SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 quarter ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27324
SYNAPTIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2859704
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
215 College Road
Paramus, NJ 07652
(Address of principal executive offices) (Zip Code)
(201) 261-1331
(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
As of May 1, 1999, there were 10,742,286 shares of the registrant's Common Stock
outstanding.
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SYNAPTIC PHARMACEUTICAL CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I. FINANCIAL INFORMATION
Page
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Item 1. Financial Statements 1
Balance Sheets at March 31, 1999 and December 31, 1998 1
Statements of Operations and Comprehensive Income (Loss) for
the three months ended March 31, 1999 and 1998 2
Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
(i)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYNAPTIC PHARMACEUTICAL CORPORATION
BALANCE SHEETS
(in thousands, except share information)
ASSETS
March 31, December 31,
1999 1998
---------- -----------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 9,176 $16,590
Restricted cash 600 600
Marketable securities--current maturities 10,543 7,133
Other current assets 1,198 1,064
------- -------
Total current assets 21,517 25,387
Property and equipment, net 5,631 5,733
Marketable securities 32,120 32,655
Patent and patent application costs,
net of accumulated amortization 837 921
------- -------
$60,105 $64,696
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 471 $ 966
Accrued liabilities 327 645
Accrued compensation 105 326
Deferred revenue 279 83
------- -------
Total current liabilities 1,182 2,020
Stockholders' equity:
Preferred Stock, $.01 par value; authorized--
1,000,000 shares; issued--none -- --
Common Stock, $.01 par value; authorized--
25,000,000 shares; issued and outstanding--
10,742,186 shares in 1999 and 10,711,374 shares
in 1998; 107 107
Additional paid-in capital 98,688 98,516
Accumulated other comprehensive income--
net unrealized (losses) gains on securities (207) (77)
Deferred compensation (45) (61)
Accumulated deficit (39,620) (35,809)
------- -------
Total stockholders' equity 58,923 62,676
------- -------
$60,105 $64,696
======= =======
See notes to financial statements.
1
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share information)
(Unaudited)
For the three months
ended March 31,
1999 1998
------- -------
Revenues:
Contract revenue $ 644 $ 2,165
License revenue -- 2,000
Grant revenue -- 90
------- -------
Total revenues 644 4,255
Expenses:
Research and development 3,986 3,661
General and administrative 1,206 1,083
------- -------
Total expenses 5,192 4,744
------- -------
Loss from operations (4,548) (489)
Other income, net:
Interest income 735 918
Gain on sale of securities 2 --
------- -------
Other income, net 737 918
------- -------
Net (loss) income $(3,811) $ 429
======= =======
Comprehensive (loss) income:
Net (loss) income $(3,811) $ 429
Unrealized losses arising
during period (118) (97)
Less: Reclassification adjustment for
gains included in net income (12) --
------- -------
Comprehensive (loss) income $(3,941) $ 332
======= =======
Basic net (loss) income per share $(0.36) $ 0.04
====== ======
Diluted net (loss) income per share $(0.36) $ 0.04
====== ======
Shares used in computation of basic
net (loss) income per share 10,727,634 10,645,281
========== ==========
Shares used in computation of diluted
net (loss) income per share 10,727,634 10,907,940
========== ==========
See notes to financial statements.
2
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the three months
ended March 31,
1999 1998
------- -------
Operating activities:
Net (loss) income $(3,811) $ 429
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 395 327
Amortization of premiums on securities 100 19
Amortization of deferred compensation 16 24
Gain on sale of securities (2) --
Compensation resulting from forgiveness of note
receivable from employee 38 --
Changes in operating assets and liabilities:
Increase in other current assets (122) (806)
Decrease in accounts payable, accrued liabilities
and accrued compensation (1,034) (723)
Increase (decrease) in collaborative agreement
revenue receivable 196 (120)
------- -------
Net cash used in operating activities (4,224) (850)
Investing activities:
Sale or maturity of investments 10,715 14,300
Purchase of investments (13,818) (27,407)
Purchases of property and equipment (209) (372)
Issuance of loan to employee (50) --
------- -------
Net cash used in investing activities (3,362) (13,479)
Financing activities:
Issuance of common stock, net of repurchases 172 1,328
------- -------
Net cash provided by financing activities 172 1,328
------- -------
Net decrease in cash and cash equivalents (7,414) (13,001)
Cash and cash equivalents at beginning of period 16,590 23,113
------- -------
Cash and cash equivalents at end of period $ 9,176 $10,112
======= =======
See notes to financial statements.
