<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 10-Q
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 1999
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________to___________________
Commission File Number 0-24026
MAXWELL SHOE COMPANY INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2599205
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
101 Sprague Street
PO Box 37
Hyde Park (Boston), MA 02137-0037
(Address of principal executive offices) (Zip code)
(617) 364-5090
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 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 [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of common stock outstanding at June 11, 1999:
Class A 8,795,899
--------------------
Class B None
--------------------
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -------
MAXWELL SHOE COMPANY INC.
BALANCE SHEETS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1999 1998
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 24,196 $ 18,731
Accounts receivable, trade (net of allowance for doubtful
accounts and discounts of $634 in 1999, $581 in 1998)............ 33,224 35,655
Inventory, net....................................................... 20,834 22,928
Prepaid expenses..................................................... 711 430
Prepaid income taxes................................................. 0 1,177
Deferred income taxes................................................ 1,064 1,074
------------ ------------
Total current assets.................................................... 80,029 79,995
Property and equipment, net............................................. 6,613 6,231
Trademarks.............................................................. 4,584 4,767
Other assets............................................................ 12 12
------------ ------------
$ 91,238 $ 91,005
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 3,182 $ 3,824
Accrued expenses..................................................... 2,198 5,938
Deferred income taxes................................................ 434 306
Current portion of capital lease obligation.......................... 125 125
------------ ------------
Total current liabilities............................................... 5,939 10,193
Capital lease obligation................................................ 157 220
Long-term deferred income taxes......................................... 1,283 1,283
Stockholders' equity:
Preferred stock, par value $.01, 1,000 shares
authorized, none outstanding..................................... 0 0
Class A common stock, par value $.01, 20,000 shares authorized,
8,796 outstanding in 1999, (8,794 outstanding in 1998)........... 88 88
Additional paid-in capital........................................... 43,027 43,015
Deferred compensation................................................ (275) (306)
Retained earnings.................................................... 41,019 36,512
------------ ------------
Total stockholders' equity.............................................. 83,859 79,309
------------ ------------
$ 91,238 $ 91,005
============ ============
</TABLE>
2
<PAGE>
MAXWELL SHOE COMPANY INC.
STATEMENTS OF INCOME
(Unaudited-In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 36,247 $ 39,786 $ 72,153 $ 76,114
Cost of sales................................ 25,709 28,862 52,169 55,353
----------- ----------- ------------ -----------
Gross profit................................. 10,538 10,924 19,984 20,761
Operating expenses:
Selling..................................... 2,734 2,647 4,959 5,093
General and administrative.................. 4,051 3,765 7,784 7,499
----------- ----------- ------------ -----------
6,785 6,412 12,743 12,592
----------- ----------- ------------ -----------
Operating income............................. 3,753 4,512 7,241 8,169
Other expenses (income)
Interest.................................... 7 9 13 21
Amortization of Trademarks.................. 91 92 183 183
Other, net.................................. (240) (52) (465) (95)
----------- ----------- ------------ -----------
(142) 49 (269) 109
----------- ----------- ------------ -----------
Income before income taxes................... 3,895 4,463 7,510 8,060
Income taxes................................. 1,558 1,318 3,003 2,685
----------- ----------- ------------ -----------
Net income................................... $ 2,337 $ 3,145 $ 4,507 $ 5,375
=========== =========== ============ ===========
Net income per share
Basic....................................... $.27 $.41 $.51 $.70
Diluted..................................... $.25 $.35 $.47 $.61
Shares used to compute net
income per share:
Basic....................................... 8,796 7,675 8,795 7,632
Diluted..................................... 9,461 8,882 9,504 8,788
</TABLE>
3
<PAGE>
MAXWELL SHOE COMPANY INC.
STATEMENTS OF CASH FLOW
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
--------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Operating activities
Net income.............................................................. $ 4,507 $ 5,375
Adjustments to reconcile net income to net cash provided
(used) by operating activities
Depreciation and amortization........................................ 898 533
Deferred income taxes................................................ 138 282
Doubtful accounts provision.......................................... 54 62
Changes in operating assets and liabilities:
Accounts receivable.............................................. 2,377 (1,090)
Inventory........................................................ 2,094 799
Prepaid expenses................................................. (250) (1,560)
Other assets..................................................... 0 (2)
Accounts payable................................................. (642) 478
Prepaid income taxes............................................. 1,177 0
Accrued expenses................................................. (3,740) 537
------------ ------------
Net cash provided by operating activities............................... 6,613 5,414
Investing activities
Purchases of property and equipment..................................... (1,097) (3,583)
------------ ------------
Net cash used by investing activities................................... (1,097) (3,583)
Financing activities
Sale of common stock proceeds........................................... 12 13,237
Stock option proceeds................................................... 0 1,239
Payments on capital lease obligations................................... (63) (62)
------------ ------------
Net cash (used) provided by financing activities........................ (51) 14,414
------------ ------------
Net increase in cash and cash equivalents............................... 5,465 16,245
Cash and cash equivalents at beginning of year.......................... 18,731 3,129
------------ ------------
Cash and cash equivalents at end of quarter $ 24,196 $ 19,374
============ ============
Interest paid........................................................... $ 13 $ 21
============ ============
Income taxes paid....................................................... $ 1,072 $ 4,027
============ ============
</TABLE>
4
<PAGE>
MAXWELL SHOE COMPANY INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
April 30, 1999
1. Basis of Presentation
The accompanying unaudited financial statements of Maxwell Shoe Company
Inc. (the "Company") 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 adjustments, considered necessary for a fair
presentation have been included. The results of the interim periods
presented herein are not necessarily indicative of the results to be
expected for any other interim period or the full year. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's 10-K Annual Report for the fiscal
year ended October 31, 1998.
2. Net Income Per Share
Basic income per share is computed based on the weighted average number of
common shares outstanding during the period. Diluted income per share is
computed based on basic shares outstanding increased by incremental shares
assumed issued for dilutive common stock equivalents in the form of stock
options.
3. Accountings Pronouncements
Effective November 1, 1998, the Company adopted Statement No. 130,
"Reporting Comprehensive Income" (FAS 130) and Statement No. 131,
"Disclosure About Segments of an Enterprise and Related Information" (FAS
131). FAS 130 establishes standards for reporting and displaying
comprehensive income and its components. Total comprehensive income is
equal to net income for all periods presented. FAS 131 establishes
standards for public companies to report information about operating
segments in financial statements, and supersedes FAS 14, "Financial
Reporting for Segments of a Business Enterprise," but retains the
requirements to report information about major customers.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133), which provides for
accounting of foreign exchange contracts. This Statement is effective for
the Company in fiscal 2000 and is not expected to have a material impact on
the Company's financial statements based on current and expected levels of
foreign exchange activity.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
- -------
Condition and Results of Operations
Results of Operations
The following table sets forth net sales by product line or category of
business:
<TABLE>
<CAPTION>
Three Months Ended April 30,
---------------------------------------------
1999 1998
-------------------- --------------------
($ Millions)
<S> <C> <C> <C> <C>
Mootsies Tootsies........ $16.9 46.7% $20.8 52.2%
Jones New York Footwear.. 10.5 29.0 9.8 24.8
Sam & Libby.............. 5.0 13.8 4.1 10.2
Private Label Footwear... 3.5 9.7 4.4 11.1
Closeout................. .3 .8 .7 1.7
----- ----- ----- -----
$36.2 100.0% $39.8 100.0%
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended April 30,
---------------------------------------------
1999 1998
-------------------- --------------------
($ Millions)
<S> <C> <C> <C> <C>
Mootsies Tootsies........ $31.8 44.0% $36.7 48.2%
Jones New York Footwear.. 19.7 27.3 19.2 25.2
Sam & Libby.............. 10.0 13.9 7.4 9.7
Private Label Footwear... 9.8 13.6 11.1 14.6
Closeout................. .9 1.2 1.7 2.3
----- ----- ----- -----
$72.2 100.0% $76.1 100.0%
===== ===== ===== =====
</TABLE>
Three Months Ended April 30, 1999 Compared to Three Months Ended April 30, 1998
Net sales were $36.2 million for the three months ended April 30, 1999 compared
to $39.8 million for the same period in the prior year, a decrease of 9.0%. The
net sales decrease was due to an 18.8% decrease in net sales of Mootsies
Tootsies footwear, offset by a 7.1% increase in net sales of Jones New York
footwear, and a 22.0% increase in net sales of Sam & Libby footwear.
