<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended April 30, 1996
Commission file number 0-19031
National Quality Care, Inc.
---------------------------
(EXACT NAME OF REGISTRANT)
Sargent, Inc.
-----------------------------------------------
(Former name of Registrant since last report)
Delaware 84-1215959
(State of Incorporation) (IRS Employer ID No.)
5901 W. Olympic Boulevard,
Suite 109
Los Angeles, California 90036
------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(213) 935-5700
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
The number of shares of common stock outstanding
as of June 10, 1996 is 6,620,471
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National Quality Care, Inc.
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
Balance Sheets as of April
30, 1996 and July 31, 1995 3
Statements of Operations for
the three months ended April
30, 1996 and 1995 5
Statements of Operations for
the nine months ended April
30, 1996 and 1995 6
Statements of Cash Flows for
the nine months ended April
30, 1996 and 1995 7
Notes to Financial Statements 9
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12
Part II. Other Information
Item 3. Promissory Note with Former
Affiliates 13
Item 4. Other Matters 13
Item 5. Exhibits and Reports on Form 8-K 16
2
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National Quality Care, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
---------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash $ 50,266 $ 517,946
Certificate of Deposit 30,000 30,000
Receivables 101,082 110,000
Inventories (Note 2) 90,933 97,683
Note Receivable (Note 3) 104,291 0
Note Receivable (Note 6) 311,667 0
Prepaid Expenses and Advances 21,502 21,502
---------- ----------
Total Current Assets $ 709,741 $ 777,437
Plant and Equipment (net)
(Note 3) 1,730,470 1,786,998
Land held for Sale (Note 4) 0 298,615
Assets held for Sale (Note 4) 14,900 0
Other Assets 10,086 13,912
---------- ----------
TOTAL ASSETS $2,465,197 $2,876,962
</TABLE>
See accompanying notes to financial statements
3
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National Quality Care, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
------------ ------------
(unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable - trade $ 69,495 $ 32,958
Accrued expenses payable (Note 5) 71,442 366,017
Current portion of long-term
debt 177,900 167,755
------------ ------------
Total Current Liabilities $ 318,837 $ 566,730
Long-term debt, less
current portion 103,073 235,747
------------ ------------
TOTAL LIABILITIES $ 421,910 $ 802,477
Commitments and contingencies
(Note 5) 110,000 0
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value
1,000,000 shares authorized, no
shares issued and outstanding 0 0
Common Stock, $.01 par value
9,000,000 shares authorized
2,111,343 shares issued and
outstanding 21,113 21,113
Additional paid-in capital 6,207,193 6,207,193
Accumulated deficit (4,295,019) (4,153,821)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,933,287 2,074,485
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,465,197 $2,876,962
See accompanying notes to financial statements
</TABLE>
4
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<TABLE>
<CAPTION>
National Quality Care, Inc.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30,
(UNAUDITED)
1996 1995
------------- -------------
<S> <C> <C>
SALES $ 0 $1,058,777
LEASE REVENUES 45,517 0
MISCELLANEOUS REVENUES 15,360 0
COST OF REVENUE 0 1,519,739
----------- -----------
GROSS PROFIT 60,877 (460,962)
OPERATING EXPENSES
General & Administrative 107,428 411,822
Depreciation and Amortization 46,715 47,784
----------- -----------
TOTAL OPERATING EXPENSES 154,143 459,606
INCOME (LOSS) FROM OPERATIONS (93,266) (920,568)
OTHER INCOME (EXPENSE)
Interest Income 20,667 3,952
Interest Expense (6,033) (45,990)
Contingency Reinstated (110,000) 0
Gain on Sale of Assets 0 (491,908)
----------- -----------
TOTAL OTHER INCOME (EXPENSE) ( 95,366) (533,946)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX (188,632) (1,454,514)
PROVISION FOR FEDERAL INCOME TAX 0 0
----------- -----------
NET INCOME (LOSS) ($188,632) ($1,454,514)
----------- -----------
NET INCOME (LOSS) PER SHARE ($0.19) ($0.69)
----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,111,343 2,087,803
----------- -----------
</TABLE>
See accompanying notes to financial statements
5
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<TABLE>
<CAPTION>
National Quality Care, Inc.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30,
(UNAUDITED)
1996 1995
---------------- ----------------
<S> <C> <C>
SALES $ 23,641 $2,623,295
LEASE REVENUES 112,524 0
MISCELLANEOUS REVENUES 20,852 0
COST OF REVENUE (7,016) (3,623,246)
------------ ------------
GROSS PROFIT 150,001 (999,951)
OPERATING EXPENSES
General & Administrative 293,467 1,259,755
Depreciation and Amortization 93,430 140,147
------------ ------------
TOTAL OPERATING EXPENSES 386,897 1,399,902
INCOME (LOSS) FROM OPERATIONS (236,896) (2,399,853)
OTHER INCOME (EXPENSE)
Interest Income 25,097 7,332
Interest Expense (48,339) (89,787)
Settlement of Contingency 87,569 0
Gain on Sale of Assets 31,372 (510,375)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 95,699 (592,830)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAX (141,197) (2,992,683)
PROVISION FOR FEDERAL INCOME TAX 0 0
------------ ------------
NET INCOME (LOSS) ($141,197) ($2,992,683)
------------ ------------
NET INCOME (LOSS) PER SHARE $0.066 ($1.43)
------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,111,343 2,087,803
------------ ------------
</TABLE>
See accompanying notes to financial statements
6
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<TABLE>
<CAPTION>
National Quality Care, Inc.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30,
(UNAUDITED)
1996 1995
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 158,176 $2,433,884
Cash Paid to Employees,
Suppliers & Subcontractors (375,725) (3,957,742)
Interest Received 25,097 7,332
Interest Paid (48,339) (89,787)
------------ ------------
Net Cash Provided (Used)
by Operating activities (240,791) (1,606,313)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on Notes
Payable (122,224) (1,648,583)
Proceeds from Notes Payable 0 831,633
Net Cash Provided (Used) by
Financing Activities (122,224) (816,950)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes Receivable (400,000) 0
Proceeds from Sale of Assets 332,237 2,546,566
Leasehold and Equipment Improvements (36,902) 0
Purchase of Property Plant
and Equipment - Net of Disposals 0 0
------------ ------------
Net Cash Provided (Used) by
Investing Activities (104,665) 2,546,566
------------ ------------
NET INCREASE (DECREASE) IN CASH (467,680) 123,303
CASH AT BEGINNING OF PERIOD 517,946 748,726
------------ ------------
CASH AT END OF PERIOD $ 50,266 $872,029
------------ ------------
</TABLE>
See accompanying notes to financial statements
7
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<TABLE>
<CAPTION>
National Quality Care, Inc.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30,
(UNAUDITED)
1996 1995
-------------- --------------
RECONCILIATION OF NET LOSS TO NET CASH FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) (141,197) ($2,992,713)
Adjustments to Reconcile Net
Income (Loss) to Net Cash Provided (Used)
by Operating Activities:
Loss (Gain) on Sale of Assets (33,622) 510,375
Depreciation 93,430 140,147
Settlement of Contingency (87,569) 0
(Increase) Decrease in
Accounts Receivable (7,040) (189,411)
(Increase) Decrease in Inventory 6,750 1,421,458
(Increase) Decrease in PrePaids 0 58,266
(Increase) Decrease in Other Assets (11,074) 0
Increase (Decrease) in
Accounts Payable 36,537 (544,435)
(Increase) Decrease in Accrued
Expense (97,006) 0
-------------- --------------
Total Adjustments to Net Income (Loss) (99,594) 1,386,400
-------------- --------------
Net Cash Provided (Used) by
Operating Activities (240,791) ($1,606,313)
-------------- --------------
</TABLE>
See accompanying notes to financial statements
8
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National Quality Care, Inc.
