<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-23006
DSP GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-2683643
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
3120 Scott Boulevard, Santa Clara, California 95054
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (408) 986-4300
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of April 30, 2000 there were 26,576,819 shares of Common Stock ($.001 par
value per share) outstanding.
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INDEX
DSP GROUP, INC.
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--March 31, 2000
and December 31, 1999................................................3
Condensed consolidated statements of income--Three
months ended March 31, 2000 and 1999....................................4
Condensed consolidated statements of cash flows--Three
months ended March 31, 2000 and 1999.................................5
Condensed consolidated statements of Stockholders' Equity --
Three months ended March 31, 2000 and 1999...........................6
Notes to condensed consolidated financial statements--
March 31, 2000.......................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................19
Item 2. Changes in Securities....................................................19
Item 3. Defaults upon Senior Securities..........................................19
Item 4. Submission of Matters to a Vote of Security Holders......................19
Item 5. Other Information........................................................19
Item 6. Exhibits and Reports on Form 8-K..........................................19
SIGNATURES............................................................................20
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DSP GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 57,635 $ 20,778
Marketable securities and cash deposits 144,055 140,593
Trade receivables, net 9,303 10,435
Inventories 6,139 3,283
Deferred income taxes 1,802 1,707
Other accounts receivable and prepaid expenses 3,665 1,362
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TOTAL CURRENT ASSETS 222,599 178,158
Property and equipment, at cost: 16,631 16,230
Less accumulated depreciation and amortization (11,248) (9,282)
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5,383 6,948
Other investments, net of accumulated amortization 15,081 18,433
Other assets, net of accumulated amortization 4,429 1,250
Severance pay fund 1,484 1,390
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TOTAL ASSETS $ 248,976 $ 206,179
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payable $ 5,326 $ 6,079
Other current liabilities 12,363 8,332
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TOTAL CURRENT LIABILITIES 17,689 14,411
LONG TERM LIABILITIES
Accrued severance pay 1,553 1,431
Deferred income taxes 6,380 6,380
Minority interest 1,404 --
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common Stock 26 12
Additional paid-in capital 141,733 119,163
Retained earnings 80,191 64,782
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TOTAL STOCKHOLDERS' EQUITY 221,950 183,957
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 248,976 $ 206,179
========= =========
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
Page 3
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DSP GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
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<S> <C> <C>
REVENUES:
Product sales $ 18,362 $ 6,522
Licensing, royalties and other 5,024 3,940
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TOTAL REVENUES 23,386 10,462
COST OF REVENUES:
Cost of product sales 10,475 3,751
Cost of licensing, royalties and other 323 75
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TOTAL COST OF REVENUES 10,798 3,826
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GROSS PROFIT 12,588 6,636
OPERATING EXPENSES:
Research and development 4,676 3,361
Sales and marketing 2,853 1,916
General and administrative 1,292 1,252
Unusual items 14,154 --
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TOTAL OPERATING EXPENSES 22,975 6,529
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OPERATING INCOME (LOSS) (10,387) 107
OTHER INCOME (EXPENSE):
Interest and other income 2,795 1,130
Interest expense and other (42) (104)
Equity in income of affiliates 437 442
Capital gain from realization
of investments 40,009 --
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INCOME BEFORE PROVISION FOR INCOME TAXES 32,812 1,575
Provision for income taxes 17,403 393
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NET INCOME $ 15,409 $ 1,182
======== ========
NET EARNINGS PER SHARE:
Basic $ 0.60 $ 0.05
Diluted $ 0.54 $ 0.05
SHARES USED IN PER SHARE COMPUTATIONS:
Basic 25,790 21,538
Diluted 28,413 21,906
</TABLE>
See notes to condensed consolidated financial statements.
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DSP GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
2000 1999
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<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,422 $ 623
INVESTING ACTIVITIES
Purchase of marketable securities and cash deposits (21,674) (39,331)
Sale and maturity of marketable securities
and cash deposits 18,212 12,049
Purchases of equipment (393) (2,308)
Proceeds from sale of investment - net 27,498 --
Cash acquired in acquisition of
consolidated subsidiary 106 --
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 23,749 (29,590)
-------- --------
FINANCIAL ACTIVITIES
Sale of Common Stock for cash upon
exercise of options and employee
stock purchase plan 7,686 304
Purchase of treasury stock -- (2,710)
Issue of Common Stock to investor -- 34,425
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,686 32,019
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 36,857 $ 3,052
======== ========
Non-cash investing and financing information:
Liabilities assumed in connection with asset acquisitions $ -- $ 500
======== ========
Capitalized software acquisition in exchange
for license sale $ -- $ 2,000
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
<PAGE>
DSP GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
RETAINED
EARNINGS
ADDITIONAL (ACCUMULATED TREASURY TOTAL
THREE MONTHS ENDED COMMON STOCK PAID-IN EARNINGS STOCK AT STOCKHOLDERS'
MARCH 31, 2000 SHARES AMOUNT CAPITAL (DEFICIT) COST EQUITY
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<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 12,671 $ 12 $ 119,163 $ 64,782 $ -- $ 183,957
Net income -- -- -- 15,409 -- 15,409
Comprehensive income -- -- -- -- -- 15,409
Issue of Common Stock, upon
purchase of subsidiary 261 -- 14,897 -- -- 14,897
Exercise of Common Stock
options by employees 14 -- 296 -- -- 296
Sale of Common Stock under
employee stock purchase
plan 428 1 7,390 -- -- 7,391
Stock split adjustment 13,069 13 (13) -- -- --
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Balance at March 31, 2000 26,443 $ 26 $ 141,733 $ 80,191 $ -- $ 221,950
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<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
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<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 9,406 $ 9 $ 75,610 $ 12,129 $ (12,053) $ 75,695
Net income -- -- -- 1,182 -- 1,182
Comprehensive income -- -- -- -- -- 1,182
Sale of Common Stock, net of
