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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
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 0-19690
BARRA, INC.
(Exact name of registrant as specified in its charter)
California 94-2993326
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Milvia Street
Berkeley, California 94704-1113
(Address, including zip code, of principal executive offices)
(510) 548-5442
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's Common Stock outstanding as of
June 30, 1998 was 13,805,544.
Exhibit Index is located on page 24.
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INDEX
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PAGE
PART I FINANCIAL INFORMATION NUMBER
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Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1998
(unaudited) and as of March 31, 1998 3
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1998 and June 30, 1997 4
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
</TABLE>
<TABLE>
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PAGE
PART II OTHER INFORMATION NUMBER
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Item 1 Legal Proceedings 20
Item 2 Changes in Securities and Use of Proceeds 20
Item 4 Submission of Matters to a Vote of Security Holders 20
Item 5 Other Information 21
Item 6 Exhibits and Reports on Form 8-K 21
Signatures 23
Exhibit Index 24
</TABLE>
2
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PART I
ITEM 1. FINANCIAL STATEMENTS.
BARRA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 (UNAUDITED) AND MARCH 31, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
---------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,674,207 $ 33,673,314
Short-term investments 14,711,799 8,294,394
Investment in municipal debt securities- available for sale 6,334,995 6,265,204
Accounts receivable:
Subscription and other (Less allowance for doubtful accounts of $152,873 and $169,183) 19,994,389 18,152,071
Asset Management 5,100,640 2,449,324
Related parties 4,586,915 3,855,057
Prepaid expenses 1,661,235 1,965,819
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 71,064,180 74,655,183
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN UNCONSOLIDATED COMPANIES 2,071,661 2,128,532
FURNITURE AND EQUIPMENT:
Computer and office equipment 17,714,344 16,447,653
Furniture and fixtures 5,228,070 5,006,947
Leasehold improvements 7,672,831 6,677,300
- ----------------------------------------------------------------------------------------------------------------------------
Total premises and equipment 30,615,245 28,131,900
Less accumulated depreciation and amortization (14,890,787) (13,513,701)
- ----------------------------------------------------------------------------------------------------------------------------
15,724,458 14,618,199
DEFERRED TAX ASSETS 2,282,522 2,282,522
COMPUTER SOFTWARE
(Less accumulated amortization of $1,303,868 and $1,051,275) 1,542,300 1,544,704
OTHER ASSETS 1,532,203 1,463,824
GOODWILL AND OTHER INTANGIBLES
(Less accumulated amortization of $3,636,380 and $3,215,801) 29,487,378 24,767,142
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $123,704,702 $121,460,106
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,841,829 $ 2,223,129
Due to related party 1,195,267 1,079,199
Accrued expenses payable:
Accrued compensation 1,427,830 9,663,688
Accrued corporate income taxes 6,009,649 4,884,113
Other accrued expenses 7,768,044 7,211,705
Unearned revenues 26,058,286 22,160,710
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 44,300,905 47,222,544
- ----------------------------------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES 1,506,173 1,486,362
MINORITY INTEREST IN EQUITY OF SUBSIDIARY 1,835,482 2,000,217
SHAREHOLDERS' EQUITY:
Preferred stock, no par; 10,000,000 shares authorized; none issued and outstanding
Common stock, no par; 40,000,000 shares authorized; 13,805,544 and 13,675,388
shares issued and outstanding 28,741,605 27,831,335
Retained earnings 48,401,962 43,875,659
Foreign currency translation adjustment (1,081,425) (956,011)
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 76,062,142 70,750,983
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $123,704,702 $121,460,106
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the BARRA, Inc. Consolidated
Financial Statements
3
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BARRA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
OPERATING REVENUES:
Subscription and consulting fees $26,790,393 $21,118,324
Electronic brokerage 3,767,264 2,580,905
Asset management 5,355,491 3,407,233
---------------------------
Total operating revenues 35,913,148 27,106,462
---------------------------
OPERATING EXPENSES:
Cost of subscription products 2,630,847 1,715,221
Compensation and benefits 16,748,774 12,958,500
Rent expense 1,738,794 1,131,628
Other operating expenses 6,341,941 4,752,767
One-time acquisition charges - 9,914,000
---------------------------
Total operating expenses 27,460,356 30,472,116
---------------------------
INTEREST INCOME & OTHER 572,835 455,070
---------------------------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME AND LOSS OF
INVESTEES, MINORITY INTEREST AND INCOME TAXES 9,025,627 (2,910,584)
EQUITY IN NET INCOME AND LOSS OF INVESTEES (250,146) 21,688
MINORITY INTEREST (1,355,827) (589,237)
---------------------------
INCOME (LOSS) BEFORE INCOME TAXES 7,419,654 (3,478,133)
INCOME TAXES (2,893,351) (2,783,874)
---------------------------
NET INCOME (LOSS) $ 4,526,303 $(6,262,007)
---------------------------
---------------------------
NET INCOME (LOSS) PER SHARE:
BASIC $ 0.33 $ (0.49)
---------------------------
---------------------------
DILUTED $ 0.31 $ (0.49)
---------------------------
---------------------------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES:
BASIC 13,746,850 12,709,623
---------------------------
---------------------------
DILUTED 14,572,990 12,709,623
---------------------------
---------------------------
</TABLE>
The accompanying notes are an integral part of the BARRA, Inc. Consolidated
Financial Statements
4
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BARRA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 4,526,303 $(6,262,007)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Equity in net income and loss of investees 250,146 (21,688)
Minority interest 1,355,827 589,237
Depreciation and amortization 1,787,735 1,057,389
Gains on marketable securities (250,000) -
One-time acquisition charges - 9,914,000
Other 211,183 (162,525)
Changes in:
Accounts receivable - subscription and other (1,842,318) 1,423,163
Accounts receivable - asset management (2,651,316) -
Accounts receivable - related parties (731,858) (236,155)
Prepaid expenses 304,584 (657,183)
Other assets (68,379) (938,547)
Accounts payable, due to related party and accrued expenses (7,012,490) (3,972,637)
Unearned revenues 3,832,576 1,944,597
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (288,007) 2,677,644
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,507,581) (3,233,412)
Short-term investments - net (6,167,405) (1,278,160)
Investment in municipal debt securities - available for sale (69,791) 1,154,641
Acquisitions - cash paid (5,356,031) (1,713,529)
Investments in unconsolidated companies - (1,803,559)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (14,100,808) (6,874,019)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to minority shareholders (1,520,562) (1,812,789)
Repayments on notes payable and lines of credit - (117,523)
Proceeds from sale of common stock 910,270 336,836
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (610,292) (1,593,476)
- ----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (14,999,107) (5,789,851)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 33,673,314 25,831,118
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,674,207 $20,041,267
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OTHER CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense $ 5,517 $ 16,819
Income taxes $ 1,767,815 $ 1,221,276
</TABLE>
The accompanying notes are an integral part of the BARRA, Inc. Consolidated
Financial Statements
5
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BARRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
BARRA, Inc. (the "Company" or "BARRA") and its wholly-owned subsidiaries. Also
included in the accompanying consolidated financial statements are the accounts
of, 1) Bond Express, L.P., in which the Company determined it had controlling
financial interest beginning June 1, 1996; and, 2) Symphony Asset Management,
LLC ("Symphony LLC"), a 50%-owned joint venture. All significant intercompany
transactions and balances have been eliminated. Certain reclassifications have
been made to prior year financial statements to conform to the current year
presentation.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments (consisting of normal recurring
entries) necessary to present fairly the financial position of BARRA as of June
30, 1998 and the results of its operations and cash flows for the periods
presented in conformity with generally accepted accounting principles. The
results of operations for the interim periods are not necessarily indicative of
results of operations for a full year. The March 31, 1998 consolidated balance
sheet is derived from the audited consolidated financial statements included in
BARRA's Annual Report on Form 10-K for the fiscal year ended March 31, 1998,
filed with the Securities and Exchange Commission on June 25, 1998 (the
"Form 10-K"), but does not include all disclosures required by generally
accepted accounting principles. It is suggested that these consolidated
financial statements be read in conjunction with the audited consolidated
financial statements and related notes included in the Form 10-K and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this Form 10-Q.