NOTES TO FINANCIAL STATEMENTS
April 30, 1996
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB. Therefore, they do not include
all information and footnotes necessary for a fair presentation of financial
position and results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of Management, all adjustments
considered necessary for a fair presentation have been included in the interim
period. Operating results for the nine months ended April 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
July 31, 1996.
The financial data presented herein should be read in conjunction with the
Company's Form 10-KSB for the year ended July 31, 1995.
NOTE 2. INVENTORIES
Inventories consist primarily of processing and warehouse supplies used in
processing potatoes and are stated at the lower of cost or market on a first-in,
first-out basis. As the Company sold its farming operations during fiscal year
1995, there were no costs accumulated at July 31, 1995 related to the growing of
crops. On September 16, 1995, the Company granted the Lessee of the packaging
facility the right to use the Sargent Produce Company trade name so that the
Lessee may make use of some of the printed bags in Company's current inventory.
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consist of the following at April 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Land $ 820,000
Buildings and Improvements 1,002,557
Potato Bins 239,089
Machinery and Equipment 1,070,920
------------
3,132,566
Less Accumulated Depreciation (1,402,096)
------------
1,730,470
------------
</TABLE>
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On September 16, 1995, the Company entered a into a Lease Agreement with
Sargent Potato Company, which is composed of two of the principals of former
management of Sargent, Inc. (Richard L. Messick and Richard A. Messick) ("SPC")
to lease the packaging facility wherein the Company leased to SPC the warehouse
for a monthly rental of $15,172 for one year, beginning September 16, 1995, with
an option to renew or purchase the packaging facility. The Company made
necessary repairs to the roof as required by the Agreement. SPC rented the
property in an "as is" condition. The Company also agreed to maintain deposits
with SLVREC and the Colorado Department of Agriculture for the term of the
lease. Upon expiration of the lease, these deposits shall be remitted to the
Company. The Lease Agreement also provides SPC the right of first refusal to
acquire the warehouse at the expiration of the Lease Agreement. SPC is respon-
sible for all property damage and fire insurance on the warehouse. Currently,
SPC is in arrears for two lease payments.
In conjunction with the Lease Agreement, the Company also loaned the
principals of SPC, former management of Sargent, Inc., $100,000. This note was
paid in full on or about May 11, 1996.
NOTE 4. LAND AND ASSETS FOR RESALE
The Company entered into two separate Purchase and Sale Agreements for
Quarter #2 and the 4.13 ("Expansion Property")acres of attached land with
Richard L. Messick. The Purchase and Sale Agreement for the Expansion Property
is dated September 16, 1995 for the purchase price of $72,750. Mr. Messick
purchased the land for $240,828.41, net of real estate fees.
The Messicks have agreed to purchase a Ford Pickup truck, Ford Bronco and a
Bobcat from the Company for an aggregate purchase price of $14,900.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company was a co-defendant, along with American Securities Transfer,
Incorporated ("AST"), the Company's transfer agent, in a law suit filed by
Carolyn K. Combs and Medica Financial Corp. ("Combs and Medica"), Case No. 93-
CV-23 in the District Court, County of Rio Grande, State of Colorado (Carolyn K.
Combs and Medica Financial Corp. vs. Sargent, Inc. and American Securities
Transfer Incorporated). The suit pled claims for specific performance against
the Company to compel the Company to remove its objection to transfer certain
pre-reorganization stock certificates. Judgment was rendered against the
Company, Richard A. Messick, Richard L. Messick, Douglas G. Messick and AST for
damages of $128,515.63 plus interest accrued at the legal rate from March 26,
1993 and exemplary damages in the amount of $64,100.
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In September of 1995, Combs and Medica instituted another civil action
[No. 95-CV-36] in the court, seeking to collect upon their Judgment under
theories of breach of contract and unjust enrichment. The parties settled
these two matters by agreeing to dismiss with prejudice civil action No.
95-CV-36 upon written assurance and admission by Sargent to Combs and Medica
that the second civil action is unnecessary for them to execute upon their
Judgment. A payment schedule called for the Company to make payment on
November 15, 1995 of $11,437.62, which was paid in full. The amount
remaining due and owing to Medica in the amount of $54,600 plus interest of
$3,925.22 is being paid in monthly installments of $6,069.25 over a period of
ten months beginning on December 15, 1995 and ending on September 15, 1996.
Within ten days after the final payment, Medica has agreed to file with the
Court in 95-CV-36 a Satisfaction of Judgment.
Seaboard Surety Company ("Seaboard"), the bonding company for AST, made
payment to Combs and Medica in the approximate amount of $140,086.06. The
Company previously carried a liability on its books in the amount of $197,569
evidencing its perceived obligation to Seaboard. In November of 1995, the
Company discovered that Seaboard failed to file a claim in the bankruptcy court
before the bar date and, therefore, believed that Seaboard would be effectively
barred from collecting on their claim and the Company thus eliminated this
contingency from its financial statements and reflected a zero balance on its
January 31, 1996 Form 10-QSB filing with the Commission. However, since January
31, 1996, the Company has conducted extensive investigation and found that
Seaboard would be able to litigate its claim and perhaps collect the full
amount. To eliminate this possibility, the Company negotiated a settlement of
this claim with Seaboard and agreed to pay Seaboard the sum of $110,000 by July
31, 1996. If for any reason, the Company is unable to pay this amount to
Seaboard by July 31, 1996, the Company is liable to Seaboard for $150,000. This
contingency has been reserved for at April 30, 1996.
The Company was also a co-defendant in an action titled M&I First National
Leasing Corp. v. Sargent, Inc., Salt Fork Rentals, Inc. and Tobias Walhout. M&I
allowing the Company to extend the lease an additional year and re-schedule its
payments. In November of 1995, M&I agreed to extend its lease agreement with
the Company. The Company paid the amount in arrears of $57,000 plus a refinance
charge of $20,000. The Company deferred its December 15, 1995 payment until May
15, 1996.
NOTE 6. NOTE RECEIVABLE - LACD.