3
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SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
Note 1 -- Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and may not include all
information and footnotes required for a presentation in accordance with
generally accepted accounting principles. In the opinion of the management of
Synaptic Pharmaceutical Corporation (the "Company"), these financial statements
include all normal and recurring adjustments necessary for a fair presentation
of the financial position and the results of operations and cash flows of the
Company for the interim periods presented. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements for the fiscal year ended December 31, 1998, and
notes thereto included in the Company's 1998 Annual Report on Form 10-K. The
results of operations for the fiscal quarter ended March 31, 1999, are not
necessarily indicative of the results of operations to be expected for the full
year.
Note 2 -- Basic and Diluted Net (Loss) Income per Share
A reconciliation of the number of shares used in the computation of
basic net (loss) income per share to the number of shares used in the
computation of diluted net (loss) income per share is as follows:
For the Three Months Ended March 31,
1999 1998
---------- ----------
Shares used in the computation of Basic
Net (Loss) Income per Share--Weighted
average common shares outstanding 10,727,634 10,645,281
Weighted average shares underlying
common stock options outstanding -- (1) 255,401
Weighted average shares underlying
common stock warrants outstanding -- (2) 7,258
---------- ----------
Shares used in the computation of
Diluted Net (Loss) Income per Share 10,727,634 10,907,940
========== ==========
(1) Common equivalent shares from stock options are excluded from the
calculation of diluted net loss per share as their effect is anti-dilutive.
(2) None outstanding during the period.
4
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Synaptic Pharmaceutical Corporation is a biotechnology company engaged
in the development of a broad platform of enabling technology which it
calls"human receptor-targeted drug design technology." The Company is utilizing
this technology to discover and clone the genes that code for human receptor
subtypes that may be associated with specific disorders. The Company and its
collaborative partners and other licensees are in turn utilizing the cloned
receptor genes to design compounds that can potentially be developed as drugs
for treating these disorders.
The Company is currently collaborating with three pharmaceutical
companies, Eli Lilly and Company ("Lilly"), Warner-Lambert Company
("Warner-Lambert") and Grunenthal GmbH ("Grunenthal"). Concurrently with the
establishment of these collaborative arrangements, the Company granted licenses
to certain of its technology and patent rights to Lilly, Warner-Lambert and
Grunenthal.
In addition to its ongoing collaborative arrangements, the Company has
granted licenses to certain of its technology and patent rights to three other
pharmaceutical companies, Merck & Co., Inc. ("Merck"), Novartis Pharma AG
("Novartis") and Glaxo Group Limited ("Glaxo"). The Merck and Novartis licenses
were granted concurrently with the establishment by Synaptic of collaborative
arrangements with such companies. While both the Merck collaboration and the
Novartis collaboration ended in February 1999 and August 1998, respectively, the
associated licenses continue for the respective periods provided in the
agreements with Merck and Novartis. For convenience of reference, the agreements
pursuant to which the licenses referred to in this paragraph and the preceding
paragraph were granted are collectively referred to as the "License Agreements."
The Company is receiving research funding to support a specified number
of the Company's scientists under its collaboration with Lilly. While the Lilly
collaboration is scheduled to end on July 31, 1999, the associated licenses will
continue for the period provided in the License Agreement with Lilly. Since
inception, the Company has financed its operations primarily through the sale of
its stock, through contract and license revenue under certain of its License
Agreements, and through interest income and capital gains resulting from its
investments. The Company also has received revenues from government grants under
the Small Business Innovative Research ("SBIR") program of the National
Institutes of Health.
To date, the Company's expenditures have been for research and
development related expenses, general and administrative related expenses, fixed
asset purchases and various patent related expenditures incurred in protecting
the Company's technologies. The Company has been historically unprofitable and
had an accumulated deficit of $39,620,000 at March 31, 1999. The Company expects
to continue to incur operating losses for a number of years and may not become
profitable, if at all, unless and until it receives royalty revenue or revenue
from sales of drugs that may be developed with the use of its technology or its
patent rights.
Results of Operations
Comparison of the Three Months Ended March 31, 1999 and 1998
Revenues. The Company recognized revenue of $644,000 and $4,255,000 for
the three months ended March 31, 1999 and 1998, respectively. The decrease of
$3,611,000 was attributable primarily to the following: the receipt in 1998 of
$2,000,000 of non-recurring revenue resulting from the Company's License
Agreement with Glaxo; and a decrease in contract revenue of $1,521,000 which is
primarily due to the contractual termination of two of the Company's
collaborations.