Gross profit in the second quarter of fiscal 1999 was $10.5 million compared to
$10.9 million in the second quarter of fiscal 1998, or 29.1% of net sales as
compared to 27.5% for the same quarter in 1998. The increase in gross margin
percentage for the second quarter of fiscal 1999 was due to a increased
proportion of net sales from branded footwear which carry a higher gross margin.
Selling, general and administrative expenses increased $.4 million during the
second quarter of fiscal 1999 due to increased depreciation expense as a result
of the infrastructure improvements in fiscal year 1998. As a percent of net
sales, selling, general and administrative expense for the second quarter of
fiscal 1999 was 18.7% compared to 16.1% in the same period in 1998.
Other income was $142,000 for the three months ended April 30, 1999 compared to
other expense of $149,000 for the same period in the prior year. In 1999, the
Company's improved cash position resulted in an increase in interest income.
6
<PAGE>
Six Months Ended April 30, 1999 Compared to Six Months ended April 30, 1998
Net sales were $72.2 million for the six months ended April 30, 1999 compared to
$76.1 million for the same period in the prior year, a decrease of 5.2%. The
net sales decrease was due to an 13.4% decrease in net sales of Mootsies
Tootsies footwear, a 2.6% increase in net sales of Jones New York footwear and
an 35.1% increase in net sales of Sam & Libby footwear.
Gross profit in the first six months of fiscal 1999 was $20.0 million as
compared to $20.8 million in the first six months of fiscal 1998, or 27.7% of
net sales as compared to 27.3% for the same period in 1998.
Selling, general and administrative expenses increased slightly during the first
six months of fiscal 1999.
The Company has accrued an anticipated effective annual income tax rate of 40%
for fiscal year 1999, as compared to 33% (29% for the second fiscal quarter) for
fiscal year 1998. The effective tax rate for 1998 and the second fiscal quarter
tax rate reflected a $.9 million tax benefit from the exercise of employee stock
options. The benefit resulted from the realization of a portion of a deferred
tax asset previously recorded and fully reserved in connection with the granting
of the options in 1994.
At April 30, 1999 and 1998, the Company had unfilled customer orders (backlog)
of $67.9 million and $74.4 million respectively, an decrease of 8.7%. The
backlog at a particular time is affected by a number of factors, including
seasonality and the scheduling of manufacturing and shipment of products.
Orders generally may be canceled by customers without financial penalty.
Accordingly, a comparison of backlog from period to period is not necessarily
meaningful and may not be indicative of eventual actual shipments to customers.
The Company expects that substantially all of its backlog at April 30, 1999 will
be shipped within six months from such date.
On June 10, 1999, the Company signed a definitive agreement under which the
Company sold to Jones Apparel Group, Inc. the Company's license to manufacture
and distribute Jones New York footwear. In consideration of the sale of the
license and certain other assets, the Company will receive a cash payment of
$25.0 million. The Company will continue to ship Jones New York footwear until
the closing date planned for the early part of July 1999. Subsequent to the
closing, the Company will liquidate the remaining inventory.
Liquidity and Capital Resources
The Company has relied upon internally generated cash flows from operations, and
financing activities from the proceeds of the sale of stock, stock options, and
borrowings under its revolving credit facility to finance its operations and
expansion. Net cash provided by operating activities totaled approximately $6.6
million in the six month period ended April 30, 1999, as compared to net cash
used of $5.4 million for the same period in 1998. The increase in cash provided
by operations in the first six months of fiscal 1999 was caused by a reduction
of receivables and inventory. Working capital was $74.1 million at April 30,
1999 as compared to $69.8 million at October 31, 1998. The increase is due
primarily to the increase in cash and a reduction in accrued expenses. Working
capital may vary from time to time as a result of seasonal requirements, the
timing of early factory shipments and the Company's in-stock position, which
requires increased inventories, and the timing of accounts receivable
collections.
The Company currently has in place with a financial institution a $35.0 million
discretionary demand credit facility in favor of the Company. A portion of the
revolving credit facility can be utilized to issue letters of credit to
guarantee payment of the Company's purchases of footwear manufactured overseas.
As of April 30, 1999, total outstanding letters of credit were $12.6 million,
and $22.4 million was available for future borrowings.
7
<PAGE>
Capital expenditures were $1.1 million for the six months ended April 30, 1999.
The Company is in the process of installing new software for the Company's
computer needs. The estimated total cost of capital expenditures for these
projects in fiscal 1999 is $2.0 million. The Company is dependent upon complex
computer systems for certain phases of its operations, including sales,
distribution and delivery. Since many of the Company's older computer software
programs recognize only the last two digits of the year in any date (e.g., "97"
for "1997"), some software may recognize a date using "00" as the year 1900
rather than the year 2000 and fail to operate properly in 1999 or 2000 if the
software is not reprogrammed or replaced (the "Year 2000 Problem"). This could
result in system failures or miscalculations leading to disruptions in the
Company's operations, including, among other things, a temporary inability to
process transactions, receive inventory from suppliers, ship inventory to
customers, or engage in similar business activities. The Company believes that
many of its customers and suppliers also have Year 2000 Problems which could
adversely affect the Company. One area in which customers' Year 2000 Problems
could adversely impact the Company and its operations relates to electronically
received orders for the Company's products through Electronic Data Interchange
(EDI). Significant customers and suppliers have been identified and the Company
has opened communication with them in regards to the Year 2000 Problem.
Correspondence has been sent to all significant customers and suppliers and the
Company has been told by a large majority that they expect to be Year 2000
compliant prior to the development of material Year 2000 Problems. The Company
plans to perform follow-up inquiries with these significant customers and
suppliers. In the event some customers and suppliers are not Year 2000
compliant, the Company's contingency plan includes utilization of existing
manual order receiving capabilities and increasing inventory. The Company
currently receives approximately 15-20% of orders for its products through EDI.
The Company intends to spend up to $1.0 million in fiscal 1999 to upgrade its
computer systems and address the Year 2000 Problem. The Company plans to fund
this expenditure with current cash resources or equipment financing
arrangements. It is not possible at present to quantify the financial effect of
the Year 2000 Problem if it is not timely resolved. Although, the Company
presently believes that the cost of fixing the Year 2000 Problem will not have a
material effect on the Company's financial condition or results of operations,
expectations about future year 2000-related costs are subject to various
uncertainties that could cause the actual results to differ materially from the
Company's expectations, including the success of the Company in identifying
systems and programs that are not Year 2000 ready, the nature and amount of
programming required to upgrade or replace each of the affected programs, the
availability, rate and magnitude of related labor and consulting costs and the
success of the Company's business partners, vendors and clients in addressing
the Year 2000 issue.
