<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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: 0-24556
MKR HOLDINGS
(Exact name of registrant as specified in its charter)
Utah 87-0372759
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1070 West 2300 South
Salt Lake City, Utah 84119
(Address of principal executive offices)
(801) 972-2100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days.
Yes X No
--------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at February 14, 2000
--------------------- --------------------------------
Common Stock, $0.01 par value 11,120,577
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<TABLE>
<CAPTION>
MKR HOLDINGS
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
-----
<S> <C>
Condensed Consolidated Balance Sheets
As of December 31, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended
December 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended
December 31, 1999 and 1998 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
</TABLE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MKR HOLDINGS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Liquidation)
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 34 $ 5,547
Accounts receivable, net of allowance for doubtful
accounts of $1,721, at March 31, 1999 - 22,392
Inventories - 18,752
Prepaid and other current assets - 391
------------- -------------
Total current assets 34 47,082
------------- -------------
PROPERTY, PLANT AND EQUIPMENT: 36 29,924
Less accumulated depreciation and amortization (36) (18,725)
------------- -------------
Net property, plant and equipment - 11,199
------------- -------------
INTANGIBLE ASSETS, net of accumulated amortization - 244
------------- -------------
INVESTMENT IN MARKER INTERNATIONAL GMBH 1,872 -
------------- ------------
OTHER ASSETS - 448
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$ 1,906 $ 58,973
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
3
<PAGE>
MKR HOLDINGS
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Liquidation)
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ - $ 46,062
Current maturities of long-term debt - 5,595
Current maturities of Series A Bonds, issued to a
related party - 11,399
Accounts payable 7 5,948
Other current liabilities 6 12,937
------------ -----------
Total current liabilities 13 81,941
------------ -----------
LONG-TERM DEBT, net of current maturities - 3,821
------------ -----------
ADVANCES PAYABLE TO MARKER
INTERNATIONAL GMBH 55 -
------------- -----------
REDEEMABLE SERIES B PREFERRED STOCK - 3,000
------------ -----------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock 111 111
Additional paid-in capital 38,236 36,311
Accumulated deficit (36,509) (64,658)
Accumulated other comprehensive loss - (1,553)
------------ -----------
Total shareholders' equity (deficit) 1,838 (29,789)
------------ -----------
$ 1,906 $ 58,973
------------ -----------
------------ -----------
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated balance sheets.
4
<PAGE>
MKR HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Liquidation)
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 14,121 $ 30,302 $ 34,140 $ 56,898
COST OF SALES 8,381 22,090 21,635 39,498
--------- --------- --------- ---------
GROSS PROFIT 5,740 8,212 12,505 17,400
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling, general and administrative 3,533 10,055 13,161 23,695
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 2,207 (1,843) (656) (6,295)
--------- ---------- ---------- ---------
OTHER INCOME (EXPENSE):
Interest expense (326) (2,106) (2,392) (5,332)
Other, net 729 593 (796) 2,751
--------- --------- --------- ---------
Total other income (expense) 403 (1,513) (3,188) (2,581)
--------- ---------- ---------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
REORGANIZATION ITEMS AND INCOME TAXES 2,610 (3,356) (3,844) (8,876)
--------- ---------- ---------- ---------
REORGANIZATION ITEMS:
Gain on sale of substantially all assets 16,537 - 16,537 -
Professional fees (488) - (1,367) -
Other general and administrative expenses (84) - (119) -
----------- --------- ----------- --------
Total reorganization items 15,965 - 15,051 -
---------- --------- ---------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 18,575 (3,356) 11,207 (8,876)
PROVISION FOR INCOME TAXES (23) (522) (12) (851)
---------- --------- ---------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 18,552 (3,878) 11,195 (9,727)
--------- ---------- --------- ---------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
snowboard business, net of income taxes - - - (1,484)
Gain (loss) on disposal of snowboard business - 769 1,634 (24,092)
--------- --------- --------- ---------
GAIN (LOSS) FROM DISCONTINUED
OPERATIONS - 769 1,634 (25,576)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM 18,552 3,109 12,829 (35,303)
--------- --------- --------- ---------
EXTRAORDINARY ITEM - GAIN ON
RESTRUCTURING OF DEBT (net of income
tax benefit of $0) 15,422 - 15,422 -
--------- --------- --------- --------
NET INCOME (LOSS) $ 33,974 $ (3,109) $ 28,251 $ (35,303)
--------- --------- --------- --------
--------- --------- --------- --------
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
5
<PAGE>
MKR HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(In Liquidation)
(Dollars in Thousands, Except Net Assets in Liquidation Per Share Amounts)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Net Assets Available in Liquidation $ 1,838
------------
------------
Shares Outstanding as of December 31, 1999 11,120,577
------------
------------
Net Assets Available in Liquidation Per Share $ .165
