) --
----------- -----------
Net cash utilized by investing activities ................................... (117,025) 92,589
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FINANCING ACTIVITIES
Net proceeds from issuance of capital stock and other capital contributions ... -- 789,000
Increase in long-term debt .................................................... 290,598 435,781
Payments of long-term debt .................................................... (29,411)
Capital lease obligations, net ................................................ (19,347)
----------- -----------
Net cash provided (utilized) by financing activities .......................... 290,598 1,176,023
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................. (30,859) 149,521
Cash and cash equivalents, beginning of period ................................ 279,364 190,696
----------- -----------
Cash and cash equivalents, end of period ...................................... $ 248,505 $ 340,217
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
PHOENIX HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying consolidated financial
statements is as follows:
The pro forma effect of the Trinity acquisition on the Company's
operations for the prior year quarter ended March 31, 1998 would have
been an increase in revenues by $1,569,217 and a decrease in the net
loss by $188,392 or $.01 per common share.
During interim periods, Phoenix Healthcare Corporation (the Company")
follows the accounting policies set forth in its Annual Report on Form
10-K filed with the Securities and Exchange Commission. Users of
financial information produced in interim periods are encouraged to
refer to the footnotes contained in the Annual Report when reviewing
interim financial results.
In management's opinion, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, the
results of operations, and the statements of cash flows of Phoenix
Healthcare Corporation for the interim periods.
BUSINESS
Phoenix Healthcare Corporation, (formerly Iatros Health Network, Inc.)
and Subsidiaries (the "Company") is a Delaware Corporation organized in
June 1988. The Company is engaged in providing health care services
principally to the long-term care industry. As of March 31, 1999, the
Company provides these services through nine (9) long-term care
facilities (seven skilled nursing facilities and two assisted living
facilities) in Massachusetts and New Hampshire. In addition, the
Company operates Trinity Rehab, Inc. ("Trinity") which provides
comprehensive rehabilitation therapy services through 131 private pay
contracts in Texas and Oklahoma. In April 1999, the Company acquired
Southland Medical Supply, Inc. based in Knoxvillle, Tennesee, a
distributor of medical supplies to hospitals, skilled nursing homes,
assisted living facilities and to home care patients in 16 states.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Phoenix
Healthcare Corporation. and its wholly-owned subsidiaries. All
intercompany transactions and accounts have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
The Company maintains cash accounts, which at times may exceed
federally insured limits. The Company has not experienced any losses
from maintaining cash accounts in excess of federally insured limits.
Management believes that the Company does not have significant credit
risk related to its cash accounts.
REVENUE AND ACCOUNTS RECEIVABLE
Nursing home operations and ancillary services revenue is reported at
the estimated net realizable amounts due from residents, third party
payors, and others. Management services revenue is reported pursuant to
the terms and amounts provided by the associated management services
contracts.
The Company's credit risk with respect to accounts receivable is
concentrated in services related to the healthcare industry, which is
highly influenced by governmental regulations. A substantial portion of
the Company's revenue is through Medicare, Medicaid and other
governmental programs. This concentration of credit risk is limited due
to the number and types of entities comprising the Company's customer
base and their geographic distribution. The Company routinely monitors
exposure to credit losses and maintains an allowance for doubtful
accounts.
The allowance for doubtful accounts is maintained at a level determined
to be adequate by management to provide for potential losses based upon
an evaluation of the accounts receivable. The evaluation considers such
factors as the age of receivables, the contract terms and the nature of
the contracted services.
7
<PAGE>
PHOENIX HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
REVENUE AND ACCOUNTS RECEIVABLE (Continued)
Certain nursing home and ancillary revenue is recorded based on
standard charges applicable to patients. Under Medicare, Medicaid and
other cost-based reimbursement programs, the provider is reimbursed for
services rendered to covered program patients as determined by
reimbursement formulas. The differences between established billing
rates and the amounts reimbursable by the programs and patient payments
are recorded as contractual adjustments and deducted from revenue.
INVENTORY
Inventory is principally comprised of pharmaceutical and medical
supplies and is valued at the lower of cost (first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the
respective assets using primarily the straight-line method. Property
and equipment under capital leases is amortized over the lives of the
respective leases or over the service lives of the assets. Leasehold
improvements are amortized over the lesser of the term of the related
lease or the estimated useful lives of the assets.
Normal maintenance and repair costs are charged against income. Major
expenditures for renewals and betterments which extend useful lives are
capitalized. When property and equipment is sold or otherwise disposed
of, the asset gain or loss is included in operations.
The useful lives of property and equipment for purposes of computing
depreciation and amortization are:
<TABLE>
<S> <C>
Building.............................................. 25 Years
Leasehold improvements................................ 3-10 Years
Property and equipment held under capital leases...... Life of lease
Equipment............................................. 5 Years
Furniture and fixtures................................ 3-7 Years
</TABLE>
INTANGIBLE ASSETS
The Company evaluates the carrying value of its long-lived assets and
identifiable intangibles including contract rights, excess of cost over
net assets acquired, leasehold rights and organization costs when
events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. The review includes an assessment
of industry factors, contract retentions, cash flow projections and
other factors the Company believes are relevant.
CONTRACT RIGHTS
Contract rights represent the value assigned to management and
ancillary service contracts obtained by the Company. Management
contracts provide for a management fee in exchange for management,
marketing and development services provided to the facilities.
Ancillary service contracts are generally provided for a fee per
unit of service rendered. Contract rights are being amortized over
the term of the related contracts.
8
<PAGE>
PHOENIX HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired relates to the
acquisition of the Company's operating subsidiaries. The excess of
cost over net assets acquired are being amortized over their lives
of 15 to 20 years.
ORGANIZATION COSTS
Organization costs incurred in connection with the acquisition or
formation of new business activities for the Company are being
amortized using the straight-line method over five years.
INCOME TAXES
The Company employs the asset and liability method in accounting for
income taxes pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on temporary
differences between the financial reporting and tax bases of assets and
liabilities and net operating loss carryforwards, and are measured
using enacted tax rates and laws that are expected to be in effect when
the differences are reversed.
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standard No. 128
"Earnings per Share" ("SFAS 128") in 1997. All prior period earnings
per common share data have been restated to conform to the provisions
of this statement.
Basic and diluted loss per share is based upon the weighted average
number of common shares outstanding during the period less preferred
dividends of $40,000 for the three months ended March 31, 1999 and
1998, respectively; Preferred dividends in arrears at March 31, 1999
were $750,000.
Diluted earnings per share is based upon the weighted average number of
common shares outstanding during the period plus the number of
incremental shares of common stock contingently issuable upon exercise
of stock options and warrants.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income", Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" and Statement of Financial Accounting Standards
No. 132 "Employers Disclosures About Pensions and Other Past Retirement
Benefits" in 1998. Adoption of these statements had no material effects
on the Company's financial position, results of operations or cash
flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ
from these estimates.
9
<PAGE>
PHOENIX HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 2: GOING CONCERN
For the quarter ended March 31, 1999, the Company reported a net loss
of $2,389,450. Recent operating losses reported by the Company through
March 31, 1999 coupled with adverse corporate developments have
exhausted the Company's capital resources and had a material adverse
effect on short term liquidity and the Company's ability to satisfy its
obligations.
At March 31, 1999, the Company reports a working capital deficit of
$16,991,683 compared with a working capital deficit of $15,021,996 at
December 31, 1998. The working capital deficit position results largely
from the increase in reserve for doubtful notes and accounts receivable
during 1998 and the reclassification to current liabilities of a
long-term debt obligation of $8,300,000 in technical default at
December 31, 1998 and to date. The Company requires an infusion of new
capital, an increased business base and a higher level of profitability
to meet its short-term obligations.
During the fourth quarter of 1998, the Company experienced a change of
control which included the introduction of new executive management.
New management's plans include pro-actively dealing with the Company's
current financial and creditor issues while implementing a growth plan
for the future.
In light of the Company's current financial position, its inability to
independently meet its short-term corporate obligations, its need to
further capitalize existing operations and its dependence on revenue
growth to support continuing operations, its viability as a going
concern is uncertain. While the Company has experienced a change in
control together with an infusion of limited new working capital, there
can be no assurance that new management's efforts to re-direct and
re-capitalize the Company will be successful.
NOTE 3: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
On March 17, 1999, the Company consummated a non-cash purchase
transaction, effective February 15, 1999, pursuant to which it acquired
all of the common stock of Trinity Rehab, Inc., ("Trinity"). The
purchase price paid for Trinity included the issuance of a long term
note in the principal amount of $1,495,000 as well as 100,000 shares of
the Company's common stock, which shares were valued at approximately
$25,000. The Trinity purchase note obligation has been accelerated
and is included in notes payable at March 31, 1999. The acquisition
of Trinity has resulted in an increase in the Company's assets and
liabilities as follow:
<TABLE>
<S> <C>
Accounts receivable and other current assets ........... $2,297,804
Intangible assets representing contract rights and other 3,597,696
-----------
Total Assets .......................................... $5,895,500
-----------
-----------
Accounts payable and accrued expenses .................. $1,167,726
Notes payable .......................................... 3,000,194
Long-term debt ......................................... 1,727,580
-----------
Total Liabilities ..................................... $5,895,500
-----------
-----------
</TABLE>
10
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NOTE 4: COMMITMENTS AND CONTINGENCIES
During 1998, the Company accepted the resignation of two executive
officers and thereby effected the termination of their associated
executive employment contracts. In addition, in connection with a
change in corporate control late in 1998, the Company accepted the
resignation of the then President and Chief Executive Officer and
negotiated a final settlement of the Company's obligations associated
with his employment contract and change in control agreement. This
settlement included a final cash payment of $60,000 in full
satisfaction of all claims and employment rights. The Company also
accepted the resignation of the then Secretary, although this person
was allowed to remain an officer of the company and has since been
terminated. The Company is in the process of negotiating final
settlements and separation arrangements relating to the terminated
executive as well as an executive who continues in the Company's
employ.
On January 1, 1999, in connection with the change in corporate control,
the Company entered into employment agreements with four executive
officers to succeed prior management. The employment agreements, each
for a period of five years, include aggregate annual base compensation
of $875,000 to be paid in the form of stock, cash or a combination
thereof. In addition, in connection with entering into such employment
contracts, each executive officer was granted 500,000 shares of the
Company's common stock. Change in control agreements providing, among
other things, termination entitlements of up to two and one-half times
base compensation were also entered into with the new executive
officers.
The Company guarantees aggregate debt service payments relating to
approximately $25,055,000 of long-term debt and working capital
financing associated with long-term care facilities for which it
provides management services on a long-term basis. The Company may be
unable to independently satisfy such debt service payments, if
required.
The Company is a defendant in two lawsuits relating to the termination
of former executive officers for cause under the terms of, in one case,
the executive's employment agreement and, in the second, the
executive's employment and merger agreement. The two former executives
are independently claiming to be paid additional compensation, and in
the case of one, damages for alleged misrepresentations in connection
with the related merger agreement. The Company continues to pursue its
counterclaims with respect to this latter case and otherwise continues
to defend itself in both of these cases. Management believes that the
Company has valid defenses against all allegations made by the
Plaintiffs in these actions as well as valid counterclaims in its
prosecution actions. Further, Management does not believe that the
outcome of these matters will have a material adverse affect on the
Company's financial position, results of operations or cash flows.
