<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
( X ) QUARTERLY REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly
Period Ended December 31, 1998 Commission File No. 1-10739
---------------------- ---------
SENSORMATIC ELECTRONICS CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 34-1024665
- ---------------------------------------------------------------------------------------------
<S> <C>
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
951 Yamato Road, Boca Raton, Florida 33431-0700
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 989-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Same
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 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 Registrant had outstanding 75,318,853 shares of Common Stock (par value $.01
per share) as of January 30, 1999.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q
SIX MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets................................................. 2
Consolidated Condensed Statements of Operations..................................... 3
Consolidated Condensed Statements of Cash Flows....................................... 4
Notes to Consolidated Condensed Financial Statements.................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................... 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk......................................................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 18
Item 2. Changes in Securities and Use of Proceeds................................................. 19
Item 4. Submission of Matters to a Vote of Security Holders....................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................................................... 21
Signatures .......................................................................................... 22
</TABLE>
<PAGE> 3
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
1998 1998
------------ ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 107.4 $ 127.0
Customer receivables 324.9 326.2
Inventories, net 194.7 203.6
Current portion of deferred income taxes 36.4 36.2
Other current assets 56.9 43.7
---------- ----------
TOTAL CURRENT ASSETS 720.3 736.7
Customer receivables - noncurrent 114.7 132.5
Revenue equipment, net 78.7 69.2
Property, plant and equipment, net 137.9 137.2
Costs in excess of net assets acquired, net 464.0 465.5
Deferred income taxes 150.5 152.3
Patents and other assets, net 121.8 109.0
---------- ----------
TOTAL ASSETS $ 1,787.9 $ 1,802.4
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 21.3 $ 33.5
Accounts payable and accrued liabilities 112.6 118.5
Other current liabilities and deferred income taxes 189.8 192.1
---------- ----------
TOTAL CURRENT LIABILITIES 323.7 344.1
Long-term debt 504.9 515.2
Other noncurrent liabilities and deferred income taxes 45.6 45.5
---------- ----------
TOTAL LIABILITIES 874.2 904.8
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10.0 shares authorized -- --
6 1/2% Convertible Preferred Stock, 0.7 shares outstanding 166.7 166.7
Common stock, $.01 par value, 125.0 shares authorized, 74.9 and 74.4
shares outstanding at December 31, 1998 and June 30, 1998, respectively 739.4 733.7
Retained earnings 104.0 103.9
Treasury stock at cost and other, 1.7 shares at December 31, 1998
and June 30, 1998 (11.2) (11.7)
Accumulated other comprehensive income (85.2) (95.0)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 913.7 897.6
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,787.9 $ 1,802.4
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended December 31, Ended December 31,
-------------------------- ------------------------
1998 1997 1998 1997
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 202.9 $ 206.4 $ 390.8 $ 410.9
Rentals 11.3 12.7 22.3 25.2
Installation, maintenance and other 36.2 24.6 64.5 53.0
---------- --------- -------- ---------
Total revenues 250.4 243.7 477.6 489.1
---------- --------- -------- ---------
Cost of Sales:
Costs of sales 141.9 125.3 268.4 257.2
Depreciation on revenue equipment 5.5 4.9 10.7 9.8
---------- --------- -------- ---------
Total cost of sales 147.4 130.2 279.1 267.0
---------- --------- -------- ---------
Gross margin 103.0 113.5 198.5 222.1
Operating expenses:
Selling, general and administrative 73.1 76.7 145.2 169.6
Provision for doubtful accounts 5.2 5.3 9.9 10.2
Restructuring charges -- -- -- 29.2
Research, development and engineering 6.4 6.9 13.5 13.4
Amortization of intangible assets 5.5 5.4 10.8 10.6
---------- --------- -------- ---------
Total operating costs and expenses 90.2 94.3 179.4 233.0
---------- --------- -------- ---------
Operating income (loss) 12.8 19.2 19.1 (10.9)
---------- --------- -------- ---------
Other (expenses) income:
Interest income 4.0 3.4 8.0 7.0
Interest expense (11.6) (13.4) (22.6) (25.7)
Litigation recoveries/(settlement) 6.3 -- 6.3 (53.0)
Other, net (0.6) (1.2) (1.7) (3.1)
---------- --------- -------- ---------
Total other (expenses) income (1.9) (11.2) (10.0) (74.8)
---------- --------- -------- ---------
Income (loss) before income taxes 10.9 8.0 9.1 (85.7)
Provision (benefit) for income taxes 3.6 2.6 3.2 (25.2)
---------- --------- -------- ---------
Net income (loss) $ 7.3 $ 5.4 $ 5.9 $ (60.5)
========== ========= ======== =========
Basic and diluted earnings (loss)
per common share $ 0.10 $ 0.07 $ 0.08 $ (0.82)
========== ========= ======== =========
Number of shares used in computation
of basic earnings (loss) per share 75.2 74.2 75.0 74.1
========== ========= ======== =========
Number of shares used in computation
of diluted earnings (loss) per share 75.2 74.4 75.0 74.3
========== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended December 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5.9 $ (60.5)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 33.4 33.7
Restructuring charges/(payments), net (3.9) 24.1
Litigation settlement charge -- 53.0
Net changes in operating assets and liabilities,
net of effects of acquisitions and divestitures:
Decrease/(increase) in receivables and sales-type leases 23.3 (39.4)
Decrease/(increase) in inventories 10.0 (10.4)
Increase in current and deferred income taxes
relating to restructuring and litigation charges -- (24.7)
Other operating assets and liabilities, net (23.0) (28.6)
------- -------
Net cash provided by (used in) operating activities 45.7 (52.8)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13.3) (15.0)
Proceeds from sale of business, net -- 7.4
Increase in revenue equipment, net of deletions (19.3) (16.4)
Additional investment in acquisitions (11.3) (10.2)
Other, net 0.5 2.2
------- -------
Net cash used in investing activities (43.4) (32.0)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings/(payments) and other debt (23.5) 77.3
Other, net 1.6 1.6
------- -------
Net cash (used in) provided by financing activities (21.9) 78.9
------- -------
Net decrease in cash (19.6) (5.9)
Cash and cash equivalents at beginning of the year 127.0 21.7
------- -------
Cash and cash equivalents at end of the period $ 107.4 $ 15.8
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions)
a) Basis of Presentation
The consolidated condensed financial statements include the accounts of
Sensormatic Electronics Corporation and its subsidiaries (the
"Company"). The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month period ended
December 31, 1998 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1999. For further
information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 1998.
b) Reclassifications
Certain amounts in the prior period's consolidated condensed financial
statements have been reclassified to conform to the fiscal 1998
year-end presentation.
c) Restructuring
The following table sets forth the details and the activity of the
restructuring charge reserves as of December 31, 1998:
<TABLE>
<CAPTION>
Accrual Accrual
Balance at Balance at
June 30, December
1998 Utilization 31, 1998
------------------
Cash Non-cash
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other $ 1.7 $ -- $ (1.1) $ 0.6
Closure of facilities and related costs 15.1 (1.4) (0.1) 13.6
Employee termination and related costs 10.5 (2.2) -- 8.3
Non-core business divestitures 18.8 (0.3) (0.1) 18.4
-------------------------------------------------------------------------------------------------
Total $ 46.1 $ (3.9) $ (1.3) $ 40.9
-------------------------------------------------------------------------------------------------
</TABLE>
The total aggregate cash outlay related to the fiscal 1996, 1997 and
1998 restructuring charges, net of expected proceeds from the
divestiture of non-core businesses, was estimated to be approximately
$63.3. As of December 31, 1998, the remaining accrual balance relates
primarily to expected cash payments the Company will pay over time
after the restructuring activity occurs. The restructuring activity is
expected to be substantially complete by June 30, 1999, or shortly
thereafter, and the Company believes the provisions recorded are
adequate to cover the costs associated with these plans.
5
<PAGE> 7
d) Customer Receivables
Amounts due to the Company in the form of accounts receivable (which
are generally due within 90 days), deferred receivables (which are
generally due within one year), installment receivables (which have
periodic payments over a term of five years, generally) and net
investment in sales-type leases (which have periodic payments over
lease terms of five to six years, principally) at December 31, and June
30, 1998 are summarized as follows :
<TABLE>
<CAPTION>
December 31 June 30
----------- --------
<S> <C> <C>
Trade accounts receivable due in 1 year $ 309.4 $ 303.9
Allowance for doubtful accounts (36.6) (33.2)
--------- --------
Total trade accounts receivable, net $ 272.8 $ 270.7
========= ========
Deferred receivables $ 6.3 $ 4.9
Installment receivables 32.5 38.8
Allowance for doubtful accounts (4.8) (5.6)
Unearned interest and maintenance (11.3) (14.5)
--------- --------
Total deferred and installment receivables, net 22.7 23.6
Less: Amounts due in 1 year, net (17.4) (19.0)
--------- --------
Total noncurrent deferred and
installment receivables, net $ 5.3 $ 4.6
========= ========
Sales-type leases-minimum lease payments receivable $ 197.0 $ 225.1
Allowance for uncollectible minimum lease payments (17.9) (20.3)
Unearned interest and maintenance (35.0) (40.4)
--------- --------
Total sales-type leases, net 144.1 164.4
Less: Amounts due in 1 year, net (34.7) (36.5)
--------- --------
Total noncurrent sales-type leases, net $ 109.4 $ 127.9
========= ========
Total customer receivables $ 439.6 $ 458.7
Less: Amounts due in 1 year, net 324.9 326.2
--------- --------
Total noncurrent customer receivables $ 114.7 $ 132.5
========= ========
</TABLE>
6
<PAGE> 8
e) Inventory
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
----------------- -------------
<S> <C> <C>
Finished goods $ 160.7 $ 165.4
Parts 51.0 56.3
Work-in-process 14.9 14.7
-------- --------
226.6 236.4
Less allowance for excess and obsolete inventory (31.9) (32.8)
-------- --------
Total inventories, net $ 194.7 $ 203.6
======== ========
</TABLE>
f) Benefit Plans
In June 1998 the Company's Board of Directors approved a Supplemental
Employee Retirement Plan ("SERP") for vice president level employees
and officers. Selected vice presidents and officers who participated in
the other Sensormatic retirement plans (Senior Executive Defined
Contribution Retirement Plan, Key Executive Supplemental Retirement
Plan and Salary Continuation Plan) and who elect to participate in the
new SERP will be paid a benefit equal to the higher of what they would
receive under the formula set forth in the SERP or under the former
plan. The new SERP for vice presidents and officers is effective July
15, 1998. Additionally, in August 1998 the Company's Board of Directors
approved a Supplemental Employee Retirement Plan for director level
employees. Selected director level employees who participated in the
Company's Key Executive Supplemental Retirement Plan and who elect to
participate in the new SERP for director level employees will be paid a
benefit equal to the higher of what they would receive under the
formula set forth in the SERP or the former Plan. The SERP for director
level employees was effective as of January 1, 1999. The Company does
not anticipate a material impact on the financial statements as a
result of the adoption of these plans.
g) Accounts Receivable Financing
Effective January 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", and
accordingly, subsequent to the adoption of SFAS No. 125, only
receivables sold or transferred under financing agreements which meet
the criteria for off-balance sheet treatment as defined by SFAS No. 125
are recognized as sales. All other transfers of receivables are treated
as financing transactions. See Note 4 of Notes to Consolidated
Financial Statements in the Company's 1998 Annual Report on Form 10-K
for additional discussion on the Company's accounts receivable
financing program.