5
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Research and Development Expenses. The Company incurred research and
development expenses of $3,986,000, and $3,661,000 for the three months ended
March 31, 1999 and 1998, respectively. The increase of $325,000, or 9%, was
attributable primarily to increases in supply costs, facility related costs and
employee moving expense reimbursements.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $1,206,000 and $1,083,000 for the three months ended
March 31, 1999 and 1998, respectively. The increase of $123,000, or 11%, was
attributable primarily to increases in: compensation expense consulting fees
associated with the Company's efforts to obtain new collaborations.
Other Income, Net. The Company recorded other income of $737,000 and
$918,000 for the three months ended March 31, 1999 and 1998, respectively. The
decrease of $181,000 was primarily due to lower cash, cash equivalent and
marketable securities balances during 1999 as a result of the utilization of
these resources to fund the Company's operations.
Net (Loss) Income and Basic and Diluted Net (Loss) Income Per Share.
The Company incurred a net loss of $3,811,000 ($0.36 per share), and had net
income of $429,000 ($0.04 per share) for the three months ended March 31, 1999
and 1998, respectively. The increase in net loss per share of $0.40 resulted
primarily from lower revenues and other income and higher expenses during the
first quarter of 1999 as described above.
Operating Trends
Revenues may vary from period to period depending on numerous factors
including the timing of revenue earned under the License Agreements and revenue
that may be earned under future collaborative and/or license agreements. During
the three months ended March 31, 1999, the Company recognized an aggregate of
$644,000 in research funding revenue. Based on a current commitment by one of
the Company's collaborative partners, the Company expects research funding
revenue to amount to $1,760,000 in 1999. Furthermore, under the terms of one or
more of the License Agreements, additional revenues may be recognized if:
certain milestones are achieved; an option to obtain additional licenses to the
Company's patents is exercised; a collaboration advances to a new stage,
triggering a research funding obligation on the part of one of the Company's
collaborative partners; or a collaboration is renewed. Management continues to
assess the opportunity for obtaining additional funding under new collaborative
and/or license agreements as well as obtaining financing through equity
transactions. The Company continues to monitor its spending level in order to
insure that it has enough cash to last through the year 2001.
Other income, net is expected to decline in 1999 and 2000 as existing
funds are utilized to support the Company's operations.
Property and equipment spending in 1999 is expected to decrease from
that of 1998 as the Company completes the conversion of a portion of its
underutilized space into laboratory space.
At March 31, 1999, the Company held marketable securities with an
estimated fair value of $42,663,000. The Company's primary interest rate
exposure results from changes in short-term interest rates. The Company does not
purchase financial instruments for trading or speculative purposes. All of the
marketable securities held by the Company are classified as available-for-sales
securities. The following table provides information about marketable securities
held by the Company at March 31, 1999:
6
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Estimated
Principal Amount and Weighted Average Stated Rate Fair
by Expected Maturity Value
- ------------------------------------------------------------ ---------
(000's) 1999 2000 2001 2002 2003 Total (000's)
- ------------------------------------------------------------ ---------
Principal $8,323 $6,487 $18,090 $2,500 $6,500 $41,900 $42,663
Weighted
Average
Stated
Rates 5.12% 6.39% 7.76% 6.50% 5.77% 6.64% --
- ------------------------------------------------------------- ---------
The stated rates of interest expressed in the above table may not
approximate the actual yield of the securities which the Company currently holds
since the Company has purchased some of its marketable securities at other than
face value. Additionally, some of the securities represented in the above table
may be called or redeemed, at the option of the issuer, prior to their expected
due dates. If such early redemptions occur, the Company may reinvest the
proceeds realized on such calls or redemptions in marketable securities with
stated rates of interest or yields that are lower than those of current holdings
affecting both future cash interest streams and future earnings.
In addition to investments in marketable securities, the Company places
some of its cash in money market funds in order to keep cash available to fund
operations and to hold cash pending investments in marketable securities.
Fluctuations in short term interest rates will affect the yield on monies
invested in such money market funds. Such fluctuations can have an impact on
future cash interest streams and future earnings of the Company, but such
impacts are not expected to be material.
Management believes that it has remedied all of its significant
information technology and non-information technology systems that may be
affected by the year 2000 issue. Management has made inquiries of its
significant vendors as to their readiness for the year 2000 issue. The Company's
significant vendors have represented to the Company that there is a high
probability that the year 2000 issue will not cause a significant disruption to
the delivery of goods and services after 1999, however, the Company gives no
assurance as to whether or not this will be the case. To date the Company has
spent less than $50,000 to remedy systems that may have been affected by the
year 2000 issue and does not expect future expenses, if any, to be material. If
it turns out that some of the Company's systems or its vendors' systems are not
year 2000 compliant, management believes the most likely worst case scenario
would be temporary reduction in the current level of productivity. The Company's
contingency plan includes, but may not be limited to, manual workarounds and a
temporary increase in the current staffing level.