Although the Company anticipates that by September 1999 no material business
disruption will occur as a result of the Year 2000 issue, the Year 2000 issue is
unique and the failure to correct a material Year 2000 issue could result in an
interruption, or a failure of, certain normal business activities or operations,
such as loss of communications with store locations, inability to process
transactions, inability for malls to operate, and the disruption of the supply
of product and distribution channel. Such failures could materially and
adversely affect the Company's results of operations, liquidity and financial
condition. Due to general uncertainty inherent in the Year 2000 Problem,
resulting from the uncertainty of the Year 2000 readiness of third parties, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 Plan is
expected to significantly reduce the Company's level of uncertainty about the
Year 2000 issue and the readiness of its material third parties. The Company
believes that with the completion of the Plan as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
The Company from time to time enters into forward exchange contracts in
anticipation of future purchases of inventory denominated in foreign currency,
principally the Spanish peseta. As of April 30, 1999 the Company did not have
any forward exchange contracts.
8
<PAGE>
The Company anticipates that it will be able to satisfy its cash requirements
for the remainder of fiscal 1999, including its expected growth, primarily with
cash flow from operations.
Certain statements contained in this Form 10-Q regard matters that are not
historical facts and are forward looking statements (as such term is defined in
the rules promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act")). Because such forward looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to; changing consumer
preference, competition from other footwear manufacturers, loss of key
employees, general economic conditions and adverse factors impacting the retail
footwear industry, and the inability by the Company to source its products due
to political or economic factors or the imposition of trade or duty
restrictions. The Company undertakes no obligation to release publicly the
results of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1: Legal Proceedings.
- ------
None.
Item 2: Changes in Securities.
- -------
None.
Item 3: Defaults Upon Senior Securities.
- ------
None.
Item 4: Submission of Matters to a Vote of Security Holders.
- ------
(a) The Company's Annual Meeting of Stockholders was held on April 8, 1999.
(b) The following directors were elected to serve until the 2000 Annual Meeting
of Stockholders or until their successors have been duly elected and
qualified. Of the 8,795,899 shares of Class A common stock, the directors
were elected by the following votes:
<TABLE>
<CAPTION>
Number of Votes Received
---------------------------------------
Withheld
Name For Authority
------------------------------ ----------------- -----------------
<S> <C> <C>
Mark J. Cocozza 6,682,966 -
James J. Tinagero 6,682,966 -
Maxwell V. Blum 6,682,466 -
Stephen A. Fine 6,697,866 -
Jonathan K. Layne 6,697,866 -
Malcolm L. Sherman 6,682,966 -
</TABLE>
(c) An amendment to the Company's Certificate of Incorporation to eliminate the
authorization for the issuance of Class B Common Stock was approved by the
stockholders by the following votes:
<TABLE>
<CAPTION>
Class A Votes
-----------------
<S> <C>
Votes For 7,923,016
Votes Against 29,112
Votes Abstaining 6,659
</TABLE>
10
<PAGE>
Item 5: Other Information.
- -------
None.
Item 6: Exhibits.
- ------
(a) Exhibits
Exhibit 3.2 - Bylaws of Maxwell Shoe Company Inc.,
amended March 29, 1999
Exhibit 99 - Press release dated June 11, 1999
(b) There were no reports on Form 8-K during the three months ended
April 30, 1999.
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.
Maxwell Shoe Company Inc.
Date: June 11, 1999 By: /s/ Richard J. Bakos
-------------------------------------
Richard J. Bakos
Vice President, Finance and
Chief Financial Officer
11
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
- -------------- ------------ ----
3.2 Bylaws of Maxwell Shoe Company Inc., amended March 29, 1999
99 Press release dated June 11, 1999
12
<PAGE>
EXHIBIT 3.2
MAXWELL SHOE COMPANY INC.
a Delaware corporation
Amended And Restated Bylaws
ARTICLE I: Offices.
SECTION 1.1 Registered Office. The registered office of Maxwell
-----------------
Shoe Company Inc. (the "Corporation") shall be at Corporation Service Company,
1013 Centre Road, City of Wilmington, County of New Castle, State of Delaware,
and the name of the registered agent in charge thereof shall be The Corporation
Trust Company.
SECTION 1.2 Principal Office. The principal office for the
----------------
transaction of the business of the Corporation shall be at such place as the
Board of Directors of the Corporation (the "Board") may determine. The Board is
hereby granted full power and authority to change said principal office from one
location to another.
SECTION 1.3 Other Offices. The Corporation may also have an office
-------------
or offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II: Meetings of Stockholders
SECTION 2.1 Place of Meetings. All annual meetings of stockholders
-----------------
and all other meetings of stockholders shall be held either at the principal
office of the Corporation or at any other place within or without the State of
Delaware that may be designated by the Board pursuant to authority hereinafter
granted to the Board.
SECTION 2.2 Annual Meetings. Annual meetings of stockholders of
---------------
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time and place and on such date as the Board shall determine by resolution.
SECTION 2.3 Special Meetings. A special meeting of the
----------------
stockholders for the transaction of any proper business may be called at any
time by the Board or the Chairman.
SECTION 2.4 Notice of Meetings. Except as otherwise required by
------------------
law, notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 days nor more than 60 days before the date of the meeting
to each stockholder of record entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to such stockholder personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
1
<PAGE>
directed to such stockholder at such stockholder's post office address furnished
by such stockholder to the Secretary of the Corporation for such purpose, or, if
such stockholder shall not have furnished an address to the Secretary for such
purpose, then at such stockholder's post office address last known to the
Secretary, or by transmitting a notice thereof to such stockholder at such
address by telegraph, cable, wireless or facsimile. Except as otherwise
expressly required by law, no publication of any notice of a meeting of
stockholders shall be required. Every notice of a meeting of stockholders shall
state the place, date and hour of the meeting and, in the case of a special
meeting, shall also state the purpose for which the meeting is called. Notice
of any meeting of stockholders shall not be required to be given to any
stockholder to whom notice may be omitted pursuant to applicable Delaware law or
who shall have waived such notice, and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.5 Quorum. Except as otherwise required by law, the holders
------
of record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of
stockholders of the Corporation or any adjournment thereof. Subject to the
requirement of a larger percentage vote, if any, contained in the Certificate of
Incorporation, these Bylaws or by statute, the stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding any withdrawal of stockholders that may leave
less than a quorum remaining, if any action taken (other than adjournment) is
approved by the vote of at least a majority in voting interest of the shares
required to constitute a quorum. In the absence of a quorum at any meeting or
any adjournment thereof, a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat or, in the absence
therefrom of all the stockholders, any officer entitled to preside at, or to act
as secretary of, such meeting may adjourn such meeting from time to time. At
any such adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 2.6 Voting.
------
(A) Each stockholder shall, at each meeting of stockholders, be
entitled to vote in person or by proxy each share of the stock of the
Corporation that has voting rights on the matter in question and that shall have
been held by such stockholder and registered in such stockholder's name on the
books of the Corporation:
(i) on the date fixed pursuant to Section 6.5 of these
Bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting; or
(ii) if no such record date shall have been so fixed, then
(a) at the close of business on the day next preceding the day upon
which notice of the meeting shall be given or (b) if notice of the
meeting shall be
2
<PAGE>
waived, at the close of business on the day next preceding the day upon which
the meeting shall be held.