issuance cost 2,300 3 34,425 -- -- 34,428
Exercise of Common Stock
options by employees 10 -- -- (54) 172 118
Sale of Common Stock under
employee stock purchase
plan 18 -- -- (107) 290 183
Purchase of treasury stock (200) -- -- -- (2,710) (2,710)
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Balance at March 31, 1999 11,534 $ 12 $ 110,035 $ 13,150 $ (14,301) $ 108,896
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</TABLE>
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DSP GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated 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
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 2000,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, reference is made to the
consolidated financial statements and footnotes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 1999.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is determined
using the average cost method. The Company periodically evaluates the quantities
on hand relative to current and historical selling prices and historical and
projected sales volume. Based on these evaluations, provisions are made in each
period to write inventory down to its net realizable value. Inventories are
composed of the following ((in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------------------------------
<S> <C> <C>
Work-in-process $ 30 $ 169
Finished goods 6,109 3,114
---------------------------------------
$6,139 $3,283
=======================================
</TABLE>
NOTE C - NET EARNINGS PER SHARE
Basic net income per share is computed based on the weighted average number of
shares of common stock outstanding during the period. For the same periods,
diluted net income per share further includes the effect of dilutive stock
options outstanding during the year, all in accordance with the Financial
Accounting Standards Board issued Statement No. 128, "Earnings per Share" ("SFAS
128"). The following table sets forth the computation of basic and diluted net
income per share (in thousands except per share amounts):
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
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<S> <C> <C>
Numerator:
Net Income $ 15,409 $ 1,182
Denominator:
Weighted average number of shares of common stock
outstanding during the period used to compute basic
earning per share....................................... 25,790 21,538
Incremental shares attributable to exercise of
outstanding options (assuming proceeds would be used to
purchase treasury stock)................................ 2,623 368
--------------- ---------------
Weighted average number of shares of common
stock used to compute diluted earnings per share........ 28,413 21,906
=============== ===============
Basic net earnings per share............................ $0.60 $0.05
=============== ===============
Diluted net earnings per share.......................... $0.54 $0.05
=============== ===============
</TABLE>
NOTE D - INVESTMENTS
The following is a summary of the held to maturity securities and cash deposits
(in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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<S> <C> <C>
Obligations of states and
political obligations $ 92,106 $ 96,312
Corporate obligations 33,144 30,440
Cash deposits 18,805 21,961
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$144,055 $148,713
======== ========
Amounts included in marketable
Securities and cash deposits $144,055 $140,593
Amounts included in
cash and cash equivalents -- 8,120
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$144,055 $148,713
======== ========
</TABLE>
At March 31, 2000 and at December 31, 1999, the carrying amount of securities
approximated their fair market value and the amount of unrealized gain or loss
was not significant. Gross
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realized gains or losses for the three months ended March 31, 2000 and 1999,
were not significant. The amortized cost of held to maturity securities at March
31, 2000, by contractual maturities, is shown below (in thousands):
<TABLE>
<CAPTION>
Amortized Cost
--------------
<S> <C>
Due in one year or less $ 96,213
Due after one year to two years 47,842
---------
$ 144,055
=========
</TABLE>
NOTE E - INCOME TAXES
The effective tax rate used in computing the provision for income taxes is based
on projected fiscal year income before taxes, including estimated income by tax
jurisdiction. The difference between the effective tax rate and the statutory
rate is due primarily to foreign tax holiday and tax exempt income in Israel.
NOTE F - SIGNIFICANT CUSTOMERS
Product sales to one distributor accounted for 47% and 8% of total revenues for
the three months ended March 31, 2000 and 1999, respectively. Revenues from one
licensee accounted for 18% of total revenues for the three months ended March
31, 1999. The loss of one or more major distributors or customers could have a
material adverse effect on our business, financial condition and results of
operations.
NOTE G - OTHER INVESTMENTS
Other investments are comprised of:
AudioCodes, Ltd.: AudioCodes, Ltd. ("AudioCodes") is an Israeli corporation
primarily engaged in design, research, development, manufacturing and marketing
of hardware and software products that enable simultaneous transmission of voice
and data over networks such as the Internet, ATM and Frame Relay.
In January 2000, we sold an additional 600,000 shares of AudioCodes for
approximately $43.8 million and recorded in the first quarter of 2000, an
additional capital gain in the amount of $40.0 million. We currently own
approximately 2.3 million of AudioCodes shares, which represents approximately
12% of the outstanding shares. The condensed consolidated statements of income
for the three months ended March 31, 2000 and 1999 include equity gains of
$437,000 and $442,000, respectively, in our investment in AudioCodes.
Voicepump, Inc.: Voicepump, Inc. ("Voicepump") is an US corporation primarily
engaged in the design, research, development and marketing of software
applications for Voice Over DSL (VoDSL) and Voice Over Internet Protocol
(VoIP). In March 2000, we acquired (1) approximately 1,960,250 shares of
Common Stock of Voicepump from certain shareholders in exchange for
approximately 261,000 shares of our Common Stock and a nominal amount of cash
(to pay for fractional shares) and (2) approximately 1,027,397 shares of
Voicepump Common Stock directly from Voicepump together with warrants to
purchase up to 1,027,397 shares of Voicepump Common Stock at an exercise
price of $4.866 per share within two years (of the issuance of the warrant)
and up to 1,027,397 additional shares at an exercise price of
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<PAGE>
$4.866 per share within three years (of the issuance of the warrant) for
$5,000,000. The shares acquired from Voicepump and its shareholders (not
including the shares issuable upon exercise of the warrants) represent
approximately 73% of the outstanding shares of Voicepump. The condensed
consolidated statements of income for the three months ended March 31, 2000
include no equity gains or losses in our investment in Voicepump. Our
operation expenses include unusual items in the amount of $11.9 million
related to the acquired in-process research and development which was written
off.