During 1998, the Company entered into an agreement with a third party
to assume its rights to manage three nursing facilities representing
391 beds located in the State of Massachusetts. While the Company
remains the primary manager of these facilities, it derives no current
management services revenue. The prior management arrangement
applicable to the Company had contemplated conversion to a long-term
lease position upon receipt by the Company of the requisite regulatory
approval for change in operators from the State of Massachusetts. The
Company abandoned its efforts to secure such approval and, at the
request of the property owner, allowed for the introduction of the
successor manager. The original agreements between the Company and
property owner involving these facilities contemplated certain
financial arrangements and the assumption of certain financial
obligations which the Company maintains were largely contingent upon
its securing the long term leasehold position for the facilities. This
matter is currently in dispute with the property
11
<PAGE>
NOTE 4: COMMITMENTS AND CONTINGENCIES (CONTINUED)
owner with respect to alleged note obligations aggregating up to
approximately $2 million. The Company has not recognized this liability
in its financial statements at March 31, 1999 and, moreover, believes
there exists a right of offset to any such claim resulting from notes
and accounts receivable due the Company from the subject facilities.
Such amounts exceed $1.5 million and were fully reserved for collection
by the Company at March 31, 1999. The Company is in the process of
resolving this matter with the property owner and does not believe that
the outcome of such resolution will have an adverse material impact on
its financial position or results of operations.
In 1996, the Company secured a long-term management position in
connection with a property purchase and sales transaction involving
four long-term care facilities aggregating 447 beds located in the
State of New Hampshire. As part of the originating property
transaction, the Company, among other things, guaranteed the payment of
certain seller financing obligations of the purchaser aggregating
approximately $1,500,000. Currently, the owner is in default of the
payment of such obligations and the seller has initiated collection
litigation, including action against the Company to perform on its
payment guarantee. As a result of this action, the Company has
initiated settlement discussions with the relevant parties which
discussions contemplate a change in the ownership interests in the
properties and, in connection therewith, amicably settling the seller
interests. Accordingly, the Company has not provided for this matter in
its financial statements at March 31, 1999 and does not believe that
the outcome in settling its guarantee obligation will have an adverse
material impact on financial position or results of operations.
The Company is a defendant in certain lawsuits involving third-party
creditors whose claims arise from transactions which occurred under
prior management. Management believes that it has sufficiently reserved
for these claims in its financial statements at March 31, 1999.
Management does not believe that the outcome of these matters will have
a material adverse affect on the Company's financial position, results
of operations or cash flows.
In addition to the foregoing, the Company and its subsidiaries have
outstanding a number of other routine actions, as well as a number of
threatened actions involving their respective creditors, vendors,
customers, former employees and/or other third parties. Some of them
are in the process of being settled, and the remainder of them are
being vigorously defended. Management does not believe that the outcome
of these matters will have a material adverse affect on the Company's
financial position, results of operations or cash flows.
12
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
BUSINESS STRATEGY
The Company's strategy is to be a low cost provider of high quality,
post acute health care services in selected markets in order to address
market demands created by ongoing changes in the health care delivery
system, changes in patient demographics, and pressures to contain costs
of delivering care.
The Company's strategy is to 1) Expand and integrate the health care
services offered; 2) Cross sell the variety of services and products it
provides; 3) Concentrate its healthcare services operations in targeted
geographic areas and; 4) expand operations through selective
acquisitions.
RESULTS OF OPERATIONS
The Company's consolidated financial statements reflect a net loss of
$2,389,450 for the quarter ended March 31, 1999, compared with a net
loss of $296,427 for the prior year quarter ended March 31, 1998. The
increase in the reported net loss results largely from a material
reduction during 1998 in the revenue base associated with ancillary
services. In addition, operations reported for the quarter ended March
31, 1999 include a net loss of $1,234,793 associated with the
operations of Trinity. The Trinity acquisition transaction was
consummated on March 17, 1999 with first quarter operations
largely attributable to their prior owners and managers.
Consolidated revenues reported for the quarter ended March 31, 1999
totaling $5,955,872 compares with $8,198,081 for the prior year quarter
representing a decrease of $2,242,209 or 27.4%. The decrease is the
result of a decrease in ancillary services revenue of $2,044,345; a
decrease in management services revenue of $169,828; and, nursing home
services revenue reported substantially level with the prior year.
Ancillary services revenue reported in 1999 is exclusively related to
the Company's acquisition of Trinity during the first quarter of 1999.
Ancillary services revenue during 1998 is attributed to the Company's
New England and Philadelphia market operations where ancillary services
were terminated during 1998. The termination of such services during
1998 resulted principally from the loss of underlying service contracts
with local healthcare providers. The reduction in management services
revenue during 1999 results from the Company having previously assigned
its contract rights associated with three nursing facilities to a third
party.
Consolidated routine operating expenses for the quarter ended March 31,
1999 total $7,378,373 or 124% of reported revenue compared with the
prior year quarter of $7,762,384 or 94.7% of reported revenue. Total
routine operating expenses for 1999 yield an operating loss of
($1,422,501) or (24%) on related revenues compared with operating
income of $435,967 or 5.3% on related revenues for the prior year
quarter. The routine operating margin for 1999 associated with
nursing, ancillary and management services totaled $369,821,
($967,408), and ($61,576), respectively. Comparable amounts
for the 1998 quarter totaled $690,734, $408,603, and $68,058,
respectively. The routine operating margin for nursing operations
during 1999 represents 8% on related revenue compared with 15%
for the prior year quarter. As to ancillary services, the routine
operating margin during 1999 represents (78%) on related revenue
compared with 12.4% for the prior year quarter.
13
<PAGE>
Nursing operations for the quarter ended March 31, 1999 reported a net loss
of $202,524 on revenues of $4,571,151 compared with the prior year quarter
when nursing home operations reported net income of $61,790 on revenues of
$4,599,197. On a combined basis, nursing operations revenue remained level
with the prior year resulting from the nursing facility occupancy levels
averaging 94%. The payor mix associated with nursing operations in 1999
compared with the prior year quarter is reported at 71.5% vs. 68.4% from
Medcaid sources; 10.8% vs. 14% from Medicare sources; and, 17.8% vs. 17.6%
representing private pay and other insurers. The reduction in Medicare
utilization relates primarily to ancillary therapy services. Ancillary
revenues associated with therapy services have decreased compared with the
prior year resulting from the Company having transitioned such services
in-house beginning in late 1998. This decrease in ancillary revenues has been
offset by a comparable increase in routine rate structures associated with
Medicaid and private sources. As to operating expenses relating to nursing
operations, salaries and related costs have increased for the current period
by approximately $235,000, primarily reflecting the increased costs
associated with in-house therapy services. Other routine operating costs
remained relatively consistent with the prior year quarter.
Operations associated with the Trinity acquisition during the quarter ended
March 31, 1999 were adversely impacted by certain revenue influences as well
as unanticipated operating costs. As to revenues, a change in Medicare Part B
reimbursement effective on January 1, 1999 from a cost based salary
equivalency methodology to one of fixed payments based upon units of service
has affected approximately seventy-five percent of the therapy revenue
stream. Management has estimated that this equates to a monthly reduction in
Medicare Part B revenue exceeding $125,000. In addition, productivity levels
(i.e. percent of billable hours) experienced by Trinity during the first
quarter fell short of management's expectations. Specifically, such levels
fell below 40% while the Company expects productivity levels to exceed 70% in
keeping with industry standards. Management has initiated efforts to increase
such productivity levels. Lastly, the Company has selectively terminated
numerous therapy contracts, many located in remote rural locations, not
anticipated to yield profitability given the newly enacted reimbursement
constraints. Such terminations are estimated to represent a reduction in
monthly revenue approximating $50,000. The Company is aggressively seeking to
selectively expand its revenue base in securing added therapy contract
business to compensate for these adverse revenue influences.
Routine operating expenses reported by Trinity for the quarter ended March
31,1999 totaled $2,207,519 and exceed operating revenues by $967,408.
Significant components of such expenses included salaries and related amounts of
$1,459,415; insurance expense of $179,524; travel & related expenses of $90,912
and general & related overhead totaling $87,456. In addition, Trinity reports a
bad debt expense during the quarter totaling $390,212 of which over $300,000 is
attributed to one multi-facility customer having filed bankruptcy. Excessive
salary and related costs reported by Trinity evidence the historic shortfall in
reaching productivity standards. In addition, during the first quarter, the
Company incurred significant employee severance and accrued benefit costs
associated with downsizing and restructuring the business organization. This has
included combining three operating divisions during the quarter and thereby
positioning the Company for greater efficiency while reducing redundant general
& administrative overhead. During the second quarter of 1999, the Company
expects to attain the stabilization of Trinity operations resulting from
management's revenue enhancement and cost reduction initiatives.
Other expenses reported by Trinity for the quarter ended March 31, 1999 total
$267,385 and include interest costs of $127,493 and amortization expense of
$139,892. Interest expense is principally attributed to accounts receivable
factoring and working capital financing. The Company is actively seeking more
cost-effective arrangements to serve its current operating and planned growth
needs for Trinity. Amortization expense represents non-cash charges to the
Trinity operations associated with the capitalization of therapy contract rights
secured by the Company. This includes the capitalization of purchase
consideration totaling approximately $1,500,000 associated with the acquisition
of the Trinity business during the first quarter of 1999. Such costs are
generally being amortized over sixty months.
14
<PAGE>
The reduction in management services revenue and related expenses
during 1999 compared to 1998 reflect the Company's initiatives away
form third party management of nursing facilities and concentration on
direct ownership and lease of such facilities. In addition, beginning
in the first quarter of 1999, the Company commenced closure of its New
England based regional management office. The financial and
administrative functions of New England operations have been
transitioned to the Company's corporate offices located in Dallas,
Texas.
General and administrative expenses for the quarter ended March 31, 1999
totaled $763,158 compared with $731,698 for the prior year quarter.
Significant components of general and administrative expenses for 1999
include professional fees of $380,599 and accrued executive compensation
expense of $262,500. Accrued executive compensation is expected to be
satisfied through the issuance of common stock during the second quarter of
1999, however, the period expense has been recognized during the first
quarter in accordance with terms of the related employment contracts.
Significant components of general and administrative expenses for 1998
include professional fees of $160,369; salaries of $285,785; insurance of
$117,932; and travel and related expenses of $73,673. Other corporate
overhead expenses for the quarters ended March 31, 1999 and 1998 totaled
$120,059 and $93,939, respectively
Property and capital related expenses for the quarter ended March 31, 1999
totaled $966,949 compared with $782,439 for the prior year quarter. For the
1999 quarter, total interest expense is reported at $443,355 of which
$224,125 is related to property mortgages; $127,493 is related to ancillary
services debt and $91,737 to working capital interest. For the 1998 quarter,
total interest expense is reported at $366,444 of which $224,125 is related
to property mortgages and $142,319 is related to working capital and other
corporate obligations. Facilities lease expense for 1999 and 1998 is related
to two nursing facilities operated by the Company. Depreciation and
amortization expense for 1999 and 1998 is related to the Company's property
and intangible assets.
LIQUIDITY AND CAPITAL RESOURCES
As discussed in Note 2 to the Financial Statements, in light of the Company's
current financial position, its viability as a going concern is uncertain.
For the quarter ended March 31, 1999, the Company reported a net loss of
$2,389,450. Recent operating losses reported by the Company through March 31,
1999 coupled with adverse corporate developments have exhausted the Company's
capital resources and had a material adverse effect on short term liquidity
and the Company's ability to satisfy its obligations.