(B) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation the pledgor shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or the pledgee's proxy, may represent
such stock and vote thereon. Stock having voting power standing of record in
the names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or with
respect to which two or more persons have the same fiduciary relationship, shall
be voted in accordance with the provisions of the Delaware General Corporation
Law.
(C) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by such stockholder's proxy appointed by an
instrument in writing, subscribed by such stockholder or by such stockholder's
attorney thereunto authorized and delivered to the secretary of the meeting.
The attendance at any meeting of a stockholder who may theretofore have given a
proxy shall not have the effect of revoking the same unless such stockholder
shall in writing so notify the secretary of the meeting prior to the voting of
the proxy. At any meeting of stockholders at which a quorum is present, all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon. The vote at any meeting of stockholders on any question
need not be by ballot, unless so directed by the chairman of the meeting. On a
vote by ballot, each ballot shall be signed by the stockholder voting, or by
such stockholder's proxy, if there by such proxy, and it shall state the number
of shares voted.
SECTION 2.7 Judges. Prior to each meeting of stockholders, the
------
Chairman of such meeting shall appoint a judge or judges to act with respect to
such vote. Each judge so appointed shall first subscribe an oath faithfully to
execute the duties of a judge at such meeting with strict impartiality and
according to the best of such judge's ability. Such judges shall decide upon
the qualification of the voters and shall certify and report the number of
shares represented at the meeting and entitled to vote on such question,
determine the number of votes entitled to be cast by each share, shall conduct
and accept the votes, when the voting is completed, ascertain and report the
number of shares voted respectively for and against the question, and determine,
and retain for a reasonable period a record of the disposition of, any challenge
made to any determination made by such judges. Reports of judges shall be in
writing and subscribed and delivered by them to the Secretary of the
Corporation. The judges need not be stockholders of the Corporation, and any
officer of the Corporation may be a judge on any question other than a vote for
or against a proposal in which such officer shall have a material interest. The
judges may appoint or retain other persons or entities to assist the judges in
the performance of the duties of the judges.
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SECTION 2.8 Advance Notice of Stockholder Proposals and Stockholder
-------------------------------------------------------
Nominations.
- -----------
(A) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board or (ii) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section 2.8(A). For
business to be properly brought before any meeting of the stockholders by a
stockholder, the stockholder must have given notice thereof in writing to the
Secretary of the Corporation not less than 90 days in advance of such meeting
or, if later, the seventh day following the first public announcement of the
date of such meeting. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the meeting (1) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (2) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (3) the class and number of shares of the Corporation that are
beneficially owned by the stockholder, and (4) any material interest of the
stockholder in such business. In addition, the stockholder making such proposal
shall promptly provide any other information reasonably requested by the
Corporation. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in this Section 2.8. The Chairman of
any such meeting shall direct that any business not properly brought before the
meeting shall not be considered.
(B) Nominations for the election of directors may be made by the Board
or by any stockholder entitled to vote in the election of directors; provided,
however, that a stockholder may nominate a person for election as a director at
a meeting only if written notice of such stockholder's intent to make such
nomination has been given to the Secretary of the Corporation not later than 90
days in advance of such meeting or, if later, the seventh day following the
first public announcement of the date of such meeting. Each such notice or any
solicitation for written consent to the election of a director (as the term
"solicitation" is defined in Rule 14a-1(l) under the Securities Exchange Act of
1934, as amended) shall set forth: (i) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(ii) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the United States Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (v) the consent of each nominee to serve as a director of the
Corporation if so elected. In addition, the stockholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated, or unless written consents with respect to the
election of such person as a director have been solicited (as the term
"solicitation" (and, by extension, its correlatives) is defined in Rule 14a-1(l)
under the Securities Exchange Act of 1934, as amended), in accordance with the
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procedures set forth in this Section 2.8(B). The Chairman of any meeting of
stockholders shall direct that any nomination not made in accordance with these
procedures be disregarded.
Section 2.9 Action by Written Consent.
-------------------------
(A) Any action which is required to be or may be taken at any annual
or special meeting of stockholders of the Corporation may be taken without a
meeting, without prior notice to stockholders and without a vote if consents in
writing, setting forth the action so taken, shall have been signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or to take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
(B) Consents to corporate action shall be valid for a maximum of
sixty (60) days after the date of the earliest dated consent delivered to the
Corporation in the manner provided in Section 228(c) of the Delaware General
Corporation Law. Consents may be revoked by written notice (i) to the
Corporation, (ii) to the stockholder or stockholders soliciting consents or
soliciting revocations in opposition to action by consent proposed by the
Corporation (the "Soliciting Stockholders"), or (iii) to a proxy solicitor or
other agent designated by the Corporation or the Soliciting Stockholders.
(C) Pursuant to Article VII of the Certificate of Incorporation of
the Corporation, any action by written consent shall be deemed effective as of
the day on which written consents signed by stockholders having the minimum
number of votes that would be necessary to authorize such action at a meeting at
which all shares entitled to vote thereon were present and voted are delivered
to the Corporation. In order to determine, in an orderly and objective fashion,
whether valid and unrevoked written consents signed by stockholders having such
minimum number of votes have been received, the procedures specified in Sections
2.9(C), (D) and (E) shall be followed with respect to any action by written
consent. Within three (3) business days after receipt of the earliest dated
consent delivered to the Corporation in the manner provided in Section 228(c) of
the Delaware General Corporation Law or the determination by the Board of
Directors of the Corporation that the Corporation should seek corporate action
by written consent, as the case may be, the Secretary shall engage nationally
recognized independent inspectors of elections for the purpose of performing a
ministerial review of the validity of the consents and revocations. The cost of
retaining inspectors of election shall be borne by the Corporation.
(D) Consents and revocations shall be delivered to the inspectors
upon receipt by the Corporation, the Soliciting Stockholders or their proxy
solicitors or other designated agents. As soon as consents and revocations are
received, the inspectors shall review the consents and revocations and shall
maintain a count of the number of valid and unrevoked consents. The inspectors
shall keep such count confidential and shall not reveal the count to the
Corporation, the Soliciting Stockholder or their representatives or any other
entity. As soon as practicable after the earlier of (i) sixty (60) days after
the date of the earliest dated consent delivered to the Corporation in the
manner provided in Section 228(c) of the Delaware General Corporation Law or
(ii) a written request therefor by the Corporation or the Soliciting
Stockholders (whichever is soliciting consents), notice of which request shall
be given to the party opposing the solicitation of consents, if any, which
request shall state that the Corporation or Soliciting Stockholders, as
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the case may be, have a good faith belief that the requisite number of valid and
unrevoked consents to authorize or take the action specified in the consents has
been received in accordance with these Bylaws, the inspectors shall issue a
preliminary report to the Corporation and the Soliciting Stockholders stating:
(i) the number of valid consents; (ii) the number of valid revocations; (iii)
the number of valid and unrevoked consents; (iv) the number of invalid consents;
(v) the number of invalid revocations; (vi) whether, based on their preliminary
count, the requisite number of valid and unrevoked consents has been obtained to
authorize or take the action specified in the consents.