NOTE H- STOCK DIVIDEND
On January 24, 2000, our Board of Directors declared a stock dividend whereby
each holder of record of Common Stock on February 16, 2000 received one
additional share of common stock for each share then owned. The stock dividend
was paid on March 1, 2000.
NOTE I- STOCK SALES BY AN INVESTOR
In February 1999, we sold 4,600,000 shares of our Common Stock to Magnum
Technologies, Ltd. ("Magnum"), an international investment fund, at a price per
share of $7.50, for an aggregate sale price of $34.4 million. At the time of the
sale, these shares represented 19.6% of our outstanding common stock. In
February 2000, Magnum sold 929,000 shares of our Common Stock. Magnum now owns
approximately 4.0 million our shares, which represents approximately 15.5% of
our outstanding shares of Common Stock.
NOTE J -- ACQUISITIONS
In the first quarter of 1999, we entered the wireless communication product
market, which we believe to be synergistic with our existing markets. We
acquired two integrated groups of engineers specializing in the design of
integrated circuits for wireless communication. In addition, we acquired
technology and products, including associated intellectual property, related to
base band and RF for 900 Megahertz digital spread spectrum. In the first quarter
of 2000 we have amortized $2.2 million, reflected the accelerated amortization
of acquired assets and intangibles related to the 1999 acquisitions.
NOTE K- CONTINGENCIES
We are involved in certain claims arising in the normal course of business,
including claims that it may be infringing patent rights owned by third parties.
We are unable to foresee the extent to which these matters will be pursued by
the claimants or to predict with certainty the eventual outcome. However, we
believe that the ultimate resolution of these matters will not have a material
adverse effect on our financial position, results of operations or cash flow.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TOTAL REVENUES. Our total revenues increased significantly to $23.4 million in
the first quarter of 2000 from $10.5 million in the first quarter of 1999. The
increase in the first quarter of 2000 compared to the same period in 1999 was
due to our increased revenues from product sales, primarily due to the phasing
in of our new line of D16K products in the second quarter of 1999. Our licensing
and royalty revenues increased to $5.0 million in the first quarter of 2000
compared to $3.9 million in the same period of 1999 primarily due to a new
licensee; OKI Electric Industry Co., Ltd., which licensed the
TeakLite-REGISTERED TRADEMARK- DSP core.
Export sales, primarily consisting of Integrated Digital Telephony (IDT) speech
processors shipped to manufacturers in Europe and Asia, including Japan, as well
as license fees on DSP core designs, represented 92% of our total revenues for
the three months ended March 31, 2000 and 70% of our total revenues for the
three months ended March 31, 1999. All export sales are denominated in U.S.
dollars.
Revenues from a distributor, Tomen Electronics, accounted for 47% of our total
revenues for the three months ended March 31, 2000 and 8% of our total revenues
for the three months ended March 31, 1999. Revenues from one of our licensees
accounted for 18% of total revenues for the first quarter of 1999.
GROSS PROFIT. Gross profit as a percentage of total revenues decreased to 54% in
the first quarter of 2000 from 63% in the first quarter of 1999. The decrease in
gross profit in the first quarter of 2000, was primarily due to an increase in
product sales revenues, which typically generate a lower gross profit than
licening revenues, as a percentage of total revenues. Product gross profit as a
percentage of product sales increase slightly to 43% in the first quarter of
2000 from 42% in the first quarter of 1999. The Company managed to off-set the
continued decline in average selling prices with a decrease in manufacturing
costs, partially due to technological improvements.
RESEARCH AND DEVELOPMENT EXPENSES. Our research and development expenses
increased to $4.7 million in the first quarter of 2000 from $3.4 million in the
first quarter of 1999. The increase was primarily due to our new research and
development projects in connection with the existing new line of products the
D16K and a new DL16K series. The expense increase was also attributed to an
increase in research and development personnel as compared to the same period in
1999, and to higher levels of depreciation, due to our acquisition of research
and development computers and lab equipment. Our research and development
expenses as a percentage of total revenues were 20% in the three months ended
March 31, 2000 and 32% in the three months ended March 1999. The decrease was
attributed to our lower revenues in the first three months ended March 31, 1999,
as compared with the same period in 2000.
SALES AND MARKETING EXPENSES. Our sales and marketing expenses increased to $2.9
million from $1.9 million in the first quarter of 2000 as compared to the same
quarter in 1999. Sales commissions increased in the first quarter of 2000
compared with the same period in 1999, due to higher sales. Salaries and fringe
benefits increased in the first quarter of 2000 compared to the first quarter of
1999, primarily due to an increase in sales and marketing personnel. Our sales
and marketing expenses as a percentage of total revenues was 12% in the three
months ended March 31, 2000 and 18% in the three months ended March 31, 1999.
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GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative expenses
were approximately $1.3 million in both of the three months ended March 31, 2000
and March 31, 1999. These expenses as a percentage of total revenues decreased
to approximately 6% in first three months of 2000, compared to 12% in the first
three months of 1999. The decrease was attributed to our lower revenues in the
first three months ended March 31, 1999, as compared with the same period in
2000.
UNUSUAL ITEMS. In the first quarter of 2000 we recorded two unusual expense
items amounting to approximately $14.2 million. A write off amount of $11.9
million was recorded relating to the acquired in-process research and
development in connection with the acquisition of approximately 73% of the
outstanding shares of Voicepump, Inc. An expense of $2.2 million was recorded
relecting the accelerated amortization of acquired assets and intangibles
related to the 1999 acquisition of 900 MHz RF and baseband technology from
Applied Micro Devices, Inc.