The uncollected principal balance of receivables and sales-type leases
sold prior to January 1, 1997, under then existing agreements, which
are subject to varying amounts of recourse totaled
7
<PAGE> 9
$100.8 at December 31, 1998. Loss reserves have been provided for
receivables and sales-type lease receivables sold and are included in
accrued liabilities.
h) Earnings Per Share
All earnings per share amounts for all periods have been presented in
accordance with the requirements of SFAS No. 128. There was no material
change to the Company's previously reported calculation of primary and
fully diluted earnings per share under APB No. 15 as a result of the
adoption of SFAS No. 128. The following table sets forth the
computation of basic and diluted earnings per share under SFAS No. 128:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
December 31, December 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NUMERATOR:
Net Income $ 7.3 $ 5.4 $ 5.9 $ (60.5)
===== ===== ===== ========
DENOMINATOR:
Basic EPS - weighted average shares 75.2 74.2 75.0 74.1
Dilutive effect: Stock options 0.0 0.2 0.0 0.2
----- ----- ----- --------
Diluted EPS - weighted average shares 75.2 74.4 75.0 74.3
===== ===== ===== ========
Basic earnings per share $0.10 $0.07 $0.08 $ (0.82)
===== ===== ===== ========
Diluted earnings per share $0.10 $0.07 $0.08 -- (a)
===== ===== ===== ========
</TABLE>
(a) Excluded as result is anti-dilutive.
i) Comprehensive Income
As of July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". The adoption of this Statement had no impact on
the Company's net income or stockholders' equity. SFAS No. 130
establishes new rules for the reporting and display of comprehensive
income and its components. SFAS No. 130 requires foreign currency
translation adjustments to be included in other comprehensive income.
Prior to the adoption of SFAS No. 130, the Company reported such
adjustments in a separate component of stockholders' equity. For the
three months ended December 31, 1998 and December 31, 1997,
comprehensive income was $5.3 and $3.4, respectively. For the six
months ended December 31, 1998 and December 31, 1997, comprehensive
income was $15.6 and $(71.6), respectively. At December 31, 1998 and
June 30, 1998, accumulated other comprehensive income was $(85.2) and
$(95.0), respectively.
8
<PAGE> 10
j) Divestitures
In September 1997, the Company sold its U.S. commercial/industrial
direct sales and service business. The Company also agreed in such
transaction to sell its monitoring business, which sale was consummated
in October 1997. The revenues of these operations prior to the
divestiture date and included in the Company's Consolidated Condensed
Statement of Operations for the six months ended December 31, 1997 were
$11.4.
k) Subsequent Event
The Company has a 51% interest in a Brazilian joint venture with fiscal
1998 revenues of approximately $30 million. Subsequent to December 31,
1998, the Brazilian currency ("Real") lost value significantly against
the U.S. Dollar. As of February 10, 1999, the Real has been devalued
approximately 35% against the U.S. Dollar as compared to December 31,
1998. The Company estimates that the change in exchange rates would not
have had a material impact on the Consolidated Balance Sheet as of
December 31, 1998 nor the Statements of Operations for the three and
six months ended December 31, 1998.
l) Litigation and other matters
During the first six months of fiscal 1996, a number of class actions
were filed in federal court by alleged shareholders of the Company
following announcements by the Company that, among other things, its
earnings for the quarter and year ended June 30, 1995, would be
substantially below expectations and, in the later actions or complaint
amendments, that the scope of the Company's year-end audit for the
fiscal year ended 1995 had been expanded and that results for the third
quarter of fiscal 1995 were being restated. These actions were
consolidated. The consolidated complaint alleged, among other things,
that the Company and certain of its current and former directors,
officers and employees, as well as the Company's auditors, violated
certain Federal securities laws.
The Company has settled the above-referenced consolidated class action.
The settlement agreement, requiring payment by the Company of
approximately $53.5, was approved by the Court and has been fully
performed by the Company. The Company has recovered a portion of the
settlement amount and related expenses from its primary directors and
officers liability insurance policy, which had a policy limit of $10.0,
and has also been paid $10.0 by one of its two excess directors and
officers liability insurers. A pretax charge of $53.0, with an
after-tax effect of $37.1, was recorded by the Company for payments
made in connection with this settlement in the first quarter of fiscal
1998. During the third quarter of fiscal 1998, the Company also
recorded a net estimated insurance recovery of $7.3 ($5.6 after-tax).
During the second quarter of fiscal 1999, the Company recorded an
insurance recovery of $6.3 ($4.4 after-tax) received pursuant to a
settlement agreement reached with the other excess liability insurer.
9
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's consolidated condensed financial statements present a
consolidation of its worldwide operations. This discussion supplements
the detailed information presented in the Consolidated Condensed
Financial Statements and Notes thereto (which should be read in
conjunction with the financial statements and related notes contained
in the Company's 1998 Annual Report on Form 10-K) and is intended to
assist the reader in understanding the financial results and condition
of the Company.
RESULTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31,
1998 COMPARED TO THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1997
The following discussion of operating results excludes the effects of
restructuring and net litigation charges recorded in fiscal 1998, which
are discussed in Note 2 and Item 7, respectively, in the Company's 1998
Annual Report on Form 10-K.
Revenues
Revenues of $250.4 for the second quarter of fiscal 1999 increased 2.7%
compared with revenues of $243.7 for the same period in fiscal 1998.
Revenues of $477.6 for the six months ended December 31, 1998 decreased
2.4% compared with revenues of $489.1 for the same period in fiscal
1998. The increase in second quarter revenues, as compared with the
same period in fiscal 1998, was due to increases in the Company's North
American Retail unit partially offset by decreases in the Company's
Europe, International and C/I Worldwide business units. The second
quarter and first six months of fiscal 1998 included revenues of $1.8
and $17.4, respectively, from subsequently divested businesses, the
largest of which was the U.S. commercial/industrial direct sales and
service business which was sold in September 1997. Excluding the
effects of these non-core businesses, fiscal 1999 revenues increased
approximately 3.5% for the second quarter and 1.2% for the first six
months, as compared with the same periods in fiscal 1998.
For the second quarter and first six months of fiscal 1999, North
America Retail revenues increased 18.9% and 17.6%, respectively, as
compared with the same periods for fiscal 1998. The increase in
revenues was attributable to continued large orders and shipments of
electronic article surveillance equipment to major retail chains.
Europe Retail revenues decreased 1.6% and 5.9% for the second quarter
and first six months of fiscal 1999, respectively, as compared with the
same periods for fiscal 1998. The decrease in Europe Retail revenues
continues to be driven by an emphasis on more outright sales rather
than sales-type lease revenue and continued pricing pressure on
electromagnetic systems. Second quarter revenues reflect improvements
in the Company's United Kingdom, Scandinavia and Eastern Europe
businesses offset by reductions in France.
International Retail revenues, which include Latin America and Asia
Pacific, decreased 3.4% and 10.2% for the second quarter and first six
months of fiscal 1999, respectively, as compared with the same periods
of fiscal 1998. The overall decrease in International Retail revenues
reflects the unfavorable economic conditions in the retail market and
weakening currencies which continue to exist in most of the Asian and
Latin American countries.
10
<PAGE> 12
Revenues generated by C/I Worldwide decreased 11% and 21.5% in the
second quarter and first six months of fiscal 1999, respectively, as
compared with the same periods of fiscal 1998. Excluding the effect on
revenues of divested non-core businesses, C/I Worldwide revenues
decreased 8.1% and 7.9% in the second quarter and the first six months
of fiscal 1999, respectively, as compared with the same periods of
fiscal 1998. While C/I revenues in North America and Europe indirect
were up 5% and 10%, respectively, in the second quarter of fiscal 1999
as compared with the same period of fiscal 1998, overall revenue
declines were due principally to worldwide price competition and
continued declines in Asia and Latin America resulting from reduced
direct business and economic conditions existing in those areas. In
light of the lack of revenue growth, during the second quarter of
fiscal 1999, steps were taken by the Company to reduce costs and more
tightly focus sales and marketing activities around the Company's C/I
product offerings.
Gross Margins, Operating Expenses and Operating Income
Gross margins on revenues were 41.1% and 41.6% for the three and six
month periods ended December 31, 1998, respectively, compared with
46.5% and 45.4% for the comparable periods of the prior year. The
decrease in margins was partially due to continued volume discounts on
major orders in North America Retail, a higher mix of service revenues
at lower margins than product margins and, in Europe Retail, a lower
level of sales-type lease revenue which historically has had margins
higher than the Company's overall margin. Additionally, continued price
competition in the market for electromagnetic systems sold in Europe
Retail and global pricing pressure in the market for multiplexers
contributed to the decrease in margins. The Company expects margins to
improve in upcoming quarters due to improvements in revenue levels and
mix, enhanced service profitability and additional expense reductions.