(E) Unless the Corporation and the Soliciting Stockholders shall
agree to a shorter or longer period, the Corporation and the Soliciting
Stockholders shall have 48 hours to review the consents and revocations and to
advise the inspectors and the opposing party in writing as to whether they
intend to challenge the preliminary report of the inspectors. If no written
notice of an intention to challenge the preliminary report is received within 48
hours after the inspectors' issuance of the preliminary report, the inspectors
shall issue to the Corporation and the Soliciting Stockholders their final
report containing the information from the inspectors' determination with
respect to whether the requisite number of valid and unrevoked consents was
obtained to authorize and take the action specified in the consents. If the
Corporation or the Soliciting Stockholders issue written notice of an intention
to challenge the inspectors' preliminary report within 48 hours after the
issuance of that report, a challenge session shall be scheduled by the
inspectors as promptly as practicable. A transcript of the challenge session
shall be recorded by a certified court reporter. Following completion of the
challenge session, the inspectors shall as promptly as practicable issue their
final report to the Soliciting Stockholders and the Corporation, which report
shall contain the information included in the preliminary report, plus all
changes in the vote totals as a result of the challenge and a certification of
whether the requisite number of valid and unrevoked consents was obtained to
authorize or take the action specified in the consents. A copy of the final
report of the inspectors shall be included in the book in which the proceedings
of meetings of stockholders are recorded.
(F) The Corporation shall give prompt notice to the stockholders of
the results of any consent solicitation or the taking of the corporate action
without a meeting and by less than unanimous written consent.
ARTICLE III: Board of Directors
SECTION 3.1 General Powers. Subject to any requirements in the
--------------
Certificate of Incorporation, these Bylaws, and of the Delaware General
Corporation Law as to action which must be authorized or approved by the
stockholders, any and all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be under the
direction of, the Board to the fullest extent permitted by law. Without
limiting the generality of the foregoing, it is hereby expressly declared that
the Board shall have the following powers, to wit:
(A) to select and remove all the officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the
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Certificate of Incorporation or these Bylaws, fix their compensation, and
require from them security for faithful service;
(B) to conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not inconsistent
with law, the Certificate of Incorporation or these Bylaws, as it may deem best;
(C) to change the location of the registered office of the Corporation
in Section 1.1 hereof; to change the principal office and the principal office
for the transaction of the business of the Corporation from one location to
another as provided in Section 1.2 hereof; to fix and locate from time to time
one or more subsidiary offices of the Corporation within or without the State of
Delaware as provided in Section 1.3 hereof; to designate any place within or
without the State of Delaware for the holding of any meeting or meetings of
stockholders; and to adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time, and in its judgment as it may deem best,
provided such seal and such certificate shall at all times comply with the
provisions of law;
(D) to authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms and for such considerations as may be lawful;
(E) to borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust and
securities therefor; and
(F) by resolution adopted by a majority of the whole Board to
designate an executive and other committees of the Board, each consisting of one
or more directors, to serve at the pleasure of the Board, and to prescribe the
manner in which proceedings of such committee or committees shall be conducted.
SECTION 3.2 Number, Qualification and Term of Office. Subject to
----------------------------------------
Article VI of the Certificate of Incorporation and until this Section 3.2 is
amended by a resolution duly adopted by the Board or by the stockholders of the
Corporation, the number of directors shall be three (3), provided that, upon the
completion of an underwritten initial public offering of the Corporation's
common stock, the number of directors shall consist of not less than three (3)
members nor more than six (6) members and shall initially consist of seven (7)
members.
Directors need not be stockholders. No person shall be qualified or
eligible to serve as a director of the Corporation if, at the time of such
person's nomination, election or appointment as a director (whether by vote at a
meeting of the stockholders, by action by written consent or by appointment by
the board of directors of the Corporation): (a) an Attempted Transaction is
pending, and (b) such person (or a person having any business, financial, or
familial relationship with such person that would reasonably be expected to
affect such person's judgment in a manner adverse to the Corporation) (i) is, or
was within the two years preceding such nomination, election or appointment, a
director, officer, employee, consultant, advisor, agent, representative or
Affiliate of an Interested Party or of a Person the identity of which would be
required to be disclosed pursuant to Item 6 of Schedule 13D under the Exchange
Act if the
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Interested Party were required to file a Schedule 13D pursuant to the
federal securities laws or (ii) is a person having a material financial interest
in the Attempted Transaction (other than through the ownership of stock or
securities of the Corporation). A person shall not be ineligible to serve or
disqualified from serving as a director of the Corporation by reason of this
Section 3.2 solely because such person is a director or officer of the
Corporation who receives normal and customary compensation as such and/or is a
stockholder or Affiliate of the Corporation.
For purposes of this Section 3.2, an Attempted Transaction shall be
irrebutably deemed to be pending if: (x) a Person or Group shall have commenced,
offered to make, or publicly disclosed an intent to commence or offer to make an
acquisition (including by tender offer or any other means) of securities of the
Corporation that, upon consummation, would result in such Person or Group having
Beneficial Ownership of securities of the Corporation possessing 15% or more of
the outstanding voting power of the Corporation; (y) a Person, Group or any
member of a Group (or any Affiliate or Associate thereof) that is a party either
to a material contract with the Corporation or to a material dispute with the
Corporation shall have commenced or publicly disclosed an intent to commence the
Solicitation of Proxies to remove two or more members of the Board and to elect
two or more members of the Board; or (z) a Person or Group shall have commenced
or publicly disclosed an intent to commence the Solicitation of Proxies to amend
the charter or bylaws of the Corporation or to cause the Corporation to
undertake any Business Combination with or to such Person, any member of such
Group, or any Affiliate or Associate of such Person or any member of such Group.
An Attempted Transaction shall be deemed to have ended at such time as such
Attempted Transaction (and the transactions, actions and events constituting
such Attempted Transaction) have been abandoned in a public filing with the
Securities and Exchange Commission or at such time as: (i) such Person or Group
shall have acquired Beneficial Ownership of securities possessing 50% or more of
the outstanding voting power of the Corporation; and (ii) 10 Business Days shall
have elapsed thereafter.
For purposes of this Section 3.2: "Business Combination," "Affiliate"
and "Associate" shall have the meanings set forth in Section 203 of the Delaware
General Corporation Law; "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended; "Person" shall have the meaning set forth in Section
2(a)(2) of the Securities Act of 1933, as amended; "Beneficial Ownership" shall
have the meaning set forth in Rule 13(d)(3) under the Exchange Act; "Group"
shall have the meaning set forth in Rule 13(d)(5) under the Exchange Act;
"Solicitation" and "Proxy" shall have the meanings set forth in Rule 14a-1 under
the Exchange Act; "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close; and "Interested
Party" shall mean a Person or Group (or of any Affiliate or Associate of such
Person, Group or member of a Group) that is a party to an Attempted Transaction.
Each of the directors of the Corporation shall hold office until the
next annual meeting of the stockholders and until such director's successor
shall have been duly elected and shall qualify or until such director shall
resign or shall have been removed in the manner provided in these Bylaws.
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SECTION 3.3 Election of Directors. The directors shall be elected by
---------------------
the stockholders of the Corporation, and at each election, the persons receiving
the greater number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provision contained in the Certificate of Incorporation relating thereto,
including any provision regarding the rights of holders of preferred stock to
elect directors.
SECTION 3.4 Resignations. Any director of the Corporation may resign
------------
at any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time is not specified, it shall take effect immediately upon
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.5 Removal. Any director of the Corporation or the entire
-------
Board may be removed from office, with or without cause, at any time by the vote
of a majority in voting interest of the shares of the Corporation then entitled
to vote at an election of directors; provided, however, that if the holders of
any class or series of shares are entitled to elect one or more directors, this
Section 3.5 shall apply, in respect to the removal without cause of a director
or directors so elected, to the vote of a majority in voting interest of the
outstanding shares of that class or series and not to the vote of a majority in
voting interest of the outstanding shares of the Corporation as a whole.