OTHER INCOME (EXPENSE). Interest for the three months ended March 31, 2000,
compared to $1.1 million for the three months and other income and interest
expense, net was $2.8 million ended March 31, 1999. The increase was primarily
the result of higher levels of cash equivalents and marketable securities in
2000 as compared with 1999, as well as higher yields.
EQUITY IN INCOME (LOSS) OF EQUITY METHOD INVESTEES, NET. Equity in income (loss)
of equity method investees, net was a $437,000 gain for the three months ended
March 31, 2000 as compared to a $442,000 gain in the comparable period ended
March 31, 1999.
CAPITAL GAIN. In January 2000, we sold 600,000 shares of AudioCodes for
approximately $43.8 million and recorded in the first quarter of 2000, a capital
gain in the amount of $40.0 million. We currently own approximately 2.3 million
of AudioCodes shares, which represents approximately 12% of the outstanding
shares.
PROVISION FOR INCOME TAXES. In 2000 and 1999, we benefited for federal and state
tax purposes from foreign tax holiday and tax exempt income in Israel.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. During the three months ended March 31, 2000, we generated
$5.4 million of cash and cash equivalents from our operating activities as
compared to $623,000 during the three months ended March 31, 1999. This increase
is mainly due to a significant increase in net income during the three months
ended March 31, 2000 as compared to the previous period, as well as to the
decrease of accounts receivable. These increases were offset by the increase of
inventory and to the recognition of capital gain on the sales of the Audiocodes'
shares, in the first three months of 2000.
INVESTING ACTIVITIES. We invest excess cash in short-term cash deposits and
marketable securities of varying maturity, depending on our projected cash needs
for operations, capital expenditures and other business purposes. In the first
three months of 2000, we purchased $21.7 million of investments classified as
short-term cash deposits and marketable securities. In the same period, $18.2
million of investments classified as marketable securities matured. Our capital
equipment purchases in the first three months of 2000, primarily of research
and development software and computers, totaled $393,000.
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FINANCING ACTIVITIES. During the three months ended March 31, 2000, we received
$7.7 million upon the exercise of employee stock options and through purchases
pursuant to the employee stock purchase plan. In February 1999, we sold
4,600,000 new shares of our common stock to Magnum Technologies, Ltd., an
international investment fund, for $7.5 per share, or an aggregate of $34.4
million. In February 2000, Magnum sold 929,000 shares of its holdings. Magnum
now owns approximately 4.0 million our shares of Common Stock, which represents
approximately 15.5% of our outstanding shares of common stock.
At March 31, 2000, our principal source of liquidity consisted of cash and cash
equivalents deposits totaling $57.6 million and marketable securities and
short-term cash deposits of $144.1 million. Our working capital at March 31,
2000 was $204.9 million.
We believe that our current cash, cash equivalent, cash deposits and
marketable securities will be sufficient to meet our cash requirements
through at least the next twelve months. In addition, as part of our business
strategy, we occasionally evaluate potential acquisitions of businesses,
products and technologies. Accordingly, a portion of our available cash may
be used at any time for the acquisition of complementary products or
businesses. Such potential transactions may require substantial capital
resources, which may require us to seek additional debt or equity financing.
There can be no assurance that we will consummate any such transactions. See
"Factors Affecting Future Operating Results--There are Risks Associated with
our Acquisition Strategy" for more detailed information.
YEAR 2000 READINESS
We were aware of the issues associated with the programming code in existing
computer systems as the Year 2000 approached. The "Year 2000" problem is
concerned with whether computer systems will properly recognize date sensitive
information when the year changed to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Year 2000 problem is pervasive and complex as the computer operation
of virtually every company could have been affected in some way.
Beginning in 1997, and continuing in 1998 and 1999, we utilized both internal
and external resources to identify, correct or reprogram and test our systems
for Year 2000 readiness. All reprogramming efforts, including testing, were
completed by December 31, 1999. Our efforts included the evaluation of both
information technology ("IT") and non-IT systems. Non-IT systems include
systems or hardware containing embedded technology such as microcontrollers.
The costs incurred by us with respect to this project were not material.
Throughout 1998 and 1999, we took steps to ensure that our products and
services would continue to operate on and after January 1, 2000. We believe
that our products being shipped today were Year 2000 ready and we have not
received any notification to the contrary from customers. In addition, we
received confirmations from our primary processing vendors that plans had
been developed to address the processing of transactions in the Year 2000. We
also communicated with suppliers and other third parties that do business
with to coordinate Year 2000 readiness. We have not experienced any supply
problems because of the year 2000 noncompliance problems with any of our
vendors or suppliers.
Based upon the steps we have taken to address this issue and the progress to
date, we believe that Year 2000 readiness expenses will not have a material
adverse effect on our earnings. As a result of the year 2000 changeover, we
know of no trend or event that could harm our business, financial condition
and results of operations. However, we will continue to monitor our vendors
manufacturing processors and the transactional based software for potential
embedded year 2000 problems.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. It is our policy not to enter into derivative financial
instruments. We do not currently have any significant foreign currency exposure
since we do not transact business in foreign currencies. Due to this, we did not
have significant overall currency exposure at April 1, 2000.
FOREIGN CURRENCY RATE RISK. As nearly all of our sales and expenses are
denominated in U.S. Dollars, we have experienced only insignificant foreign
exchange gains and losses to date, and do not expect to incur significant gains
and losses in 2000. We did not engage in foreign currency hedging activities
during the three months ended March 31, 2000.