2. BUSINESS COMBINATIONS
On June 17, 1998, the Company completed the acquisition of substantially all of
the assets and assumption of certain liabilities of Redpoint Software, Inc.
("Redpoint"). Redpoint is a leading provider of integrated risk management
solutions and enterprise-wide data management systems. The purchase price was
$5.5 million in cash and up to an additional $12.5 million over a period of two
years following the closing based upon the financial performance of the acquired
assets.
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The acquisition has been accounted for as a purchase and the cost of the
acquisition has been allocated on the basis of the estimated fair value of
assets acquired and liabilities assumed and resulted in goodwill of
approximately $5.5 million which is being amortized over 10 years. Under the
purchase method of accounting, results of operations from acquired businesses
are included in the financial statements of the acquiring company from the date
of acquisition only. Comparative pro forma financial information has not been
presented as the results of operations of Redpoint were not material to the
Company's consolidated financial statements.
3. PER SHARE DATA
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share" ("SFAS 128"), basic earnings per share is based on the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share data is based on the weighted-average number of common and
dilutive potential common shares outstanding. Dilutive potential common shares
result from the assumed exercise of outstanding stock options that have a
dilutive effect when applying the treasury stock method. For all periods
presented, the only difference between basic and diluted earnings per share for
the Company is the inclusion of dilutive stock options in the denominator for
purposes of calculating diluted earnings per share. All prior period per share
data has been restated to conform to the provisions of SFAS 128 subsequent to
its adoption by the Company in the quarter ended December 31, 1997.
4. RECLASSIFICATION
Revenues from bond offering services provided by Bond Express, L.P. of $377,198
for the three months ended June 30, 1997 have been reclassified on the
accompanying Consolidated Statement of Operations from "Electronic Brokerage" to
"Subscription and Consulting" to conform with the current period presentation.
Bond offering service revenues for the three months ended June 30, 1998 included
in "Subscription and Consulting" amounted to $414,929.
7
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5. NEW ACCOUNTING STANDARDS
COMPREHENSIVE INCOME
In the quarter ended June 30, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), which establishes standards for reporting
and display of comprehensive income and its components. In accordance with SFAS
130, the Company has set forth in the table below the components of "Other
comprehensive income" and "Comprehensive Income":
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three months ended June 30,
1998 1997
---- ----
<S> <C> <C>
Net Income (Loss) $4,526,303 $(6,262,007)
Other Comprehensive income (loss):
Change in foreign currency
translation adjustment during
period $ (125,414) $ 288,724
---------- -----------
Comprehensive income (loss) $4,400,889 $(5,973,283)
---------- -----------
---------- -----------
</TABLE>
SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), which is effective for fiscal years beginning after December 15, 1997.
SFAS 131 establishes standards for reporting financial and descriptive
information about an enterprises operating segments in its annual financial
statements and selected segment information in interim financial reports.
Although SFAS No. 131 need not be applied to interim financial statements in the
initial year of application, comparative information for interim periods of
fiscal 1999 will be reported in the Company's interim financial statements in
fiscal 2000. Further, all comparative information for prior periods will be
restated to conform to the provisions of SFAS 131. Application of the
disclosure requirements of SFAS 131 will have no impact on the Company's
consolidated financial position, results of operations or earnings per share
data as currently reported.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
BARRA, Inc. ("BARRA" or the "Company") unaudited financial statements and
related notes presented in this Form 10-Q. The discussion of results, causes
or trends should not be construed to imply that such results, causes or
trends will necessarily continue in the future. Each statement made in this
discussion and analysis and elsewhere in this report containing any future
verb tense or form of the words "anticipate", "estimate", "expect,"
"believe," "future" or "forward" is a forward-looking statement that may
involve a number of risk factors and uncertainties. Among other factors that
could cause actual results to differ materially are the following: business
conditions and other changes in the Company's industry; competitive factors
such as rival products and price pressures both domestically and
internationally; availability of adequate third-party data on reasonable
terms and at reasonable prices; significant delays or excessive costs
associated with product research, development and/or introduction; the loss
of a large single revenue source; the investment performance and the timing
of performance fee determination dates for the Company's asset management
subsidiary; significant changes in trading volumes on the POSIT trading
system; the ability of software and data to accommodate date changes after
December 31, 1999; the adoption of the Euro Currency; and fluctuations in
U.S. dollar exchange rates for non-U.S. currencies. Further information and
potential risk factors that could affect the Company's financial results are
included throughout this Form 10-Q and in the Company's Form 10-K for the
fiscal year ended March 31, 1998.
A. GENERAL
Certain of the information required by this item has been previously reported
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Form 10-K.
REDPOINT ACQUISITION
As discussed in Note 2 to the financial statements, on June 17, 1998 the Company
completed the acquisition of substantially all of the assets and assumption of
certain liabilities of Redpoint. The purchase price was for $5.5 million in cash
and up to an additional $12.5 million over a period of two years following the
closing based upon the
9
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financial performance of the acquired assets. The acquisition has been
accounted for as a purchase and the cost of the acquisition has been
allocated on the basis of the estimated fair value of assets acquired and
liabilities assumed and resulted in goodwill of approximately $5.5 million
which is being amortized over 10 years.
YEAR 2000
It is widely anticipated that potential problems could occur after December 31,
1999 with computer systems or any equipment with computer chips which use year
dates that have been stored as just two digits. On January 1, 2000, any clock
or date recording mechanism, including date-sensitive software, which uses only
two digits to represent a year, may recognize a two digit date (e.g., "00") as
referring to the twentieth century (e.g., "1900") rather than the twenty-first
century (e.g., "2000"), which could in turn result in system failure or
miscalculations.
To address the Year 2000 issue in the Company's products and internal systems,
the Company has assembled a team of internal and external information technology
professionals to review each of its applications and programs to identify those
that contain two-digit year codes. The Company has also begun coordination with
other entities, including vendors that provide data for the Company's investment
anayltics software, to assess their Year 2000 compliance efforts and the
Company's exposure to any non-compliance by such vendors. The Company is
assessing the amount of programming required to upgrade or replace each of the
affected applications or programs with the goal of completing all relevant
software remediation and testing by the end of the calendar year 1998. The
Company anticipates continuing its general Year 2000 compliance efforts through
1999.
Based upon current information, the Company believes that its expenditures for
outside services relating to its Year 2000 compliance efforts, excluding
hardware, in fiscal 1998 and through the project's completion will be
approximately $2.5 million. Costs incurred relating to this project are being
expensed by the Company during the period in which they are incurred. The
Company's expectations about future costs associated with the Year 2000 issue
and about the target date for completion of software remediation and testing are
subject to uncertainties that could cause actual results to differ materially
from what has been discussed above. Factors that could influence the amount and
timing of future costs include: the success and timeliness of the Company in
identifying products, applications and internal software that contain two-digit
year codes, the nature and amount of programming
10
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required to upgrade or replace each of the affected applications or programs,
the rate and magnitude of related labor and consulting costs, and the success
and timeliness of the Company's external counterparties and suppliers in
addressing the Year 2000 issue.
EUROPEAN MONETARY UNION ("EMU")
It is also anticipated that potential problems could arise when the EMU replaces
certain European currencies with the "Euro". That replacement is expected to
occur by January 1, 1999. To address the Euro issue, the Company has assembled
a team of technology and finance professionals to review its applications and
programs that use European currency data. This team has also begun coordinating
with external vendors and service providers to assess their Euro compliance
efforts.
Based upon current information, the Company believes that it's expenditures for
outside services relating to its Euro compliance will be approximately $.5
million for fiscal 1998. Costs associated with modifications necessary to
prepare for the EMU are being expensed by the Company during the period in which
they are incurred. The Company's expectations for future costs associated with
and timely resolution of all Euro issues are subject to uncertainties that could
cause actual results to differ materially from the projections set forth above.