The Company does not believe that inflation has had a material impact
on its results of operations.
Liquidity and Capital Resources
At March 31, 1999 and December 31, 1998, cash, cash equivalents and
marketable securities aggregated $51,839,000 and $56,378,000, respectively. In
addition to the cash, cash equivalents and marketable securities described
above, the Company had $600,000 in restricted cash recorded in its balance sheet
at March 31, 1999. This restricted cash secures lease payments to the Company's
landlord.
To date, the Company has met its cash requirements through the sale of
its stock, through contract and license revenue, through SBIR grants and through
interest income and gains resulting from its investments. During the three
months
7
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ended March 31, 1999, aggregate research funding from Lilly and Merck amounted
to $644,000. Research funding under the Company's agreement with Merck ended
concurrently with the termination of the related collaboration. Warner-Lambert
does not currently provide research funding to the Company and the Company does
not expect that such funding will be provided, if at all, until mid-1999. In
addition, it is anticipated that if the current biotechnology financing
environment remains unfavorable, raising additional capital may be difficult.
At March 31, 1999, the Company had invested an aggregate of $10,828,000
in property and equipment.
The Company leases laboratory and office facilities under an agreement
expiring on December 31, 2015. The minimum annual payment under the lease is
currently $1,250,000. A standby letter of credit for $580,000 has been issued to
the Company's landlord as a security deposit and is secured by investment
securities of the Company which are, to the extent of $600,000, recorded in the
balance sheet as "Restricted Cash." This standby letter of credit must be
renewed annually during the life of the lease.
At March 31, 1999, the Company had $51,839,000 in cash, cash
equivalents and marketable securities. The Company currently intends to utilize
these funds primarily to conduct certain of its research programs, for patent
related expenditures, for general corporate purposes, to make leasehold
improvements to its facilities and to purchase property and equipment. The
Company expects to continue to incur operating losses for a number of years. The
Company believes that its cash on hand, together with the funds that it expects
to receive under certain of the License Agreements and interest income, will be
sufficient to fund its operations, as well as the Company's share of certain
development costs under the Grunenthal Agreement, through the year 2001.
This Report on Form 10-Q contains "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Such statements include, but are not limited
to, those relating to future cash and spending plans, amounts of future research
funding, and any other statements regarding future growth, future cash needs,
future operations, business plans and financial results, and any other
statements which are not historical facts. When used in this document, the words
"expects," "may," "believes," and similar expressions are intended to be among
the words that identify forward-looking statements. Such statements involve
risks and uncertainties, including, but not limited to, those risks and
uncertainties detailed in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "1998 Form 10-K"), including in Item 1
of the 1998 Form 10-K under the captions "Patents, Proprietary Technology and
Trade Secrets," "Competition" and "Government Regulation" as well as in the
section entitled "Disclosure Regarding Forward-Looking Statements" under the
captions "Early Stage of Product Development; Technological Uncertainty,"
"Dependence on Collaborative Partners and Licensees for Development, Regulatory
Approvals, Manufacturing, Marketing and Other Resources" and "Uncertainties
Related to Clinical Trials" or detailed from time to time in filings the Company
makes with the SEC. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated. Although the Company believes that the
expectations reflected in the forward-looking statements contained herein are
reasonable, it can give no assurance that such expectations will prove to be
correct. The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
8
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk (i.e.,
interest rate risk) are included in Item 2 of this Report.
9
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
- ------- -----------
3.2 Amended and Restated By-Laws of the Company, as amended on March 24,
1999 (filed herewith)
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 5, 1999, the Company filed a Current Report on Form 8-K summarizing
the status of certain drug discovery programs it is conducting in collaboration
with each of Merck and Lilly.
On February 5, 1999, the Company filed a Current Report on Form 8-K announcing
the extension of the Company's collaboration with Lilly through July 31, 1999.
On March 4, 1999, the Company filed a Current Report on Form 8-K stating that it
had issued a press release announcing that Lilly had delayed the beginning of
Phase III clinical trials of the migraine compound identified as part of the
Company's collaboration with Lilly.
On March 19, 1999, the Company filed a Current Report on Form 8-K stating that
it had issued a press release announcing that Lilly had discontinued the
commercial development of the migraine compound identified as part of the
Company's collaboration with Lilly.