15
<PAGE>
At March 31, 1999, the Company reports a working capital deficit of
$18,486,683 compared with a working capital deficit of $15,021,996 at
December 31, 1998. The working capital deficit position results largely
from the increase in reserve for doubtful notes and accounts receivable
during 1998 and the reclassification to current liabilities of a
long-term debt obligation of $8,300,000 in technical default. In
addition, current liabilities at March 31, 1999 include $1,495,000
representing a seller note obligation relating to the Trinity
acquisition. This obligation was accelerated by a Default and Demand
Notice received from the note holder in May 1999. The Company
requires an infusion of new capital, an increased business base
and a higher level of profitability to meet its short-term obligations.
Cash and cash equivalents at March 31, 1999 and December 31, 1998
totaled $248,505 and $279,364, respectively, representing operating
funds associated with the Company's continuing operations. Restricted
cash balances principally relate to loan reserves associated with the
Company's mortgage financing of two nursing facilities. At March 31,
1999 and December 31, 1998, such reserve amounts totaled $475,875 and
$470,000, respectively.
Accounts receivable at March 31, 1999 of $4,566,919, representing 93%
of total current assets, is comprised of $2,223,823 relating to nursing
operations; $2,110,642 relating to ancillary services; and, $232,454
relating to management services. Accounts receivable at December 31,
1998 of $2,470,416, representing 89% of total current assets, is
comprised of $2,187,499 relating to nursing operations and $282,917
relating to management services. The increase in accounts receivable at
March 31, 1999 is attributable to the ancillary accounts resulting from
the acquisition of Trinity during the first quarter. Reported
amounts of accounts receivable for 1999 and 1998 are net of
allowances for doubtful accounts.
Notes payable, banks and other at March 31, 1999 totaled $8,458,777 and
includes notes payable to bank and financing institutions aggregating
$4,023,708 of which $943,710 relates to working capital associated with
nursing operations and $3,079,998 to working capital associated with
ancillary services. Of the later amount, $1,481,500 payable to a bank
institution has been declared in payment default. In addition, notes
payable include $1,495,000 associated with the Trinity acquisition.
Other notes payable amounts at March 31, 1999 totaling $2,690,069
largely relate to judgement creditors and other corporate obligations
resulting from prior period operations. The increase in Notes
payable, banks and other from $4,840,931 at December 31, 1998 relates
largely to increased working capital obligations of $1,598,498
associated with the acquisition of Trinity during the first quarter
of 1999. In addition, the note obligation to Match, Inc. at
March 31, 1999 totaled $722,000. Such funds advanced during the first
quarter of 1999 were utilized for working capital and to settle
selected corporate creditor obligations.
Accounts payable at March 31, 1999 totaled $4,130,004 and include
$1,524,869 associated with nursing home operations; $2,206,504
associated with ancillary services; and $398,631 associated with
management services and corporate accounts. Comparable amounts at
December 31, 1998 totaled $3,214,549 and include $1,167,596 associated
with nursing operations; $1,396,399 associated with ancillary services;
$250,602 associated with management services; and, $400,000 associated
with corporate accounts.
Accrued expenses, current portion of long-term debt and capital
lease obligations and other current liabilities at March 31, 1999
totaled $2,499,251 compared with $1,217,716 at December 31, 1998. For
1999, significant components include $870,402 associated with nursing
operations; $232,252 associated with ancillary services; $323,508
associated with management services; $400,000 associated with corporate
obligations; and accrued salaries and related expenses approximating
$673,089. For 1998, significant components include $721,608 associated
with nursing operations; $207,748 associated with management services;
and, $288,360 in accrued salaries and related costs.
At March 31, 1999 and December 31, 1998, the Company was in technical
default on $8,300,000 of mortgage debt associated with two nursing
facilities. The Company has not defaulted on its payment obligations
associated with the debt yet it is not in full compliance with certain
loan covenants. In light of uncertainty with respect to future lender
actions, the Company has reclassified the mortgage loan payable as a
current liability, reflecting the lender's absolute right to accelerate
the debt.
In May 1999, the Company received a Default and Demand Notice
accelerating the purchase note obligation of $1,495,000 associated
with the Trinity acquisition. Accordingly, this note has been
classified as a current liability at March 31, 1999.
16
<PAGE>
OTHER DEVELOPMENTS
Southland Medical Supply, Inc.
On April 7, 1999, the Company acquired all of the issued and
outstanding shares of Southland Medical Supplies, Inc., d/b/a/
Southland Medical Supply ("Southland") from HF Holdings as more
fully disclosed in the Company's 8-K filed with the Securities and
Exchange Commission on April 22, 1999. Southland, based in
Knoxville, Tennesee, with annual revenues of approximately
$23.0 million, is a distributor of medical supplies to hospitals,
skilled nursing homes, assisted living facilities and to home care
patients in 16 states.
Alternative Care (Volunteer Medical)
On February 17, 1999, the Company acquired certain assets of
Alternative Care Medical Services ("ACMS") located in Providence, Rhode
Island (the "ACMS Assets"). The consideration paid by the Company for
this purchase was the assumption of certain liabilities of ACMS. On
that date, upon completion of this transaction, the Company transferred
all the ACMS Assets and obligations assumed thereunder to Volunteer
Medical Acquisition Corp., a wholly owned subsidiary of the Company
("Volunteer").
At the time of the transaction, it was believed that the ACMS Assets
were owned by Travel Nurse ("Travel Nurse"). Following the purchase of
the ACMS Assets, and upon further investigation, it was determined that
ACMS Assets were in fact owned by Hospital Staffing of Rhode Island,
Inc. ("HSS-RI"), a subsidiary of Hospital Staffing Services, Inc.
("HSSI"). At the time of the transaction, HSS-RI was a debtor in
possession under Chapter 11 of Title 11 of the United States Code
before the United States Bankruptcy Court for the Southern District
of Florida ( the "Bankruptcy Court"). HSS-RI has since converted to
Chapter 7 liquidation and a trustee (the "Bankruptcy Trustee")
has been appointed by the Bankruptcy Court.
Due to the belief that Travel Nurse owned the ACMS assets, the Company
did not seek prior approval from the Bankruptcy Court. On May 3, 1999,
the Bankruptcy Court conducted a hearing in connection with the
Trustee's request that the business (the "Providence Facility") be
turned over to the bankruptcy estate. During the course of the
hearing, the Company and the Trustee reached certain agreements to
accommodate the needs of the Trustee and to provide for adequate
protection of the Company's interests. Specifically, pursuant to the
court approved stipulation, the Bankruptcy Trustee shall temporarily
operate the Providence Facility for a period of thirty (30) days.
The Trustee shall report to the court at 15 day intervals as to his
review of the Providence Facility and the potential for higher and
better offers of purchase, if any. In the event that the Trustee is
unable to obtain a higher and better offer of purchase, the Company's
offer of purchase shall be brought before the Bankruptcy Court for
final approval thus restoring the Company's control and operation
of the business.
YEAR 2000 COMPLIANCE
The Year 2000 ("Y2K") issue stems from the way dates are recorded and
computed in many computer systems because such programs use only the
last two digits to indicate the year. If uncorrected, these computer
programs will be unable to interpret dates beyond the year 1999,
which could cause computer system failure or other computer errors,
thereby disrupting operations. The Company understands the importance
of being prepared for Y2K. The Company's objective is to ensure an
uninterrupted transition into Y2K and is taking steps to assure the
achievement of that goal. The scope of the Company's Y2K readiness
efforts includes (1) evaluating information technology such as
software and hardware, (2) investigating other systems which may
include embedded technology such as microcontrollers contained in
certain lab equipment, environmental and safety systems, and
facilities and utilities, and (3) assessing the readiness of key
third parties, including suppliers, customers and key financial
institutions.
17
<PAGE>
The Company's efforts involve inventorying, assessing and prioritizing those
items which have Y2K implications; remediating (repairs, replacing or upgrading)
non-compliant items; and testing items with major exposure to ensure compliance
and developing contingency plans to minimize potential business interruptions.
With regard to the Company's information technology systems, hardware, equipment
and instrumentation, the Company has identified mission critical and
non-critical items and is in the process of updating and/or replacing items that
are non-compliant. The Company believes that it should be able to substantially
complete implementation of critical aspects of its Y2K plan prior to the
commencement of Y2K. Because the Company has relied primarily on 'off-the-shelf'
software for its information technology needs and because much of the hardware,
equipment and instrumentation is currently compliant, the Company does not
anticipate that the costs for internal remediation efforts will be significant.
The Company does not currently have a Y2K contingency plan established. The
Company expects by mid-1999 to have finalized a contingency plan which will
address the most likely worse case Y2K scenario. The Company believes that
its most likely worst case scenario would be delayed payments from
reimbursers and delays in products or services necessary for the operation of
the Company's facilities. To mitigate this risk, the Company plans, among
other things, to stock extra inventory and supplies. The Company does not
currently have available data to predict the impact of delayed payments on
its business operations. Should there be any material delays caused by Y2K
issues, the Company anticipates that the governmental entities will make
estimated payments.
With regard to the Company's Y2K readiness plan, there can be no assurances
that: 1) the Company will be able to identify all aspects of its business
that are subject to Y2K problems, including issues of its customers or
suppliers, 2) the Company's software vendors, third parties and others will
be correct in their assertions that they are Y2K ready, 3) the Company's
estimate of the cost of Y2K readiness will prove ultimately to be accurate,
and 4) the Company will be able to successfully address its Y2K issues and
that this could result in interruptions in, or failures of, certain normal
business activities or operations that may have a material adverse effect.
The Company does not separately track the internal costs of its Y2K
compliance efforts and therefore these costs are unknown. As of March 31,
1999, the Company has not incurred any material costs to replace, upgrade or
repair systems and/or equipment that are non-compliant and expects the future
costs to complete these efforts should not exceed $100,000. The Company
presently anticipates that its remediation efforts will be substantially
completed in the second quarter of 1999. Testing of certain business critical
items is expected to be completed in the third quarter of 1999.
The above contains forward looking statements including, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequate resources, that are made pursuant to
the 'safe harbor' provisions of the Private Securities Litigation Reform Act
of 1995. Readers are cautioned that forward-looking statements contained in
the Y2K disclosure should be read in conjunction with the following
disclosure of the Company:
The costs of the project and the dates on which the Company plans to complete
the necessary Y2K modifications are based on Management's best estimates,
which were derived utilizing numerous assumptions of future events including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and the ability of the
Company's significant suppliers, customers and others with which it conducts
business, including Federal and state entities.
18
<PAGE>
PART II
ITEM 1: LEGAL PROCEEDINGS
Nothing to report.
ITEM 2: CHANGES IN SECURITIES
During 1999, the Company issued 100,000 shares if its Common
Stock in connection with the acquisition of Trinity
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
On December 11, 1998, the Company received a Default and
Demand Notice associated with a loan payable to a bank in the
principal amount of $1,481,500. The loan principal and
interest arrearage at May 14, 1999 totaled approximately
$1,625,000.
In May 1999, the Company received a Default and Demand
Notice associated with a note payable of $1,495,000 to the
sellers of Trinity. The note principal and interest
arrearage at May 14, 1999 totaled approximately $1,520,000.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report.
ITEM 5: OTHER INFORMATION
Nothing to report.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation
3.2 By-Laws
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed the following current reports on Form
8-K during the first Quarter of 1999:
<TABLE>
<CAPTION>
Date Items Reported
---- --------------
<S> <C>
1/22/99 Change in Company's Certifying Accountant
3/18/99 Acquisition or Disposition of Assets
</TABLE>
19
<PAGE>
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.