Selling, general and administrative expenses, as a percentage of total
revenues, was 29.2% and 30.4% for the second quarter and first six
months of fiscal 1999, respectively, as compared with 31.5% and 34.7%
for the comparable periods in fiscal 1998. The decrease in expenses as
a percentage of revenues for the second quarter and first six months of
fiscal 1999, as compared with the comparable periods of the prior year,
reflects the Company's continued effort to implement the headcount and
facilities reductions associated with its previously announced
restructuring plans and the effect of the cost reductions resulting
from an extensive review performed by the Company, beginning in fiscal
year 1996, to realign its business. Ongoing cost containment and
rationalization efforts are expected to generate lower levels and
ratios of selling, general and administrative expense in relation to
revenues in the second half of fiscal 1999 as the Company completes the
cost reductions outlined in its restructuring plans and further reduces
expenses in the current fiscal year. Included in selling, general and
administrative expenses for the first six months of fiscal 1998 are
incremental charges of $10.8, or 2.2% of revenues, for certain employee
separation and contract resolution costs.
Provision for doubtful accounts, as a percentage of total revenues, was
2.1% in the second quarter and first six months of fiscal 1999, as
compared with 2.2% and 2.1% for the same periods in fiscal 1998.
Research, development and engineering expenses were 2.5% of revenue in
the three months ended December 31, 1998 as compared with 2.8% for the
same period in fiscal 1998. For the first six months of fiscal 1999,
research, development and engineering expenses were 2.8% of revenue as
compared with 2.7% for the same period in fiscal 1998.
11
<PAGE> 13
Operating income decreased from $19.2 in the second quarter of fiscal
1998 to $12.8 in the second quarter of fiscal 1999. Before
restructuring, operating income increased from $18.3 for the first six
months of fiscal 1998 to $19.1 for the comparable period in fiscal
1999. The impact of the incremental charges discussed under selling,
general and administrative expenses above, and $3.0 of additional
incremental charges included in cost of sales, was to reduce operating
income by $13.8 million in the first six months of fiscal 1998.
Other (Expenses) Income and Taxes
Net interest and other expenses of $8.2 and $16.3 for the second
quarter and first six months of fiscal 1999, respectively, reflected a
decrease of $3.0 and $5.5, respectively, over the comparable periods of
fiscal 1998, excluding litigation settlement charges in the first
quarter of fiscal 1998 and insurance recoveries during the second
quarter of fiscal 1999. These decreases are primarily due to the
decrease in interest expense and improved cash flow from reductions in
working capital. Lower debt levels resulted primarily from the use of a
portion of the proceeds from the Company's April 1998 preferred stock
offering to repay the outstanding balance under the Company's revolving
credit line. The second quarter fiscal 1999 insurance recovery of $6.3
($4.4 after-tax) is related to a settlement agreement reached with one
of the Company's insurance carriers related to the shareholder
litigation settled in the first quarter of fiscal 1998.
The provision for income taxes for the second quarter and first six
months of fiscal 1999 and the second quarter of fiscal 1998 is based on
an estimated effective annual consolidated tax provision rate of 30.0%.
The benefit for income taxes for the first six months of fiscal 1998 is
based on an estimated effective annual consolidated tax benefit rate of
30.0%. The tax benefit for the first six months of fiscal 1998 related
primarily to the restructuring and litigation charges recorded during
the first quarter.
The Company reported net income of $7.3, or $0.10 per share, and $5.9,
or $0.08 per share, for the second quarter and first six months of
fiscal 1999, respectively, as compared with net income of $5.4, or
$0.07 per share, for the second quarter of fiscal 1998 and a net loss
of $60.5, or $0.82 per share, for the first six months of fiscal 1998.
Excluding restructuring and litigation charges and associated insurance
recoveries, the Company reported net income of $2.9, or $0.04 per
share, and $1.5, or $0.02 per share, for the second quarter and first
six months of fiscal 1999, respectively, as compared with net income of
$5.4, or $0.07 per share, for the second quarter of fiscal 1998 and a
net loss of $3.0, or $0.04 per share, for the first six months of
fiscal 1998. The foregoing net loss includes the effect of the
incremental charges of $13.8 discussed under operating income, above,
which had a negative after-tax impact of $9.7 or $0.13 per share.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1999, cash and cash equivalents
decreased $19.6 primarily due to the repayment of debt and expenditures
related to revenue equipment, offset by reductions in receivables. For
the six month period ended December 31, 1998, cash flow provided by
operating activities was $45.7 compared with cash used in operations
for the six month period ended December 31, 1997 of $52.8. The
improvement in operating cash flow in the six month period ended
December 31, 1998 was primarily a result of reduced levels of
receivables and inventories in fiscal 1999, as compared with increases
in inventory and receivables in the comparable period in fiscal 1998.
Included in operating cash flow in the six
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month period ended December 31, 1998 is an insurance recovery of
$6.3 ($4.4 after-tax) related to a settlement agreement reached with
one of the Company's insurance carriers related to the shareholder
litigation settled in the first quarter of fiscal 1998.
In the first six months of fiscal 1999, the Company used $43.4 of cash
in investing activities, compared with $32.0 in the first six months of
fiscal 1998. The fiscal 1998 amount included $7.4 million of net
proceeds from the sale of a non-core business.
For the six month period ended December 31, 1998, $21.9 of cash was
used for financing activities as compared with cash being generated of
$78.9 as a result of financing activities during the six month period
ended December 31, 1997. The principal use of cash in financing
activities during the first six months of fiscal 1999 was to repay
approximately $23.5 of debt.
The Company's percentage of total debt to total capital was 36.5% at
December 31, 1998 as compared with 37.9% at June 30, 1998. Certain of
the Company's financial agreements currently prohibit the payment of
cash dividends, as well as the purchase of Company securities, until
certain profit levels are achieved and reflected in the Company's
annual audited financial statements. Under these provisions, it is
unlikely that the Company would be able to pay cash dividends until
after the preparation of its audited financial statements for fiscal
year 2000 at the earliest. The Company intends to pay any dividends
declared on the Convertible Preferred Stock with shares of Common Stock
prior to the time it is able to pay such cash dividends. The Company
issued approximately 414,532 shares of common stock in payment of the
January 4, 1999 dividend on the Preferred Stock.
The Company uses the U.S. dollar as its reporting currency for
financial statement purposes. The Company conducts business in numerous
countries around the world through its international subsidiaries which
use local currencies to denominate their transactions, and is,
therefore, subject to certain risks associated with fluctuating foreign
currencies. See Note k to the Consolidated Condensed Financial
Statements for a further discussion of the recent developments
regarding the Brazilian currency. The resulting changes in the
financial statements do not indicate any underlying changes in the
financial position of the international subsidiaries but merely reflect
the adjustment in the carrying value of the net assets of these
subsidiaries at the current U.S. dollar exchange rate. Due to the
long-term nature of the Company's investment in these subsidiaries, the
translation adjustments resulting from these exchange rate fluctuations
are excluded from the results of operations and are recorded in a
separate component of consolidated stockholders' equity. The $9.8
decrease in currency translation adjustments at December 31, 1998
compared to June 30, 1998, which is reflected in the balance sheet
caption "Accumulated other comprehensive income", resulted primarily
from the translation of the balance sheets denominated in French francs
and Belgian francs, reflecting the weakening of the U.S. dollar
relative to such currencies at December 31, 1998. The Company monitors
its currency exposures but does not hedge its translation exposures due
to the high economic costs of such a program and the long-term nature
of its investment in its international subsidiaries.
The Company requires significant cash flow to meet its debt service and
other continuing obligations. As of December 31, 1998, the Company had
$526.2 million of total indebtedness outstanding. The Company's
expected principal liquidity requirements are working capital,
financing of customer equipment purchases, investments in revenue
equipment and capital expenditures and interest on the Senior Notes. At
December 31, 1998, the Company's principal
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sources of liquidity are (i) cash on hand, (ii) cash flow from
operations, (iii) borrowings under the $250.0 million Revolving Credit
Facility, of which none was utilized, and (iv) receivable
securitization facilities. The Company believes that cash flow from
operations, together with borrowings under the Revolving Credit
Facility, will be sufficient to meet its liquidity needs for the
foreseeable future.
YEAR 2000 UPDATE
Year 2000
Many computer applications, processor chips embedded in many products
and computers and operating systems that are not Year 2000 compliant
are unable to distinguish between the calendar year 1900 and the
calendar year 2000. The Year 2000 Issue creates potential risks for the
Company, including potential problems in the Company's products as well
as in the Information Technology ("IT") and non-IT systems that the
Company uses in its business operations. The Company may also be
exposed to risks from third parties with whom the Company interacts who
fail to adequately address their Year 2000 Issues. The Company has
recognized the need to ensure that its business operations will not be
adversely affected by the upcoming calendar year 2000 and is cognizant
of the time sensitive nature of the Year 2000 problem. In 1996, the
Company began a project to implement a global enterprise resource
planning system. The Company has completed this implementation at all
manufacturing locations and many of the sales and service subsidiaries
around the world. This project continues to address the Company's key
non-compliant IT systems. Scheduled implementation dates for those
remaining locations are as follows:
Mexico July 1, 1999
North America July 1, 1999
United Kingdom September 6, 1999
The Company's State of Readiness
The Company centralized its focus on addressing the Year 2000 Issue by
establishing a Year 2000 Program Management Office in order to
implement a consistent approach to minimizing Year 2000 risks across
the Company worldwide. The Company also assigned Project Teams in each
Business Unit. The Program Management Office and the Project Teams are
assisted by specialists and consultants. The Company's key dates
relative to its program focusing on IT and non-IT systems that the
Company uses in its business operations are as follows:
Inventory and assessment completed March 31, 1999
All Critical components in testing May 31, 1999
Critical components Year 2000 compliant August 31, 1999
Address non-critical components September 30, 1999
The Company has substantially completed testing of its manufactured
products. To aid in communication with the Company's customers and
suppliers, the Company has developed an Internet Web site that
identifies the current Year 2000 status for each of the Company's
products.