10
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SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYNAPTIC PHARMACEUTICAL CORPORATION
(Registrant)
Date: May 7, 1998 By:/s/ Kathleen P. Mullinix
-----------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President &
Chief Executive Officer
By:/s/ Robert L. Spence
-----------------------------
Name: Robert L. Spence
Title: Senior Vice President,
Chief Financial Officer &
Treasurer
11
EXHIBIT 3.2
-----------
Adopted March 1992
as Amended Through
March 24, 1999
SYNAPTIC PHARMACEUTICAL CORPORATION
(the "Corporation")
Amended and Restated By-laws
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of New York, State of New York, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with
the year 1987, shall be held on the first Thursday of May if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
11:00 A.M., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the
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stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board or the
president and shall be called by the chairman of the board or the president or
secretary at the request in writing of a majority of the members of the board of
directors. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given, not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the shares of capital stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of law or of the certificate of incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy
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for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on or after three years from its date,
unless the proxy provides for a longer period.
Section 11. Written notice of the intent by any stockholder to
make a nomination of any person for election as a director at a meeting of
stockholders must be received by the secretary of the Corporation not later than
(i) with respect to an election to be held at an annual meeting of stockholders,
ninety days in advance of the annual meeting and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the day on which
notice of such meeting is first given to stockholders. The notice shall contain:
(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 the
stockholder is a holder of record of shares of stock having power to vote at the
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 the 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 the stockholder; (D) the citizenship
of each nominee proposed by such stockholder; (E) the information that 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 of the
Corporation; and (F) the written consent of each nominee to serve as a director
of the Corporation if so elected.
ARTICLE III
DIRECTORS
GENERAL
Section 1. The number of directors constituting the whole
board shall be eight. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 2 of this Article or as
otherwise provided in the Corporation's certificate of incorporation, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.*
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by law.
Section 3. The business of the Corporation shall be managed by
or under the direction of its board of directors which may exercise all such
powers of the Corporation and do all
- --------
* This Section was amended by the Board of Directors on March 24, 1999, to read
as set forth herein.
-3-
<PAGE>
such lawful acts and things as are not by law or by the certificate of
incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the board of directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time be
determined by the board of directors.
Section 7. Special meetings of the board may be called by the
president on twenty-four hours' notice to each director, either personally, by
mail, by telegram or by telecopier. Special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors.
Section 8. At all meetings of the board of directors a
majority of the directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these By-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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<PAGE>
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, be resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
board of directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-laws of the Corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the certificate of
incorporation or these By-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or By-laws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of law or of the
certificate of incorporation or of these By-laws, notice is required to be given
to any director or stockholder, it
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<PAGE>
shall not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
hand, by telegram or by telecopy.
Section 2. Whenever any notice is required to be given under
the provisions of law or of the certificate of incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The principal officers of the Corporation shall be
chosen by the board of directors and shall be a president, a vice-president, a
secretary and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these By-laws otherwise provide.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all principal officers of the
Corporation shall be fixed by the board of directors.
Section 5. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative vote of
a majority of the board of directors. Any vacancy occurring in any office of the
Corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the Corporation, shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall preside at the meetings
of the stockholders and the board of directors. He shall have such other powers
and perform such other duties as are provided in these By-laws and, in addition
thereto, as the board of directors may from time to time determine.
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<PAGE>
Section 7. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the Corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of
his inability or refusal to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the board of
directors.
Section 12. The treasurer shall disburse the funds of the
Corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so
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<PAGE>
requires, an account of all his transactions as treasurer and of the financial
condition of the Corporation.
Section 13. If required by the board of directors, the
treasurer shall give the Corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the board of directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of shares of stock of the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the chairman of the board of directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
Section 2. Any of or all 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 such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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<PAGE>
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a 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 change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meetings, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, deem
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall deem conducive to the interests of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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<PAGE>
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. Except as otherwise provided in the certificate of
incorporation, these Bylaws, or any of them, may be altered, amended or
repealed, or new By-laws may be made, at any annual or special meeting, by the
stockholders having at least 67% of the total voting power of the Corporation,
or at any regular or special meeting of the Board of Directors, by vote of a
majority of the whole Board. By-laws made, altered or amended by the Board shall
be subject to alteration, amendment or repeal by the stockholders having at
least 67% of the total voting power of the Corporation.
ARTICLE IX
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted
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<PAGE>
in such capacity, against costs, charges, expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was or has agreed to
become a director, officer, employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been taken
or committed in such capacity, against costs, charges and expenses (including
attorney's fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper.
Section 3. Expenses incurred in connection with a civil,
criminal, administrative or investigative action, suit or proceeding, or threat
thereof, may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article.
Section 4. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
-11-
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