PHOENIX HEALTHCARE CORPORATION
May 17, 1999
By: /S/ RONALD LUSK
-------------------------------------
Ronald Lusk, Chairman of the Board and
Chief Executive Officer
20
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IATROS HEALTH NETWORK, INC.
---------------
The Certificate of Incorporation of Iatros Health Network, Inc.,
originally filed with the Secretary of the State of Delaware on June 16, 1988,
under the name Neo, Corp. is hereby amended and restated as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is
PHOENIX HEALTHCARE CORPORATION
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware is
[229 South State Street, City of Dover, County of Kent]; and the name of the
registered agent of the Corporation in the State of Delaware is [CT
Corporation?].
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Fifty Five Million (55,000,000),
consisting of Fifty Million (50,000,000) shares of Common Stock, all of a par
value of $.001 and Five Million (5,000,000) shares of Preferred Stock, all of a
par value of $0.001.
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The number of authorized shares to Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of common stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the certificate or certificates establishing any series of
Preferred Stock..
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed
between this
<PAGE>
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any receiver or receivers appointed for this
Corporation under the provisions of section 291 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further definition, limitation
and regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws.
The phrase "whole Board" and the phrase "total number of directors"
shall be deemed to have the same meaning, to wit, the total number of
directors which the Corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. After the original or other By-Laws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance
with the provisions of Section 109 of the General Corporation Law of
the State of Delaware, and, after the Corporation has received any
payment for any of its stock, the power to adopt, amend, or repeal the
By-Laws of the Corporation may be exercised by the Board of Directors
of the Corporation; provided, however, that any provision for the
classification of directors of the Corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth in
an initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the Corporation unless provisions for such classification
shall be set forth in this certificate of incorporation.
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the
<PAGE>
holder thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the Corporation shall be authorized to issue
more than one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the
right to vote at any meeting of stockholders except as the provisions
of paragraph (2) of subsection (b) of section 242 of the General
Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied
voting power shall entitle the holder thereof to vote upon the increase
or decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of section 102 of the General Corporation Law of the State
of Delaware, as the same be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified my be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
The amendments of the certificate of incorporation herein
certified have been duly adopted in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware.
I, THE UNDERSIGNED, acknowledge that the foregoing Amended and Restated
Certificate of Incorporation is the act and deed of the Corporation, and do
certify that the facts herein stated are true, and I have accordingly hereunto
set my hand and seal this 29th day of April, 1999.
<PAGE>
/s/ Ronald E. Lusk
Ronald E. Lusk
Chairman and Chief Executive Officer
<PAGE>
Exhibit 3.2
BYLAWS
of
PHOENIX HEALTHCARE CORPORATION
(a Delaware corporation)
<PAGE>
INDEX
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
STOCKHOLDERS
<S> <C> <C>
1.01 Annual meetings................................................................ 1
1.02 Special meetings............................................................... 1
1.03 Notice......................................................................... 1
1.04 Record dates................................................................... 2
1.05 Quorum and adjournment......................................................... 3
1.06 Organization of meetings....................................................... 3
1.07 Action by stockholders......................................................... 4
1.08 Voting rights of stockholders.................................................. 4
1.09 Stockholders list.............................................................. 4
1.10 Inspectors of election......................................................... 4
1.11 Procedure at stockholders meetings............................................. 5
1.12 Proxies........................................................................ 6
1.13 Voting by fiduciaries and pledgees............................................. 7
1.14 Voting by joint holders of shares.............................................. 7
1.15 Voting by corporations......................................................... 7
1.16 Voting by minors; other matters................................................ 8
1.17 Consents in lieu of meetings................................................... 8
ARTICLE II
DIRECTORS
2.01 Qualifications; number, term of office,
election..................................................................... 9
2.02 Annual and other regular meetings.............................................. 9
2.03 Special meetings............................................................... 9
2.04 Notice of Board meetings....................................................... 9
2.05 Quorum of and action by directors; written
consents..................................................................... 10
2.06 Organization................................................................... 10
2.07 Committees..................................................................... 10
2.08 Presumption of assent.......................................................... 11
2.09 Resignation.................................................................... 11
2.10 Removal........................................................................ 11
2.11 Vacancies...................................................................... 11
2.12 Compensation................................................................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III
GENERAL PROVISIONS REGARDING NOTICE; TELEPHONIC MEETINGS
<S> <C> <C>
3.01 Manner of giving notice........................................................ 12
3.02 Waiver of notice............................................................... 12
3.03 Modification of proposal contained in notice................................... 12
3.04 Use of conference telephone and similar
equipment.................................................................... 13
ARTICLE IV
OFFICERS AND EMPLOYEES
4.01 Number, qualifications and designation......................................... 13
4.02 Election and term of office; authority......................................... 13
4.03 Non-Executive officers; employees and agents................................... 13
4.04 Resignations................................................................... 14
4.05 Removal........................................................................ 14
4.06 Vacancies...................................................................... 14
4.07 Compensation; bonding.......................................................... 14
4.08 The Chairman................................................................... 14
4.09 The President.................................................................. 14
4.10 Vice Presidents................................................................ 14
4.11 The Secretary and assistant secretaries........................................ 15
4.12 The Treasurer and assistant treasurers......................................... 15
ARTICLE V
SHARES OF CAPITAL STOCK
5.01 Share certificates............................................................. 15
5.02 Issuance; registration......................................................... 15
5.03 Transfer of shares............................................................. 16
5.04 Transfer agents and registrars................................................. 16
5.05 Lost, stolen, destroyed or mutilated certificates.............................. 16
5.06 Holders of record.............................................................. 16
ARTICLE VI
EXECUTION OF INSTRUMENTS, ETC.; MISCELLANEOUS
6.01 Checks, deposits, etc.......................................................... 16
6.02. Other contracts................................................................ 17
6.03 Interested directors or officers; quorum....................................... 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.04 Voting securities owned by the Corporation..................................... 18
6.05 Corporate records.............................................................. 18
6.06 Offices........................................................................ 18
6.07 Corporate seal................................................................. 19
6.08 Fiscal year.................................................................... 19
ARTICLE VII
INDEMNIFICATION
7.01 Scope of indemnification....................................................... 19
7.02 Proceedings initiated by Indemnified Representatives........................... 20
7.03 Advancing expenses............................................................. 21
7.04 Insurance; security............................................................ 21
7.05 Payment of indemnification or advance.......................................... 21
7.06 Contribution................................................................... 21
7.07 Mandatory indemnification...................................................... 22
7.08 Contract rights; amendment or repeal; reliance................................. 22
7.09 Article VII not exclusive; survival of rights.................................. 22
ARTICLE VIII
AMENDMENTS
8.01 Amendment of bylaws............................................................ 22
</TABLE>
<PAGE>
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1.01. ANNUAL MEETINGS. An annual meeting of the
stockholders shall be held each year. The annual meeting shall be held at such
time and place, within or without the State of Delaware, and on such date (not a
legal holiday at the place of the meeting) as may be fixed by the Board of
Directors, or if not so fixed, then at 11:00 a.m., Central Daylight Saving time,
on the third Thursday in April, if not a legal holiday at the place of the
meeting, and if a legal holiday, then on the next succeeding day which is not a
legal holiday, at the principal business office of the Corporation. At the
annual meeting the stockholders shall elect directors and shall transact such
other business as may properly be brought before the meeting. If an annual
meeting is not held within thirteen months after the date of incorporation of
the Corporation, or within thirteen months after the last annual meeting, any
stockholder or director of the Corporation may apply to the Delaware Court of
Chancery for an order requiring an annual meeting to be held.
Section 1.02. SPECIAL MEETINGS. Special meetings of the
stockholders may be called at any time, for the purpose or purposes set forth in
the call, by the Chairman of the Board, the President or the Board of Directors.
Special meetings shall be held at such time and place, within or without the
State of Delaware, and on such date (not a legal holiday at the place of the
meeting), as may be fixed by the Board of Directors, or if not so fixed by the
Board of Directors, then on the thirtieth day after the date such meeting is
called, if not a legal holiday at the place of the meeting, and if a legal
holiday, then on the next succeeding day which is not a legal holiday, at the
principal business office of the Corporation.
Section 1.03. NOTICE.
(a) GENERAL RULE. Written notice of every meeting of the
stockholders shall be given by, or at the direction of, the Secretary to each
stockholder of record entitled to vote at the meeting not less than 10 nor more
than 60 days before the date fixed for the meeting. However, if a purpose of the
meeting is to act upon an agreement of merger or consolidation pursuant to
section 251 of the General Corporation Law of the State of Delaware (the
"General Corporation Law"), or a proposal to sell, lease or exchange all or
substantially all of the Corporation's property and assets pursuant to section
271 of the General Corporation Law, such notice shall be given not less than 20
nor more than 60 days before the date fixed for the meeting.
(b) CONTENTS. In the case of a special meeting of
stockholders, the notice shall specify the general nature of the business to be
transacted and shall contain such other material as may be required by law. Any
business may be transacted at an annual meeting regardless of whether the notice
calling such meeting contains a reference thereto, except as otherwise required
by law.
<PAGE>
(c) ADJOURNED STOCKHOLDERS MEETINGS. When a meeting of
stockholders is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken, unless the adjournment is for more than
thirty days or unless a new record date is fixed for the adjourned meeting, in
which case notice of such adjourned meeting shall be given as provided in
Section 1.03(a). At the adjourned meeting any business may be transacted which
could have been transacted at the original meeting.
(e) STOCKHOLDERS WITHOUT FORWARDING ADDRESSES. Notices need
not be sent to any stockholder to whom either (i) notices of two consecutive
annual meetings, and all notices of stockholders meetings or of the taking of
action by written consent of the stockholders without a meeting between such two
consecutive annual meetings, or (ii) all, and at least two, payments (if sent by
first class mail) of dividends or interest on securities during any twelve-month
period, have been mailed by the Corporation addressed to the stockholder at the
stockholder's address as shown on the records of the Corporation and have been
returned undeliverable. Whenever the stockholder delivers to the Corporation a
notice containing the stockholder's then current address, the requirement that
notices be given to the stockholder shall be reinstated.
Section 1.04. RECORD DATES.
(a) FIXING A RECORD DATE FOR VOTING AT A MEETING. The Board of
Directors may fix a date and time before any meeting of stockholders as a record
date for the determination of the stockholders entitled to notice of, or to vote
at, the meeting, which date, except in the case of an adjourned meeting, shall
be not more than 60 or less than 10 days before the date of the meeting, and
shall not precede the day on which the Board of Directors fixed the record date.
Such record date shall also apply to any adjournment of the meeting, unless the
Board of Directors fixes a new record date for the adjourned meeting in
accordance with the preceding sentence. Only stockholders of record on the date
and time so fixed shall be so entitled, notwithstanding any transfer of shares
on the books of the Corporation after any such record date.
(b) FIXING A RECORD DATE FOR OTHER PURPOSES. The Board of
Directors may similarly fix a record date and time (i) for the determination of
stockholders of record entitled to consent to corporate action in writing
without a meeting, in which case such record date shall not be more than 10 days
after the day on which the Board of Directors fixed the record date and shall
not precede that day, or (ii) for the determination of stockholders of record
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, or for any other purpose, in which case such record date
shall not be more than 60 days before such action.