Factors that could influence the amount and timing of such costs include: the
success and timeliness of the Company in identifying products, applications and
internal software containing European currency data, the nature and amount of
programming and research required to upgrade or replace each of the affected
products and programs, the rate and magnitude of related labor and consulting
costs, and the success of the Company's external vendors and service providers
in addressing the Euro issue.
FOREIGN CURRENCY AND BUSINESS IN ASIA
BARRA, as an international corporation, generates revenues from clients
throughout the world, maintains sales and representative offices worldwide and
holds certain deposits and accounts in foreign currencies. BARRA's revenues are
generated from both United States and non-U.S. currencies. BARRA's
subscriptions in the United Kingdom and the European Community are priced in
British pounds sterling ("pounds") and European Currency Units ("ECUs"),
respectively. Additionally, BARRA's consolidated subsidiary, BARRA
International (Japan), Ltd. ("BARRA Japan"), generates revenues, has expenses
and has assets and liabilities in Japanese yen.
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The Company has customers and three sales and client support offices in Asia.
For the three months ended June 30, 1998, revenues from Asia and Japan
totaled approximately $3.7 million ($2.7 million in Japan) or approximately
10% of total revenues. Excluding Japan, the Company bills its customers in
Asia in US dollars and has nominal expenses in local currencies. Recent
volatility in Asian and Japanese capital markets has negatively impacted yen
denominated revenues and could adversely impact future subscription renewals
and related revenues for customers throughout Asia.
All other things being equal, weakening of the U.S. dollar has a positive impact
on profits, and strengthening of the U.S. dollar has a negative impact. The
Company has considered its exposures to foreign currency fluctuations and to
this point has decided not to engage in hedging or managing exposures to foreign
currency fluctuations through contracts for the purchase, sale or swapping of
currencies. Accordingly, a strengthening of the U.S. dollar versus non-U.S.
currencies could have a material adverse impact on the Company's results of
operations and financial condition.
For the three month period ended June 30, 1998, when compared to the same period
a year ago, the U.S. dollar strengthened against the yen and ECU and was
relatively unchanged against the pound - all of which had the net effect of
reducing net revenues and net income by approximately $500,000 and $100,000,
respectively, compared to exchange rates in effect for the three month period
ended June 30, 1997.
Because the functional currency of BARRA Japan is the yen, the translation gains
and losses associated with the consolidation of its balance sheets at points in
time are reported as part of shareholders' equity.
Under current operating arrangements in the countries in which BARRA does
business, there are no restrictions upon the flow of funds from BARRA's foreign
subsidiaries to the parent company.
B. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The dollar and percentage increases or decreases set forth below in this
discussion and analysis of BARRA's consolidated financial condition result from
a comparison of BARRA's balance sheet at June 30, 1998 (unaudited) to the
balance sheet at March 31, 1998. All amounts have been rounded to the nearest
$1,000.
12
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FINANCIAL CONDITION
Total assets increased $2,245,000 or 2%.
Total current assets decreased $3,591,000 or 5%. This net decrease consists
primarily of decreased cash and equivalents as a result of investing activities
and the payment of annual bonuses which occurred in May 1998 - see the
accompanying unaudited condensed consolidated statement of cash flows for more
information.
Goodwill and other intangibles increased $4,720,000 as a result of the Redpoint
purchase discussed in Note 2 to the accompanying condensed consolidated
financial statements.
Total current liabilities decreased $2,922,000. This decrease primarily reflects
growth in BARRA product subscriptions offset by a decrease in accrued
compensation as a result of the payment of annual bonuses to employees in May
1998.
Minority interest in equity of subsidiary represents minority shareholders'
interests in the net assets of Bond Express L.P. and Symphony Asset Management
LLC.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, short-term investments and investment in municipal
debt securities available-for-sale totaled $39,721,000 at June 30, 1998. In
addition, the Company has a commitment from a bank for an unsecured short-term
line of credit of up to $5 million - of which, no amounts have been, or are
presently anticipated to be, drawn down.
BARRA believes that its cash flow from operations (including prepaid
subscription fees), together with existing cash balances, will be sufficient to
meet its cash requirements for capital expenditures and other cash needs for
ongoing business operations. Other than commitments described in this discussion
and analysis and in the financial statements and notes, the Company has no
present binding understandings or commitments with respect to any significant
expenditures.
PRINCIPAL FINANCIAL COMMITMENTS. The Company's principal financial commitments
consist of obligations under operating leases, contracts for the use of computer
and office facilities, and contingent obligations associated with acquisitions.
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C. RESULTS OF OPERATIONS
References to the dollar and percentage increases or decreases set forth below
in this discussion and analysis of BARRA's results of operations are derived
from comparisons of BARRA's consolidated statements of operations for the three
month periods ended June 30, 1998 and June 30, 1997. All amounts, except per
share amounts, have been rounded to the nearest $1,000.
NET INCOME (LOSS)
Net income for the three month period ended June 30, 1998 was $4,526,000 or
$0.31 per share (diluted), compared to a net loss of ($6,262,000) or ($0.49) per
share (diluted) for the same quarter a year ago. Results for the three month
period ended June 30, 1997 included a one-time acquisition charge of $9,914,000
($.74 per share) related the write-off of in-process research and development in
connection with the acquisition of Global Advanced Technology Corporation
("GAT").
OPERATING REVENUES. Total operating revenues increased $8,807,000 or 32% over
the same quarter a year ago. Operating revenues from business acquired since
June 1997 (GAT, The Estimate Directory ("TED") and Directus included in the
three month period ended June 30, 1998 were $2,803,000.
SUBSCRIPTION AND CONSULTING FEES consist of annual subscription fees for BARRA's
software products, revenues from other sources related to the institutional
analytics business and consulting services to pension plan sponsors and
investment managers. A summary of the components and related changes is as
follows (amounts in $000's):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30,
%
1997 1998 CHANGE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Analytics subscriptions $20,778 $15,232 36
Other analytics related 1,552 1,278 21
Consulting 4,460 4,608 (3)
- ---------------------------------------------------------------------------------
TOTAL $26,790 $21,118 27
- ---------------------------------------------------------------------------------
</TABLE>
ANALYTICS SUBSCRIPTIONS are for BARRA's software and investment data products
and related updates. The Company generally bills and collects fees on an annual
basis, but recognizes the income 1/12th per month over each year of the
subscription period. Analytics subscriptions for the three
14
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month period ended June 30, 1998 includes $2,555,000 from GAT, TED and
Directus businesses acquired since last year. The growth in annual
subscription fees continues to be generated from a combination of obtaining
new clients, increasing revenues from existing customers through the
introduction of new products and services and acquisitions.
For the three month period ended June 30, 1998 compared to the same quarter a
year ago, annual subscription fee revenue (including GAT, Ted and Directus
revenue for 1998) for the U.S and non-U.S. markets increased approximately 51%
and 29%, respectively. Excluding the impact of the acquired subscription
revenue, the increase was 29% for U.S. and 14% for Non-U.S. subscription
revenues. In both cases revenues from non-U.S. sources were adversely impacted
by changes in foreign currency exchange rates (See section A above).
Revenue growth primarily came from equity models and related data reflecting the
continued success of the BARRA Aegis System-TM-. Various new single country and
global versions of this equity analytics system have been introduced
continuously since July 1995. Fixed income product sales also contributed,
primarily to the non-US increase, as a result of sales of the BARRA COSMOS
System-TM-. Increases in subscription revenues continue to come most
significantly from net increases in the number of subscriptions and less
significantly from changes in the prices of subscriptions.
REVENUES FROM OTHER SOURCES RELATED TO THE INSTITUTIONAL ANALYTICS BUSINESS
include timesharing revenues, seminar revenues and other recurring fees.
Fluctuations in these revenue sources result primarily from the timing of
seminars and the amount of timesharing billed to clients.