------------
------------
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
6
<PAGE>
MKR HOLDINGS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Liquidation)
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended December 31,
-------------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,251 $ (35,303)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Extraordinary gain on debt restructuring (15,422) -
Gain on sale of substantially all assets (16,537) -
Loss on sale of property, plant and equipment 80 680
Depreciation and amortization 2,488 2,344
Loss from write-off of goodwill and intangibles - 8,487
Change in assets and liabilities, net of the effects
of disposition:
Increase in accounts receivable, net (20,891) (7,575)
(Increase) decrease in inventories (124) 6,481
(Increase) decrease in prepaid and other assets (45) 3,983
Increase in accounts payable 1,157 690
Increase in other current liabilities 3,461 587
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (17,582) (19,626)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (713) (2,856)
Proceeds from disposition of equipment 148 4,434
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (565) 1,578
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable to banks 16,794 18,456
Proceeds from issuance of preferred stock - 3,000
Proceeds from issuance of long-term debt - 710
Principal payments on long-term debt (3,454) (9,376)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,340 12,790
--------- ---------
Effect of foreign exchange rate changes on cash and cash
equivalents (706) 6,763
---------- ---------
Net (decrease) increase in cash and cash equivalents (5,513) 1,505
Cash and cash equivalents at beginning of period 5,547 4,241
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34 $ 5,746
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,966 $ 4,979
Cash paid for reorganization professional fees 1,361 -
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these condensed consolidated statements.
7
<PAGE>
MKR HOLDINGS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN LIQUIDATION)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements include
the accounts of MKR Holdings, formerly known as Marker International (the
"Company") (see "Recent Events"). The condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally required in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. The financial statements reflect all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary to fairly present the financial position, results of
operations and cash flows for the periods presented.
The accompanying condensed consolidated balance sheets have been
prepared on the basis of accounting principles applicable to companies in
liquidation. As discussed in Note 2, the Company is required to liquidate no
later than November 30, 2004.
The results of operations and cash flows for the three and nine month
periods ended December 31, 1999 materially differ from the results of operations
and cash flows for the corresponding periods in the prior fiscal year due to the
consummation of the transactions referenced in the Purchase Agreement (as
defined below). As discussed in Note 2, the Company is no longer engaged in the
conduct of business and operates for the sole purpose of holding and
subsequently liquidating its assets.
NOTE 2. RECENT EVENTS
PURCHASE AGREEMENT WITH MARKER INTERNATIONAL GMBH - On November 30,
1999 (the "Closing Date"), the Company sold substantially all of its assets
(including the equity securities of its subsidiaries) to Marker International
GmbH, a GmbH organized under the laws of Switzerland ("Newco"), pursuant to an
asset purchase agreement (as amended by the Amendment to the Asset Purchase
Agreement dated as of September 20, 1999, the "Purchase Agreement") between the
Company and Newco. In exchange, Newco assumed substantially all of the
liabilities of the Company and the Company received a 15% equity interest in
Newco. The remaining 85% equity interest in Newco is held by CT Sports Holding
AG ("CT"), a joint venture between Tecnica S.p.A. and H.D. Cleven, the principal
shareholder of the Volkl Group. In consideration for its 85% equity interest in
Newco, CT transferred $13,974,499 ($15,000,000 less $1,025,501 as a result of
the consummation of the sale to CT of the 66.66% equity interest in Marker
Canada, Ltd. in June 1999), in a combination of debt and equity, to Newco.
In connection with the Purchase Agreement, the Company and CT entered
into an operating agreement which, among other things, grants CT an option (the
"Option") to purchase the Company's 15% equity interest in Newco at any time on
or after the second anniversary of
8
<PAGE>
MKR HOLDINGS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN LIQUIDATION)
the consummation date of the Company's plan of reorganization at the then fair
market value, subject to reduction in an amount equal to the sum of: (a) any
indemnity obligations of the Company to Newco, (b) all unreimbursed advances for
operating and administrative expenses (currently estimated to be approximately
$300,000 per year) and costs of defending any indemnifiable claims, if any,
incurred by Newco, together with interest thereon, (c) all advances by Newco to
the Company to pay any income tax liability , together with interest thereon,
plus (d) $775,000. Thereafter, the Company will be liquidated and the net
proceeds of the exercise of the Option will then be distributed to the
shareholders of the Company in liquidation. In determining fair market value,
all of CT's transfer of the $15,000,000 will be considered as equity.