(c) WHEN A RECORD DATE IS NOT FIXED. If a record date is not
fixed pursuant to Sections 1.04(a) or 1.04(b):
(i) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be
the close of business on the day before the day on which notice of the
meeting is first given to stockholders or, if notice is waived, the
<PAGE>
close of business on the day before the day on which the meeting is
held.
(ii) The record date for determining stockholders
entitled to express consent to corporate action in writing without a
meeting, when prior action by the Board of Directors is not required,
shall be the close of business on the day on which the first signed
written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to (1) the Secretary, or
(2) the principal place of business of the Corporation, or (3) the
registered office of the Corporation in Delaware (with such delivery to
be by hand or by certified or registered mail, return receipt
requested). If prior action by the Board of Directors is required, such
record date shall be the close of business on the day such action is
taken.
(iii) The record date for determining stockholders
for any other purpose shall be the close of business on the day on
which the Board of Directors adopts the resolution relating to such
purpose.
Section 1.05. QUORUM AND ADJOURNMENT.
(a) GENERAL RULE. A meeting of stockholders shall not be
organized for the transaction of business unless a quorum is present. The
presence in person or by proxy of the holders of at least a majority of the
shares entitled to be voted at the meeting shall constitute a quorum. Shares of
its own capital stock belonging to the Corporation, or shares of the
Corporation's capital stock belonging to another corporation if the Corporation
holds, directly or indirectly, a majority of the shares of such other
corporation entitled to vote in the election of directors, shall not be counted
in determining the total number of outstanding shares, or the number of shares
present at the meeting, for quorum purposes.
(b) ADJOURNMENT FOR LACK OF QUORUM. If a meeting cannot be
organized because a quorum is not present, those stockholders present may
adjourn the meeting to such time and place as they may determine.
(c) WITHDRAWAL OF STOCKHOLDERS. Once a meeting is duly
organized, the stockholders present may continue to do business until
adjournment notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
(d) SPECIAL RULE FOR ELECTION OF DIRECTORS. If one of the
purposes of a meeting is the election of directors, and such meeting has been
adjourned twice for lack of a quorum, those stockholders who attend the third
attempt to convene the meeting shall constitute a quorum for the purpose of
electing directors whether or not they would constitute a quorum for other
purposes pursuant to Section 1.05(a), so long as there is present in person or
by proxy the holders of at least one-third of the shares entitled to be voted at
the meeting.
Section 1.06. ORGANIZATION OF MEETINGS. At every meeting of
the stockholders, the Chairman of the Board shall act as chairman of the
meeting. If the Chairman of the Board is not
<PAGE>
present, then one of the following persons present, in the following order,
shall act as chairman of the meeting: the President, or a person chosen by
majority vote of the stockholders present at the meeting. The Secretary or an
Assistant Secretary, or in their absence a person appointed by the chairman of
the meeting, shall act as secretary of the meeting and take the minutes thereof.
Section 1.07. ACTION BY STOCKHOLDERS. Any proposal submitted
to a vote of the stockholders shall be approved if a majority of the votes
entitled to be cast with respect to such proposal by stockholders present at the
meeting in person or by proxy are cast in favor of such proposal and, if any
shares are entitled to be voted thereon as a class, if of the votes entitled to
be cast with respect to such proposal by stockholders of the class present at
the meeting in person or by proxy are cast in favor of such proposal.
Section 1.08. VOTING RIGHTS OF STOCKHOLDERS. Unless otherwise
provided in the certificate of incorporation, each person shall be entitled to
one vote for each share of capital stock registered in the name of such person
on the books of the Corporation on the record date for such matter determined
pursuant to Section 1.04. The date and time of the opening and the closing of
the polls for each matter on which the stockholders will vote at a meeting shall
be announced at the meeting. No ballots, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted after the closing of the polls.
Section 1.09. STOCKHOLDERS LIST.
(a) GENERAL RULE. At least ten days before every meeting of
stockholders, the Secretary shall prepare a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. The list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours for a
period of at least ten days prior to the meeting, either at the place where the
meeting is to be held, or at another place within the city where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting and may be inspected during the whole time of the meeting by any
stockholder who is present. The Corporation's stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger or
the stockholders list or to vote in person or by proxy at any meeting of
stockholders.
(b) EFFECT OF NON-COMPLIANCE. Failure to comply with Section
1.09(a) shall not affect the validity of any action taken at a meeting prior to
a demand at such meeting, by any stockholder entitled to vote thereat, to
examine the list, except that if the directors willfully neglect or refuse to
produce the stockholders list at any meeting for the election of directors, they
shall be ineligible for election to any office at the meeting.
Section 1.10. INSPECTORS OF ELECTION.
(a) APPOINTMENT. Before any meeting of stockholders, the Board
of Directors may appoint inspectors of election to act at the meeting or any
adjournment thereof. If inspectors of
<PAGE>
election are not so appointed by the Board of Directors, the chairman of the
meeting may, and on the request of any stockholder shall, appoint inspectors of
election at the meeting. The number of inspectors of election shall be one or
three. Inspectors of election need not be stockholders. A person who is a
candidate for an office to be filled at the meeting shall not act as an
inspector of election. Each inspector of election, at or before the meeting and
before beginning his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector of election with strict impartiality and
according to the best of his or her ability.
(b) VACANCIES. In case any person appointed as a judge of
election fails to appear or fails or refuses to act, the vacancy may be filled
by appointment made by the Board of Directors before the convening of the
meeting or by the chairman of the meeting at the meeting.
(c) DUTIES. The inspectors of election shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, whether a quorum is present, and the authenticity,
validity and effect of proxies and ballots; receive all votes and ballots; hear
and determine all challenges and questions in any way arising in connection with
the right to vote, and retain for at least 60 days a record of the disposition
of all such challenges; count and tabulate all votes; determine the results and
certify them to the chairman of the meeting; and do such acts as may be proper
to conduct the vote with fairness to all stockholders.
(d) EVIDENCE TO BE CONSIDERED. In determining the validity and
counting of proxies and ballots, the inspectors of election shall be limited to
an examination of the proxies, any envelopes submitted with those proxies, any
information provided in accordance with Section 1.12(b), ballots, and the
regular books and records of the Corporation, except that the inspectors of
election may consider other reliable information for the limited purpose of
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons who represent more votes than the holder of a
proxy is authorized by the record owner to cast, or more votes than the
stockholder holds of record. If the inspectors of election consider such other
reliable information, the certificate of the inspectors of election made
pursuant to Section 1.10(e) shall specify the precise information so considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which it was
obtained and the basis for the belief of the inspectors of election that the
information is accurate and reliable.
(e) REPORT AND CERTIFICATE. On request of the chairman of the
meeting, or of any stockholder, the inspectors of election shall make a report
in writing of any challenge or question or matter determined by them, and
execute a certificate of any fact found by them. Any report or certificate made
by them shall be prima facie evidence of the facts stated therein.
Section 1.11. PROCEDURE AT STOCKHOLDERS MEETINGS. The
organization of each meeting of stockholders, the order of business and all
matters relating to the manner of conducting the meeting shall be determined by
the chairman of the meeting, whose decisions may be overruled only by a majority
of the votes entitled to be cast on any matter by stockholders present at the
meeting in person or by proxy. Such votes shall not be taken by ballot. Meetings
shall be
<PAGE>
conducted in a manner designed to accomplish the business of the meeting in a
prompt and orderly fashion and to be fair and equitable to all stockholders, but
it shall not be necessary to follow Roberts' Rules of Order or any other manual
of parliamentary procedure.
Section 1.12. PROXIES.
(a) GENERAL RULES.
(i) Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to
act for the stockholder by proxy. The presence of, or vote or other
action at a meeting, or the expression of consent or dissent to
corporate action in writing without a meeting, by a person holding a
proxy of such stockholder shall constitute the presence of, or vote or
action by, or written consent or dissent of, such stockholder.
(ii) If two or more persons hold proxies with respect
to the same shares, the Corporation shall, unless otherwise expressly
provided in such proxies, accept as the vote with respect to all such
shares the vote cast by a majority of such persons and, if a majority
of such persons cannot agree whether such shares shall be voted or upon
the manner of voting such shares, the voting of such shares shall be
divided equally among such persons.
(b) EXECUTION AND FILING. Every proxy shall be in writing,
signed manually or by facsimile by the stockholder of record or by such
stockholder's duly authorized officer, director, employee or agent, and filed
with the Secretary. A telegram, telex, cablegram, datagram or similar electronic
transmission from a stockholder or attorney-in-fact, or a photographic or other
copy, facsimile telecommunication or similar reliable and complete reproduction
of a writing executed by a stockholder or attorney-in-fact, (i) may be treated
as properly executed for purposes of this subsection and (ii) shall be so
treated if it sets forth a confidential and unique identification number or
other mark furnished by the Corporation to the stockholder for the purposes of a
particular meeting or transaction.
(c) REVOCATION; EXPIRATION. A duly executed proxy, unless
coupled with an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective with respect to the Corporation until written
notice thereof has been given to the Secretary. An unrevoked proxy shall not be
valid after three years from the date of its execution unless the proxy provides
for a longer period. A proxy shall not be revoked by the death or incapacity of
the stockholder unless, before the vote is counted or the authority is
exercised, written notice of such death or incapacity is given to the Secretary.
(d) EXPENSES. The Corporation shall pay the reasonable
expenses of the solicitation of votes, proxies or consents of stockholders by or
on behalf of the Board of Directors or its nominees for election to the Board,
including solicitation by professional proxy solicitors and otherwise.
<PAGE>
Section 1.13. VOTING BY FIDUCIARIES AND PLEDGEES. Shares held
of record by a trustee or other fiduciary, an assignee for the benefit of
creditors or a receiver may be voted, or proxies relating thereto granted, by
the trustee, fiduciary, assignee or receiver. A stockholder whose stock is
pledged shall be entitled to vote the pledged shares, or to grant proxies with
respect thereto, until such shares have been transferred of record into the name
of the pledgee or a nominee of the pledgee; except that if, in the transfer of
the pledged shares by the stockholder to the pledgee on the books of the
Corporation, the stockholder has expressly empowered the pledgee to vote the
pledged shares, then only the pledgee or the proxy of the pledgee may vote such
shares.
Section 1.14. VOTING BY JOINT HOLDERS OF SHARES.
(a) GENERAL RULE. If shares or other securities having voting
power stand of record in the names of two or more persons, whether fiduciaries,
members of a partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, then (i) if any of such persons are
present in person or by proxy, all of such shares shall be deemed to be
represented for the purpose of determining whether a quorum is present, and
(ii)(1) if only one of such persons votes such shares, the vote of such person
binds all of such persons, (2) if more than one of such persons vote such
shares, the votes of the majority of such persons so voting binds all of such
persons, and (3) if more than one of such persons vote such shares but their
votes are evenly split on any particular matter, each such person may vote such
shares in proportion to the interest of such person therein, unless a court
having jurisdiction shall order otherwise.
(b) EXCEPTION. If there has been filed with the Secretary (i)
written notice that the voting rights with respect to such shares are different
from the rights provided in Section 1.14(b), and (ii) a copy, certified by an
attorney at law to be correct, of the instrument or order appointing such joint
holders or creating the relationship of such joint holders to one another and
providing for their voting rights with respect to the shares, then the persons
specified as having such voting power in the latest-dated document so filed, and
only those persons, shall be entitled to vote the shares or grant proxies
relating thereto, but only in accordance with such document.
Section 1.15. VOTING BY CORPORATIONS.