The Company loaned the sum of $300,000 to Los Angeles Community Dialysis
("LACD") in conjunction with its executed Letter of Intent with LACD. The
Company has accrued interest on the promissory note reflecting such loan at 8.5%
through April 30, 1996. Upon closing of the transaction with LACD, discussed
more
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fully hereinbelow on May 11, 1996, this Promissory Note was cancelled. See
Item 5 - "Other Matters."
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the financial
statements and accompanying notes included elsewhere in this report.
The Company operated the packaging facility for the entire month of August
and 1/2 of the month of September, whereafter, it leased the facility to SPC.
During August and the first half of September, the Company did not generate
income from potato sales, but did collect upon its receivables and incurred
other expenses related to the operations of the packaging facility. After
September 15, 1995, the Company leased the packaging facility to SPC and ceased
its involvement with the on going operations. The Company's sole source of
operating income is derived from the lease payments on the warehouse and the
sale of certain assets.
COMPARISON OF THE THREE MONTHS ENDED APRIL 30, 1996 WITH THE THREE MONTHS ENDED
APRIL 30, 1995
Revenues decreased for the three months ended April 30, 1996 as compared
with the same period in the prior year. The decrease was due to the cessation
of operations and the leasing of the facility to SPC. Although revenues
decreased, gross profits increased due to the fact that no operating costs were
involved with leasing the facility to SPC. The net loss for the three months
was $226,032 compared to a net loss of $1,454,514 in the prior period. The loss
was largely attributable to the Company recomputation of accumulated deprecia-
tion and re-instating its contingency of $150,000 to Seaboard.
COMPARISON OF THE NINE MONTHS ENDED APRIL 30, 1996 WITH THE NINE MONTHS ENDED
APRIL 30, 1995.
Revenues decreased for the nine months ended April 30, 1996 as compared
with the same period in the prior year. The decrease was due to the cessation
of operations and the leasing of the facility to SPC. Gross profit margins
increased due to the lack of operating costs associated with operating the
facility. The net loss for the nine months ended April 30, 1996 was largely
attributable to the re-instatement of the Company's contingent liability with
Seaboard Surety Company. The Company recognized a $178,597 loss for the nine
months ending April 30, 1996 as compared with a net loss of $2,992,683 for the
same period in the prior year. The Company paid down a large portion of its
Accrued Expenses during the nine months ended January 31, 1996.
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LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the ratio of current assets to current liabilities was
2.01 to 1.00 compared to .96 to 1.00 at July 31, 1995. The inventory consists
of bags and packaging supplies which will be purchased by SPC as they are used.
The Company's primary source of liquidity is provided by the Lease Agreement
with SPC, however, since July 31, 1995, the Company's liquidity has been
provided by collection of accounts receivable and by the sale of some of its
assets. The Company realized cash from the sale of Quarter #2 (land held for
resale) of approximately $240,000 during second quarter.
FUTURE OPERATIONS. The Company plans to continue to lease the packaging
facility to SPC and has entered into a Letter of Intent with Los Angeles
Community Dialysis (see Item 5 below).
PART II - OTHER INFORMATION
ITEM 3. PROMISSORY NOTE WITH FORMER AFFILIATES
The Company also entered into a Promissory Note with Richard L. Messick and
Richard A. Messick for $100,000, interest has been accrued through April 30,
1996 at the rate of 9% per annum and shall continue to accrue until the balance
is paid in full. This note was paid in full on or about May 11, 1996.
ITEM 4. OTHER MATTERS
SHARE EXCHANGE AGREEMENT. On May 11, 1996, the Company, Los Angeles
Community Dialysis, Inc. ("LACD"), Victor Gura, M.D. ("Gura"), Avraham H. Uncyk,
M.D. ("Uncyk") and Ronald P. Lang, M.D. ("Lang") completed the transactions
contemplated by an Agreement for Exchange of Stock (the "Share Exchange Agree-
ment"). In connection with the Share Exchange Agreement, the Company issued an
aggregate of 4,234,128 shares (the "Exchanged Sargent Shares") of the common
stock, par value $0.01 per share (the "Common Stock") of the Company to Gura,
Uncyk and Lang in exchange for 100% of the issued and outstanding shares (the
"Exchanged LACD Shares") of common stock of LACD, as follows: (i) Gura
(2,183,036 shares), (ii) Lang (727,679 shares), (iii) Uncyk (323,413 shares),
and (iv) Medipace Medical Group, Inc. ("Medipace"), a California corporation
owned by Gura, Lang and Uncyk (1,000,000 shares). The 1,000,000 shares issued
to Medipace were originally issued to Gura, Lang and Uncyk in their proportion-
ate ownership interests in Medipace (67.5%, 22.5% and 10%, respectively), and
subsequently transferred to Medipace.
LACD is a high-quality provider of hemodialysis services for patients
suffering from chronic kidney failure, also known as end-stage renal disease
("ESRD").
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RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS. As of May 12, 1996, the
Company adopted a Restated Certificate of Incorporation and newly revised
Bylaws. The Company filed the Restated Certificate of Incorporation with the
State of Delaware as of May 28, 1996.
The following is a description of certain material provisions of the
Company's newly adopted Restated Certificate of Incorporation and Bylaws:
1. CHANGE OF NAME. The Company has changed its name from "Sargent, Inc."
to "National Quality Care, Inc."
2. CAPITALIZATION. The authorized capital stock of the Company shall be
55,000,000 shares, consisting of 50,000,000 shares of common stock, par value
$0.01 per share and 5,000,000 shares of preferred stock, par value $0.01 per
share.
3. DIRECTORS. The authorized number of directors shall be fixed from
time to time by resolution of the Company's Board of Directors but shall not be
less than three (3) nor more than nine (9).
4. CERTAIN ANTI-TAKEOVER PROCEDURAL REQUIREMENTS. The Restated Certifi-
cate of Incorporation adopts certain measures (the "Measures") which are
intended to protect the Company's stockholders by rendering it more difficult
for a person or persons to obtain control of the Company without cooperation of
the Company's management. These Measures include the potential implementation
of certain supermajority requirements for the amendment of the Restated Certifi-
cate of Incorporation and Bylaws. Such Measures are often referred to as "anti-
takeover" provisions.
The inclusion of such "anti-takeover" provisions in the Restated Certifi-
cate of Incorporation may delay, deter or prevent a takeover of the Company
which the stockholders may consider to be in their best interests, thereby
possibly depriving holders of the Company's securities of certain opportunities
to sell or otherwise dispose of their securities at above-market prices, or
limit the ability of stockholders to remove incumbent directors as readily as
the stockholders may consider to be in their best interests.