A survey of the Company's suppliers and service providers has begun to
insure they are working on this effort and will remain viable suppliers
through and after January 1, 2000. The process of evaluating the Year
2000 status of the Company's principal suppliers and service providers
will be on-going through the remainder of the calendar year.
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The Costs to Address the Company's Year 2000 Issues
The cost of implementing the enterprise resource planning system is
estimated at $40.0 million. In addition to the enterprise resource
planning system, the Company estimates approximately $1.0 million for
the cost associated with the Company's Year 2000 project. Remediation
efforts are not currently expected to be significant, however, this can
not be assured until after the inventory and assessment is completed.
Should significant remediation efforts be required, the project cost
would exceed $1.0.
The Risks of the Company's Year 2000 Issues
The Company presently believes that the Year 2000 issue will not cause
material operational problems for the Company. However, if the Company
is not successful in identifying all material Year 2000 problems, or
its assessment and remediation of identified Year 2000 problems is not
completed in a timely manner, there may be an interruption in, or
failure of, certain normal business activities or operations. This risk
includes unforeseen delays in the implementation of the Company's
enterprise resource planning system. Such interruptions, failures or
delays in implementing the enterprise resource planning system could
have a material adverse impact on the Company's consolidated results of
operations and financial condition, or on its relationships with
customers, suppliers or others.
The Company's Contingency Plans
The Company expects to have developed by June 30, 1999, or shortly
thereafter, a comprehensive contingency plan to address situations that
may result if the Company or any of the third parties upon which the
Company is dependent is unable to achieve Year 2000 readiness. The
Company's Year 2000 compliance program is ongoing and its ultimate
scope, as well as the consideration of contingency plans, will continue
to be evaluated as new information becomes available.
Year 2000 Forward-Looking Statements
The foregoing Year 2000 discussion contains "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements, including without limitation,
anticipated costs and the dates by which the Company expects to
complete certain actions, are based on management's best current
estimates, which were derived utilizing numerous assumptions about
future events, including the continued availability of certain
resources, representations received from third parties and other
factors. However, there can be no guarantee that these estimates will
be achieved, and actual results could differ materially from those
anticipated. Specific factors that might cause such material
differences include, but are not limited to, the ability to identify
and remediate all relevant IT and non-IT systems, results of Year 2000
testing, adequate resolution of Year 2000 Issues by businesses and
other third parties who are service providers, suppliers or customers
of the Company, unanticipated system costs, the adequacy of and ability
to develop and implement contingency plans and similar uncertainties.
The "forward-looking statements" made in the foregoing Year 2000
discussion speak only as of the date on which such statements are made,
and the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which
such statement is made or to reflect the occurrence of unanticipated
events.
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INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Except for historical matters, the matters discussed in this Form 10-Q
are forward-looking statements which reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. The following
factors could cause actual results to differ materially from historical
results or those anticipated: 1) changes in international operations 2)
exchange rate risk 3) market conditions for the Company's products 4)
the Company's ability to provide innovative and cost-effective
solutions 5) development risks 6) competition and 7) changes in the
economic climate.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
See the Company's 1998 Annual Report on Form 10-K (Item 7A). There has
been no material change in this information.
17
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In connection with the settlement of the Federal Insurance Company
("Federal") action referred to in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1998 ("Form 10-K"), the Company
and Federal have entered into a final settlement agreement and the $6.3
million payable by Federal thereunder in settlement of its insurance
obligations has been received by the Company.
In addition, reference is made to Item 3 of Part I of the Form 10-K.
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Item 2. Changes in Securities and Use of Proceeds
Pursuant to the terms of the Preferred Stock, the Company issued
approximately 414,532 shares of common stock in payment of the dividend
payable, and certain liquidated damages under the registration
agreement, on January 4, 1999. (Registration of these shares is not
required because no additional consideration was paid therefor.)
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Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on November
20, 1998. The following business was transacted:
Three company directors were voted on for re-election. The re-election
of James Lineberger and John Ray was voted on by 89% of the outstanding
shares with 97% of those voting for both nominees and 3% voting
against. The re-election of Thomas Buffett was voted on by 89% of the
outstanding shares with 95% of those voting for the nominee and 5%
voting against. All three were re-elected for a three year term
expiring in the year 2001.
A proposal to approve the Company's 1999 Stock Incentive Plan, which
provides 3.65 million additional shares available for grant, was voted
on by 75% of the outstanding shares with 71% of those voting in favor
of the proposal and 29% voting against. The proposal was approved.
Additionally, there were 320,471 abstention votes.
A proposal to amend the Company's Directors Stock Option Plan to
increase the total number of shares that may be issued under the plan
by 350,000 shares was voted on by 75% of the outstanding shares with
72% of those voting in favor of the proposal and 28% voting against.
The proposal was approved. Additionally, there were 380,089 abstention
votes.
A stockholder proposal by the New York City Teachers' Retirement System
(NYCTRS) that shareholders request the Company's Board of Directors to
reinstate the rights of shareholders to take action by written consent
and to call special meeting was voted on by 67% of the outstanding
shares with 56% of those voting in favor of the proposal and 44% voting
against. The proposal was approved. Additionally, there were 6,290,018
abstention votes. After review and consideration of the proposal and
the results of the vote, the Board of Directors approved amendments to
the By-Laws of the Company which, among other things, provide for the
calling of special meetings of stockholders at the request of
stockholders. The By-Laws of the Company, as amended, are filed as an
exhibit to this Form 10-Q.
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3) By-Laws of the Company
27) Financial Data Schedule (for SEC use only).
b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three - month period ended December 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SENSORMATIC ELECTRONICS CORPORATION
By /S/ Garrett E. Pierce
------------------------------
Garrett E. Pierce
Senior Vice President, Chief
Administrative Officer and
Chief Financial Officer
(Principal Financial Officer)
Date: February 16, 1999
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<PAGE> 1
As amended through February 12, 1999
SENSORMATIC ELECTRONICS CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Dover, County of Kent, State of Delaware,
and the registered agent of the Corporation shall be The Prentice-Hall
Corporation System, Inc., whose address is 229 South State Street, Dover,
Delaware.
Section 2. OTHER OFFICES. 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. ANNUAL MEETING. The annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as may properly come before the meeting
shall be held on the first Friday of November in each year, if not a legal
holiday, and if a legal holiday, then on the next succeeding day not a legal
holiday, or on such other date as may be fixed from time to time by resolution
of the Board of Directors, and at the principal office of the Corporation or at
such other place within or without the State of Delaware as shall be designated
by the Board of Directors. The Board of Directors may change the date and/or
place of any scheduled annual meeting, either before or after notice of such
meeting has been given.
Section 2. SPECIAL MEETING. A special meeting of the
stockholders may be called at any time by the Chairman of the Board, the
President of the Corporation or the majority of the Board of Directors, and
shall be called following the written request of stockholders holding of record
in the aggregate at least thirty-three and one-third percent(33 1/3%) of the
issued and outstanding shares of stock of the Corporation entitled to vote at
such meeting. Such special meeting shall be held for such purpose or purposes,
at such time, and at such place within or without the State of Delaware, as may
be determined by the Chairman of the Board or the President, respectively, in
the case of meetings called by the Chairman of the Board or the President,
<PAGE> 2
or by resolution of the Board, in the case of meetings called by the Board. Any
special meeting called at the request of the stockholders pursuant hereto shall
be held for the purpose or purposes described in the request therefor and for
such other purpose or purposes as may be determined by the Board of Directors,
on a date, not more than 90 days following receipt by the Secretary of the
Corporation of such request and confirmation reasonably satisfactory to the
Board that such request meets the requirements of this Section, and at such
time and at such place as may be determined by the Board. Notwithstanding
anything contained herein to the contrary, if the annual meeting of
stockholders would occur within such 90-day period or within 30 days following
the expiration of such 90-day period, the Board of Directors may determine to
include the purpose or purposes requested by stockholders hereunder with the
business to be conducted at such annual meeting. The purpose or purposes of any
proposed special meeting shall be set forth in the notice of such meeting. The
business transacted at any such special meeting shall be limited to such
purpose or purposes as are set forth in the notice thereof. Subject to the
requirements of this Section and applicable law, the date, time and/or place of
any scheduled special meeting of the stockholders may subsequently be changed,
either before or after notice of such meeting has been given, by the Chairman
of the Board or the President of the Corporation or the majority of the Board
of Directors.
Section 3. NOTICE OF MEETINGS. Notice of the place, date and
time of the holding of each annual and special meeting of the stockholders (and
of any change in such place, date and/or time) and the purpose or purposes
thereof shall be given personally or by mail in a postage prepaid envelope to
each stockholder entitled to vote at such meeting, not less than ten nor more
than sixty days before the date of such meeting, and, if mailed, it shall be
directed to such stockholder at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, in which
case it shall be directed to him at such other address. Any such notice for any
meeting other than the annual meeting of stockholders shall indicate that such
meeting is being called at the direction of the Chairman of the Board, the
President, a majority of the Board of Directors, or at the request of
stockholders in accordance with Section 2 of this Article II, as applicable.
Notice of any meeting shall not be required to be given to any stockholder who
shall attend such meeting in person or by proxy and shall not, at the beginning
of such meeting, object to the transaction of any business because the meeting
is not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy. Unless the
Board shall fix a new record date for an
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adjourned meeting, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. 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 4. QUORUM. At all meetings of the stockholders, the
holders of one-third of the shares of stock of the Corporation issued and
outstanding and entitled to vote and present in person or by proxy shall
constitute a quorum for the transaction of any business, except as otherwise
required by law or the Certificate of Incorporation in respect of the vote that
shall be required for a specified action. In the absence of a quorum, the
holders of a majority of the shares of stock present in person or by proxy and
entitled to vote, or the Chairman of the Board, the President or any officer of
the Corporation authorized by the Board, may adjourn the meeting from time to
time. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 5. ORGANIZATION. At each meeting of the stockholders,
the Chief Executive Officer or, in his absence or inability to act, such
officer or other person designated by the Board of Directors, or, in the
absence or inability to act of such designee, such other person chosen by a
majority of those stockholders present or represented, shall act as chairman of
the meeting. The Secretary, or, in his absence or inability to act, an
Assistant Secretary or any other officer appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep the minutes thereof.