CONSULTING FEES
Consulting fees consist of fixed income consulting (acquired in the GAT
acquisition); services to pension plan sponsors ("Sponsor Services") which are
usually recurring retainer-based fee arrangements; and consulting to money
managers ("Strategic Services"), which are usually non-recurring, project
engagements that are completed in phases. Also included in Strategic Services
revenues are fees related to consulting work done in connection with strategic
transactions involving clients. Accordingly, Strategic Services revenues are
susceptible to a large degree of variability depending on the ability to source
new projects and the unpredictable nature and significance of fees associated
with strategic transactions. Consulting fees from GAT's fixed income consulting
unit amounted to $248,000 for the three month period ended June 30, 1998.
Excluding the impact of GAT consulting fees, revenues from consulting services
decreased
15
<PAGE>
approximately $400,000 compared to the same period a year ago reflecting
lower transaction fees of approximately $300,000 and a decline in project
related revenues for the Strategic Service group.
ELECTRONIC BROKERAGE
Electronic brokerage revenues consist of license fees from Portfolio System for
Institutional Trading ("POSIT"), which increased $1,146,000 or 46% compared to
the same quarter a year ago. BARRA's revenues from POSIT are derived from
commissions generated by the trading volume in the system. POSIT revenue
increases reflect record trading volumes during the quarter.
ASSET MANAGEMENT
Asset management revenues increased $1,948,000 or 57% compared to the same
quarter a year ago. Asset management revenues consist of fees generated from
active management of investor accounts by Symphony LLC and fees earned by BARRA
RogersCasey Asset Services Group from management of customized multi-manager
programs.
Symphony LLC's revenues consist primarily of asset management fees which are a
fixed percentage of asset value and performance fees that are based on the
performance over a benchmark for each account. Symphony's total revenues were
$4,883,000 for the current quarter compared to $2,999,000 for the same quarter a
year ago. This increase in total revenues was the result of substantial
increases in both base and performance fees due to growth in assets under
management. As of June 30, 1998, Symphony had approximately $2.4 billion under
direct management. Of the funds under direct management, approximately $1.6
billion are managed under agreements that provide for performance fees in
addition to a base management fee.
Performance fees included in total revenues were $1,384,000 for the current
quarter compared to $378,000 for the same quarter a year ago. Performance fees
are recognized only at the measurement date for determining performance of an
account, which typically is at the end of each year of the contract. The
increase in performance fee revenues for the June, 1998 quarter over the same
quarter a year ago is the result of an increase in the number and value of
investor account anniversaries. Assets under management subject to performance
fees have increased approximately $600 million or 60% from June 30, 1997. The
pattern of anniversaries can change from quarter to quarter because of the
addition, termination and re-negotiation of account agreements. There is also,
of course, no assurance that the investment performance will continue at
historical levels. It is presently estimated
16
<PAGE>
that approximately 10% and 60% of the performance based funds under
management will have performance fee determination dates in the quarters
ended September 30, 1998 and December 31, 1998, respectively.
Symphony's future revenues will depend on the performance of the funds it
manages and the timing of anniversary fee determination dates for performance
based funds.
OPERATING EXPENSES. For the three month period ended June 30, 1998 compared to
the same period a year ago, total operating expenses, including one-time
acquisition charges, decreased $3,012,000 or 10%. Excluding one-time
acquisition charges, operating expenses increased $6,902,000 or 34%.
COST OF SUBSCRIPTION PRODUCTS
Cost of subscription products consists of computer access charges, data and
software acquisition expenses, BARRA's computer leasing expenses, and seminar
expenses. This component of expense increased $916,000 or 53% compared to the
same quarter a year ago. Excluding the impact of acquired operations, cost of
subscription products increased approximately 29% compared to the same period a
year ago reflecting higher data, communication and seminar expenses.
COMPENSATION AND BENEFITS
Compensation and benefits increased $3,790,000 or 29% compared to the same
quarter a year ago. Excluding compensation and benefit costs from acquisitions
of approximately $2.4 million for the three months ended June 30, 1998, the
increase was 11%. The increases from the same quarter a year ago are primarily
the result of wage increases that take effect on July 1 within each fiscal year,
a modest increase in average headcount, increases in consultant costs associated
with Year 2000 and other projects, and increases in other related employee
benefit costs.
RENT EXPENSE
Rent expense increased $607,166 or 54% compared to the same quarter a year ago.
Approximately $140,000 of the increase is from acquired operations while the
remaining increase reflects new or expanded office space in London, Brazil, New
York and Darien, CT since June of 1997.
OTHER OPERATING EXPENSES
Other operating expenses increased $1,589,000 or 33% compared to the same
quarter a year ago. Other operating expenses include travel, office,
maintenance, depreciation, amortization, data and other expenses related to
asset management operations, marketing, advertising, outside legal and
accounting services and other corporate expenses. The
17
<PAGE>
increases from the same quarter a year ago reflect expenses of acquired
operations of approximately $1,200,000. Excluding expenses from acquired
operations, other operating expenses increased $389,000 or 8% compared to the
same quarter a year ago. These increases reflect higher data costs associated
with asset management activities as well as increases in computer and
communication costs and various other operating costs associated with BARRA's
expanding business.
ONE-TIME ACQUISITION CHARGES
One-time acquisition charges of $9,914,000 ($.74 per share) for the three month
period ended June 30, 1997 represent purchased in-process research and
development in connection with the acquisition of GAT on June 24, 1997. As
required by generally accepted accounting principles, the portion of the
purchase price allocated to purchased in-process technology was immediately
expensed.
INTEREST INCOME AND OTHER
Interest income and other increased over the same quarter a year ago as a result
of higher recorded gains on short-term investments.
MINORITY INTEREST
Minority interest primarily represents the share of profits from Symphony Asset
Management LLC that is due to the principals.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INVESTMENT PORTFOLIO
The Company does not use derivative financial instruments in its investment
portfolio. The Company's investment portfolio primarily consists of investments
in: a) short-term, high-credit quality money market funds - amounting to
approximately $22.2 million at June 30, 1998; b) short-term, high credit quality
municipal debt securities - amounting to approximately $6.3 million at June 30,
1998; and c) market-neutral investment programs managed by two of the Company's
subsidiaries - amounting to approximately $11.2 million at June 30, 1998. The
short-term money market funds and the municipal debt securities are not insured
and because of the short-term nature of the investments are subject to credit
risk, but are not likely to fluctuate significantly in market value.
The Company's investments in market-neutral programs consist principally of long
and short positions placed directly (in
18
<PAGE>
the case of funds managed by Symphony) or indirectly (in the case of funds
managed by BARRA RogersCasey Asset Services Group) through other fund
managers in U.S and non-U.S. equity securities of both public and private
issuers. Although the intent of the managers of these funds is to structure
portfolios that are hedged against general market movements, these
investments can be subject to significant changes in market value and are not
insured. All investment decisions with respect to these market neutral
programs are made by the Company's professional investment advisers and the
performance of the funds is reviewed periodically by management and the
Company's Board of Directors.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
The Company invoices customers in Europe in both British Pound Sterling and
European Currency Units. In Japan, the Company bills its customers in Japanese
Yen. Excluding customers in these locations, the Company generally bills for
its services in U.S. dollars. BARRA has not engaged in foreign currency hedging
activities. To the extent of its local currency (Yen, Pound and ECU) invoicing,
its international revenues are subject to currency exchange fluctuation risk.
To the extent that international revenues that are invoiced in local currencies
increase in the future, the Company's exposure to fluctuations in currency
exchange rates will correspondingly increase. Currency fluctuations may also
effectively increase the cost of BARRA's products and services in countries in
which customers are invoiced in U.S. dollars. See also Part I, Item 2, "Foreign
Currency and Business in Asia" for a description of the impact of changes in
foreign currency exchange rates during the quarter ended June 30, 1998.
The Company has no foreign debt and non-U.S. dollar cash balances held overseas
are generally kept at levels needed to meet current operating needs.