EUROPEAN MONETARY UNION
Within Europe, the European Economic and Monetary Union (the "EMU") introduced a
new currency, the euro, on January 1, 1999. During 2002, all EMU countries are
expected to be operating with the euro as their single currency. Uncertainty
exists as to the effect the euro currency will have on the marketplace.
Additionally, all of the final rules and regulations have not yet been defined
and finalized by the European Commission with regard to the euro currency. We
are assessing the effect the euro formation will have on DSP Group's internal
systems and the sale of DSP Group products. We expect to take appropriate
actions based on the results of such assessment. We believe that the cost
related to this issue will not be material to us and will not have a substantial
effect on our financial condition and results of operations.
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<PAGE>
FACTORS AFFECTING FUTURE OPERATING RESULTS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS CONCERNING OUR FUTURE
PRODUCTS, EXPENSES, REVENUE, LIQUIDITY AND CASH NEEDS AS WELL AS OUR PLANS AND
STRATEGIES. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS
AND WE ASSUME NO OBLIGATION TO UPDATE THIS INFORMATION. NUMEROUS FACTORS COULD
CAUSE OUR ACTUAL RESULTS TO DIFFER SIGNIFICANTLY FROM THE RESULTS DESCRIBED IN
THESE FORWARD-LOOKING STATEMENTS, INCLUDING THE FOLLOWING RISK FACTORS.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. Our quarterly
results of operations may vary significantly in the future for a variety of
reasons, including the following:
- - fluctuations in volume and timing of product orders;
- - timing of recognition of license fees;
- - level of per unit royalties;
- - changes in demand for our products due to seasonal customer buying patterns
and other factors;
- - timing of new product introductions by us or our customers, licensees or
competitors;
- - changes in the mix of products sold by us;
- - fluctuations in the level of sales by original equipment manufacturers
(OEMs) and other vendors of products incorporating our products; and
- - general economic conditions, including the changing economic conditions in
Asia.
Each of the above factors is difficult to forecast and thus could harm
our business, financial condition and results of operations. Through 2000, we
expect that revenues from our DSP core designs and TrueSpeech algorithms will be
derived primarily from license fees rather than per unit royalties. The
uncertain timing of these license fees has caused, and may continue to cause,
quarterly fluctuations in our operating results. Our per unit royalties from
licenses are dependent upon the success of our OEM licensees in introducing
products utilizing our technology and the success of those OEM products in the
marketplace. Per unit royalties from TrueSpeech licensees have not been
significant to date.
OUR AVERAGE SELLING PRICES CONTINUE TO DECLINE. We have experienced a decrease
in the average selling prices of our IDT processors, but have to date been able
to offset this decrease on an annual basis through manufacturing cost reductions
and the introduction of new products with higher performance. However, we cannot
guarantee that our on-going efforts will be successful or that they will keep
pace with the anticipated, continuing decline in average selling prices.
WE DEPEND ON THE IDT MARKET WHICH IS HIGHLY COMPETITIVE. Sales of IDT products
comprise a substantial portion of our product sales. Any adverse change in the
digital IDT market or in our ability to compete and maintain our position in
that market would harm our business, financial condition and results of
operations. The IDT market and the markets for our products in general are
extremely competitive and we expect that competition will only increase. Our
existing and potential competitors in each of our markets include large and
emerging domestic and foreign companies, many of which have significantly
greater financial, technical, manufacturing, marketing, sale and distribution
resources and management expertise than we
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<PAGE>
do. It is possible that we may one day be unable to respond to increased price
competition for IDT processors or other products through the introduction of new
products or reductions of manufacturing costs. This inability would have a
material adverse effect on our business, financial condition and results of
operations. Likewise, any significant delays by us in developing, manufacturing
or shipping new or enhanced products also would have a material adverse effect
on our business, financial condition and results of operations. The 900 Mhz
Digital Spread Spectrum RF and Base Band technology acquired in 1999 from AMD
gave us a "cheap entry ticket" to this market. This technology is not state of
the art and the company has noticed a trend of decreasing sales for the product
models which are based on this technology. The company may not succeed in its
development of new RF and Base Band models and those which are going to be
developed may not be accepted by the market. Despite the recent success of
development and sales of our DSP Cores, the market needs extensive R&D efforts
in new technologies not currently owned by the company, and we may not succeed
in developing such technologies in due time, which could effect our competitive
position.
WE DEPEND ON INDEPENDENT FOUNDRIES TO MANUFACTURE OUR INTEGRATED CIRCUIT
PRODUCTS. All of our integrated circuit products are manufactured by independent
foundries. While these foundries have been able to adequately meet the demands
of our increasing business, we are and will continue to be dependent upon these
foundries to achieve acceptable manufacturing yields, quality levels and costs,
and to allocate to us a sufficient portion of foundry capacity to meet our needs
in a timely manner. To meet our increased wafer requirements, we have added
additional independent foundries to manufacture our processors. Our revenues
could be harmed should any of these foundries fail to meet our request for
products due to a shortage of production capacity, process difficulties, low
yield rates or financial instability. For example, foundries in Taiwan produce a
significant portion of our wafer supply. As a result, earthquakes, aftershocks
or other natural disasters in Asia, could preclude us from obtaining an adequate
supply of wafers to fill customer orders and could harm our business, financial
condition, and results of operations.
WE MAY NEED TO INCREASE OUR RESEARCH AND DEVELOPMENT EFFORTS TO REMAIN
COMPETITIVE. The DSP Cores market is experiencing extensive efforts by some of
ourcompetitors to use new technologies to manipulate the chip design programming
toincrease the parallel processing of the chip. One such technology used is
VeryLong Instruction Word (VLIW), which some of our competitors possess elements
of,but which we do not possess at the present time. If such technology continues
toimprove the programming processing of these chips, then we may need to
furtherour research and development to obtain such technology to remain
competitive inthe market.