The meeting may be adjourned from time to time by the chairman of the meeting
or, at the direction of the Board, by any officer.
Section 6. ORDER OF BUSINESS. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
Section 7. VOTING. Except as otherwise provided by statute or
the Certificate of Incorporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation (a) on the date fixed by the
Board of Directors as the record date for the determination of
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the stockholders who shall be entitled to notice of and to vote at such
meeting; or (b) if such record date shall not have been so fixed, then at the
close of business on the day next preceding the day on which notice thereof
shall be given; or (c) if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. Each stockholder entitled
to vote at any meeting of stockholders may authorize another person or persons
to act for him by a proxy signed by such stockholder or his attorney-in-fact.
Any such proxy shall be delivered to the secretary of such meeting at or prior
to the time designated in the order of business for so delivering such proxies.
No proxy shall be valid after the expiration of three years from the date
thereof, unless the proxy provides for a longer period. Every proxy shall be
revocable at the pleasure of the stockholder executing it, except in those
cases where an irrevocable proxy is permitted by law. Except as otherwise
required by law, the rules and regulations of any exchange on which the stock
of the Corporation is traded, the Certificate of Incorporation or these
By-Laws, any corporate action to be taken by vote of the stockholders shall be
authorized by a majority of the total votes cast at a meeting of stockholders
by the holders of shares present in person or represented by proxy and entitled
to vote on such action. Unless required by statute, or determined by the
chairman of the meeting to be advisable, the vote on any question need not be
by written ballot. On a vote by written ballot, each ballot shall be signed by
the stockholder voting, or by his proxy, if there be such proxy, and shall
state the number of shares voted.
Section 8. LIST OF STOCKHOLDERS. The officer who has charge
of the stock ledger of the Corporation shall prepare and make or cause to be
prepared and made, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of 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 9. INSPECTORS. The Board of Directors may, in advance
of any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If
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inspectors shall not be so appointed or if any of them shall fail to appear or
act, the chairman of the meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any
fact found by them. No director or candidate for the office of director shall
act as inspector of an election of directors. Inspectors need not be
stockholders.
Section 10. NO ACTION BY CONSENT. No action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Corporation may be taken without a meeting and the power of stockholders to
consent in writing to the taking of any action is specifically denied.
Section 11. NOTICE OF STOCKHOLDER BUSINESS. At an annual
meeting of stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or by the Chairman of the Board or the President of the
Corporation or (c) otherwise properly brought before the meeting by a
stockholder entitled to vote at such meeting. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice must be received by the Secretary at the
principal office of the Corporation not less than seventy-five (75) days nor
more than 120 days prior to the meeting; provided, however, that in the event
that less than ninety (90) days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to
be timely must be so received not later than the close of business on the
fifteenth (15th) day following
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the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. As used in this Section 11 and in paragraph B of
Section 2 of Article III of these By-Laws, the phrase "notice or prior public
disclosure of the date of the meeting" shall mean notice or prior public
disclosure of the date on which the meeting is originally scheduled to be
called to order, whether or not such notice is given, without limitation, by
press release, filing with the Securities and Exchange Commission or inclusion
in any quarterly, annual or other report or material mailed to stockholders,
and shall not refer to notice or prior public disclosure of any date to which
such meeting may be adjourned. A stockholder's notice to the Secretary shall
set forth, as to each matter the stockholder proposes to bring before the
annual meeting, (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
stock transfer books, of the stockholder proposing such business, (c) the class
and number of shares of capital stock of the Corporation which are beneficially
owned (such term being used in this Section 11 and in paragraph B of Section 2
of Article III of these By-Laws with the meaning ascribed to such term in Rule
13d-3 of the rules under the Securities Exchange Act of 1934, as amended, as
such Rule was in effect on July 1, 1990) by the stockholder and (d) any
material interest of the stockholder in such business, and shall otherwise
comply with the requirements of Rule 14a-8 under Regulation 14A of the
Securities Exchange Act of 1934, as amended, whether or not such requirements
are then applicable. Notwithstanding any other provision of these By-Laws, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 11. If the presiding officer of an annual
meeting determines and declares that business was not properly brought before
the meeting in accordance with this Section 11, any such business shall not be
transacted.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The property, business and affairs
of the Corporation shall be managed by the Board of Directors. The Board of
Directors may exercise all such authority and powers of the Corporation and do
all such lawful acts and things as are not by statute, the Certificate of
Incorporation or these By-Laws directed or required to be exercised or done by
the stockholders.
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Section 2. A. NUMBER, CLASSIFICATION, TERM OF OFFICE,
QUALIFICATIONS AND ELECTION. The Board of Directors shall initially consist of
six directors. Thereafter, the number of directors of the Corporation shall be
determined by resolution approved by at least a majority of the then authorized
number of directors, but shall not be more than fifteen nor less than five. The
Board of Directors shall be divided into three classes as nearly equal in
number as possible, with the term of office of one class expiring each year.
The terms of office of the directors elected at the annual meeting of
stockholders in 1977 and initially classified shall be as follows: directors of
the first class shall hold office for a term expiring at the next succeeding
annual meeting; directors of the second class shall hold office for a term
expiring at the second succeeding annual meeting; and directors of the third
class shall hold office for a term expiring at the third succeeding annual
meeting. At each annual meeting of stockholders after the annual meeting in
1977, directors elected to succeed the class of directors whose terms expire at
such annual meeting shall be elected to hold office for a term expiring at the
third succeeding annual meeting after their election. When the number of
directors is changed, any newly created directorships or any decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal in number as possible. Subject to the foregoing, the respective
classes for which directors shall be selected or chosen shall be determined by
resolution approved by at least a majority of the then authorized number of
directors. Each director shall hold office for the specified term and until his
successor shall be duly elected and qualified, or until his death, or until he
shall have resigned or he shall have been removed, as hereinafter provided in
these By-Laws, or as otherwise provided by statute or by the Certificate of
Incorporation. All the directors shall be of full age. Directors need not be
stockholders. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, directors to be elected at each annual meeting
of stockholders shall be elected by a plurality of the votes cast at the
meeting by the holders of shares present in person or represented by proxy and
entitled to vote for the election of directors.
B. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the procedures set forth in this paragraph B shall be eligible
for election as a director at any meeting of stockholders for the election of
directors (an "Election Meeting"). Nominations of candidates for election to
the Board of Directors of the Corporation at an Election Meeting may be made
only by or at the direction of the Board of Directors or by a stockholder
entitled to vote at such Election Meeting. All such nominations, except those
made by or at the direction of the Board of Directors, shall be made pursuant
to timely notice in
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writing to the Secretary of the Corporation of the stockholder's intention to
make such nomination. To be timely, any such notice must be received by the
Secretary at the principal office of the Corporation not less than seventy-five
(75) nor more than 120 days prior to the date of the Election Meeting;
provided, however, that in the event that less than ninety (90) days' notice or
prior public disclosure (as described in Section 11 of Article II) of the date
of the Election Meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of business
on the fifteenth (15th) day following the day on which such notice of the date
of the Election Meeting was mailed or such public disclosure was made. Such
stockholder's notice with respect to a proposed nomination shall set forth (a)
as to each person whom the stockholder proposes to nominate as a candidate for
election to the Board of Directors (i) the name, age, business address and
residence address and the principal occupation or employment of such person,
(ii) the class and number of shares of capital stock of the Corporation which
are beneficially owned by such person, (iii) such other information concerning
such person as would be required, under the rules of the Securities and
Exchange Commission, in a proxy statement soliciting proxies for the election
of such person and (iv) a signed consent of such person to serve as a Director
of the Corporation, if elected, and (b) as to the stockholder giving the notice
(i) the name and address of such stockholder, as they appear in the
Corporation's stock transfer books and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. In the event that a person is validly designated as a nominee in
accordance with the procedures specified above and shall thereafter become
unable or unwilling to stand for election to the Board of Directors, the Board
of Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee; provided, however, that in the case of
persons not nominated by the Board of Directors, such a substitution may be
made only if notice as provided above in this paragraph B is received at the
principal office of the Corporation not later than the later of (x) thirty
(30) days prior to the date of the Election Meeting or (y) five (5) days after
the stockholder proposing the original nominee first learned that such original
nominee has become unable or unwilling to stand for election. If the presiding
officer of an Election Meeting determines and declares that a Director
nomination was not made in accordance with the foregoing procedures, such
nomination shall be void and shall be disregarded for all purposes.
Section 3. ANNUAL MEETING. The Board of Directors shall meet
for the purpose of organization, the election of officers and the transaction
of other business, as soon as practicable after each annual meeting of the
stockholders, on the
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same day and at the same place where such annual meeting shall be held. Notice
of such meeting need not be given. Such meeting may be held at any other time
or place (within or without the State of Delaware) which shall be specified in
a notice thereof given as hereinafter provided in Section 6 of this Article
III, or in a waiver of notice thereof.
Section 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places within or without the State of
Delaware as the Board of Directors may from time to time by resolution
determine. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day. Notice of regular meetings of the Board of Directors
need not be given except as otherwise required by statute or these By-Laws.
Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the President
or any two directors of the Corporation and shall be held at such time and at
such place within or without the State of Delaware as shall be specified in the
notice of meeting or waiver thereof.
Section 6. NOTICE OF MEETINGS. Notice of each special meeting
of the Board of Directors (and of each regular meeting for which notice shall
be required) shall be given by the Secretary as hereinafter provided in this
Section 6, in which notice shall be stated the time and place of the meeting.
Notice of each such meeting shall be delivered to each director, either
personally (including by courier) or by telephone, telex, telegraph, or
facsimile transmission at least twenty-four hours before the time at which such
meeting is to be held, or shall be mailed to each director by first-class mail
postage prepaid, addressed to him at his residence or usual place of business,
at least three days before the day on which such meeting is to be held. Notice
of any such meeting need not be given to any director who shall, either before
or after the meeting, submit a signed waiver of notice or who shall attend such
meeting without objecting, at the beginning of such meeting, to the transaction
of any business because the meeting is not lawfully called or convened. Except
as otherwise specifically required by these By-Laws, a notice or waiver of
notice of any regular or special meeting of the Board of Directors need not
state the purpose or purposes of such meeting.