Delaware law contains a statutory provision which is intended to curb
abusive takeovers of Delaware corporations. Section 203 of the Delaware General
Corporation Law addresses the problem by preventing certain business combina-
tions of the corporation with interested stockholders within three years after
such stockholders become interested. Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three (3) years from
the date that such person became an
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interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the Board of Directors of the corporation before the person becomes an interest-
ed stockholder; (ii) the interested stockholder acquired 85% or more of the
outstanding voting stock of the corporation in the same transaction that makes
such person an interested stockholder (excluding shares owned by persons who are
both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66-2/3% of the
corporation's outstanding voting stock at an annual or special meeting, exclud-
ing shares owned by the interested stockholder. Under Section 203, an "inter-
ested stockholder" is defined as any person who is: (i) the owner of fifteen
percent (15%) or more of the outstanding voting stock of the corporation or (ii)
an affiliate or associate of the corporation and who was the owner of fifteen
percent (15%) or more of the outstanding voting stock of the corporation at any
time within the three (3) year period immediately prior to the date on which it
is sought to be determined whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action of
its stockholders to exempt itself from coverage, provided that such bylaw or
certificate of incorporation amendment shall not become effective until twelve
(12) months after the date it is adopted. The Company has not adopted such an
amendment to the Restated Certificate of Incorporation. It is not anticipated
that the Board of Directors will seek stockholder approval to "opt out" of the
operation of this provision.
The Restated Certificate of Incorporation also provides that any amendment,
change or repeal of the provisions contained in the Restated Certificate of
Incorporation with respect to: (i) the Company's capitalization, (ii) amendment
of the Bylaws, (iii) determination by the Board of the number of directors, (iv)
filling Board vacancies, (v) the requirement that stockholder action be taken at
an annual or special meeting, (vi) requirements with respect to appraisal rights
for stockholders, or (vii) the amendment of the provision imposing such superma-
jority requirement for amendment of the Restated Certificate of Incorporation,
shall require the affirmative vote of the holders of at least 66 2/3% of the
voting power of all outstanding shares of voting stock, including, in any
instance where the repeal or amendment is proposed by an interested stockholder
(as such term is defined in Section 203 of the Delaware General Corporation Law)
or its affiliate or associate, the affirmative vote of a majority of the voting
power of all outstanding shares of voting stock held by persons other than such
interested stockholder or its affiliates or associates. However, only the
affirmative vote of the majority of
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the voting power of all outstanding shares of voting stock is required if the
amendment of any of the foregoing provisions is approved by a majority of the
"continuing directors") (as such term is defined in the Restated Certificate of
Incorporation).
The Restated Certificate of Incorporation permits the Board of Directors to
adopt, amend or repeal any or all of the Company's bylaws without stockholder
action and provide that such bylaws may also be adopted, amended or repealed by
its stockholders, but only if approved by holders of 66 2/3% or more of the
voting power of all outstanding shares of voting stock, including in any
instance in which the alteration is proposed by an interested stockholder or by
affiliates or associate of any interested stockholder, the affirmative vote of
the holders of at least a majority of voting power of all outstanding shares of
voting stock held by persons other than the interested stockholder who proposed
such action. However, the only stockholder vote required if the modification is
approved by a majority of the continuing directors is the affirmative vote of
the majority of the voting power of all outstanding shares of voting stock.
OTHER EVENTS. In October of 1995, the Company moved its corporate head-
quarters from Monte Vista, Colorado to Denver, Colorado. As of May 11, 1996, in
connection with the Share Exchange Agreement, the Company moved its corporate
headquarters to Los Angeles, California.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K.
REPORTS ON FORM 8-K.
The Company did not file any Reports on Form 8-K during the quarterly
period ended April 30, 1996.
EXHIBITS.
3.1 Restated Certificate of Incorporation
3.2 Bylaws
27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized on the dates
indicated.
Dated: June 13, 1996 NATIONAL QUALITY CARE, INC.
By: /s/ Victor Gura, M.D.
----------------------------
Victor Gura, M.D., President
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EXHIBIT 3.1
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
SARGENT, INC.
This Restated Certificate of Incorporation (the "Certificate") of Sargent,
Inc. (the "Corporation"), was duly adopted by the Board of Directors of the
Corporation as of May 12, 1996 and the stockholders of the Corporation on May
12, 1996, as set forth below, in accordance with the General Corporation Law of
the State of Delaware. The original Certificate of Incorporation was filed on
August 1, 1989 under the name of "Emory Capital Corp."
The following Restated Certificate of Incorporation was adopted on May 12,
1996 by a vote of the stockholders. The vote of by the written consent of the
stockholders of the Corporation representing in excess of the majority of the
issued and outstanding voting securities of the Corporation by which the
foregoing Restated Certificate of Incorporation was adopted was 4,234,128 shares
in favor, 0 shares opposed and 0 shares not voting, out of the Corporation's
total of 6,345,471 shares issued and outstanding. The number of shares voted
for the Restated Certificate of Incorporation was sufficient for approval.
FIRST: The name of the corporation is Natioanl Quality Care, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, City
of Wilmington, County of New Castle, Delaware 19801. The name and address of the
Corporation's registered agent in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware
19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
FOURTH: 1. The total number of shares of stock which the Corporation
shall have authority to issue is Fifty Five Million (55,000,000) shares,
consisting of Fifty Million (50,000,000) shares of Common Stock, par value $0.01
per share (the "Common Stock"), and Five Million (5,000,000) shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock").
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2. Shares of Preferred Stock may be issued from time to time in one or
more series as may be established from time to time by resolution of the Board
of Directors of the Corporation (the "Board of Directors"), each of which series
shall consist of such number of shares and have such distinctive designation or
title as shall be fixed by resolution of the Board of Directors prior to the
issuance of any shares of such series. Each such class or series of Preferred
Stock shall have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be stated
in such resolution of the Board of Directors providing for the issuance of such
series of Preferred Stock. The Board of Directors is further authorized to
increase or decrease (but not below the number of shares of such class or series
then outstanding) the number of shares of any series subsequent to the issuance
of shares of that series.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute and subject to Article Sixth hereof, the Board of Directors is expressly
authorized to adopt, repeal, rescind, alter or amend in any respect the Bylaws
of the Corporation (the "Bylaws").
SIXTH: Notwithstanding Article Fifth hereof, the Bylaws may be adopted,
rescinded, altered or amended in any respect by the stockholders of the
Corporation, but only by the affirmative vote of the holders of not less than 66
2/3% of the voting power of all outstanding shares of voting stock regardless of
class and voting together as a single voting class; PROVIDED, HOWEVER, that
where such action is approved by a majority of the continuing directors the
affirmative vote of a majority of the voting power of all outstanding shares of
voting stock, regardless of class and voting together as a single voting class,
shall be required for approval of such action.
SEVENTH: The business and affairs of the Corporation shall be managed by
and under the direction of the Board of Directors. Except as may otherwise be
provided pursuant to Section 2 of Article Fourth hereof in connection with
rights to elect additional directors under specified circumstances which may be
granted to the holders of any series of Preferred Stock, the exact number of
directors of the Corporation shall be determined from time to time by a Bylaw or
Amendment thereto provided that the number of directors shall not be reduced to
less than three (3), except that there need be only as many directors as there
are stockholders in the event that the outstanding shares are held of record by
fewer than three (3) stockholders.