(a) VOTING BY CORPORATE STOCKHOLDERS. Shares held of record by
another corporation may be voted, or proxies relating thereto may be granted, by
any of its officers or agents, unless there has been filed with the Secretary a
copy of a resolution of such other corporation's board of directors or a
provision of its certificate or articles of incorporation or bylaws, certified
to be correct by one of such corporation's officers, appointing some other
person its general or special proxy, in which case that person shall be entitled
to vote the shares held of record by such corporation.
(b) SHARES OWNED BY THE CORPORATION. Shares of its own capital
stock belonging to the Corporation, or shares of the Corporation's capital stock
belonging to another corporation if the Corporation holds, directly or
indirectly, a majority of the shares of such other corporation entitled
<PAGE>
to vote in the election of directors, shall not be entitled to vote. Nothing in
this section shall be construed as limiting the right of the Corporation to vote
stock, including its own capital stock, held by it in a fiduciary capacity.
Section 1.16. VOTING BY MINORS; OTHER MATTERS. The Corporation
may treat every natural person who holds shares or other obligations of the
Corporation as having capacity to receive and to empower others to receive
dividends, interest, principal and other payments or distributions, to vote or
express consent or dissent and to make elections and exercise rights relating to
such shares or obligations unless, in the case of payments or distributions on
shares, the Secretary or the transfer agent of the Corporation or, in the case
of payments or distributions on other obligations, the Treasurer or paying agent
of the Corporation, has received written notice that the holder is a minor or is
otherwise legally incapacitated.
Section 1.17. CONSENTS IN LIEU OF MEETINGS.
(a) ACTION BY CONSENT. Any action required or permitted to be
taken at a meeting of the stockholders or of a class of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
(b) FORMAL REQUIREMENTS FOR ACTION BY CONSENT. Every written
consent shall bear the date of signature of each stockholder who signs it. No
written consent shall be effective to take the corporate action referred to
therein unless (i) written consents signed by a sufficient number of
stockholders to take such action are delivered to the Secretary, and (ii) such
delivery of consents sufficient to take such action is completed within 60 days
of the date of the earliest-dated consent so delivered.
(c) NOTICE TO NON-CONSENTING STOCKHOLDERS. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
to such action.
ARTICLE II
DIRECTORS
Section 2.01. QUALIFICATIONS; NUMBER; TERM OF OFFICE;
ELECTION. Each director of the Corporation shall be a natural person of full age
who need not be a resident of Delaware or a stockholder of the Corporation. The
Board of Directors shall consist of such number of persons as may be determined
from time to time by the Board of Directors but shall not be less than one (1)
nor more than six (6) unless otherwise established pursuant to the Certificate
of Designation for the Series A Convertible Preferred Stock. A full Board of
Directors shall be elected at each annual meeting of the stockholders. Each
director shall hold office from the time of his or her election until the
election of his or her successor, or until his or her earlier death, resignation
or removal. A
<PAGE>
decrease in the number of directors constituting the full Board of Directors
shall not have the effect of shortening the term of office of any incumbent
director. In elections of directors, voting need not be by ballot unless
balloting is required by vote of the stockholders taken before the voting for
the election of directors begins. Unless otherwise provided by law or in the
certificate of incorporation, the candidates receiving the highest numbers of
votes cast in the election shall be elected, even if such numbers are less than
a majority of the votes cast.
Section 2.02. ANNUAL AND OTHER REGULAR MEETINGS. A regular
meeting of the Board of Directors shall be held immediately after the annual
meeting of the stockholders, or at such other time and at such place as may be
designated from time to time by the Board of Directors. Such regular meeting
shall be the annual organization meeting at which the Board shall organize
itself and elect the Executive Officers of the Corporation and may transact any
other business. Other regular meetings of the Board of Directors shall be held
on such dates and at such times and places, within or without Delaware, as shall
be designated from time to time by the Board of Directors. Any business may be
transacted at any regular meeting.
Section 2.03. SPECIAL MEETINGS. A special meeting of the Board
of Directors may be called at any time by the Board itself, or by the Chairman
or the President, or by at least one-fourth of the directors, to be held on such
date and at such time and place, within or without Delaware, as shall be
specified by the person or persons calling the meeting. Any business may be
transacted at any special meeting.
Section 2.04. NOTICE OF BOARD MEETINGS. Once the dates, times
and places of regular meetings of the Board of Directors has initially been
determined by the Board of Directors, notices of such regular meetings
thereafter need not be given unless any such date, time or place is changed, in
which case notice thereof shall be given in the manner provided below for
special meetings. Notice of every special meeting of the Board of Directors
shall be given to each director by telephone or in writing at least 24 hours (in
the case of notice by telephone, telex, TWX or fax) or 48 hours (in the case of
notice by telegraph, courier service or express mail) or five days (in the case
of notice by first class mail) before the time at which the meeting is to be
held. Every such notice shall state the date, time and place of the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board need be specified in a notice of the meeting.
Section 2.05. QUORUM OF AND ACTION BY DIRECTORS; WRITTEN
CONSENTS. A majority of the directors in office shall be necessary to constitute
a quorum for the transaction of business, except as otherwise provided in
Section 7.05(b). If a quorum is not present at any meeting, the meeting may be
adjourned from time to time by a majority of the directors present until a
quorum shall be present, but notice of the time and place to which such meeting
is adjourned shall be given to any directors not present either in writing or
personally or by telephone at least eight hours prior to the hour of
reconvening. The acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors. Any action required or permitted to be taken at a meeting of the
Board of Directors may be taken without a meeting if, prior or subsequent to the
action, all of the directors in office consent thereto in writing and such
<PAGE>
consent or consents are filed with the minutes of the Board.
Section 2.06. ORGANIZATION. The Chairman of the Board, if
present, or if not, the President, if the President is a director and is
present, or if not, a director designated by the Board, shall preside at each
meeting of the Board. The Secretary, if present, or if not, any Assistant
Secretary, shall take the minutes at all meetings of the Board of Directors. In
the absence of the Secretary and an Assistant Secretary, the presiding officer
shall designate any person to take the minutes of the meeting.
Section 2.07. COMMITTEES.
(a) ESTABLISHMENT AND POWERS. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more standing or temporary committees (which may include an Executive
Committee), consisting of one or more directors, who shall serve at the pleasure
of the Board. Any such committee shall have and may exercise such powers and
authority of the Board of Directors as the Board may specify from time to time,
which may include the declaration of dividends; PROVIDED that a committee shall
not have any power or authority as to the following: (i) the recommendation or
submission to stockholders of any action requiring approval of stockholders
under the Delaware General Corporation Law, (ii) the adoption of an agreement of
merger or consolidation, (iii) amendment of the certificate of incorporation
except as specifically permitted by Section 2.07(b), (iv) the creation or
filling of vacancies in the Board of Directors, (v) the adoption, amendment or
repeal of the bylaws, (vi) the amendment or repeal of any resolution of the
Board of Directors that by its terms is amendable or repealable only by the
Board of Directors, or (vii) action on any matter committed by these bylaws or
by resolution of the Board of Directors to another committee of the Board of
Directors.
(b) CERTAIN TERMS OF SECURITIES. Notwithstanding Section
2.07(a)(iii), a committee may, to the extent authorized by the Board of
Directors in a resolution providing for the issuance of shares of stock, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation, or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation, or fix the number of shares of any
series of stock, or authorize the increase or decrease of the shares of any
series.
(c) ALTERNATE MEMBERS. The Board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for the purposes of any
written action by the committee. In the absence or disqualification of a member
and alternate member or members of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another director to act at
the meeting in the place of any such absent or disqualified member.
(d) PROCEDURES. The term "Board of Directors" or "Board," when
used in any provision of these bylaws relating to the organization or procedures
of or the manner of taking action by the Board of Directors, shall be construed
to include and refer to any Executive
<PAGE>
Committee or other committee of the Board.
Section 2.08. PRESUMPTION OF ASSENT. Minutes of each meeting
of the Board and each committee of the Board, respectively, shall be made
available to each director or member of such committee, respectively, at or
before the next succeeding meeting of the Board or such committee. A director
who is present at a meeting of the Board, or of a committee of the Board, at
which action on any matter is taken shall be presumed to have assented to the
action taken unless the director's dissent is entered in the minutes of the
meeting or unless the director files a written dissent to the action with the
secretary of the meeting before the adjournment thereof or transmits the dissent
in writing to the Secretary of the Corporation immediately after the adjournment
of the meeting. The right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a director from asserting
that minutes of the meeting incorrectly omitted his or her dissent if, promptly
upon receipt of a copy of such minutes, the director notifies the Secretary, in
writing, of the asserted omission or inaccuracy.
Section 2.09. RESIGNATION. Any director may resign by
submitting his or her resignation to the Secretary. Such resignation shall
become effective upon its receipt by the Secretary or as otherwise specified
therein.
Section 2.10. REMOVAL.
(a) REMOVAL BY THE STOCKHOLDERS. The entire Board of
Directors, or any individual director, may be removed from office, with or
without cause, by the vote of the stockholders. In case the entire Board or any
one or more directors are so removed, new directors may be elected by the
stockholders at the same meeting.
(b) REMOVAL BY THE BOARD. The Board of Directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year. Failure to attend a meeting or meetings of the Board shall
not entitle the Board to remove such director.
Section 2.11. VACANCIES. Vacancies in the Board of Directors
that shall occur by reason of death, resignation, removal, increase in the
number of directors or any other cause whatever may be filled (unless filled
pursuant to Section 2.10(a)) by a majority vote of the remaining directors,
whether or not a quorum, or by a sole remaining director, and each person so
elected shall be a director to serve for the balance of the unexpired term. When
one or more directors resign from the Board effective at a future date, the
directors then in office, including those who have so resigned, shall have power
by the applicable vote to fill the vacancies, the vote thereon to take effect
when the resignations become effective.
Section 2.12. COMPENSATION. The Board of Directors shall have
the authority to fix the compensation of directors for their services as
directors. A director may be a salaried officer of the Corporation.
<PAGE>
ARTICLE III
GENERAL PROVISIONS REGARDING NOTICE; TELEPHONIC MEETINGS
Section 3.01. MANNER OF GIVING NOTICE. Whenever written notice
is required to be given to any person under the provisions of the Delaware
General Corporation Law or by the certificate or these bylaws, it may be given
to the person either personally or by sending a copy thereof by first class or
express mail, postage prepaid, or by telegram (with messenger service
specified), telex or TWX (with answerback received) or courier service, charges
prepaid, or by facsimile transmission, to the address (or to the telex, TWX or
fax number) of the person appearing on the books of the Corporation or, in the
case of directors, supplied by the director to the Corporation for the purpose
of notice. If the notice is sent by mail, telegraph or courier service, it shall
be deemed to have been given to the person entitled thereto when deposited in
the United States mail or with a telegraph office or courier service for
delivery to that person or, in the case of telex or TWX, when dispatched or, in
the case of fax, when received. A notice of meeting shall specify the date, time
and place of the meeting and any other information required by any provision of
the Delaware General Corporation Law, the certificate of incorporation or these
bylaws.
Section 3.02. WAIVER OF NOTICE.
(a) WRITTEN WAIVER. Whenever any notice is required to be
given under the provisions of the Delaware General Corporation Law, the
certificate of incorporation or these bylaws, a written waiver thereof, signed
by the person or persons entitled to the notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of the notice.
Neither the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice of the meeting.
(b) WAIVER BY ATTENDANCE. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
Section 3.03. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE.