SECTION 3.6 Vacancies. Except as otherwise provided in the
---------
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors,
removal, or any other cause, may be filled by vote of the majority of the
remaining directors, although less than a quorum. Each director chosen to fill
a vacancy shall hold office until such director's successor shall have been
elected and shall qualify or until such director shall resign or shall have been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
SECTION 3.7 Place of Meeting. The Board or any committee thereof may
----------------
hold any of its meetings at such place or places within or without the State of
Delaware as the Board or such committee may from time to time by resolution
designate or as shall be designated by the person or persons calling the meeting
or in the notice or a waiver of notice of any such meeting. Directors may
participate in any regular or special meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board or such
committee can hear each other, and such participation shall constitute presence
in person at such meeting.
SECTION 3.8 Regular Meetings. Regular meetings of the Board may be
----------------
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.9 Special Meetings. Special meetings of the Board for any
----------------
purpose or purposes shall be called at any time by the Chairman of the Board or,
if the Chairman
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of the Board is absent or unable or refuses to act, by the President, and may
also be called by any two members of the Board. Except as otherwise provided by
law or by these Bylaws, written notice of the time and place of special meetings
shall be delivered personally or by facsimile to each director, or sent to each
director by mail or by other form of written communication, charges prepaid,
addressed to such director at such director's address as it is shown upon the
records of the Corporation, or, if it is not so shown on such records and is not
readily ascertainable, at the place in which the meetings of the directors are
regularly held. In case such notice is mailed or telegraphed, it shall be
deposited in the United States mail or delivered to the telegraph company in the
County in which the principal office for the transaction of the business of the
Corporation is located at least 48 hours prior to the time of the holding of the
meeting. In case such notice is delivered personally or by facsimile as above
provided, it shall be delivered at least two (2) hours prior to the time of the
holding of the meeting. For all purposes of this Section 3.9, personal delivery
shall mean delivery by hand or by telephonic communication. Such mailing,
telegraphing, delivery or facsimile transmission as above provided shall be due,
legal and personal notice to such director. Except where otherwise required by
law or by these Bylaws, notice of the purpose of a special meeting need not be
given. Notice of any meeting of the Board shall not be required to be given to
any director who is present at such meeting, except a director who shall attend
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise
---------------------------
provided in these Bylaws, the Certificate of Incorporation or by applicable law,
the presence of a majority of the authorized number of directors shall be
required to constitute a quorum for the transaction of business at any meeting
of the Board, and all matters shall be decided at any such meeting, a quorum
being present, by the affirmative votes of a majority of the directors present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided any action taken
is approved by at least a majority of the required quorum for such meeting. In
the absence of a quorum, a majority of directors present at any meeting may
adjourn the same from time to time until a quorum shall be present. Notice of
any adjourned meeting need not be given. The directors shall act only as a
Board, and the individual directors shall have no power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to
-----------------
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if consent in writing is given thereto by all members of the
Board or of such committee, as the case may be, and such consent is filed with
the minutes of proceedings of the Board or of such committee.
SECTION 3.12 Compensation. Directors, whether or not employees of
------------
the Corporation or any of its subsidiaries, may receive an annual fee for their
services as directors in an amount fixed by resolution of the Board plus other
compensation, including options to acquire capital stock of the Corporation, in
an amount and of a type fixed by resolution of the Board, and, in addition, a
fixed fee, with or without expenses of attendance, may be allowed by resolution
of the Board for attendance at each meeting, including each meeting of a
committee of the Board. Nothing herein contained shall be construed to preclude
any director from serving the
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Corporation in any other capacity as an officer, agent, employee, or otherwise,
and receiving compensation therefor.
SECTION 3.13 Committees. The Board may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and subject to any
restrictions or limitations on the delegation of power and authority imposed by
applicable law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. Unless
the Board or these Bylaws shall otherwise prescribe the manner of proceedings of
any such committee, meetings of such committee may be regularly scheduled in
advance and may be called at any time by the chairman of the committee or by any
two members thereof; otherwise, the provisions of these Bylaws with respect to
notice and conduct of meetings of the Board shall govern.
ARTICLE IV: Officers
SECTION 4.1 Officers. The officers of the Corporation shall be a
--------
Chairman, a President, one or more Vice Presidents (the number thereof and their
respective titles to be determined by the Board), a Secretary, and such other
officers as may be appointed at the discretion of the Board in accordance with
the provisions of Section 4.3 hereof.
SECTION 4.2 Election. The officers of the Corporation, except such
--------
officers as may be appointed or elected in accordance with the provisions of
Sections 4.3 or 4.5 hereof, shall be chosen annually by the Board at the first
meeting thereof after the annual meeting of stockholders, and each officer shall
hold office until such officer shall resign or shall be removed or otherwise
disqualified to serve, or until such officer's successor shall be elected and
qualified.
SECTION 4.3 Other Officers. In addition to the officers chosen
--------------
annually by the Board at its first meeting, the Board also may appoint or elect
such other officers as the business of the Corporation may require, each of whom
shall have such authority and perform such duties as are provided in these
Bylaws or as the Board may from time to time specify, and shall hold office
until such officer shall resign or shall be removed or otherwise disqualified to
serve, or until such officer's successor shall be elected and qualified.
SECTION 4.4 Removal and Resignation. Any officer may be removed,
-----------------------
either with or without cause, by resolution of the Board, at any regular or
special meeting of the Board, or except in case of an officer chosen by the
Board, by any officer upon whom such power of removal may be conferred by the
Board. Any officer or assistant may resign at any time by giving written notice
of his resignation to the Board or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time is
not specified, upon receipt thereof by the Board or the Secretary, as the case
may be; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 4.5 Vacancies. 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 such office.
SECTION 4.6 Chairman of the Board. The Chairman of the Board, if
----------------------
any, shall be the chief executive officer of the Corporation and shall, subject
to the control of the Board, have general supervision, direction and control of
the business and affairs of the Corporation. The Chairman of the Board shall
preside at all meetings of stockholders and at all meetings of the Board. The
Chairman shall exercise and perform such powers and duties with respect to the
business and affairs of the Corporation as may be assigned to the Chairman by
the Board or such other powers and duties as may be prescribed by the Board or
these Bylaws.
SECTION 4.7 President. The President shall exercise and perform such
---------
powers and duties with respect to the administration of the business and affairs
of the Corporation as may from time to time be assigned to the President by the
Chairman of the Board or by the Board, or as may be prescribed by these Bylaws.
In the absence or disability of the Chairman of the Board, or in the event and
during the period of a vacancy in that office, the President shall perform all
the duties of the Chairman of the Board, and when so acting shall have all of
the powers of, and be subject to all the restrictions upon, the Chairman of the
Board and chief executive officer of the Corporation.
SECTION 4.8 Vice President. Each Vice President shall have such
--------------
powers and perform such duties with respect to the administration of the
business and affairs of the Corporation as may from time to time be assigned to
such Vice President by the Chairman of the Board or the Board, or the President
or as may be prescribed by these Bylaws. In the absence or disability of the
Chairman of the Board and the President, the Vice Presidents in order of their
rank as fixed by the Board, or if not ranked, the Vice President designated by
the Board, shall perform all of the duties of the Chairman of the Board, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board.