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
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EIGHTH: Each director shall serve until his successor is elected and
qualified or until his death, resignation or removal; no decrease in the
authorized number of directors shall shorten the term of any incumbent director;
and additional directors, elected pursuant to Section 2 of Article Fourth hereof
in connection with rights to elect such additional directors under specified
circumstances which may be granted to the holders of any series of Preferred
Stock, shall not be included in any class, but shall serve for such term or
terms and pursuant to such other provisions as are specified in the resolution
of the Board of Directors establishing such series.
NINTH: Except as may otherwise be provided pursuant to Section 2 of
Article Fourth hereof in connection with rights to elect additional directors
under specified circumstances which may be granted to the holders of any series
of Preferred Stock, newly created directorships resulting from any increase in
the number of directors, or any vacancies on the Board of Directors resulting
from death, resignation, removal or other causes, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until such director's death, resignation or
removal, whichever first occurs.
TENTH: Except for such additional directors as may be elected by the
holders of any series of Preferred Stock pursuant to the terms thereof
established by a resolution of the Board of Directors pursuant to Article Fourth
hereof, any director may be removed from office with or without cause and only
by the affirmative vote of the holders of not less than 66 2/3% of the voting
power of all outstanding shares of voting stock entitled to vote in connection
with the election of such director regardless of class and voting together as a
single voting class; PROVIDED, HOWEVER, that where such removal is approved by a
majority of the continuing directors, the affirmative vote of a majority of the
voting power of all outstanding shares of voting stock entitled to vote in
connection with the election of such director, regardless of class and voting
together as a single voting class, shall be required for approval of such
removal.
ELEVENTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called Annual Meeting or at a
special meeting of stockholders of the Corporation, unless such action requiring
or permitting stockholder approval is approved by a majority of the continuing
directors, in which case such action may be authorized or taken by the written
consent of the holders of outstanding shares of voting stock having not less
than the minimum voting power that would be necessary to
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authorize or take such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voted, provided, all other
requirements of applicable law and this Certificate have been satisfied. Except
as specifically set forth in this Article Eleventh, no action may be taken by
stockholders by written consent.
TWELFTH: Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision of applicable law) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws.
THIRTEENTH: For the purposes of this Restated Certificate of
Incorporation, the following definitions shall apply:
(a) "continuing director" means: (i) any member of the Board of Directors
who (A) is not an interested stockholder or an affiliate or associate
of an interested stockholder and (B) was a member of the Board of
Directors prior to the time that an interested stockholder became an
interested stockholder; and (ii) any person who is elected or
nominated to succeed a continuing director, or to join the Board of
Directors, by a majority of the continuing directors.
(b) The terms "affiliate," "associate," "control," "interested
stockholder," "owner," "person" and "voting stock" shall have the
meanings set forth in Section 203(c) of the Delaware General
Corporation Law.
FOURTEENTH: The provisions set forth in this Article Fourteenth and in
Articles Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh hereof
may not be repealed, rescinded, altered or amended in any respect, and no other
provision or provisions may be adopted which impair(s) in any respect the
operation or effect of any such provision, except by the affirmative vote of the
holders of not less than 66 2/3% of the voting power of all outstanding shares
of voting stock regardless of class and voting together as a single voting
class, and, where such action is proposed by an interested stockholder or by any
associate or affiliate of an interested stockholder, the affirmative vote of the
holders of a majority of the voting power of all outstanding shares of voting
stock, regardless of class and voting together as a single class, other than
shares held by the interested stockholder which proposed (or the affiliate or
associate of which proposed) such action, or any affiliate or associate of such
interested stockholder; PROVIDED, HOWEVER, that where such action is approved by
a majority of the continuing directors, the affirmative vote of a majority of
the voting power of all outstanding shares of voting stock, regardless of class
and
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voting together as a single voting class, shall be required for approval of such
action.
FIFTEENTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Certificate in the
manner now or hereafter prescribed by applicable law, and all rights conferred
on stockholders herein are granted subject to this reservation. Notwithstanding
the preceding sentence, the provisions set forth in Articles Fourth, Fifth,
Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh and Fourteenth may not be
repealed, rescinded, altered or amended in any respect, and no other provision
or provisions may be adopted which impair(s) in any respect the operation or
effect of any such provision, unless such action is approved as specified in
Article Fourteenth hereof.
SIXTEENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this Section by the stockholders of the Corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
SEVENTEENTH: No contract or other transaction of the Corporation with any
other person, firm or corporation, or in which this corporation is interested,
shall be affected or invalidated by: (a) the fact that any one or more of the
directors or officers of the Corporation is interested in or is a director or
officer of such other firm or corporation; or, (b) the fact that any director or
officer of the Corporation, individually or jointly with others, may be a party
to or may be interested in any such contract or transaction, so long as the
contract or transaction is authorized, approved or ratified at a meeting of the
Board of Directors by sufficient vote thereon by directors not interested
therein, to which such fact of relationship or interest has been disclosed, or
the contract or transaction has been approved or ratified by vote or written
consent of the stockholders entitled to vote, to whom such fact of relationship
or interest has been disclosed, or so long as the contract or transaction is
fair and reasonable to the
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Corporation. Each person who may become a director or officer of the
Corporation is hereby relieved from any liability that might otherwise arise by
reason of his contracting with the Corporation for the benefit of himself or any
firm or corporation in which he may in any way be interested.
IN WITNESS WHEREOF SARGENT, INC. has caused this Restated Certificate of
Incorporation to be executed by its President and to be attested to by its
Secretary as of the 12th day of May, 1996.
SARGENT, INC.
By: /S/ Victor Gura, M.D.
--------------------------------
Victor Gura, M.D.
Chief Executive Officer
By: /S/ Ronald P. Lang, M.D.
--------------------------------
Ronald P. Lang, M.D.
Secretary
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EXHIBIT 3.2
<PAGE>
BYLAWS
OF
NATIONAL QUALITY CARE, INC.
(a Delaware corporation)
The foregoing are the Bylaws of National Quality Care, Inc., a Delaware
corporation (the "Corporation"), effective as of May 12, 1996, after approval by
the Corporation's Board of Directors and stockholders:
ARTICLE I
Offices
Section 1.01. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be located at 5901 West Olympic Boulevard, Suite 109,
Los Angeles, California 90036. The Board of Directors of the Corporation (the
"Board of Directors") may change the location of said principal executive
office.
Section 1.02. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 2.01. ANNUAL MEETINGS. The annual meeting of stockholders of the
Corporation shall be held at a date and at such time as the Board of Directors
shall determine. At each annual meeting of stockholders, directors shall be
elected in accordance with the provisions of Section 3.03 hereof and any other
proper business may be transacted.
Section 2.02. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time by a majority of the Board of
Directors, by the Chairman of the Board or by holders of not less than ten
percent (10%) of the voting power of all outstanding shares of voting stock
regardless of class and voting together as a single voting class. The term
"voting stock" as used in these Bylaws shall have the meaning set forth in
Section 203(c) of the Delaware General Corporation Law. Special meetings may
not be called by any other person or persons. Each special meeting shall be
held at such date and time as is requested by the person or persons calling the
meeting, within the limits fixed by law.