Section 7. QUORUM AND MANNER OF ACTING. Except as provided in
Section 5 of Article IX of these By-Laws, a majority of the directors shall be
present in person at any meeting of the
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Board of Directors in order to constitute a quorum for the transaction of
business at such meeting, and, except as otherwise expressly required by
statute or the Certificate of Incorporation, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum at any meeting of the
Board of Directors, a majority of the directors present thereat, or if no
director be present, the Secretary, may adjourn such meeting to another time
and place, or such meeting, unless it be the annual meeting of the Board of
Directors, need not be held. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called. Except as provided in Section 11 of this Article
III, Article IV and Section 4 of Article IX of these By-Laws and as otherwise
specifically authorized by resolution of the Board of Directors, the directors
shall act only as a Board of Directors and the individual directors shall have
no power as such.
Section 8. A. ORGANIZATION OF MEETINGS. At each meeting of
the Board of Directors, the Chairman of the Board, or, in his absence or
inability to act, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside thereat. The minutes of the meeting shall
be recorded by any officer of the Corporation present and designated by the
chairman.
B. CHAIRMAN OF THE BOARD. The Board of Directors, by action
of a majority of the entire Board, shall from time to time designate a Chairman
of the Board, who shall serve at the discretion of the Board and who shall, if
present, preside at all meetings of the Board of Directors and perform such
other duties as may from time to time be assigned to him by the Board of
Directors. The Board of Directors may designate the Chairman of the Board as an
officer of the Corporation and, if so designated, the Chairman of the Board
shall, in addition, have such powers, and perform such duties, as are
incidental to the office of Chairman of the Board and as otherwise may be
assigned to him by the Board of Directors.
Section 9. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
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Section 10. REMOVAL OF DIRECTORS. Except as otherwise
provided in the Certificate of Incorporation or in these By-Laws, any director
may be removed, but only for cause, at any time, by the affirmative vote of the
holders of a majority of the outstanding shares of stock entitled to vote for
the election of directors of the Company at a meeting of the stockholders
called and held for that purpose.
Section 11. VACANCIES. Except as otherwise required by
statute or by the Certificate of Incorporation, during the intervals between
annual meetings of stockholders, any vacancies and any newly-created
directorships resulting from an increase in the authorized number of directors
shall be filled by a majority vote of the directors then in office, whether or
not a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next election of the class for which such directors
shall have been chosen and until their successors shall be duly elected and
qualified, unless sooner displaced. If there are no directors in office, then a
special meeting of stockholders for the election of directors may be called and
held in the manner provided by statute. When one or more directors shall resign
from the Board of Directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the filling of other
vacancies.
Section 12. COMPENSATION. The Board of Directors or a
committee of the Board designated by it shall have authority to fix the
compensation, including without limitation fees and reimbursement of expenses,
of directors for services to the Corporation in any capacity; provided,
however, that no such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 13. ACTION WITHOUT MEETING. 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 14. PARTICIPATION IN MEETINGS BY TELEPHONE AND OTHER
EQUIPMENT. Members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or 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 par-
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ticipation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. EXECUTIVE AND OTHER COMMITTEES. The Board of
Directors may, by a resolution passed by a majority of the whole Board,
designate an Executive Committee, to consist of three or more directors of the
Corporation, and one or more other committees, each such other 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 any member of the
Executive Committee or such other committee or committees, 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. The Executive Committee, while the Board of
Directors is not in session, shall have and may exercise, and any such other
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 By-Laws expressly so provide, no such committee shall
have the power or authority to declare a dividend or to authorize the issuance
of stock. Each committee shall keep written minutes of its proceedings and
shall report such minutes to the Board of Directors when required. All such
proceedings shall be subject to revision or alteration by the Board of
Directors; provided, however, that rights of third parties shall not be
prejudiced by such revision or alteration. The Board of Directors, by action of
a majority of the entire Board, may at any time fill vacancies in, change the
membership of, or dissolve any such committee.
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Section 2. EXECUTIVE COMMITTEE: GENERAL. Regular meetings of
the Executive Committee shall be held at such times and places, within or
without the State of Delaware, as a majority of such Committee may from time to
time by resolution determine. Special meetings of the Executive Committee may
be called at the request of any member thereof and may be held at such times
and places, within or without the State of Delaware, as such Committee may from
time to time by resolution determine or as shall be specified in the respective
notices or waivers of notice thereof. Notice of regular meetings of such
Committee need not be given except as otherwise required by statute or these
By-Laws. Notice of each special meeting of such Committee shall be given to
each member of such Committee, unless waived or not required, as provided in
Section 6 of Article III of these By-Laws. Subject to the provisions of this
Article IV, the Executive Committee, by resolution of a majority of such
Committee, shall fix its own rules of procedure. A majority of the Executive
Committee shall be present in person at any meeting of the Executive Committee
in order to constitute a quorum for the transaction of business at such
meeting, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of the Executive Committee. The members of
the Executive Committee shall act only as a committee, and the individual
members shall have no power as such.
Section 3. OTHER COMMITTEES: GENERAL. A majority of any
committee may fix its rules of procedure, determine its action, and fix the
time and place, within or without the State of Delaware, of its meetings,
unless the Board of Directors shall otherwise by resolution provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in Section 6 of Article III of these By-Laws. Nothing in this
Article IV shall be deemed to prevent the Board of Directors from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority of the Board.
ARTICLE V
OFFICERS
Section 1. NUMBER AND QUALIFICATIONS. The officers of the
Corporation shall be a President, a Vice President and Controller, one or more
other Vice Presidents, a Secretary, a Treasurer and, if designated as an
officer by the Board of Directors, the Chairman of the Board. Any two or more
offices may be held by the same person. Such officers shall be elected from
time to time by the Board of Directors, each to hold office
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until the meeting of the Board following the next annual meeting of the
stockholders, or until his successor shall have been duly elected and shall
have qualified, or until his death, or until he shall have resigned or until he
shall have been removed, as hereinafter provided in these By-Laws. The Board of
Directors shall designate a Chief Executive Officer, may designate a Chief
Financial Officer, and may, from time to time, appoint such other officers
(including one or more Assistant Treasurers and Assistant Secretaries) and such
agents as it may deem necessary or desirable for the business of the
Corporation. The Board of Directors may from time to time authorize any
principal officer or committee to appoint, and to prescribe the authority and
duties of, any such subordinate officers or agents. Each of such other officers
and agents shall have such authority, perform such duties, and hold office for
such period, as are provided in these By-Laws or as may be prescribed by the
Board of Directors or by the principal officer or committee appointing such
officer or agent.
Section 2. RESIGNATIONS. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3. REMOVAL. Any officer or agent of the Corporation
may be removed, either with or without cause, at any time, by the vote of the
majority of the entire Board of Directors at any meeting of the Board, or,
except in the case of an officer or agent elected or appointed by the Board, by
any principal officer or committee upon whom such power of removal may be
conferred by the Board.
Section 4. VACANCIES. A vacancy in any office, whether
arising from death, resignation, disqualification, removal or any other cause,
may be filled for the unexpired portion of the term of the office which shall
be vacant, in the manner prescribed in these By-Laws for the regular election
or appointment to such office.
Section 5. PRESIDENT. The President shall, in the absence or
inability to act of the Chairman of the Board, preside at all meetings of the
Board of Directors. In general, the President shall have such other powers and
perform such other duties as may usually pertain to the office of President, or
as from time to time may be assigned to him by the Board of
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Directors or the Chief Executive Officer, if the President is not the Chief
Executive Officer. Unless otherwise directed by the Board of Directors, when
there is no Chairman of the Board, or in the absence or inability to act of the
Chairman of the Board, the President shall perform all the duties and functions
and exercise all the powers of the Chairman of the Board.
Section 6. CHIEF EXECUTIVE OFFICER. The President shall be
the Chief Executive Officer of the Corporation, unless the Board of Directors
has designated the Chairman of the Board an officer of the Corporation, in
which case the Board may designate either the Chairman of the Board or the
President the Chief Executive Officer of the Corporation. The officer so
designated shall have, in addition to the powers and duties applicable to the
office set forth in these By-laws, general and active supervision and direction
over the business and affairs of the Corporation and over its several officers,
agents and employees, subject, however, to the control of the Board of
Directors. The Chief Executive Officer shall see that all orders and
resolutions of the Board of Directors are carried into effect and, in general,
the Chief Executive Officer shall have such other powers and perform such other
duties as may be incidental to the position of Chief Executive Officer or as
from time to time may be assigned to him by the Board of Directors.
Section 7. CHIEF FINANCIAL OFFICER. The Chief Financial
Officer, if designated, shall supervise and direct the Vice President and
Controller and the Treasurer in the performance of their duties set forth in
these By-laws and, in general, shall have such other powers and perform such
other duties as may be incidental to the position of Chief Financial Officer or
as from time to time may be assigned to him by the Board of Directors or the
Chief Executive Officer.
Section 8. VICE PRESIDENT AND CONTROLLER. The Vice President
and Controller shall:
(a) have control of all books of account of the Corporation;
(b) keep true and accurate records of all property owned by
the Corporation, of its debts and of its revenues and expenses;
(c) render to the Chairman of the Board, the President, the
Board or any committee thereof, whenever required, an account of the financial
condition of the Corporation; and
(d) in general, have such other powers and perform such other
duties as usually pertain to the office of Vice
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President and Controller or as from time to time may be assigned to him by the
Board of Directors, the Chief Executive Officer, or, if designated, the Chief
Financial Officer.
Section 9. OTHER VICE PRESIDENTS. Each other Vice President,
including any Executive Vice President or Senior Vice President, if appointed,
shall have such powers and perform such duties as usually pertain to his
designated office or as from time to time may be assigned to him by the Board
of Directors or the Chief Executive Officer.