19
<PAGE>
PART II - OTHER INFORMATION
Each statement made in this Part II containing any future verb tense or any form
of the words "believe", "future", "forward", "estimate", "anticipate" or
"expect" is a forward looking statement that may involve a number of risk
factors and uncertainties. A discussion of those risk factors is located in the
first paragraph of Part I, Item 2. Further information can be found throughout
this form and in the Company's Form 10-K.
ITEM 1. LEGAL PROCEEDINGS.
All information required by this item has been previously reported under the
heading "Legal Proceedings" in the Form 10-K. There have been no other material
developments in the legal proceedings of BARRA since the date of the Form 10-K.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Effective August 14, 1998, the Company changed its state of incorporation from
California to Delaware. The reincorporation was accomplished through a merger
(the "Merger") of BARRA, Inc., a California corporation ("BARRA California"),
into its wholly owned Delaware subsidiary, BARRA (DE), Inc. ("BARRA Delaware").
Upon the Merger, BARRA Delaware changed its name to BARRA, Inc. As a result of
the Merger, each outstanding share of BARRA California Common Stock, no par
value, was automatically converted into one share of BARRA Delaware Common
Stock, par value $.0001 per share. Except for (a) the increase in the Company's
authorized number of shares of Common Stock from 40,000,000 to 75,000,000, (b)
the elimination of shareholder action by written consent, (c) the elimination of
the right of shareholders controlling at least ten percent of the voting shares
to call a special meeting of the shareholders, (d) the elimination of the right
of shareholders to cumulate their votes and (e) changes that are dictated by the
application of Delaware law, the BARRA Delaware Certificate of Incorporation and
Bylaws are substantially similar to those currently adopted by BARRA California.
As of the effective date of the Merger, BARRA Delaware has also entered into
indemnification agreements with each of its directors and certain of its
officers in a form approved by the Company's shareholders as a part of the
reincorporation proposal. The reincorporation proposal was approved by the
Company's shareholders at the Company's Annual Meeting of Shareholders on August
5, 1998. See also Item 4, Item 6(a) and Item 6(b)(i) and (ii) below.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Annual
Meeting of the Shareholders of BARRA was held on Wednesday, August 5, 1998.
The meeting was held to consider and vote upon (i) electing directors to serve
for the ensuing year and until their successors
20
<PAGE>
are duly elected and qualified; (ii) approving the merger of BARRA into its
wholly-owned Delaware subsidiary for the purpose of changing the state of
incorporation of BARRA from California to Delaware and effecting certain
changes in the charter and the Bylaws of BARRA; (iii) approving a proposal to
increase BARRA's authorized number of shares of Common Stock from 40,000,000
to 75,000,000 and (iv) ratifying the selection of Deloitte & Touche LLP as
independent auditors of BARRA for the fiscal year ended March 31, 1999. The
votes case with respect to each director are summarized as follows: A.
George Battle, for 12,201,922, withheld 333,399; John F. Casey, for
12,197,224, withheld 338,097; M. Blair Hull, for 12,202,322, withheld
332,999; Norman J. Laboe, for 12,201,422, withheld 333,899; Ronald J.
Lanstein, for 12,201,372, withheld 333,949; Andrew Rudd, for 12,201,372,
withheld 333,949.
The votes cast to approve the merger of BARRA into a wholly-owned Delaware
subsidiary for the purpose of changing the state of incorporation of BARRA from
California to Delaware and effecting certain changes in the charter and the
Bylaws of BARRA are summarized as follows: for 8,723,564, against 1,228,887,
abstain 471,482, broker non-vote 2,111,388. The votes cast to approve the
increase in the Company's authorized number of shares of Common Stock from
40,000,000 to 75,000,000 are summarized as follows: for 11,675,144, against
384,033, abstain 476,144. The votes cast to ratify the selection of Deloitte &
Touche LLP as independent auditors are summarized as follows: for 12,057,449,
against 8,550, abstain 469,322.
ITEM 5. OTHER INFORMATION.
On June 17, 1998 the Company completed the acquisition of substantially all of
the assets and assumption of certain liabilities of Redpoint Software, Inc.
("Redpoint"). For further details regarding the Redpoint transaction see Note 2
of the Notes to Consolidated Financial Statements and Item 2 of Part I of this
form.
Stockholders who expect to present a proposal at the 1999 Annual Meeting of
Stockholders which is not included in the Company's proxy statement should
notify the Secretary of the Company at 2100 Milvia Street, Berkeley, California
94704 of the proposal by May 16, 1999. Without such notice, proxy holders
appointed by the Board of Directors of the Company will be entitled to exercise
their discretionary voting authority when the proposal is raised at the annual
meeting, without any discussion of the proposal in the proxy statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) the following exhibits are required by Item 601 of the Regulation S-K:
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
Number Exhibit Description Page Number
- ------ ------------------- -----------
<S> <C> <C>
3.1 Certificate of Incorporation
Of BARRA, Inc. 25
3.2 Bylaws of BARRA, Inc. 27
27 Financial Data Schedule 36
(electronic filing only)
</TABLE>
(b) Reports on Form 8-K:
(i) Current Report on Form 8-K filed June 8, 1998 containing BARRA,
Inc.'s press release regarding its agreement to acquire
substantially all of the assets and assume certain of the
liabilities of Redpoint Software, Inc.
(ii) Current Report on Form 8-K filed June 18, 1998 containing BARRA,
Inc.'s press release regarding the closing of its acquisition of
substantially all of the assets and assumption of certain
liabilities of Redpoint, Software, Inc.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, BARRA has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
BARRA, Inc.
(Registrant)
Date: August 14, 1998 /s/ Andrew Rudd
-----------------------------------------
Andrew Rudd, Chairman of the Board of
Directors and Chief Executive Officer
Date: August 14, 1998 /s/ James D. Kirsner
-----------------------------------------
James D. Kirsner, Chief Financial Officer
23
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Sequential
Number Exhibit Description Page Number
- ------ ------------------- -----------
<S> <C> <C>
3.1 Certificate of Incorporation 25
Of BARRA, Inc.
3.2 Bylaws of BARRA, Inc. 27
27 Financial Data Schedule 36
(electronic filing only)
</TABLE>
24
<PAGE>
CERTIFICATE OF INCORPORATION
OF
BARRA (DE), INC.
BARRA (DE), Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
I
The name of this corporation is BARRA (DE), Inc. (the "Corporation").
II
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
III
The address of the registered office of this Corporation in the state
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
IV
This Corporation is authorized to issue two classes of shares of
stock which shall be known as Common Stock and Preferred Stock. The total
number of shares of Common Stock which this Corporation is authorized to
issue is seventy-five million (75,000,000) shares, par value $.0001 per
share, and the total number of shares of Preferred Stock which this
Corporation is authorized to issue is ten million (10,000,000) shares, par
value $.0001 per share.
The designations, powers, preferences and relative, participating,
optional or other special rights of, and the qualifications, limitations and
restrictions upon, each class of stock shall be as follows:
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law or by action of the Board of
Directors. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by class unless
expressly provided or required by law.
<PAGE>
Authority is hereby expressly granted to the Board of Directors of the
Corporation from time to time to issue the Preferred Stock in one or more
series, by resolution or resolutions providing for the issue of the shares
thereof, to determine and fix such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, including without limitation thereof, dividend rights, conversion
rights, redemption privileges and liquidation preferences, as shall be stated
and expressed in such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of the State of Delaware. The Board of
Directors of the Corporation shall have the power to set the number of shares of
any such series and to increase or reduce such number (but not below the number
of shares of such series then outstanding). No vote of the holders of the
Common Stock or Preferred Stock of the Corporation shall, unless otherwise
required by law or provided in the resolutions creating any particular series of
Preferred Stock, be a prerequisite to the issuance of any shares of any series
of the Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation.
V
No action required to be taken or that may be taken at any annual
or special meeting of the stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
VI
The liability of the directors of this Corporation for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law.