<PAGE>
Section 2.03. PLACE OF MEETINGS. Each annual or special meeting of
stockholders shall be held at such location as may be determined by the Board of
Directors or, if no such determination is made, at such place as may be
determined by the Chairman of the Board. If no location is so determined, any
annual or special meeting shall be held at the principal executive office of the
Corporation.
Section 2.04. NOTICE OF MEETINGS. Written notice of each annual or
special meeting of stockholders stating the date and time when, and the place
where, it is to be held shall be delivered either personally or by mail to
stockholders entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The purpose or purposes
for which the meeting is called may, in the case of an annual meeting, and
shall, in the case of a special meeting, also be stated. If mailed, such notice
shall be directed to a stockholder at his address as it shall appear on the
stock books of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices intended for him be mailed to
some other address, in which case such notice shall be mailed to the address
designated in such request.
Section 2.05. CONDUCT OF MEETINGS. All annual and special meetings of
stockholders shall be conducted in accordance with such rules and procedures as
the Board of Directors may determine subject to the requirements of applicable
law and, as to matters not governed by such rules and procedures, as the
chairman of such meeting shall determine. The chairman of any annual or special
meeting of stockholders shall be the Chairman of the Board. The Secretary, or
in the absence of the Secretary, a person designated by the Chairman of the
Board, shall act as secretary of the meeting.
Section 2.06. QUORUM. At any meeting of stockholders of the
Corporation, the presence, in person or by proxy, of the holders of record of a
majority of the shares then issued and outstanding and entitled to vote at the
meeting shall constitute a quorum for the transaction of business; PROVIDED,
HOWEVER, that this Section 2.06 shall not affect any different requirement which
may exist under statute, pursuant to the rights of any authorized class or
series of stock, or under the Certificate of Incorporation of the Corporation,
as amended or restated from time to time (the "Certificate"), for the vote
necessary for the adoption of any measure governed thereby.
In the absence of a quorum, the stockholders present in person or by
proxy, by majority vote and without further notice, may adjourn the meeting from
time to time until a quorum is attained. At any reconvened meeting following
such adjournment at which a quorum shall be present, any business may be
transacted
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which might have been transacted at the meeting as originally notified.
Section 2.07. VOTES REQUIRED. The affirmative vote of a majority of
the shares present in person or represented by proxy at a duly called meeting of
stockholders of the Corporation, at which a quorum is present and entitled to
vote on the subject matter, shall be sufficient to take or authorize action upon
any matter which may properly come before the meeting, except that the election
of directors shall be by plurality vote, unless the vote of a greater or
different number thereof is required by statute, by the rights of any authorized
class of stock or by the Certificate.
Unless the Certificate or a resolution of the Board of Directors
adopted in connection with the issuance of shares of any class or series of
stock provides for a greater or lesser number of votes per share, or limits or
denies voting rights, each outstanding share of stock, regardless of class or
series, shall be entitled to one (l) vote on each matter submitted to a vote at
a meeting of stockholders.
Section 2.08. PROXIES. A stockholder may vote the shares owned of
record by him either in person or by proxy executed in writing (which shall
include writings sent by telex, telegraph, cable or facsimile transmission) by
the stockholder himself or by his duly authorized attorney-in-fact. No proxy
shall be valid after three (3) years from its date, unless the proxy provides
for a longer period. Each proxy shall be in writing, subscribed by the
stockholder or his duly authorized attorney-in-fact, and dated, but it need not
be sealed, witnessed or acknowledged.
Section 2.09. STOCKHOLDER ACTION. Any action that may, or is
required to, be taken at any annual or special meeting of the stockholders of
the Corporation, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 2.10. LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make (or cause to be prepared and made), at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of, and the number of shares registered in the name of, each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days
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prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the duration
thereof, and may be inspected by any stockholder who is present.
Section 2.11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or at any adjournment or adjournments thereof. If such
Inspectors are not so appointed or fail or refuse to act, the chairman of any
such meeting may (and, upon the demand of any stockholder or stockholder's
proxy, shall) make such an appointment.
The number of Inspectors of Election shall be one (1) or three (3). If
there are three (3) Inspectors of Election, the decision, act or certificate of
a majority shall be effective and shall represent the decision, act or
certificate of all. No such Inspector need be a stockholder of the Corporation.
Subject to any provisions of the Certificate of Incorporation, the
Inspectors of Election shall determine the number of shares outstanding, the
voting power of each, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies; they shall receive
votes, ballots or consents, hear and determine all challenges and questions in
any way arising in connection with the right to vote, count and tabulate all
votes or consents, determine when the polls shall close and determine the
result; and finally, they shall do such acts as may be proper to conduct the
election or vote with fairness to all stockholders. On request, the Inspectors
shall make a report in writing to the secretary of the meeting concerning any
challenge, question or other matter as may have been determined by them and
shall execute and deliver to such secretary a certificate of any fact found by
them.
ARTICLE III
Directors
Section 3.01. POWERS. The business and affairs of the Corporation shall
be managed by and be under the direction of the Board of Directors. The Board
of Directors shall exercise all the powers of the Corporation, except those that
are conferred upon or reserved to the stockholders by statute, the Certificate
or these Bylaws.
Section 3.02. NUMBER. The number of directors shall be fixed from time to
time by resolution of the Board of Directors but shall not be less than three
(3) nor more than nine (9).
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Section 3.03. ELECTION AND TERM OF OFFICE. Each director shall serve
until his successor is elected and qualified or until his death, resignation or
removal, no decrease in the authorized number of directors shall shorten the
term of any incumbent director, and additional directors elected in connection
with rights to elect such additional directors under specified circumstances
which may be granted to the holders of any series of Preferred Stock shall not
be included in any class, but shall serve for such term or terms and pursuant to
such other provisions as are specified in the resolution of the Board of
Directors establishing such series.
Section 3.04. ELECTION OF CHAIRMAN OF THE BOARD. At the organizational
meeting immediately following the annual meeting of stockholders, the directors
shall elect a Chairman of the Board from among the directors who shall hold
office until the corresponding meeting of the Board of Directors in the next
year and until his successor shall have been elected or until his earlier
resignation or removal. Any vacancy in such office may be filled for the
unexpired portion of the term in the same manner by the Board of Directors at
any regular or special meeting.
Section 3.05. REMOVAL. Any director may be removed from office only as
provided in the Certificate of Incorporation.
Section 3.06. VACANCIES AND ADDITIONAL DIRECTORSHIPS. Newly created
directorships resulting from death, resignation, disqualification, removal or
other cause shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
Section 3.07. REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board
of Directors shall be held immediately following the annual meeting of the
stockholders; without call at such time as shall from time to time be fixed by
the Board of Directors; and as called by the Chairman of the Board in accordance
with applicable law.