SECTION 4.9 Secretary.
---------
(A) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or such other place as the Board may order, a book of
minutes of all meetings of directors and stockholders, with the time and place
of holding, whether regular or special, and if special, how authorized and the
notice thereof given, the names of those present at meetings of directors, the
number of shares present or represented at meetings of stockholders, and the
proceedings thereof.
(B) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the name of each stockholder, the number of shares of
each class held by such stockholder, the number and date of certificates issued
for such shares, and the number and date of cancellation of every certificate
surrendered for cancellation.
12
<PAGE>
ARTICLE V: Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.1 Execution of Contracts. The Board, 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, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, 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 in any amount.
SECTION 5.2 Checks, Drafts, Etc. All checks, drafts or other orders
-------------------
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.3 Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, the Chairman of the
Board, the President, any Vice President (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5.4 General and Special Bank Accounts. The Board may from
---------------------------------
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI: Shares and Their Transfer
SECTION 6.1 Certificates for Stock. Every owner of stock of the
----------------------
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class or
series of shares of the stock of the Corporation owned by such owner. The
certificates representing shares of such stock shall be numbered in the order in
which they shall be issued and shall be signed in the name of the Corporation by
the Chairman of the Board, the President or any Vice President, and by the
Secretary. Any or all of the signatures on the certificates may be a facsimile.
In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon, any such certificate, shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued,
13
<PAGE>
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such an officer, transfer agent
or registrar at the date of issue. A record shall be kept of the respective
names of the persons, firms or corporations owning the stock represented by such
certificates, the number and class or series of shares represented by such
certificates, respectively, and the respective dates thereof, and in case of
cancellation, the respective dates of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be cancelled, and
no new certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled, except
in cases provided for in Section 6.4 hereof.
SECTION 6.2 Transfers of Stock. Transfers of shares of stock of the
------------------
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.3 hereof, and upon surrender
of the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry of transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.3 Regulations. The Board may make such rules and
-----------
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.4 Lost, Stolen, Destroyed, and Mutilated Certificates. In
---------------------------------------------------
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.5 Fixing Date for Determination of Stockholders of Record.
-------------------------------------------------------
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action other than to consent to corporate action in writing without a meeting,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any such other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders the Board shall not fix such a record date, then the record date
for
14
<PAGE>
determining stockholders for such purpose shall be the close of business on
the day on which the Board shall adopt the resolution relating thereto. A
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of such meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
ARTICLE VII: Indemnification
SECTION 7.1 Indemnification of Directors and Officers. The
-----------------------------------------
Corporation shall indemnify, in the manner and to the fullest extent permitted
by the Delaware General Corporation Law, as the same exists or may hereafter be
amended (the "Delaware Law") (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), any person (or the estate
of any person) who is or was a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding, whether or not
by or in the right of the Corporation, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation may, to the fullest extent permitted by the Delaware Law, purchase
and maintain insurance on behalf of any such person against any liability which
may be asserted against such person. The Corporation may create a trust fund,
grant a security interest or use other means (including without limitation a
letter of credit) to ensure the payment of such sums as may become necessary to
effect the indemnification as provided herein. To the fullest extent permitted
by the Delaware Law, the indemnification provided herein shall include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement and
any such expenses shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the indemnitee to repay such amounts if it is ultimately
determined that he or she is not entitled to be indemnified. The
indemnification provided herein shall not be deemed to limit the right of the
Corporation to indemnify any other person for any such expenses to the fullest
extent permitted by the Delaware Law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, the Corporation's Certificate of
Incorporation, vote of stockholders or disinterested directors, or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office.
SECTION 7.2 Indemnification of Employees and Agents. The Corporation
---------------------------------------
may, but only to the extent that the Board of Directors may (but shall not be
obligated to) authorize from time to time, grant rights to indemnification and
to the advancement of expenses to any employee or agent of the Corporation to
the fullest extent of the provisions of this Article VII as they apply to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
SECTION 7.3 Enforcement of Indemnification. The rights to
------------------------------
indemnification and the advancement of expenses conferred above shall be
contract rights. If a claim under this ARTICLE VII is not paid in full by the
Corporation within 60 days after written
15
<PAGE>
claim has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expenses of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware Law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article VII or
otherwise shall be on the Corporation.
ARTICLE VIII: Miscellaneous
SECTION 8.1 Seal. The Board shall adopt a corporate seal, which
----
shall be in the form of a circle and shall bear the name of the Corporation and
words showing that the Corporation was incorporated in the State of Delaware.
SECTION 8.2 Waiver of Notices. Whenever notice is required to be
-----------------
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.3 Amendments. Bylaws may only be adopted, amended or
----------
repealed by a majority of the members of the Board then holding office or by the
affirmative vote or valid and unrevoked consent of holders of more than seventy-
five percent (75%) in voting interest of the shares of the Corporation then
entitled to vote at an election of directors.
SECTION 8.4 Representation of Other Corporations. The Chairman of
------------------------------------
the Board or the President or the Secretary or any Vice President of the
Corporation is authorized to vote, represent and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation, other than a
corporation of which the Corporation owns twenty percent (20%) or more of its
capital
16
<PAGE>
stock, in which case such officers shall not be so authorized under these Bylaws
without the authorization of the Board of Directors. The authority herein
granted to said officers to vote or represent on behalf of the Corporation any
and all shares held by the Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by such officers.
17
<PAGE>
- --------------------------------------------------------------------------------
NEWS RELEASE Morgen-Walke
Associates, Inc.
- --------------------------------------------------------------------------------
Exhibit 99
For: Maxwell Shoe Company Inc.
Investor Contact: Richard J. Bakos
Chief Financial Officer
617/333-4007
IMMEDIATE RELEASE Media Contact: Michael McMullan
- ----------------- Morgen-Walke Associates
212/850-5600
MAXWELL SHOE COMPANY INC. REPORTS
SECOND QUARTER FISCAL 1999 RESULTS
-The Company Also Announces The Sale of Its
Jones New York(R) License To Jones Apparel Group, Inc.-
Hyde Park, MA, June 11, 1999 -- Maxwell Shoe Company Inc., (Nasdaq: MAXS),
today reported results for the second quarter ended April 30, 1999.
Net sales for the second fiscal quarter ended April 30, 1999 were $36.2
million compared to $39.8 million for the comparable period in the prior year.
Net income for the period was $2.3 million, or $0.25 per diluted share, compared
to net income of $3.1 million, or $0.35 per diluted share, during the same
period last year. Weighted average shares outstanding increased due primarily
to the additional shares issued in April 1998 during the Company's secondary
offering.
For the six months ended April 30, 1999, net sales were $72.2 million
compared to $76.1 million during the six-month period last year. Net income for
the period was $4.5 million, or $0.47 per diluted share, compared to net income
of $5.4 million, or $0.61 per diluted share, during the same period last year.
Mark J. Cocozza, Chairman and Chief Executive Officer of the Company,
commented,
"Results for the second quarter reflect the continued challenges that we face in
this difficult retail footwear environment. While our shoes continue to sell
through at profitable levels, we have not been able to replicate the overall
sales volume experienced last year due to several industry-wide trends. These
relate to excess inventories, retail consolidation and the continued shift in
retailers' booking trends towards shorter lead times as well as ordering in-
season and closer to need."