VII
No action required to be taken or that may be taken at any annual
or special meeting of the stockholders of this corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
VIII
This Corporation is authorized to provide indemnification of agents
(as defined in Section 145 of the General Corporation Law of the State of
Delaware) for breach of duty to this Corporation and its stockholders through
bylaw provisions or through agreements with the agents, or both, in excess of
the indemnification otherwise permitted by Section 145 of the General
Corporations Law of the State of Delaware, subject to the limits on such
excess indemnification created by applicable Delaware law (statutory or
nonstatutory), with respect to actions for breach of duty to this
Corporation, its stockholders, and others.
IX
The name and mailing address of the incorporator is:
David M. Niebauer
Graham & James LLP
One Maritime Plaza, Suite 300
San Francisco, CA 94111-3492
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
herein are true.
Dated: June 16, 1998
/s/ David M. Niebauer
------------------------------------
David M. Niebauer, Incorporator
2
<PAGE>
BYLAWS
OF
BARRA (DE), INC.
ARTICLE I - OFFICES
Section 1.1 Principal Office. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of Delaware. If the principal executive office is
located outside this State, the Board of Directors shall fix and designate a
principal business office in the State of Delaware.
Section 1.2 Other Offices. The Board of Directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II - STOCKHOLDERS
Section 2.1 Place of Meetings. Meetings of stockholders shall be held
at any place designated by the Board of Directors. In the absence of
designation, stockholders' meetings shall be held at the principal executive
office of the corporation.
Section 2.1A Chairman and Secretary of Stockholder Meetings. The
chairman of the board shall preside at each meeting of the stockholders. In the
absence or disability of the chairman of the board, the meeting shall be chaired
by an officer of the corporation in the following order: president, executive
vice president, senior vice president and vice president. In the absence of all
such officers, a person chosen by the vote of a majority in interest of the
stockholders present in person or represented by proxy and entitled to vote
thereat shall act as chairman. The secretary or in his/her absence an assistant
secretary or in the absence of the secretary and all assistant secretaries a
person whom the chairman of the meeting shall appoint shall act as secretary of
the meeting and keep a record of the proceedings thereof.
Section 2.1B Regulation and Conduct of Stockholder Meetings. The Board
of Directors of the corporation shall be entitled to make such rules or
regulations for the conduct of meetings of the stockholders as it shall deem
necessary, appropriate or convenient. Subject to such rules and regulations of
the Board of Directors, if any, the chairman of the meeting shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as in the judgment of such chairman, are necessary, appropriate or
convenient for the proper conduct of the meeting, including, without limitation,
establishing an agenda or order of business for the meeting, rules and
procedures for maintaining order at the meeting and for the safety of those
present, limitations on participation in such meeting to stockholders of record
of the corporation and their duly authorized and constituted proxies, and such
other persons as the chairman shall permit, restrictions on entry into the
meeting after the time fixed for commencement thereof, limitations on the time
allotted to questions or comments by participants and regulation of the opening
and closing of the polls for balloting on matters which are to be voted on by
ballot, unless, and to the extent determined by the Board of Directors or the
chairman of the meeting, meetings of the stockholders shall not be required to
be held in accordance with the rules of parliamentary procedure.
Section 2.2 Annual Meeting. The annual meeting of stockholders shall be
held during the first week of August in each year at 2:00 p.m. on such day
during that week as shall be chosen by the Board of Directors; provided,
however, that if (a) the Board of Directors fails to select a day during the
first week of August, the annual meeting of the stockholders shall be held on
the first Tuesday of August; and if (b) this day falls on a legal holiday, then
the meeting shall be held at the same time and place on the next succeeding
business day. At the annual meeting directors shall be elected and any other
proper business may be transacted.
Section 2.3 Special Meetings. Special meetings of the stockholders may
be called for any purpose at any time by the president, the Board of Directors
or the chairman of the board. If a special meeting is called by any
<PAGE>
person or persons other than the Board of Directors, a written request to notice
the meeting, specifying the time of the meeting and the general nature of the
business to be transacted, shall be delivered personally or sent by registered
mail or by telegraphic or other facsimile transmission to the corporation. The
officer receiving the request shall cause notice to be given promptly to the
stockholders entitled to vote, in accordance with the provisions of Section 2.4,
that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, the person or persons requesting the
meeting may give the notice.
Section 2.4 Notice of Meetings. Notice of meetings of the stockholders
of the corporation shall be given in writing to each stockholder entitled to
vote, either personally or by first-class mail or other means of written
communication, addressed to the stockholder at the stockholder's address
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Such notice shall be sent not less than
ten (10) nor more than sixty (60) days before the meeting. Said notice shall
state the place, date and hour of the meeting and (a) in the case of special
meetings, the general nature of the business to be transacted, and no other
business may be transacted, or (b) in the case of annual meetings, those matters
which the Board of Directors, at the time of the mailing of the notice, intends
to present for action by the stockholders, and (c) in the case of any meeting at
which directors are to be elected, the names of the nominees intended at the
time of the mailing of the notice to be presented by the board for election.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.
Section 2.5 Waiver of Notice or Consent by Absent Stockholders. The
transactions of any meeting of stockholders, however called and noticed, shall
be as valid as though done at a meeting duly held after regular call and notice,
if a quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote at the meeting, not
present in person or by proxy, signs a written waiver of notice or a consent to
the holding of the meeting or an approval of the minutes thereof. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 2.6 Quorum. The presence in person or by proxy of the holders
of a majority of the shares of stock entitled to vote shall constitute a quorum
at a meeting of the stockholders for the transaction of business. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
of stock required to constitute a quorum. Any stockholders' meeting, whether or
not a quorum is present, may be adjourned from time to time by the vote of a
majority of the shares represented in person or by proxy at that meeting, and in
the absence of a quorum no other business may be transacted at such meeting,
except as provided above. When any stockholders' meeting is adjourned for
thirty (30) days or more or, if after the adjournment, a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder entitled to vote at the adjourned meeting in accordance with
the provisions of Section 2.4.
Section 2.7 Voting.
(a) Procedures. The stockholders entitled to vote at any
meeting of stockholders shall be determined in accordance with the provisions of
Section 2.9, and subject to Sections 217 and 218 of the General Corporation Law
of the State of Delaware. The stockholders' vote may be by voice vote or by
ballot; provided, however, that any election for directors must be by ballot if
demanded by any stockholder at the meeting and before the voting has begun.
Except as provided in Section 2.6 or in this Section 2.7, the affirmative vote
of the majority of the shares of stock represented and voting at a duly held
meeting at which a quorum is present (which shares of stock voting affirmatively
also constitute at least a majority of the required Quorum) shall be the act of
the stockholders. Stockholders may not cumulate their votes.
(b) Proxies. Every person entitled to vote shall have the right
to do so either in person or by written proxy signed by such person and filed
with the secretary of the corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy, (whether by manual signature,
typewriting, telegraphic transmission, or otherwise) by the stockholder or the
stockholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the
2
<PAGE>
person executing it prior to the vote pursuant to that proxy by a writing
delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of three (3) months from the date of the proxy
unless otherwise provided in the proxy.
Section 2.8 Action Without Meeting. No action required to be taken or
that may be taken at any annual or special meeting of the stockholders of the
corporation may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
Section 2.9 Record Date.
(a) Established by the Board of Directors. In order that the
corporation may determine the stockholders entitled to notice of, or to vote at,
any meeting or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
(b) Established by Operation of Law. If no record date is
fixed:
(i) the record date for determining stockholders entitled
to notice of, or to vote at, a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if the notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held;
(ii) the record date for determining stockholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given; and
(iii) the record date for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
(c) Effect of Determination of Record Date. Stockholders of
record at the close of business on the record date are entitled to notice and to
vote, or to receive the dividend, distribution or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares of stock on the books of the corporation after the record date, except as
otherwise provided by agreement or in the General Corporation Law of the State
of Delaware.