WE DEPEND ON INTERNATIONAL OPERATIONS, PARTICULARLY IN ISRAEL. We are dependent
on sales to customers outside the United States. We expect that international
sales will continue to account for a significant portion of our net product and
license sales for the foreseeable future. As a result, the occurrence of any
negative international political, economic or geographic events could result in
significant revenue shortfalls. These shortfalls could cause our business,
financial condition and results of operations to be harmed. Some of the risks of
doing business internationally include:
- - unexpected changes in regulatory requirements;
- - fluctuations in the exchange rate for the U.S. dollar;
- - imposition of tariffs and other barriers and restrictions;
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<PAGE>
- - burdens of complying with a variety of foreign laws;
- - political and economic instability; and
- - changes in diplomatic and trade relationships.
In particular, our principal research and development facilities are located in
the State of Israel and, as a result, at March 31, 2000, 123 of our 162
employees were located in Israel, including 85 out of 93 of our research and
development personnel. In addition, although DSP Group is incorporated in
Delaware, a majority of our directors and executive officers are residents of
Israel. Therefore, we are directly affected by the political, economic and
military conditions to which Israel is subject.
Moreover, many of our expenses in Israel are paid in Israeli currency which
subjects us to the risks of foreign currency fluctuations and to economic
pressures resulting from Israel's generally rate of inflation. While
substantially all of our sales and expenses are denominated in United States
dollars, a portion of our expenses are denominated in Israeli shekels. Our
primary expenses paid in Israeli currency are employee salaries and lease
payments on our Israeli facilities. As a result, an increase in the value of
Israeli currency in comparison to the United States dollar could increase the
cost of technology development, research and development expenses and general
and administrative expenses. We cannot provide assurance that currency
fluctuations, changes in the rate of inflation in Israel or any of the other
factors mentioned above will not have a material adverse effect on our business,
financial condition and results of operations.
WE DEPEND ON OEMS AND THEIR SUPPLIERS TO OBTAIN REQUIRED COMPLEMENTARY
COMPONENTS. Some of the raw materials, components and subassemblies included in
the products manufactured by our OEM customers, which also incorporate our
products, are obtained from a limited group of suppliers. Supply disruptions,
shortages or termination of any of these sources could have an adverse effect on
our business and results of operations due to the delay or discontinuance of
orders for our products by customers until those necessary components are
available.
WE DEPEND UPON THE ADOPTION OF INDUSTRY STANDARDS BASED ON TRUESPEECH. Our
prospects are partially dependent upon the establishment of industry standards
for digital speech compression based on TrueSpeech algorithms in the computer
telephony and Voice over IP markets. The development of industry standards
utilizing TrueSpeech algorithms would create an opportunity for us to develop
and market speech co-processors that provide TrueSpeech solutions and enhance
the performance and functionality of products incorporating these co-processors.
In February 1995, the ITU established G.723.1, which is predominately composed
of a TrueSpeech algorithm, as the standard speech compression technology for use
in video conferencing over public telephone lines. In March 1997, the
International Multimedia Teleconferencing Consortium, a nonprofit industry
group, recommended the use of G.723.1 as the default audio coder for all voice
transmissions over the Internet or for IP applications for H.323 conferencing
products.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY. DSP Group has pursued,
and will continue to pursue, growth opportunities through internal development
and acquisition of complementary businesses, products and technologies. We are
unable to predict whether or when any prospective acquisition will be completed.
The process of integrating an acquired business may be prolonged due to
unforeseen difficulties and may require a disproportionate
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<PAGE>
amount of our resources and management's attention. We cannot provide assurance
that we will be able to successfully identify suitable acquisition candidates,
complete acquisitions, integrate acquired businesses into our operations, or
expand into new markets. Once integrated, acquisitions may not achieve
comparable levels of revenues, profitability or productivity as the existing
business of DSP Group or otherwise perform as expected. The occurrence of any of
these events could harm our business, financial condition or results of
operations. Future acquisitions may require substantial capital resources, which
may require us to seek additional debt or equity financing.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED; RISKS OF INFRINGEMENT OF
RIGHTS OF OTHERS. As is typical in the semiconductor industry, we have been and
may from time to time be notified of claims that we may be infringing patents or
intellectual property rights owned by third parties. For example, AT&T has
asserted that G.723.1, which is primarily composed of a TrueSpeech algorithm,
includes certain elements covered by patents held by AT&T and has requested that
video conferencing manufacturers license the technology from AT&T. Other
organizations including Lucent Microelectronics, NTT and VoiceCraft have raised
public claims that they also have patents related to the G.723.1 technology. If
it appears necessary or desirable, we may try to obtain licenses for those
patents or intellectual property rights that we are allegedly infringing.
Although holders of these types of intellectual property rights commonly offer
these licenses, we cannot assure you that licenses will be offered or that terms
of any offered licenses will be acceptable to us. Our failure to obtain a
license for key intellectual property rights from a third party for technology
used by us could cause us to incur substantial liabilities and to suspend the
manufacturing of products utilizing the technology. We believe that the ultimate
resolution of these matters will not harm our financial position, results of
operations, or cash flows.
OUR STOCK PRICE MAY BE VOLATILE. Announcements of developments related to our
business, announcements by competitors, quarterly fluctuations in our financial
results, changes in the general conditions of the highly dynamic industry in
which we compete or the national economies in which we do business and other
factors could cause the price of our common stock to fluctuate, perhaps
substantially. In addition, in recent years the stock market has experienced
extreme price fluctuations, which have often been unrelated to the operating
performance of affected companies. These factors and fluctuations could have a
material adverse effect on the market price of our common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quantitative and Qualitative Disclosures About Market Risk."