Section 10. TREASURER. The Treasurer shall:
(a) have charge and custody of, and be responsible
for, all the funds and securities of the Corporation;
(b) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(c) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(d) disburse funds of the Corporation, taking proper vouchers
therefor;
(e) cause all moneys and other valuables to be deposited to
the credit of the Corporation in such depositaries as may be designated by the
Board of Directors, the Executive Committee or, if designated, the Finance
Committee of the Board;
(f) supervise the investment of the Corporation's funds as
ordered or authorized by the Board of Directors, taking proper vouchers
therefor;
(g) render to the Chairman of the Board, the President, the
Board or any committee thereof, whenever required, an account of his
transactions as Treasurer; and
(h) in general, have such other powers and perform such other
duties as from time to time may be assigned to him by the Board of Directors,
the Chief Executive Officer or, if designated, the Chief Financial Officer.
Section 11. ASSISTANT TREASURERS. Each Assistant Treasurer
shall have such powers and perform such duties as usually pertain to his office
or as from time to time may be assigned to him by the Board of Directors, the
Chief Executive Officer or the Treasurer.
Section 12. SECRETARY. The Secretary shall:
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(a) keep, or cause to be kept, in one or more books provided
for the purpose, the minutes of all meetings of the Board of Directors, of the
committees of the Board and of the stockholders;
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates
and other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, have such other powers and perform such other
duties as usually pertain to the office of Secretary or as from time to time
may be assigned to him by the Board of Directors or the Chief Executive
Officer.
Section 13. ASSISTANT SECRETARIES. At the request of the
Secretary or in case of his absence or inability to act, the Assistant
Secretary, or if there be more than one, the Assistant Secretary designated by
the Board of Directors or, in the absence of such designation, by the
President, shall perform all the duties of the Secretary, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
Secretary. In general, each Assistant Secretary shall have such other powers
and perform such other duties as from time to time may be assigned to him by
the Board of Directors, the Chief Executive Officer or the Secretary.
Section 14. OFFICERS' BONDS OR OTHER SECURITY. If required by
the Board of Directors, any officer of the Corporation shall give a bond for
the faithful performance of his duties, for such term and in such amount and
with such surety or sureties as the Board may require.
Section 15. COMPENSATION. The compensation of the officers of
the Corporation for their services as such officers shall be fixed from time to
time by the Board of Directors or a committee of the Board designated by it,
and no officer of the Corporation shall be prevented from receiving
compensation by reason of the fact that he is also a director of the
Corporation.
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ARTICLE VI
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1. CHECKS, DRAFTS, ETC. All checks, drafts, bills of
exchange or other orders for the payment of money out of the funds of the
Corporation, and all notes or other evidences of indebtedness of the
Corporation shall be signed in the name and on behalf of the Corporation by
such person or persons and in such manner as shall from time to time be
authorized by the Board of Directors.
Section 2. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as the Board
of Directors may from time to time designate or as may be designated by any
officer or officers of the Corporation to whom such power of designation may
from time to time be delegated by the Board of Directors. For the purpose of
deposit and for the purpose of collection for the account of the Corporation,
checks, drafts and other orders for the payment of money which are payable to
the order of the Corporation may be endorsed, assigned and delivered by any
officer or agent of the Corporation.
Section 3. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of
Directors may from time to time authorize the opening and keeping of general
and special bank accounts with such banks, trust companies or other
depositaries as the Board may designate or as may be designated by any officer
or officers of the Corporation to whom such power of designation may from time
to time be delegated by the Board of Directors. The Board of Directors may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with provisions of these By-Laws, as it may deem expedient.
Section 4. PROXIES IN RESPECT OF SECURITIES OF OTHER
CORPORATIONS. Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board, if designated an officer of the
Corporation, the President or any Vice President may from time to time appoint
an attorney or attorneys or agent or agents of the Corporation in the name and
on behalf of the Corporation to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation, any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing in the name of the Corporation
as such holder to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such
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votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE VII
SHARES AND THEIR TRANSFER - EXAMINATION OF BOOKS
Section 1. STOCK CERTIFICATES. Every holder of stock of the
Corporation shall be entitled to have a certificate, in such form as shall be
approved by the Board of Directors, certifying the number and class of shares
of stock of the Corporation owned by him. The certificates representing shares
of the respective classes of stock shall be numbered in order of their issue
and shall be signed in the name of the Corporation by the Chairman of the
Board, if designated an officer of the Corporation, or the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, and sealed with the seal of the Corporation (which seal may
be a facsimile, engraved or printed). Any or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 2. BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. The
books and records of the Corporation may be kept at such places, within or
without the State of Delaware, as the Board of Directors may from time to time
determine. The stock record books and the blank stock certificate books shall
be kept by the Secretary or by any other officer or agent designated by the
Board of Directors.
Section 3. TRANSFERS OF SHARES. Transfers of shares of stock
of the Corporation shall be made on the stock records of the Corporation only
upon authorization by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary or with a transfer agent or transfer clerk, and on surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
a duly executed stock transfer power and the payment of all taxes thereon.
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or shares
stand on the
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<PAGE> 20
record of stockholders as the owner of such share or shares for all purposes,
including without limitation the rights to receive dividends or other
distributions and to vote as such owner, and the Corporation may hold any such
stockholder of record liable for calls and assessments and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof. Whenever any transfers of shares
shall be made for collateral security and not absolutely, and both the
transferor and transferee request the Corporation to do so, such fact shall be
stated in the entry of the transfer.
Section 4. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation. It may appoint, or
authorize any officer or officers to appoint, one or more transfer agents or
one or more transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any of
them.
Section 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board of Directors may, in its discretion, require such
owner or his legal representatives to give the Corporation and/or any agent of
the Corporation designated by it a bond in such sum, limited or unlimited, and
in such form and with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation and/or such agent
against any claim that may be made against it on account of the alleged loss
theft, or destruction of any such certificate, or the issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the State
of Delaware.
Section 6. STOCKHOLDER'S RIGHT OF INSPECTION. Any stockholder
of record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
of business to inspect for any proper purpose the Corporation's stock ledger, a
list of its stockholders, and its other books and records, and to
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<PAGE> 21
make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office in the State of Delaware or at its
principal place of business.
Section 7. FIXING OF RECORD DATE. 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 meeting, 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.
ARTICLE VIII
DIVIDENDS
Subject to the provisions of the Certificate of Incorporation
relating thereto, if any, dividends upon the capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Subject to the provisions of the Certificate of Incorporation,
dividends may be paid in cash, in property or in shares of the capital stock of
the Corporation.
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
Board of Directors from time to time, in its absolute discretion, think 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 or purposes as the Board of Directors shall determine to be in the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
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<PAGE> 22
ARTICLE IX
INDEMNIFICATION
Section 1. RIGHT TO INDEMNIFICATION. The Corporation shall,
to the fullest extent permitted by applicable law as then in effect, indemnify
any person (the "Indemnitee") who was or is involved in any manner (including,
without limitation, as a party or a witness) or was or is threatened to be made
so involved in any threatened, pending or completed investigation, claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or proceeding by
or in the right of the Corporation to procure a judgment in its favor)(a
"Proceeding") by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation or of a partnership, joint venture,
trust or other enterprise (including, without limitation, service with respect
to any employee benefit plan), whether the basis of any such Proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, against all expenses,
liability and loss (including, without limitation, attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) actually and reasonably incurred by him in connection with such
Proceeding. The right to indemnification conferred in this Article IX shall
include the right to receive payment in advance of any expenses incurred by the
Indemnitee in connection with such Proceeding, consistent with applicable law
as then in effect. All right to indemnification conferred in this Article IX,
including such right to advance payments and the evidentiary, procedural and
other provisions of this Article IX, shall be a contract right. The Corporation
may, by action of its Board of Directors, provide indemnification for
employees, agents, attorneys and representatives of the Corporation with up to
the same scope and extent as provided for officers and directors.
Section 2. INSURANCE, CONTRACTS AND FUNDING. The Corporation
may purchase and maintain insurance to protect itself and any person who is,
was or may become an officer, director, employee, agent, attorney or
representative of the Corporation or, at the request of the Corporation, an
officer, director, employee, agent, attorney or representative of another
corporation or entity, against any expense, liability or loss asserted against
him or incurred by him in connection with any Proceeding in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such expense, liability or loss under the
provisions of this Article IX or otherwise. The Corporation may
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<PAGE> 23
enter into contracts with any director, officer, employee, agent, attorney or
representative of the Corporation, or any person serving as such at the request
of the Corporation for another corporation or entity, in furtherance of the
provisions of Article TENTH of the Certificate of Incorporation or this Article
IX and may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification of any person
entitled thereto.
Section 3. INDEMNIFICATION; NOT EXCLUSIVE RIGHT. The right of
indemnification provided in this Article IX shall not be exclusive of any other
rights to which any person seeking indemnification may otherwise be entitled
under any provision of the Certificate of Incorporation, By-Laws or agreement
or otherwise. The provisions of this Article IX shall inure to the benefit of
the heirs and legal representatives of any person entitled to indemnity under
this Article IX and shall be applicable to all Proceedings, whether arising
from acts or omissions occurring before or after the adoption of this Article
IX. No amendment or repeal of any provision of this Article IX shall remove,
abridge or adversely affect any right of indemnification or any other benefits
of the Indemnitee under the provisions of this Article IX with respect to any
Proceeding involving any act or omission which occurred prior to such
amendment.
Section 4. ADVANCEMENT OF EXPENSES; PROCEDURES; PRESUMPTIONS
AND EFFECT OF CERTAIN PROCEEDINGS; REMEDIES. In furtherance, but not in
limitation, of the provisions of the Certificate of Incorporation or the
foregoing provisions of this Article IX, the following procedures, presumptions
and remedies shall apply with respect to advancement of expenses and the right
to indemnification under the Certificate of Incorporation or this Article IX:
(a) ADVANCEMENT OF EXPENSES. All reasonable expenses incurred
by or on behalf of the Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Corporation within 20 days after the receipt
by the Corporation of a statement or statements from the Indemnitee requesting
such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements reasonably shall
evidence the expenses incurred by the Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or
on behalf of the Indemnitee to repay the amounts advanced if it should
ultimately be determined that the Indemnitee is not entitled to be indemnified
against such expense pursuant to this Article IX.
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<PAGE> 24
(b) PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.