Whenever the language of a proposed resolution is included in a written notice
of a meeting required to be given under the provisions of the Delaware General
Corporation Law or the certificate of incorporation or these bylaws, the meeting
considering the resolution may without further notice adopt it with such
clarifying or other amendments as do not enlarge its original purpose.
Section 3.04. USE OF CONFERENCE TELEPHONE AND SIMILAR
EQUIPMENT. One or more persons may participate in a meeting of the Board of
Directors or any committee thereof, or the stockholders of the Corporation, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at the meeting.
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ARTICLE IV
OFFICERS AND EMPLOYEES
Section 4.01. NUMBER, QUALIFICATIONS AND DESIGNATION. The
Executive Officers of the Corporation shall be a Chairman, a President, a
Secretary and a Treasurer, and such other officers of the Corporation as the
Board of Directors may designate from time to time as Executive Officers. The
Corporation shall have such other officers from time to time as the Board may
determine. Other than the Chairman, who must also be a director, officers may
but need not be directors or stockholders of the Corporation. The President and
the Secretary shall be natural persons of full age. Any number of offices may be
held by the same person. The Board of Directors shall elect from among the
directors the Chairman.
Section 4.02. ELECTION AND TERM OF OFFICE; AUTHORITY. The
Executive Officers of the Corporation shall be elected annually by the Board of
Directors at the regular annual meeting of the Board, and shall hold office at
the pleasure of the Board of Directors. Other officers of the Corporation shall
be elected by the Board of Directors or appointed pursuant to Section 4.03, and
shall hold office at the pleasure of the Board of Directors and of the Executive
Officer, if any, charged with their supervision. All officers of the
Corporation, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may be
provided by or pursuant to resolutions or orders of the Board of Directors or,
in the absence of controlling provisions in the resolutions or orders of the
Board of Directors, as may be determined by or pursuant to these bylaws. The
Board of Directors may delegate for the time being some or all of the powers and
duties of any officer to any other person whom the Board may select.
Section 4.03. NON-EXECUTIVE OFFICERS; EMPLOYEES AND AGENTS.
The Board of Directors may from time to time elect such other officers as the
Board deems appropriate, to have such authority and perform such duties as are
provided in these bylaws or as the Board may from time to time determine. The
Board of directors may delegate to any Executive Officer or committee of the
Board the power to appoint non-Executive officers and to prescribe the authority
and duties of such officers. The Chairman, or other officers of the Corporation
pursuant to authority delegated by the Chairman, may employ from time to time
such other agents, employees and independent contractors as the Chairman or such
other officer may deem advisable for the prompt and orderly transaction of the
business of the Corporation, may prescribe their duties and the conditions of
their employment, fix their compensation and dismiss them at any time, without
prejudice to their contract rights, if any.
Section 4.04. RESIGNATIONS. Any officer may resign at any
time upon written notice to the Secretary. The resignation shall be effective
upon receipt thereof by the Secretary or at such subsequent time as may be
specified in the notice of resignation.
Section 4.05. REMOVAL. Any officer of the Corporation may be
removed by the Board of Directors, and any employee or agent may be dismissed by
the Chairman, in any case with or without cause. The removal shall be without
prejudice to the contract rights, if any, of any
<PAGE>
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 4.06. VACANCIES. Any vacancy in any office or position
by reason of death, resignation, removal, disability or any other cause shall be
filled in the manner provided in these bylaws for regular election or
appointment to such office or position.
Section 4.07. COMPENSATION; BONDING. The compensation of the
officers elected by the Board of Directors shall be fixed from time to time by
the Board. The compensation of any other officers, employees and agents shall be
fixed from time to time by the Chairman or such other officer or committee to
which the Chairman delegates such power. The Corporation may secure the fidelity
of any or all of its officers or agents by bond or otherwise.
Section 4.08. THE CHAIRMAN. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors, and
shall have such other powers and duties as from time to time may be prescribed
by the Board.
Section 4.09. THE PRESIDENT. Subject to the control of the
Board of Directors, the President shall have general supervision of and general
management and executive powers over all the property, operations, business,
affairs and employees of the Corporation, and shall see that the policies and
programs adopted or approved by the Board are carried out. The President shall
exercise such further powers and duties as from time to time may be prescribed
by these bylaws or by the Board of Directors.
Section 4.10. EXECUTIVE VICE PRESIDENTS. Executive Vice
Presidents may be given by resolution of the Board general executive powers,
subject to the control of the Chairman or the President, concerning one or more
or all segments of the operations of the Corporation. Executive Vice Presidents
shall exercise such further powers and duties as from time to time may be
prescribed by these bylaws, the Board of Directors, the Chairman or the
President. At the request of the President, or in the President's absence or
disability, the senior Executive Vice President shall exercise the powers and
duties of the President.
Section 4.11. THE SECRETARY AND ASSISTANT SECRETARIES. The
Secretary or an assistant secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record the proceedings of
the stockholders and of the Board and of committees of the Board in a book or
books to be kept for that purpose; shall see that notices are given and records
and reports properly kept and filed by the Corporation as required by law and
these bylaws; and shall be the custodian of the seal of the Corporation and see
that it is affixed to all documents to be executed on behalf of the Corporation
under its seal. The Secretary shall exercise such further powers and duties as
from time to time may be prescribed by these bylaws or by the Board of Directors
or the President. At the request of the Secretary, or in the Secretary's absence
or disability, an assistant secretary shall exercise the powers and duties of
the Secretary.
Section 4.12. THE TREASURER AND ASSISTANT TREASURERS. The
Treasurer shall be the chief accounting officer of the Corporation. The
Treasurer or an assistant treasurer shall have or
<PAGE>
provide for the custody of the funds or other property of the Corporation; shall
collect and receive or provide for the collection and receipt of moneys earned
by or in any manner due to or received by the Corporation; shall deposit all
funds in his or her custody as Treasurer in such banks or other places of
deposit as the Board of Directors may from time to time designate; and shall,
whenever so required by the Board, render an account showing all transactions as
Treasurer and the financial condition of the Corporation. The Treasurer shall
exercise such further powers and duties as from time to time may be prescribed
by these bylaws or by the Board of Directors or the President. At the request of
the Treasurer, or in the Treasurer's absence or disability, an assistant
treasurer shall exercise the powers and duties of the Treasurer.
ARTICLE V
SHARES OF CAPITAL STOCK
Section 5.01. SHARE CERTIFICATES. Every record holder of
fully-paid stock of the Corporation shall be entitled to a share certificate or
certificates representing the shares held of record by such holder, unless the
Board of Directors provides by resolution or resolutions that some or all of any
or all classes or series of the Corporation's stock shall be uncertificated
shares. Each such certificate shall state that the Corporation is incorporated
under the laws of Delaware, the name of the person to whom the certificate is
issued and the number and class of shares and the designation of the series, if
any, that the certificate represents, and otherwise shall be in such form as the
Board of Directors may from time to time prescribe. The Board may authorize the
issuance of certificates for fractional shares or, in lieu thereof, scrip or
other evidence of ownership, which may (or may not) as determined by the Board
entitle the holder thereof to voting, dividends or other rights of stockholders.
Section 5.02. ISSUANCE; REGISTRATION. The stock ledger or
transfer books and blank share certificates shall be kept by the Secretary or by
any transfer agent or registrar designated by the Board of Directors for that
purpose. The share certificates of the Corporation shall be numbered and
registered in the stock ledger or transfer books of the Corporation as they are
issued or transferred. Such certificates shall be signed by the Chairman of the
Board or the President, and by the Secretary or the Treasurer or an assistant
secretary or an assistant treasurer, and shall bear the seal of the Corporation
or a facsimile thereof. Any or all the signatures on the certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer, transfer agent or registrar before the certificate is
issued, it may be issued by the Corporation with the same effect as if the
officer, transfer agent or registrar had not ceased to be such at the date of
its issue. The provisions of this Section shall be subject to any inconsistent
or contrary agreement at the time between the Corporation and any transfer agent
or registrar.
Section 5.03. TRANSFER OF SHARES. Transfers of certificated
shares of stock of the Corporation shall be made on the stock ledger or transfer
books of the Corporation only upon surrender to the Corporation or its transfer
agent of the certificate or certificates for such shares, properly endorsed by,
or accompanied by an appropriate stock power properly signed by, the record
holder of such shares or by such record holder's assignee, agent or legal
representative, who
<PAGE>
shall furnish proper evidence of authority. No transfer shall be made
inconsistent with Article 8 of the Delaware Uniform Commercial Code, as such
sections exist at the time of the purported transfer. Whenever any transfer of
shares shall be made for collateral security and not absolutely, that fact shall
be so expressed in the entry of transfer if both the transferor and the
transferee request the Corporation to do so when the certificates are presented
for transfer or uncertificated shares are requested to be transferred. Except as
provided in Section 5.05, every certificate surrendered for transfer shall be
cancelled.
Section 5.04. TRANSFER AGENTS AND REGISTRARS. The Board of
Directors may appoint one or more banks, trust companies or other corporations,
organized under the laws of any state of the United States or under the laws of
the United States, as agent or agents for the Corporation in the transfer of the
stock of the Corporation or as registrar or registrars of the stock of the
Corporation.
Section 5.05. LOST, STOLEN, DESTROYED OR MUTILATED
CERTIFICATES. New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such conditions as the
Board of Directors may from time to time determine, which may but need not
include the giving of a satisfactory bond or other indemnity.
Section 5.06. HOLDERS OF RECORD. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock of the
Corporation as the holder and owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by law.
ARTICLE V
EXECUTION OF INSTRUMENTS, ETC.; MISCELLANEOUS
Section 6.01. CHECKS, DEPOSITS, ETC. All funds of the
Corporation shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as the Board of
Directors may approve or designate, and all such funds shall be withdrawn only
upon checks or other orders signed by such officers or employees as the Board
shall from time to time determine. Facsimile signatures on checks may be used
unless prohibited by the Board of Directors.
Section 6.02. OTHER CONTRACTS. Except as provided in Section
6.01, all notes, bonds, endorsements (other than for deposit), guarantees and
other evidences of indebtedness of the Corporation, and all deeds, mortgages,
contracts and other instruments by which the Corporation is to be bound, shall
be executed manually by the Chairman, the President or any Executive Vice
President, or by any other officer, employee or agent of the Corporation upon
whom authority to execute any of the foregoing, which may be general or confined
to specific instances, has been conferred by the Board of Directors. Any officer
of the Corporation so authorized may delegate, from time to time, by instrument
in writing, all or any part of such authority to any other person or persons if
such delegation has been authorized by the Board of Directors, which
authorization may
<PAGE>
be general or confined to specific instances. The affixation of the corporate
seal shall not be necessary to the valid execution, assignment or endorsement by
the Corporation of any instrument or other document.
Section 6.03. INTERESTED DIRECTORS OR OFFICERS; QUORUM.
(a) GENERAL RULE. No contract or transaction between the
Corporation and one or more of its directors or officers or between the
Corporation and another corporation, partnership, association, joint venture,
trust or other organization in which one or more of the Corporation's directors
or officers are directors or officers or have a financial or other interest,
shall be void or voidable solely for that reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or transaction, or
solely because the votes of such interested directors or officers are counted
for that purpose, if:
(i) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee and the Board or the
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even
though the disinterested directors are less than a quorum; or
(ii) the material facts as to such interested
director's or officer's relationship or interest and as to the contract
or transaction are disclosed or are known to the stockholders entitled
to vote thereon and the contract or transaction is specifically
approved in good faith by vote of those stockholders; or
(iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by
the Board of Directors or a committee thereof or the stockholders.