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On April 13, 2000, the Company amended its bylaws to provide that the
authorized number of directors shall be not less than five (5) nor more than
nine (9) and that the exact number of directors shall be seven (7) until
changed, within the limits specified above, by the board of directors or by the
stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Bylaws (as amended 4/13/00)
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended March 31, 2000.
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 thereunto duly authorized.
DSP GROUP, INC.
(Registrant)
By /s/ Moshe Zelnik
-------------------------------------------------------------
Moshe Zelnik, Vice President of Finance, Chief Financial Officer
and Secretary (Principal Financial Officer and Principal Accounting Officer)
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<PAGE>
Date: May 15, 2000
Page 20
<PAGE>
Ex.3.1
===============================================================================
BYLAWS
OF
DSP GROUP, INC.
(A DELAWARE CORPORATION)
AMENDED AND RESTATED AS OF APRIL 13, 2000
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES.......................................................................................1
1.1 REGISTERED OFFICE....................................................................1
1.2 OTHER OFFICES........................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS...............................................................................1
2.1 PLACE OF MEETINGS....................................................................1
2.2 ANNUAL MEETING.......................................................................1
2.3 SPECIAL MEETING......................................................................3
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.....................................................3
2.5 MANNER OF GIVING NOTICE, AFFIDAVIT OF NOTICE.........................................3
2.6 QUORUM...............................................................................4
2.7 ADJOURNED MEETING; NOTICE............................................................4
2.8 VOTING...............................................................................4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE, CONSENT....................................5
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING..............................5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS..........................6
2.12 PROXIES..............................................................................6
2.13 INSPECTORS OF ELECTION...............................................................7
ARTICLE III DIRECTORS.............................................................................................7
3.1 POWERS...............................................................................7
3.2 NUMBER AND TERM OF OFFICE............................................................7
3.3 CLASSES OF DIRECTORS.................................................................8
3.4 RESIGNATION AND VACANCIES............................................................8
3.5 REMOVAL..............................................................................9
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.............................................9
3.7 FIRST MEETINGS......................................................................10
3.8 REGULAR MEETINGS....................................................................10
3.9 SPECIAL MEETINGS; NOTICE............................................................10
3.10 QUORUM..............................................................................10
3.11 WAIVER OF NOTICE....................................................................11
3.12 ADJOURNMENT.........................................................................11
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<PAGE>
3.13 NOTICE OF ADJOURNMENT...............................................................11
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING...................................11
3.15 FEES AND COMPENSATION OF DIRECTORS..................................................11
3.16 APPROVAL OF LOANS TO OFFICERS.......................................................12
ARTICLE IV COMMITTEES............................................................................................12
4.1 COMMITTEES OF DIRECTORS.............................................................12
4.2 MEETINGS AND ACTION OF COMMITTEES...................................................12
ARTICLE V OFFICERS...............................................................................................13
5.1 OFFICERS............................................................................13
5.2 ELECTION OF OFFICERS................................................................13
5.3 SUBORDINATE OFFICERS................................................................13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................................................13
5.5 VACANCIES IN OFFICES................................................................14
5.6 CHAIRMAN OF THE BOARD...............................................................14
5.7 CHIEF EXECUTIVE OFFICER.............................................................14
5.8 VICE PRESIDENTS.....................................................................14
5.9 SECRETARY...........................................................................14
5.10 CHIEF FINANCIAL OFFICER.............................................................15
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS....................................15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................................15
6.2 INDEMNIFICATION OF OTHERS...........................................................16
6.3 INSURANCE...........................................................................16
ARTICLE VII RECORDS AND REPORTS..................................................................................16
7.1 MAINTENANCE AND INSPECTION OF RECORDS...............................................16
7.2 INSPECTION BY DIRECTORS.............................................................17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS....................................................17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS......................................17
ARTICLE VIII GENERAL MATTERS.....................................................................................17
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING...............................17
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS...........................................18
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<PAGE>
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED...................................18
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES..............................................18
8.5 SPECIAL DESIGNATION ON CERTIFICATES.................................................19
8.6 LOST CERTIFICATES...................................................................19
8.7 CONSTRUCTION; DEFINITIONS...........................................................19
ARTICLE IX AMENDMENTS............................................................................................19
ARTICLE X DISSOLUTION............................................................................................20
ARTICLE XI CUSTODIAN.............................................................................................20
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.........................................20
11.2 DUTIES OF CUSTODIAN.................................................................21
</TABLE>
iii
<PAGE>
BYLAWS
OF
DSP GROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
Certificate of Incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held each year
on a date and at a time designated by the board of directors. In the absence of
such designation, the annual meeting of stockholders shall be held on the third
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
(b) At an annual meeting of the 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 (C) otherwise
properly brought before the meeting by a stockholder. 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 delivered to or mailed and received
at the principal executive offices of the corporation not
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less than one hundred twenty (120) calendar days in advance of the date
specified in the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders: provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30) days
from the date contemplated at the time of the previous year's proxy statement,
notice by the stockholder to be timely must be so received a reasonable time
before the solicitation is made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) 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, (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal. Notwithstanding
the foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.2. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or reelection as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for elections of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a Director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 2.2. At the request of the Board of Directors, any
person nominated by a stockholder for election as a Director shall furnish to
the Secretary of the corporation that
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<PAGE>
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrants, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or in the absence of the
chairman of the board by the chief executive officer. No other person or persons
are permitted to call a special meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5, that a meeting will be held at the time requested by the person or
persons who called the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this paragraph
of this Section 2.3 shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the board of directors
may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
Except as set forth in Section 2.3, all notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.5 of
these bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date, and hour of the
meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted (no business other than that specified in the notice
may be transacted) or (ii) in the case of the annual meeting, those matters
which the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but any proper matter may be presented
at the meeting for such action). The notice of any meeting at which directors
are to be elected shall include the name of any nominee or nominees who, at the
time of the notice, the board intends to present for election.