ARTICLE III - DIRECTORS
Section 3.1 Powers. Subject to the provisions of the General
Corporation Law of the State of Delaware and to any limitations in the
Certificate of Incorporation or these Bylaws requiring stockholder authorization
or approval of a particular action, the business and affairs of the corporation
shall be managed, and all corporate powers shall be exercised, by or under the
direction of the Board of Directors. The Board of Directors may delegate the
management of day-to-day operation of the business of the corporation to a
management company or other person; provided, however, that the business and
affairs of the corporation shall be managed, and all corporate powers shall be
exercised, under the ultimate direction of the Board of Directors.
Section 3.2 Number and Qualification of Directors. The authorized
number of directors of this corporation shall be not less than four (4) persons
and not more than seven (7), until changed by an amendment to the Certificate of
Incorporation, or by an amendment to this Section 3.2, adopted by approval of a
majority of the outstanding shares entitled to vote. The exact number of
directors shall be fixed at six (6), until changed, within the limits specified
above, by the amendment to this Section 3.2 adopted by the Board of Directors or
a majority of the
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<PAGE>
outstanding shares entitled to vote; provided, however, that an amendment to the
articles or this Section 3.2 reducing either the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting or the shares of stock not
consenting in the case of an action by written consent are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares of stock
entitled to vote. The directors need not be stockholders of this corporation.
Section 3.3 Nomination, Election and Term of Office.
(a) Nominations. Nominations for the election of directors may
be made by the Board of Directors or by any stockholder entitled to vote for the
election of directors. Any stockholder entitled to vote for the election of
directors at a meeting may nominate persons for election as directors only if
written notice of such stockholder's intent is given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
corporation not later than (i) with respect to an election to be held at an
annual meeting of the stockholders, 90 days in advance of such meeting, and (ii)
with respect to an election to be held at a special meeting of the stockholders
for the election of directors, the close of business on the seventh day
following the date on which notice of such meeting was first given to
stockholders. Each such notice shall set forth: (A) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated, (B) a representation that such stockholder is a holder of
record of stock of the corporation, entitled to vote at such meeting, and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (C) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder, (D) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors, and (E) the consent of each nominee
to serve as a director of the corporation, if elected. The chairman of a
stockholders' meeting may refuse to acknowledge the nomination of any person not
made in compliance with the foregoing procedure.
(b) Election and Term of Office. Pursuant to the provisions of
Section 2.7, the directors shall be elected at the annual meeting of the
stockholders and shall hold office until the next annual meeting. Subject to
the provisions of Sections 3.5 and 3.6, each director shall hold office until
the expiration of the term for which elected and until a successor has been
elected and qualified.
Section 3.4 Vacancies. Except for a vacancy created by the removal of a
director, vacancies in the Board of Directors may be filled by a majority of the
remaining directors, whether or not less than a quorum, or by a sole remaining
director, and each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected. The
stockholders shall elect a director or directors to fill any vacancy created by
removal, and the stockholders may elect a director or directors at any time to
fill a vacancy not filled by the directors.
Section 3.5 Resignation. Any director may resign effective upon giving
written notice to the chairman of the board, the president, the secretary or the
Board of Directors, unless the notice specifies a later time for that
resignation to become effective. If the resignation is effective at a future
time, a successor may be elected to take office when the resignation becomes
effective.
Section 3.6 Removal. The Board of Directors may declare vacant the
office of a director who has been declared of unsound mind by order of court, or
who has been convicted of a felony. Any or all of the directors may be removed
without cause by an affirmative vote of a majority of the outstanding shares of
stock entitled to vote at an election of directors.
Section 3.7 Place of Meetings. Meetings of the Board of Directors may
be held at any place which has been designated in the notice of the meeting, or,
if not stated in the notice or there is no notice, designated in the Bylaws or
by resolution of the Board of Directors. In the absence of designation,
meetings shall be held at the principal executive office of the corporation.
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<PAGE>
Section 3.8 Regular Meetings. Immediately following, and at the same
place as, each annual meeting of stockholders, the Board of Directors shall hold
without call or notice other than this bylaw a regular meeting for the purposes
of organization, election of officers and the transaction of other business.
Other regular meetings of the Board of Directors shall be held without notice at
such time as from time to time may be fixed by the Board of Directors.
Section 3.9 Special Meetings; Notice. Special meetings of the Board of
Directors may be called at any time by the chairman of the board or the
president or any vice president or the secretary or any two directors. Notice
of the time and place of all special meetings shall be given to each director by
any of the following means:
(a) By personal delivery, or by telephone or telegraph at least
48 hours prior to the time of the meeting; or
(b) By first-class mail, postage prepaid, at least four days
prior to the time of the meeting.
Section 3.10 Waiver of Notice. The transactions of any meeting of the
Board of Directors, however called and noticed and wherever held, are as valid
as though had at a meeting duly held after regular call and notice, if a quorum
is present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed waived by any director who
attends the meeting without protesting before or at its commencement the lack of
notice.
Section 3.11 Participation by Telephone. Members of the Board of
Directors may participate in a meeting through use of conference telephone or
similar communications equipment, as long as all members participating in such
meeting can hear one another. Participation in a meeting pursuant hereto
constitutes presence in person at such meeting.
Section 3.12 Quorum and Action at Meeting. A majority of the authorized
number of directors shall constitute a quorum for the transaction of business.
Subject to the provisions of the General Corporation Law of the State of
Delaware, every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present is the act of the
Board of Directors. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, if
any action taken is approved by the required quorum for that meeting.
Section 3.13 Action Without Meeting. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting, if all
members of the board individually or collectively consent in writing to the
action. Such written consent or consents shall be filed with the minutes of the
board. Actions by written consent shall have the same force and effect as a
unanimous vote of the directors.
Section 3.14 Committees. The Board of Directors may, by resolution
adopted by a majority of the authorized number of directors, designate one or
more committees, each consisting of one or more directors and each of which, to
the extent provided in the resolution and as limited by the General Corporation
Law of the State of Delaware, shall have all the authority of the Board of
Directors. Further, the board may designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
the committee. Each committee shall serve at the pleasure of the board.
Section 3.15 Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these Bylaws, with such changes in the context of
these Bylaws as are necessary to substitute the committee and its members for
the Board of Directors and its members, except that the time for regular
meetings of committees may be determined either by resolution of the Board of
Directors or by resolution of the committee. Special meetings of committees may
also be called by resolution of the Board of Directors. Notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. Minutes shall be kept
of each
5
<PAGE>
meeting of any committee and shall be filed with the corporate records. The
Board of Directors may adopt such other rules for the governance of any
committee as are not inconsistent with the provisions of these Bylaws.
Section 3.16 Compensation and Expenses of Directors. Directors and
members of committees shall not receive compensation for their services or
reimbursement for their expenses except in amounts fixed or determined by
resolution of the Board of Directors. This Section 3.16 shall not be construed
to preclude any director from serving the corporation in any other capacity as
an officer, agent, employee or otherwise, and receiving compensation for those
services.
ARTICLE IV - OFFICERS
Section 4.1 Officers. The officers of the corporation shall be a chief
executive officer or a president, a chief financial officer or a treasurer, and
a secretary, all of whom shall be chosen by and serve at the pleasure of the
Board of Directors. The corporation may also have, at the discretion of the
Board of Directors, a chairman of the board, a chief operating officer, one or
more vice presidents and such other officers as may be deemed expedient for the
proper conduct of the business of the corporation, each of whom shall have such
authority and shall perform such duties as the Board of Directors may from time
to time determine. One person may hold two or more offices.
Section 4.2 Removal and Resignation. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed at any
time, with or without cause, by the Board of Directors. Any officer may resign
at any time by giving written notice to the corporation without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party. Any resignation shall take effect at the date of the receipt of the
notice or at any later time specified in the notice, and unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective.
Section 4.3 Chairman of the Board. The Board of Directors may elect a
chairman, who shall preside, if present, at all board meetings and, pursuant to
the provisions of Section 2.1A of Article II of these Bylaws, all stockholder
meetings and shall exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors.