Special meetings of the Board of Directors shall be held upon call by
or at the direction of the Chairman of the Board, the President or any two (2)
directors, except that when the Board of Directors consists of one (1) director,
then the one director may call a special meeting. Except as otherwise required
by law, notice of each special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at
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least three days before the day on which the meeting is to be held, or shall be
sent to him at such place by telex, telegram, cable, facsimile transmission or
telephoned or delivered to him personally, not later than the day before the day
on which the meeting is to be held. Such notice shall state the time and place
of such meeting, but need not state the purpose or purposes thereof, unless
otherwise required by law, the Certificate of Incorporation or these Bylaws
("Bylaws").
Notice of any meeting need not be given to any director who shall attend
such meeting in person (except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened) or who shall
waive notice thereof, before or after such meeting, in a signed writing.
Section 3.08. QUORUM. At all meetings of the Board of Directors, a
majority of the fixed number of directors shall constitute a quorum for the
transaction of business, except that when the Board of Directors consists of one
(1) director, then the one director shall constitute a quorum.
In the absence of a quorum, the directors present, by majority vote
and without notice other than by announcement, may adjourn the meeting from time
to time until a quorum shall be present. At any reconvened meeting following
such an adjournment at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 3.09. VOTES REQUIRED. Except as otherwise provided by applicable
law or by the Certificate of Incorporation, the vote of a majority of the
directors present at a meeting duly held at which a quorum is present shall be
sufficient to pass any measure.
Section 3.10. PLACE AND CONDUCT OF MEETINGS. Each regular meeting and
special meeting of the Board of Directors shall be held at a location determined
as follows: The Board of Directors may designate any place, within or without
the State of Delaware, for the holding of any meeting. If no such designation
is made: (a) any meeting called by a majority of the directors shall be held at
such location, within the county of the Corporation's principal executive
office, as the directors calling the meeting shall designate; and (b) any other
meeting shall be held at such location, within the county of the Corporation's
principal executive office, as the Chairman of the Board may designate or, in
the absence of such designation, at the Corporation's principal executive
office. Subject to the requirements of applicable law, all regular and special
meetings of the Board of Directors shall be conducted in accordance with such
rules and procedures as the Board of Directors may approve and, as to matters
not governed by such rules and procedures, as the chairman of such meeting shall
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determine. The chairman of any regular or special meeting shall be the Chairman
of the Board, or, in his absence, a person designated by the Board of Directors.
The Secretary, or, in the absence of the Secretary, a person designated by the
chairman of the meeting, shall act as secretary of the meeting.
Section 3.11. FEES AND COMPENSATION. Directors shall be paid such
compensation as may be fixed from time to time by resolution of the Board of
Directors: (a) for their usual and contemplated services as directors; (b) for
their services as members of committees appointed by the Board of Directors,
including attendance at committee meetings as well as services which may be
required when committee members must consult with management staff; and (c) for
extraordinary services as directors or as members of committees appointed by the
Board of Directors, over and above those services for which compensation is
fixed pursuant to items (a) and (b) in this Section 3.11. Compensation may be
in the form of an annual retainer fee or a fee for attendance at meetings, or
both, or in such other form or on such basis as the resolutions of the Board of
Directors shall fix. Directors shall be reimbursed for all reasonable expenses
incurred by them in attending meetings of the Board of Directors and committees
appointed by the Board of Directors and in performing compensable extraordinary
services. Nothing contained herein shall be construed to preclude any director
from serving the Corporation in any other capacity, such as an officer, agent,
employee, consultant or otherwise, and receiving compensation therefor.
Section 3.12. COMMITTEES OF THE BOARD OF DIRECTORS. To the full extent
permitted by applicable law, the Board of Directors may from time to time
establish committees, including, but not limited to, standing or special
committees and an executive committee with authority and responsibility for
bookkeeping, with authority to act as signatories on Corporation bank or similar
accounts and with authority to choose attorneys for the Corporation and direct
litigation strategy, which shall have such duties and powers as are authorized
by these Bylaws or by the Board of Directors. Committee members, and the
chairman of each committee, shall be appointed by the Board of Directors. The
Chairman of the Board, in conjunction with the several committee chairmen, shall
make recommendations to the Board of Directors for its final action concerning
members to be appointed to the several committees of the Board of Directors.
Any member of any committee may be removed at any time with or without cause by
the Board of Directors. Vacancies which occur on any committee shall be filled
by a resolution of the Board of Directors. If any vacancy shall occur in any
committee by reason of death, resignation, disqualification, removal or
otherwise, the remaining members of such committee, so long as a quorum is
present, may continue to act until such vacancy is filled by the Board of
Directors. The Board of Directors may, by resolution, at any time deemed
desirable, discontinue any standing or special committee. Members of standing
committees, and their chairmen,
7
<PAGE>
shall be elected yearly at the regular meeting of the Board of Directors which
is held immediately following the annual meeting of stockholders. The
provisions of Sections 3.07, 3.08, 3.09 and 3.10 of these Bylaws shall apply,
MUTATIS MUTANDIS, to any such Committee of the Board of Directors.
ARTICLE IV
Officers
Section 4.01. DESIGNATION, ELECTION AND TERM OF OFFICE. The Corporation
shall have a Chairman of the Board, a President, Treasurer, such senior vice
presidents and vice presidents as the Board of Directors deems appropriate, a
Secretary and such other officers as the Board of Directors may deem
appropriate. These officers shall be elected annually by the Board of Directors
at the organizational meeting immediately following the annual meeting of
stockholders, and each such officer shall hold office until the corresponding
meeting of the Board of Directors in the next year and until his successor shall
have been elected and qualified or until his earlier resignation, death or
removal. Any vacancy in any of the above offices may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall preside at all meetings of the directors and shall have such
other powers and duties as may from time to time be assigned to him by the Board
of Directors.
Section 4.03. PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall, subject to the power of the Board of
Directors, have general supervision, direction and control of the business and
affairs of the Corporation. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board, at all meetings
of the directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other duties as may be assigned to him from time to time by the Board of
Directors.
Section 4.04. TREASURER. The Treasurer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of account of
the properties and business transactions of the Corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by the directors.
8
<PAGE>
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the Corporation with such depositaries as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his transactions as
the Treasurer and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
Section 4.05. SECRETARY. The Secretary shall keep the minutes of the
meetings of the stockholders, the Board of Directors and all committees. He
shall be the custodian of the corporate seal and shall affix it to all documents
which he is authorized by law or the Board of Directors to sign and seal. He
also shall perform such other duties as may be assigned to him from time to time
by the Board of Directors or the Chairman of the Board or President.
Section 4.06. ASSISTANT OFFICERS. The President may appoint one or more
assistant secretaries and such other assistant officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as may be specified from time to time by
the President.
Section 4.07. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of
absence or disability of an officer of the Corporation or for any other reason
that may seem sufficient to the Board of Directors, the Board of Directors or
any officer designated by it, or the President, may, for the time of the absence
or disability, delegate such officer's duties and powers to any other officer of
the Corporation.