- more -
<PAGE>
MAXWELL SHOE COMPANY INC. REPORTS Page: 2
SECOND QUARTER FISCAL 1999 RESULTS
- -The Company Also Announces The Sale of Its
Jones New York(R) License To Jones Apparel Group, Inc.-
Mr. Cocozza added, "Our Sam & Libby division continues to perform well,
generating a 22.0% sales gain for the quarter and a 35.1% gain year-to-date.
Maxwell Shoe also posted a good increase in overall gross margin to 29.1% during
the quarter versus the 27.5% achieved last year, exceeding our internal plan.
While our backlog as of April 30, 1999 was down 8.7% to $67.9 million, compared
to $74.4 million a year ago, we are encouraged by our ability to manage our
business despite this decrease in sales. We have a very strong balance sheet,
our cash position increased by $5.5 million since year-end to $24.2 million, and
we have lowered accounts receivable and inventory on a pairs basis."
The Company also noted that it has entered into an agreement to sell to
Jones Apparel Group, Inc. the Company's exclusive license agreement for the
manufacture and sale of Jones New York footwear. Jones Apparel Group will pay
to the Company $25.0 million in cash at the closing of the sale, which is
expected to occur in early July 1999.
Mark Cocozza added, "The cash provided by the sale, coupled with our debt
free balance sheet, enables us to act opportunistically in executing our long
term strategy."
The Company had a long term licensing agreement with Jones Apparel Group,
Inc. through 2017 for the sale of both Jones New York and Jones New York Sport
better-priced women's shoes. The shoes are distributed to department stores in
the United States and throughout Canada.
Mr. Cocozza commented, "In light of the pending acquisition of Nine West
Group Inc. by Jones Apparel Group, Inc. and the potential competitive issues
raised by such acquisition, management and the Board of Directors of the Company
carefully evaluated a number of alternatives and concluded that it is in the
best interest of our Company and its stockholders to move forward with the sale
of the license to Jones Apparel Group, Inc."
- more -
<PAGE>
MAXWELL SHOE COMPANY INC. REPORTS Page: 3
SECOND QUARTER FISCAL 1999 RESULTS
- -The Company Also Announces The Sale of Its
Jones New York(R) License To Jones Apparel Group, Inc.-
Mr. Cocozza noted, "Importantly, Maxwell Shoe Company generates some of the
highest operating margins in the shoe industry, and both our Sam & Libby and
Mootsies Tootsies products enjoy tremendous brand loyalty among both retailers
and consumers. Additionally, we are very excited about the prospects for our
newest brand, Dockers/(R)/ Footwear for Women, as we begin an initial shipping
in early July for the Fall '99 season."
The Company also noted that on March 29, 1999, its Board of Directors
adopted amendments to its Bylaws to further strengthen the Company's Bylaws.
Maxwell Shoe Company Inc. designs, develops and markets casual and dress
footwear for women and children. The Company's brands include Mootsies
Tootsies, Sam & Libby and Dockers/(R)/ Footwear for Women.
Certain statements contained in this press release regard matters that
are not historical facts and are forward looking statements (as such term is
defined in the rules promulgated pursuant to the Securities Act of 1933, as
amended). Because such forward looking statements contain risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to: changing consumer
preference, competition from other footwear manufacturers or retailers, loss of
key employees, general economic conditions and adverse factors impacting the
retail footwear industry, and the inability by the Company to source its
products due to political or economic factors or the imposition of trade or duty
restrictions. The Company undertakes no obligation to release publicly the
results of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. Investors are also directed to other risks
discussed in documents filed by the Company with the Securities and Exchange
Commission.
- Financial Tables To Follow -
<PAGE>
MAXWELL SHOE COMPANY, INC. Page: 4
STATEMENTS OF INCOME
(Unaudited-In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
----------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 36,247 $ 39,786 $ 72,153 $ 76,114
Cost of sales................................ 25,709 28,862 52,169 55,353
-------- -------- -------- --------
Gross profit................................. 10,538 10,924 19,984 20,761
Operating expenses:
Selling.................................... 2,734 2,647 4,959 5,093
General and administrative................. 4,051 3,765 7,784 7,499
-------- -------- -------- --------
6,785 6,412 12,743 12,592
-------- -------- -------- --------
Operating income............................. 3,753 4,512 7,241 8,169
Other expenses (income)
Interest................................... 7 9 13 21
Amortization of Trademarks................. 91 92 183 183
Other, net................................. (240) (52) (465) (95)
-------- -------- -------- --------
(142) 49 (269) 109
-------- -------- -------- --------
Income before income taxes................... 3,895 4,463 7,510 8,060
Income taxes................................. 1,558 1,318 3,003 2,685
-------- -------- -------- --------
Net income................................... $ 2,337 $ 3,144 $ 4,507 $ 5,375
======== ======== ======== ========
Net income per share
Basic...................................... $.27 $.41 $.51 $.70
Diluted.................................... $.25 $.35 $.47 $.61
Shares used to compute net
income per share:
Basic....................................... 8,796 7,675 8,795 7,632
Diluted..................................... 9,461 8,882 9,504 8,788
</TABLE>
- more -
<PAGE>
MAXWELL SHOE COMPANY, INC. Page: 5
BALANCE SHEETS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
ASSETS April 30, October 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 24,196 $ 18,731
Accounts receivable, trade (net of allowance for doubtful
accounts and discounts of $634 in 1999, $581 in 1998)............ 33,224 35,655
Inventory, net....................................................... 20,834 22,928
Prepaid expenses..................................................... 711 430
Prepaid income taxes................................................. 0 1,177
Deferred income taxes................................................ 1,064 1,074
------------ ------------
Total current assets.................................................... 80,029 79,995
Property and equipment, net............................................. 6,613 6,231
Trademarks.............................................................. 4,584 4,767
Other assets............................................................ 12 12
------------ ------------
$ 91,238 $ 91,005
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 3,182 $ 3,824
Accrued expenses..................................................... 2,198 5,938
Deferred income taxes................................................ 434 306
Current portion of capital lease obligation.......................... 125 125
------------ ------------
Total current liabilities............................................... 5,939 10,193
Capital lease obligation................................................ 157 220
Long-term deferred income taxes......................................... 1,283 1,283
Stockholders' equity:
Preferred stock, par value $.01, 1,000 shares
authorized, none outstanding..................................... 0 0
Class A common stock, par value $.01, 20,000 shares authorized,
8,796 outstanding in 1999, (8,794 outstanding in 1998)........... 88 88
Additional paid-in capital........................................... 43,027 43,015
Deferred compensation................................................ (275) (306)
Retained earnings.................................................... 41,019 36,512
------------ ------------
Total stockholders' equity.............................................. 83,859 79,309
------------ ------------
$ 91,238 $ 91,005
============ ============
</TABLE>
# # #
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 24,196
<SECURITIES> 0
<RECEIVABLES> 33,859
<ALLOWANCES> 635
<INVENTORY> 20,834
<CURRENT-ASSETS> 80,030
<PP&E> 10,136
<DEPRECIATION> 3,212
<TOTAL-ASSETS> 91,238
<CURRENT-LIABILITIES> 5,939
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 83,771
<TOTAL-LIABILITY-AND-EQUITY> 91,238
<SALES> 75,153
<TOTAL-REVENUES> 75,153
<CGS> 52,169
<TOTAL-COSTS> 52,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 54
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 7,510
<INCOME-TAX> 3,003
<INCOME-CONTINUING> 4,507
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,507
<EPS-BASIC> .51
<EPS-DILUTED> .47
</TABLE>