(i) To obtain indemnification, an Indemnitee shall
submit to the President or Secretary of the Corporation a written
request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination of
the Indemnitee's entitlement to indemnification shall be made not
later than 60 days after receipt by the Corporation of the written
request for indemnification together with the Supporting
Documentation. The President or Secretary of the Corporation shall,
promptly upon receipt of such a request for indemnification, advise
the Board of Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnitee's entitlement to indemnification
shall be determined in one of the following ways: (A) by a majority
vote of the Disinterested Directors (as hereinafter defined) (or the
Disinterested Director, if only one); (B) by a written opinion of
Independent Counsel (as hereinafter defined) if (x) a Change in
Control (as hereinafter defined) shall have occurred and the
Indemnitee so requests or (y) there is no Disinterested Director or a
majority of the Disinterested Directors (or the Disinterested
Director, if only one) so directs; (C) by the stockholders of the
Corporation (but only if a majority of the Disinterested Directors (or
the Disinterested Director, if only one) determines that the issue of
entitlement to indemnification should be submitted to the stockholders
for their determination); or (D) as provided in Section 4(c) of this
Article IX.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4(b)(ii) of this Article IX, a majority of the Disinterested
Directors (or the Disinterested Director, if only one) shall select
the Independent Counsel, but only an Independent Counsel to which the
Indemnitee does not reasonably object; provided, however, that if a
Change in Control shall have occurred, the Indemnitee shall select
such Independent Counsel, but only an Independent Counsel to which the
Board of Directors does not reasonably object.
(c) PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. Except as
otherwise expressly provided in this Article IX, the Indemnitee shall be
presumed to be entitled to indemnification upon submission of a request for
indemnification together with
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<PAGE> 25
the Supporting Documentation in accordance with Section 4(b)(i) of this Article
IX, and thereafter the Corporation shall have the burden of proof to overcome
that presumption in reaching a contrary determination. In any event, if the
person or persons empowered under Section 4(b) of this Article IX to determine
entitlement to indemnification shall not have been appointed or shall not have
made a determination within 60 days after receipt by the Corporation of the
request therefor together with the Supporting Documentation, the Indemnitee
shall be deemed to be entitled to indemnification. With regard to the right to
indemnification for expenses, if and to the extent that the Indemnitee has been
successful on the merits or otherwise in any Proceeding, or if and to the
extent that the Indemnitee was not a party to the Proceeding or if a Proceeding
was terminated without a determination of liability on the part of the
Indemnitee with respect to any claim, issue or matter therein or without any
payments in settlement or compromise being made by the Indemnitee with respect
to a claim, issue or matter therein, the Indemnitee shall be deemed to be
entitled to indemnification, which entitlement shall not be diminished by any
determination which may be made pursuant to Sections (4)(b)(ii)(A), (B) or (C).
In either case, the Indemnitee shall be entitled to such indemnification,
unless (A) the Indemnitee misrepresented or failed to disclose a material fact
in making the request for indemnification or in the Supporting Documentation or
(B) such indemnification is prohibited by law, in either case as finally
determined by adjudication or, at the Indemnitee's sole option, arbitration (as
provided in Section 4(d)(i) of this Article IX). The termination of any
Proceeding described in Section 1 of this Article IX; or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not, of itself, adversely affect the
right of the Indemnitee to indemnification or create any presumption with
respect to any standard of conduct or belief or any other matter which might
form a basis for a determination that the Indemnitee is not entitled to
indemnification.
(d) REMEDIES OF INDEMNITEE.
(i) In the event that a determination is made pursuant
to Section 4(b) of this Article IX that the Indemnitee is not entitled
to indemnification under this Article IX, (A) the Indemnitee shall be
entitled to seek an adjudication of his entitlement to such
indemnification either, at the Indemnitee's sole option, in (x) an
appropriate court of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be conducted by three
arbitrators (or, if the dispute involves less than $100,000, by a
single arbitrator) pursuant to the rules of the American Arbitration
Association; (B) any such judicial
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<PAGE> 26
proceedings or arbitration shall be DE NOVO and the Indemnitee shall
not be prejudiced by reason of such adverse determination; and (C) in
any such judicial proceeding or arbitration the Corporation shall have
the burden of proof that the Indemnitee is not entitled to
indemnification under this Article IX.
(ii) If a determination shall have been made or deemed
to have been made, pursuant to Section 4(b) or (c) of this Article IX,
that the Indemnitee is entitled to indemnification, the Corporation
shall be obligated to pay the amounts constituting such
indemnification within five days after such determination has been
made or deemed to have been made and shall be conclusively bound by
such determination, unless (A) the Indemnitee misrepresented or failed
to disclose a material fact in making the request for indemnification
or in the Supporting Documentation or (B) such indemnification is
prohibited by law, in either case as finally determined by
adjudication or, at the Indemnitee's sole option, arbitration (as
provided in Section 4(d)(i) of this Article IX). In the event that (C)
advancement of expenses is not timely made pursuant to Section 4(a)
of this Article IX or (D) payment of indemnification is not made
within five days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant to
Section 4(b) or (c) of this Article IX, the Indemnitee shall be
entitled to seek judicial enforcement of the Corporation's obligation
to pay to the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the Corporation may
bring an action, in an appropriate court in the State of Delaware or
any other court of competent jurisdiction, contesting the right of the
Indemnitee to receive indemnification hereunder due to the occurrence
of an event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"), provided, however, that if the Indemnitee
shall elect, at his sole option, that such dispute shall be determined
by arbitration (as provided in Section 4(d)(i) of this Article IX),
the Corporation shall proceed by such arbitration. In any such
enforcement or other proceeding or action in which whether a
Disqualifying Event has occurred is an issue, the Corporation shall
have the burden of proving the occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to this
Section 4(d) that the procedures and presumptions of this Article IX
are not valid, binding and enforceable and shall stipulate in any such
court or before
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any such arbitrator or arbitrators that the Corporation is bound by
all the provisions of this Article IX.
(iv) In the event that the Indemnitee, pursuant to this
Article IX, seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages for
breach of, this Article IX, or is otherwise involved in any
adjudication or arbitration with respect to his right to
indemnification, the Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by him if the Indemnitee
prevails in such judicial adjudication or arbitration. If it shall be
determined in such judicial adjudication or arbitration that the
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
(e) DEFINITIONS. For purposes of this Section 4:
(i) "Change in Control" means a change in control of
the Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the "Act"), as such Item
was in effect on July 1, 1990, whether or not the Corporation is then
subject to such reporting requirement; provided that, without
limitation, such a change in control shall be deemed to have occurred
if (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the
Corporation representing 20 percent or more of the combined voting
power of the Corporation's then outstanding securities without the
prior approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such acquisition; (B) the
Corporation is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of
Directors thereafter; or (C) during any period of two consecutive
years, individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director whose
election or nomination for election by the Corporation's stockholders
was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of
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such period) cease for any reason to constitute at least a
majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a material party to the Proceeding
in respect of which indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member
of a law firm that neither presently is, nor in the past five years
has been, retained to represent: (A) the Corporation or the Indemnitee
in any matter or (B) any other party to the Proceeding giving rise to
a claim for indemnification under this Article IX. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then
prevailing under the law of the State of Delaware, would have a
conflict of interest in representing either the Corporation or the
Indemnitee in an action to determine the Indemnitee's rights under
this Article IX.
Section 5. ACTS OF DISINTERESTED DIRECTORS. Disinterested
Directors considering or acting on any indemnification matter under this
Article IX or otherwise may consider or take action as the Board of Directors
or may consider or take action as a committee or individually or otherwise. In
the event Disinterested Directors consider or take action as the Board of
Directors, one-third of the total number of directors shall constitute a
quorum.
Section 6. SEVERABILITY. If any provision or provisions of
this Article IX shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (I) the validity, legality and enforceability of the
remaining provisions of this Article IX (including, without limitation, all
portions of any paragraph of this Article IX containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby;
and (ii) to the fullest extent possible, the provisions of this Article IX
(including, without limitation, all portions of any paragraph of this Article
IX containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
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<PAGE> 29
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE XI
SEAL
The Board of Directors shall provide a corporate seal, which
shall be circular in form and bear the name of the Corporation and the words
and figures denoting its organization under the laws of the State of Delaware
and the year thereof.
ARTICLE XII
AMENDMENTS
These By-Laws may be amended or repealed, or new By-Laws may
be adopted, except as provided in Section 3 of Article IX of these By-Laws, (a)
at any annual or special meeting of the stockholders, by a majority of the
total votes of the stockholders or when stockholders are entitled to vote by
class, by a majority of the appropriate class, present in person or represented
by proxy and entitled to vote on such action; provided, however, that the
notice of such meeting shall have been given as provided in these By-Laws,
which notice shall mention that amendment or repeal of these By-Laws or the
adoption of new By-Laws is one of the purposes of such meeting, or (b) by the
Board of Directors at any meeting thereof; provided, however, that notice of
such meeting shall have been given as provided in these By-Laws, which notice
shall mention that amendment or repeal of the By-Laws or the adoption of new
By-Laws is one of the purposes of such meeting; provided, further, that By-Laws
adopted by the Board of Directors may be amended or repealed by the
stockholders as hereinabove provided; provided, further, that the stockholders
may limit the power of the Board of Directors to make, amend, alter or repeal
the By-Laws of the Company. Notwithstanding the foregoing, the provisions of
these By-Laws with respect to the number, classification, term of office,
qualifications, election and removal of directors and the filling of vacancies
and newly created directorships, and the amendment thereof, that is, Sections
2, 10 and 11 of Article III and this Article XII, may be amended or repealed or
new By-Laws affecting such provisions may be adopted only with the unanimous
approval of the entire Board of Directors or by the affirmative vote of
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<PAGE> 30
the holders of at least 80% of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors (except that if such
proposed amendment or repeal or adoption of new By-Laws shall be submitted to
the stockholders with the unanimous recommendation of the entire Board of
Directors, such provisions may be amended or repealed or such new By-Laws may
be adopted by the affirmative vote of the holders of a majority of such stock),
and amendment of these By-Laws is further subject to the requirements of the
Certificate of Incorporation.
-30-
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