Section 4.08. OFFICERS HOLDING TWO OR MORE OFFICES. The same person may
hold any two (2) or more of the above-mentioned offices.
Section 4.09. COMPENSATION. The Board of Directors shall have the power
to fix the compensation of all officers and employees of the Corporation.
Section 4.10. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors, to the President, or to the Secretary
of the Corporation. Any such resignation shall take effect at the time
specified therein unless otherwise determined by the Board of Directors. The
acceptance of a resignation by the Corporation shall not be necessary to make it
effective.
9
<PAGE>
Section 4.11. REMOVAL. Any officer of the Corporation may be removed,
with or without cause, by the affirmative vote of a majority of the entire Board
of Directors. Any assistant officer of the Corporation may be removed, with or
without cause, by the President or by the Board of Directors.
ARTICLE V
Indemnification of Directors, Officers
Employees end other Corporate Agents
Section 5.01. ACTION, ETC. OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise (all such persons being
referred to hereinafter as an "Agent"), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Section 5.02. ACTION, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was an Agent against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, unless and only to the
10
<PAGE>
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Section 5.03. DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Sections 5.01 or 5.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the Agent is proper in the circumstances
because the Agent has met the applicable standard of conduct set forth in
Sections 5.01 and 5.02 hereof, which determination is made (a) by the Board of
Directors, by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
Section 5.04. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article V, to the extent that an
Agent has been successful on the merits or otherwise, including the dismissal of
an action without prejudice or the settlement of an action without admission of
liability, in defense of any action, suit or proceeding referred to in Sections
5.01 or 5.02 hereof, or in defense of any claim, issue or matter therein, such
Agent shall be indemnified against expenses, including attorneys' fees actually
and reasonably incurred by such Agent in connection therewith.
Section 5.05. ADVANCES OF EXPENSES. Except as limited by Section 5.06 of
this Article V, expenses incurred by an Agent in defending any civil or criminal
action, suit, or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if the Agent shall
undertake to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified as authorized in this Article V.
Notwithstanding the foregoing, no advance shall be made by the Corporation if a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum of disinterested directors, or (if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel in a written opinion, that, based upon the
facts known to the Board of Directors or counsel at the time such determination
is made, such person acted in bad faith and in a manner that such person did not
believe to be in or not opposed to the best interest of the Corporation, or,
with respect to any criminal proceeding, that such person believed or had
reasonable cause to believe his conduct was unlawful.
11
<PAGE>
Section 5.06. RIGHT OF AGENT TO INDEMNIFICATION UPON APPLICATION;
PROCEDURE UPON APPLICATION. Any indemnification or advance under this Article V
shall be made promptly, and in any event within ninety days, upon the written
request of the Agent, unless a determination shall be made in the manner set
forth in the second sentence of Subsection 5.05 hereof that such Agent acted in
a manner set forth therein so as to justify the Corporation's not indemnifying
or making an advance to the Agent. The right to indemnification or advances as
granted by this Article V shall be enforceable by the Agent in any court of
competent jurisdiction, if the Board of Directors or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such claim is
made within ninety (90) days. The Agent's expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
Section 5.07. OTHER RIGHTS AND REMEDIES. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article V
shall not be deemed exclusive of any other rights to which an Agent seeking
indemnification or advancement of expenses may be entitled under any Bylaw,
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, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be an Agent and shall inure
to the benefit of the heirs, executors and administrators of such a person. All
rights to indemnification under this Article V shall be deemed to be provided by
a contract between the Corporation and the Agent who serves in such capacity at
any time while these Bylaws and other relevant provisions of the Delaware
General Corporation Law and other applicable law, if any, are in effect. Any
repeal or modification thereof shall not affect any rights or obligations then
existing.
Section 5.08. INSURANCE. Upon resolution passed by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person who is or was an Agent against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article V.
Section 5.09. CONSTITUENT CORPORATIONS. For the purposes of this Article
V, references to "the Corporation" shall include, in addition to the resulting
corporation, all constituent corporations (including all constituents of
constituents) absorbed in a consolidation or merger as well as the resulting or
surviving corporation, which, if the separate existence of such constituent
corporation had continued, would have had power and authority to indemnify its
Agents, so that any Agent of such constituent corporation shall stand in the
same position under the provisions
12
<PAGE>
of the Article V with respect to the resulting or surviving corporation as that
Agent would have with respect to such constituent corporation if its separate
existence had continued.
Section 5.10. OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S
REQUEST. For purposes of this Article V, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
V.
Section 5.11. SAVINGS CLAUSE. If this Article V or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Agent as to expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether internal or external, including a
grand jury proceeding and an action or suit brought by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article V that shall not have been invalidated, or by any other applicable law.
ARTICLE VI
Stock
Section 6.01. CERTIFICATES. Except as otherwise provided by law, each
stockholder shall be entitled to a certificate or certificates which shall
represent and certify the number and class (and series, if appropriate) of
shares of stock owned by him in the Corporation. Each certificate shall be
signed in the name of the Corporation by the Chairman of the Board or a Vice-
Chairman of the Board or the President or a Vice President, together with the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary.
Any or all of the signatures on any certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
13
<PAGE>
Section 6.02. TRANSFER OF SHARES. Shares of stock shall be transferable
on the books of the Corporation only by the holder thereof, in person or by his
duly authorized attorney, upon the surrender of the certificate representing the
shares to be transferred, properly endorsed, to the Corporation's transfer
agent, if the Corporation has a transfer agent, or to the Corporation's
registrar, if the Corporation has a registrar, or to the Secretary, if the
Corporation has neither a transfer agent nor a registrar. The Board of
Directors shall have power and authority to make such other rules and
regulations concerning the issue, transfer and registration of certificates of
the Corporation's stock as it may deem expedient.
Section 6.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have
one or more transfer agents and one or more registrars of its stock whose
respective duties the Board of Directors or the Secretary may, from time to
time, define. No certificate of stock shall be valid until countersigned by a
transfer agent, if the Corporation has a transfer agent, or until registered by
a registrar, if the Corporation has a registrar. The duties of transfer agent
and registrar may be combined.
Section 6.04. STOCK LEDGERS. Original or duplicate stock ledgers,
containing the names and addresses of the stockholders of the Corporation and
the number of shares of each class of stock held by them, shall be kept at the
principal executive office of the Corporation or at the office of its transfer
agent or registrar.
Section 6.05. RECORD DATES. The Board of Directors may fix, in advance, a
date as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or in order to make a
determination of stockholders for any other proper purpose. Such date in any
case shall be not more than sixty (60) days, and in case of a meeting of
stockholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
Only those stockholders of record on the date so fixed shall be entitled to any
of the foregoing rights, notwithstanding the transfer of any such stock on the
books of the Corporation after any such record date fixed by the Board of
Directors.
14
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<PAGE>
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