2.5 MANNER OF GIVING NOTICE, AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is
3
<PAGE>
given, notice shall be deemed to have been given if sent to that stockholder by
mail or telegraphic or other written communication to the corporation's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of stockholders. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than thirty (30) days from the date set
for the original meeting, then notice of the adjourned meeting shall be given.
Notice of any such adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of
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Sections 217 and 218 of the General Corporation Law of Delaware (relating to
voting rights of fiduciaries, pledgors and joint owners, and to voting trusts
and other voting agreements).
Except as may be otherwise provided in the Certificate of
Incorporation, each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote of the stockholders. Any stockholder
entitled to vote on any matter may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or, except when the matter
is the election of directors, may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the stockholders, unless the vote of a greater number or a vote by
classes is required by law or by the Certificate of Incorporation.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE, CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Certificate of Incorporation, any
action which may be taken at any annual or special meeting of stockholders may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in
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writing. If the action which is consented to is such as would have required the
filing of a certificate under any section of the General Corporation Law of
Delaware if such action had been voted on by stockholders at a meeting thereof,
then the certificate filed under such section shall state, in lieu of any
statement required by such section concerning any vote of stockholders, that
written notice and written consent have been given as provided in Section 228 of
the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only stockholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and
(b) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
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2.13 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more stockholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fads to appear or fads or refuses to act, then
the chairman of the meeting may, and upon the request of any stockholder or a
stockholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies,
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the Certificate of Incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER AND TERM OF OFFICE
The authorized number of directors shall be not less than five (5) nor
more than nine (9). The exact number of directors shall be seven (7) until
changed, within the limits specified above,
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by a bylaw amending this Section 3.2, duly adopted by the board of directors or
by the stockholders. The indefinite number of directors may be changed, or a
definite number may be fixed without provision for an indefinite number, by a
duly adopted amendment to the Certificate of Incorporation or by an amendment to
this bylaw adopted by the vote or written consent of holders of a majority of
the outstanding shares entitled to vote or by resolution of a majority of the
board of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
If for any cause, the directors shall not have been elected at an annual
meeting, they may be elected as soon thereafter as convenient at a special
meeting of the stockholders called for that purpose in the manner provided in
these Bylaws.
3.3 CLASSES OF DIRECTORS
Following the closing of the corporation's initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering"), the Directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class I Directors shall expire and Class I Directors
shall be elected for a full term of three years. At the second annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class II Directors shall expire and Class II Directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class III Directors shall expire and Class III Directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, Directors shall be elected for a full term of three years to
succeed the Directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each Director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the stockholders or by court order may be
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filled only by the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
unanimous written consent of all shares entitled to vote thereon. Each director
so elected shall hold office until the next annual meeting of the stockholders
and until a successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 REMOVAL
Subject to any limitations imposed by law, and unless otherwise
provided in the Certificate of Incorporation, the Board of Directors, or any
individual Director, may be removed from office at any time by the affirmative
vote of the holders of at least a majority of the then outstanding shares of the
capital stock of the corporation entitled to vote at an election of Directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the
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absence of such a designation, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board may be held
at any place within or outside the State of Delaware that has been designated in
the notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, or in the absence of the
chairman of the board by the chief executive officer or any three directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least seven (7) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least seventy-two (72) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act
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or decision done or made by a majority of the directors present at a duly held
meeting at which a quorum is present shall be regarded as the act of the board
of directors, subject to the provisions of the Certificate of Incorporation and
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.8 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.14 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
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3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, but no such committee shall have the power or authority to (i) amend
the Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in Section 151(a) of the
General Corporation Law of Delaware, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.7 (regular meetings), Section 3.8 (special
meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice),
Section 3.11 (adjournment), Section 3.12 (notice of adjournment), and Section
3.13 (action without meeting), with such changes in the context of
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those bylaws as are necessary to the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a chairman of the board, a
chief executive officer, a secretary and a chief financial officer. The
corporation may also have, at the discretion of the board of directors, a
president, one or more vice presidents, one or more assistant secretaries, one
or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall serve
as the corporation's general manager, and shall have general supervision,
direction and control of the corporation's business and its officers, and, if
present, preside at meetings of the stockholders and the board of directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. If there is no chief executive officer, then the chairman of the board
shall also be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 5.7 of these bylaws. The chairman of the
board shall report to the board of directors.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the chief
executive officer shall, subject to the control of the chairman of the board, or
the board of directors if there is no chairman of the board, have general
supervision, direction, and control of the business and the officers of the
corporation. He or she shall preside at all meetings of the stockholders and the
board of directors, in the absence or nonexistence of a chairman of the board.
He or she shall have the general powers and duties of management usually vested
in the office of president of a corporation, and shall have such other powers
and duties as may be prescribed by the board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records.
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 for 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 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 is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each
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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 (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall he 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.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of
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any shares on the books of the corporation after the record date so fixed,
except as otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the chief
financial officer, the secretary or an assistant secretary of such corporation
representing the number of shares registered in certificate form. Any or all of
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 has 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 or she were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon
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<PAGE>
partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote, provided, however, that the
corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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<PAGE>
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs
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of the corporation that the required vote for action by the board of directors
cannot be obtained and the stockholders are unable to terminate this division,
or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
21
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