(b) QUORUM. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee thereof that authorizes a contract or transaction specified in Section
6.03(a).
Section 6.04. VOTING SECURITIES OWNED BY THE CORPORATION.
Securities owned by the Corporation and having voting power in any other
corporation shall be voted by the Chairman, the President or any Executive Vice
President, unless the Board confers authority to vote with respect thereto,
which may be general or confined to specific investments, upon some other
person. Any person authorized to vote such securities shall have the power to
appoint proxies, with general power of substitution.
Section 6.05. CORPORATE RECORDS.
(a) REQUIRED RECORDS. The Corporation shall keep complete and
accurate books and
<PAGE>
records of account, minutes of the proceedings of the incorporators,
stockholders and Board of Directors and a stock ledger giving the names and
addresses of all stockholders and the number and class of shares held by each.
The stock ledger shall be kept at either the registered office of the
Corporation in Delaware or at its principal place of business wherever situated
or at the office of its registrar or transfer agent.
(b) FORM OF RECORDS. Any records kept by the Corporation in
the regular course of its business, including records relating to meetings of
the stockholders or the Board of Directors or any committee thereof, and
including its stock ledger, books of account and minute books, may be kept on,
or in the form of, punch cards, magnetic tape, photographs, microphotographs, or
any other information storage device, provided that the records so kept can be
converted into clearly legible written form within a reasonable time. The
Corporation shall so convert any records so kept upon the request of any person
entitled to inspect such records.
(c) RIGHT OF INSPECTION. Every stockholder of record shall,
upon written demand under oath stating a proper purpose therefor, have a right
to inspect, in person or by agent or attorney, during the usual hours for
business, the Corporation's stock ledger, a list of its stockholders, and its
other books and records, and to make copies or extracts therefrom. A proper
purpose shall mean a purpose reasonably related to the interest of the person as
a stockholder. In every instance where an attorney or other agent is the person
who seeks the right of inspection, the demand under oath shall be accompanied by
a power of attorney or other writing that authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the Corporation at its registered office in Delaware or at its principal
place of business wherever situated. Any director shall have the right to
inspect the Corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to the director's position as
a director.
Section 6.06. OFFICES. The principal business office of the
Corporation shall be at 11910 Greenville Avenue, Suite 300, Dallas, Texas,
unless changed as authorized by the Board of Directors. The Corporation may have
offices at such places within or without Delaware as the business of the
Corporation may require. The registered office of the corporation in Delaware
shall be at 1013 Centre Road, Wilmington, Delaware, until otherwise established
by an amendment of the certificate of incorporation or by the Board of Directors
and a record of the change is filed with the Delaware Secretary of State and
duly recorded in the manner provided by law.
Section 6.07. CORPORATE SEAL. The Board of Directors shall
prescribe the form of a suitable corporate seal, which shall contain the full
name of the Corporation and the year and state of incorporation.
Section 6.08. FISCAL YEAR. The fiscal year of the Corporation
shall end on such day as shall be fixed by the Board of Directors.
<PAGE>
ARTICLE VII
INDEMNIFICATION
Section 7.01. SCOPE OF INDEMNIFICATION.
(a) GENERAL RULE. The Corporation shall indemnify an
Indemnified Representative who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed Proceeding by reason of the fact
that the Indemnified Representative is or was a serving in an Indemnified
Capacity. Such indemnity shall be against all Liabilities of whatever nature
which the Indemnified Representative has incurred or may incur in connection
with such Proceeding. The terms Indemnified Representative, Proceeding,
Indemnified Capacity and Liabilities are defined in paragraph (e) of this
Section 7.01.
(b) EXCEPTIONS. Notwithstanding paragraph (a) of this Section
7.01, indemnification shall not be provided:
(i) if the Indemnified Representative did not act in
good faith and in a manner the Indemnified Representative reasonably
believed to be in, or not opposed to, the best interests of the
Corporation (or, as to action with respect to an employee benefit plan,
the interests of participants in and beneficiaries of the plan);
(ii) with respect to any criminal Proceeding, if the
Indemnified Representative had reasonable cause to believe the conduct
of the Indemnified Representative was unlawful;
(iii) with respect to any Proceeding by or in the
right of the Corporation to procure a judgment in its favor, if the
Indemnified Representative is adjudged to be liable to the Corporation,
except as may be otherwise ordered by the Delaware Court of Chancery or
the court in which such Proceeding was brought; or
(iv) to the extent that indemnification has been
determined by a court to be unlawful.
(c) PARTIAL PAYMENT. If an Indemnified Representative is
entitled to indemnification in respect of a portion, but not all, of any
Liabilities to which the Indemnified Representative may be subject, the
Corporation shall indemnify the Indemnified Representative to the maximum extent
for such portion of such Liabilities.
(d) PRESUMPTION. The termination of any Proceeding by
judgment, order, settlement or conviction or upon a plea of nolo contendere or
its equivalent shall not of itself create a presumption that the Indemnified
Representative is not entitled to indemnification, except as otherwise provided
in Section 7.01(b)(iii).
(e) DEFINITIONS. For purposes of this Article VII:
<PAGE>
(i) "Indemnified Capacity" means any and all past,
present and future service by an Indemnified Representative in one or
more capacities as a director, officer, employee or agent of the
Corporation, or, at the request of the Corporation, as a director,
officer, employee, agent, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other
entity or enterprise;
(ii) "Indemnified Representative" means any and all
directors, officers, employees and agents of the Corporation and any
person serving at the request of the Corporation as a director,
officer, employee, agent, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other
entity or enterprise);
(iii) "Liability" means any damage, judgment, amount
paid in settlement, fine, penalty, punitive damages, excise tax
assessed with respect to an employee benefit plan, or cost or expense,
of any nature (including, without limitation, attorneys' fees and
disbursements), actually and reasonably incurred by an Indemnified
Representative in connection with a Proceeding, and includes without
limitation liabilities resulting from any actual or alleged breach or
neglect of duty, error, misstatement or misleading statement,
negligence, gross negligence or act giving rise to strict or products
liability; and
(iv) "Proceeding" means any threatened, pending or
completed action, suit, appeal or other proceeding of any nature,
whether civil, criminal, administrative or investigative, whether
formal or informal, whether brought by or on behalf of the Corporation,
a class of its security holders, an employee benefit plan or its
participants or beneficiaries, or otherwise, and including but not
limited to an action by or in the right of the Corporation to procure a
judgment in its favor.
Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED
REPRESENTATIVES. Notwithstanding any other provision of this Article VII, the
Corporation shall not indemnify an Indemnified Representative, or make any
advance pursuant to Section 7.03, for any Liability incurred in a Proceeding
initiated (other than by the assertion of counterclaims or affirmative defenses)
or participated in as an intervenor or amicus curiae by the Indemnified
Representative unless the initiation of or participation in the Proceeding is
authorized, either before or after its commencement, by the affirmative vote of
a majority of the directors in office. This Section 7.02 shall not apply to
reimbursement of expenses incurred in successfully prosecuting or defending the
rights of an Indemnified Representative granted by or pursuant to this Article.
Section 7.03. ADVANCING EXPENSES. Except as provided in
Section 7.02, expenses (including attorneys' fees and disbursements) incurred by
an Indemnified Representative in defending any Proceeding shall be paid by the
Corporation, as an advance to the Indemnified Representative, in advance of the
final disposition of the Proceeding, upon receipt of an undertaking by or on
behalf of the Indemnified Representative to repay the amount so advanced by the
Corporation if it is ultimately determined that the Indemnified Representative
is not entitled to be indemnified by the Corporation pursuant to this Article
VII. The financial ability of an
<PAGE>
Indemnified Representative to repay such an advance shall not be a prerequisite
to the making of the advance.
Section 7.04. INSURANCE; SECURITY. The Corporation may, on
behalf of itself or any Indemnified Representative, purchase and maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other trusteed or non-trusteed fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs and upon such
other terms and conditions as the Board of Directors shall deem appropriate,
against any Liability which might be asserted against or incurred by the
Corporation or any Indemnified Representative, whether or not the Corporation
would have the power to indemnify the Indemnified Representative against such
Liability under the provisions of this Article VII. The determination of the
Board with respect to such amounts, costs, terms and conditions shall be
conclusive.
Section 7.05. PAYMENT OF INDEMNIFICATION OR ADVANCE.
(a) ADVANCES. Within 30 days after a written request for an
advance pursuant to Section 7.03 has been delivered to the Secretary or the
Treasurer, the Corporation shall provide such advance unless the Board of
Directors determines that the person making such request is not entitled to such
indemnification or advance. Such determination by the Board shall be conclusive.
(b) INDEMNIFICATION. Unless ordered by a court, any
indemnification pursuant to this Article VII shall be made only as authorized in
the specific case upon a determination that such indemnification is authorized
by this Article VII. Such determination shall be made (i) by the Board of
Directors by a majority vote of the directors who were not parties to the
Proceeding, even though less than a quorum, (ii) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion, or (iii) by the stockholders. A determination made pursuant to this
paragraph (b) shall be conclusive.
Section 7.06. CONTRIBUTION. If the indemnification provided
for in this Article VII or otherwise is unavailable for any reason in respect of
any Liability or portion thereof, the Corporation shall contribute to the
Liabilities to which the Indemnified Representative may be subject in such
proportion as is appropriate to reflect the intent of this Article VII or
otherwise.
Section 7.07. MANDATORY INDEMNIFICATION. To the extent that
any director, officer, employee or agent of the Corporation, whether or not an
Indemnified Representative, has been successful on the merits or otherwise in
defense of any Proceeding, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
Section 7.08. CONTRACT RIGHTS; AMENDMENT OR REPEAL; RELIANCE.
All rights, duties and obligations of the Corporation and each Indemnified
Representative under this Article VII shall be deemed to constitute a contract
between the Corporation and the Indemnified Representative pursuant to which the
Corporation and such Indemnified Representative intend to be legally
<PAGE>
bound. Any repeal, amendment or modification of any provision of this Article
VII shall be prospective only and shall not affect any rights or obligations
then existing. Each person who acts as an Indemnified Representative of the
Corporation shall be deemed to be doing so in reliance upon the rights provided
by this Article VII.
Section 7.09. ARTICLE VII NOT EXCLUSIVE; SURVIVAL OF RIGHTS.
The rights granted by this Article VII shall not be deemed exclusive of any
other right as to which a person seeking indemnification, contribution or
advancement of expenses may be entitled under any statute, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
indemnified capacity and as to action in any other capacity. A person who has
otherwise ceased to be an Indemnified Representative, and the heirs and personal
representatives of such person, shall continue to have the rights of an
Indemnified Representative under this Article VII with respect to any Proceeding
in which such person, or such heirs or personal representatives, may incur a
Liability arising from an action, or failure to act, while such person was an
Indemnified Representative.
ARTICLE VIII
AMENDMENTS
Section 8.01. AMENDMENT OF BYLAWS. These bylaws may be amended
or repealed, or new bylaws may be adopted by vote of a majority of the directors
in office at any regular or special meeting of the Board of Directors. Any
change in these bylaws shall take effect when adopted unless otherwise provided
in the resolution effecting the change.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT OF PHOENIX HEALTHCARE CORPORATION FOR THE QUARTER ENDED
MARCH 31, 1999.
</LEGEND>
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