Section 4.3A Chief Executive Officer. The corporation's chief executive
officer, subject to the control of the Board of Directors, shall have the
general supervision, direction, and control over the corporation's business and
its officers. In addition to the general powers and duties of the chief
executive officer, such officer shall have all such other powers and duties as
prescribed by the Board of Directors and the Bylaws. In the event that the
corporation does not elect a president, the chief executive officer shall
exercise the powers and duties of the president enumerated in Section 4.4 of the
Bylaws.
Section 4.4 President. Except to the extent that these Bylaws or the
Board of Directors assign specific powers and duties to the chairman of the
board or the chief executive officer, the president shall be the corporation's
acting manager and, subject to the control of the Board of Directors, shall be
responsible for the quotidian supervision, direction, and control of the
corporation's business. In the absence or disability of the chairman of the
board and chief executive officer, the chairman of the board and chief executive
officer's duties and responsibilities shall be carried out by the president. In
addition to the general powers and duties of the president, such officer shall
have all such other powers and duties as prescribed by the Board of Directors
and the Bylaws.
Section 4.4A Chief Operating Officer. Subject to the control of the
Board of Directors, the chairman of the board, the chief executive officer and
the president, the chief operating officer shall be the corporation's acting
operations manager and shall be responsible for the quotidian operation of the
corporation's business. In addition to the general powers and duties of the
chief operating officer, such officer shall have all such other powers and
duties as prescribed by the Board of Directors and the Bylaws.
Section 4.5 Vice-Presidents. In the absence or disability of the
president, the vice-presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranged, a vice-president designated by the Board
of Directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be
6
<PAGE>
subject to all the restrictions upon, the president. The vice-presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board of Directors, the chairman of the
board or the president.
Section 4.6 Secretary. The secretary shall keep a book of minutes of
all meetings and actions of directors, committees of directors and stockholders.
The minutes of each meeting shall state the time and place that it was held and
such other information as shall be necessary to determine the actions taken
thereat and whether the meeting was held in accordance with the law and these
Bylaws. The secretary shall keep at the corporation's principal executive
office, or at the office of its transfer agent or registrar, a stock register
showing the names and addresses of all stockholders and the number and class of
shares of stock held by each. The secretary shall give notice of all meetings
of stockholders, directors and committees required to be given by these Bylaws.
The secretary shall keep the seal of the corporation in safe custody and shall
have such other powers and perform such other duties as may be prescribed by the
Board of Directors, the chairman of the board or the president.
Section 4.7 Chief Financial Officer. The chief financial officer shall
have the custody of all moneys and securities of the corporation and shall keep
regular books of account. The chief financial officer shall disburse the funds
of the corporation in payment of the just demands against the corporation or as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors from time to time as
may be required by the Board of Directors, an account of all transactions as
chief financial officer and of the financial condition of the corporation. The
chief financial officer shall perform all duties incident to the office or which
are properly required by the Board of Directors, the chairman of the board or
the president.
Section 4.8 Salaries. The salaries of the officers may be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that the officer is also a director
of the corporation.
ARTICLE V - MISCELLANEOUS
Section 5.1 Records and Inspection Rights. The corporation shall keep
such records (including stockholders' lists, accounting books, minutes of
meetings and other records) as are required by the General Corporation Law of
the State of Delaware, and these records shall be open to inspection by the
directors and stockholders of the corporation to the extent permitted by the
General Corporation Law of the State of Delaware.
Section 5.2 Checks, Drafts, Evidences of Indebtedness. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of, or payable to, the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the Board of Directors.
Section 5.3 Execution of Corporate Contracts and Instruments. Subject
to restrictions on contracts and transactions involving directors and officers,
as provided by Section 144 of the General Corporation Law of the State of
Delaware, the Board of Directors may authorize any officer or officers or agent
or agents, or appoint an attorney or attorneys-in-fact, to enter into any
contract or execute any instrument in the name of, and on behalf of, the
corporation, and this authority may be general or confined to specific
instances; and unless so authorized or appointed, or unless afterwards ratified
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
Section 5.4 Certificates for Shares. Every holder of shares of stock in
the corporation shall be entitled to have a certificate signed in the name of
the corporation by the chairman of the board or the president or a
vice-president and by the chief financial officer or the secretary or an
assistant secretary, certifying the number of shares of stock and the class or
series of shares of stock owned by the stockholder. Any or all of the
signatures on the certificate may be 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
7
<PAGE>
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
Section 5.5 Lost, Stolen or Destroyed Certificates. The corporation may
issue a new stock certificate or a new certificate for any other security in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 5.6 Corporate Seal. The corporation may have a corporate seal
in such form as shall be prescribed and adopted by the Board of Directors.
Section 5.7 Indemnification of Corporate Agents. The corporation shall
indemnify each of its agents against expenses, judgments, fines, settlements and
other amounts, actually and reasonably incurred by such person by reason of such
person's having been made or having been threatened to be made a party to a
proceeding to the fullest extent permissible by the provisions of Section 145 of
the General Corporation Law of the State of Delaware, and the corporation shall
advance the expenses reasonably expected to be incurred by such agent in
defending any such proceeding upon receipt of the undertaking required by
subdivision (f) of such Section. The terms "agent", "proceeding" and "expenses"
used in this Section 5.7 shall have the same contextual meaning as such terms in
said Section 145. The corporation may purchase and maintain insurance on behalf
of any agent of the corporation against any liability asserted against, or
incurred by, the agent in such capacity or arising out of the agent's status as
such, whether or not the corporation would have the power to indemnify the agent
against that liability under the provisions of Section 145 of the General
Corporation Law of the State of Delaware.
ARTICLE VI - AMENDMENTS
Section 6.1 Amendment by Stockholders. New bylaws may be adopted or
these Bylaws may be amended or repealed by the affirmative vote of a majority of
the outstanding shares of stock entitled to vote, except as otherwise provided
by law or by the Certificate of Incorporation.
Section 6.2 Amendment by Directors. Subject to the right of
stockholders as provided in Section 6.1, bylaws other than a bylaw or amendment
thereof changing the maximum or minimum number of authorized directors or
changing from a variable to a fixed number of directors or vice versa may be
adopted, amended or repealed by the Board of Directors.
8
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, certify that I am the presently elected and acting
Secretary of BARRA (DE), Inc., a Delaware corporation (the "Corporation"), and
that the above bylaws, consisting of nine (9) pages including, this page,
are the Bylaws of the Corporation, as amended and adopted by resolution of the
Board of Directors of the Corporation on June 16, 1998.
Dated: June 16, 1998 /s/ Maria Hekker
Executed: Berkeley, California --------------------------------
Maria Hekker, Secretary
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BARRA
INC.'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE
MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 18,674,207
<SECURITIES> 21,046,794
<RECEIVABLES> 29,834,817
<ALLOWANCES> 152,873
<INVENTORY> 0
<CURRENT-ASSETS> 71,064,180
<PP&E> 30,615,245
<DEPRECIATION> 14,890,787
<TOTAL-ASSETS> 123,704,702
<CURRENT-LIABILITIES> 44,300,905
<BONDS> 0
0
0
<COMMON> 28,741,605
<OTHER-SE> 47,320,537
<TOTAL-LIABILITY-AND-EQUITY> 123,704,702
<SALES> 35,913,148
<TOTAL-REVENUES> 35,913,148
<CGS> 2,630,847
<TOTAL-COSTS> 27,460,356
<OTHER-EXPENSES> 1,605,973<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 572,835<F2>
<INCOME-PRETAX> 7,419,654
<INCOME-TAX> (2,893,351)
<INCOME-CONTINUING> 4,526,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,526,303
<EPS-PRIMARY> .330
<EPS-DILUTED> .310
<FN>
<F1>REPRESENTS MINORITY INTEREST SHARE OF NET INCOME AND LOSS ON EQUITY JOINT
VENTURES
<F2>REPRESENTS NET INTEREST INCOME
</FN>
</TABLE>