In connection with the Purchase Agreement, the Company reached
agreements-in-principle regarding the restructuring of its debt and the
treatment of such debt under a plan of reorganization with substantially all of
its creditors that were impaired under the plan of reorganization. On August 19,
1999, the Company, DNR North America, Inc. and DNR USA, Inc. (collectively, the
"Debtors") filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On September 22, 1999, the Debtors filed the
First Amended Joint Chapter 11 Plan of Reorganization (as amended by the
Amendment to the First Amended Joint Chapter 11 Plan of Reorganization, dated as
of October 25, 1999, the "Plan") and a related disclosure statement (the
"Disclosure Statement"). By order dated September 22, 1999, the Bankruptcy Court
approved the Disclosure Statement as containing adequate information. The
Disclosure Statement and the Plan were subsequently distributed to the Debtors'
creditors and shareholders for approval, which approval was subsequently
obtained. On October 27, 1999, the Plan was confirmed by order of the Bankruptcy
Court (the "Confirmation Order"). Pursuant to the Confirmation Order, the
Bankruptcy Court approved the Plan and the Purchase Agreement on October 27,
1999.
The Company is no longer engaged in the conduct of business and
operates for the sole purpose of holding and subsequently liquidating its assets
(which consists almost entirely of its equity interest in Newco). The Company is
required to dissolve and liquidate all of its assets no earlier than November
30, 2002, and no later than November 30, 2004. If the Option is not exercised
prior to liquidation, then upon liquidation, the shareholders of the Company
will receive an equity interest in Newco equal to each shareholder's pro rata
share of the Company's 15% equity interest in Newco.
EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF DEBT - An
extraordinary gain of $15.4 million resulted from the Company's restructuring
of debt with Manufacturers and Traders Trust Company ("M&T Bank"), KeyBank
National Association ("KeyBank"), the holder of the Company's Series A bonds
and Hypo Vereinsbank (New York branch). As of the Closing Date, Marker
Deutschland GmbH had debts outstanding with the Hypo Vereinsbank and the
Deutsche Bank totaling $53.4 million. Pursuant to the Purchase Agreement,
Marker Deutschland GmbH
9
<PAGE>
MKR HOLDINGS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN LIQUIDATION)
was acquired by Newco and is no longer a subsidiary of the Company.
GAIN ON SALE AND VALUATION OF INVESTMENT IN MARKER INTERNATIONAL GMBH -
The Company recognized a gain of $16.5 million from the sale to Newco of
substantially all of the Company's assets and the assumption by Newco of certain
of the Company's liabilities pursuant to the Purchase Agreement. As of December
31, 1999, the Company's 15% equity interest in Newco (the "Investment") was
valued at approximately $1.9 million ($2.7 million less the $775,000 that will
be deducted from the purchase price if CT exercises the Option) and CT's 85%
equity interest in Newco was valued at approximately $15.0 million. An
independent appraiser will conduct a fair market valuation of the Company's 15%
equity interest in Newco on an annual basis and the Investment will be adjusted
accordingly. The actual liquidation value of the Company's 15% equity interest
in Newco may materially differ from the estimate contained herein.
NOTE 3. NET ASSETS AVAILABLE IN LIQUIDATION PER SHARE
For the nine months ended December 31, 1999, options to purchase
1,531,800 shares of common stock were not included in the computation of net
assets available in liquidation per comon share because pursuant to the
Confirmation Order, all outstanding options of the Company were cancelled on
October 27, 1999.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
GENERAL
PURCHASE AGREEMENT WITH MARKER INTERNATIONAL GMBH - On November 30,
1999 (the "Closing Date"), the Company sold substantially all of its assets
(including the equity securities of its subsidiaries) to Marker International
GmbH, a GmbH organized under the laws of Switzerland ("Newco") pursuant to an
asset purchase agreement (as amended by the Amendment to the Asset Purchase
Agreement dated as of September 20, 1999, the "Purchase Agreement") between the
Company and Newco. In exchange, Newco assumed substantially all the liabilities
of the Company and the Company received a 15% equity interest in Newco. The
remaining 85% equity interest in Newco is held by CT Sports Holding AG ("CT"), a
joint venture between Tecnica S.p.A. and H.D. Cleven, the principal shareholder
of the Volkl Group. In consideration for its 85% equity interest in Newco, CT
transferred $13,974,499 ($15,000,000 less $1,025,501 as a result of the
consummation of the sale to CT of the 66.66% equity interest in Marker Canada,
Ltd. in June 1999), in a combination of debt and equity, to Newco.
In connection with the Purchase Agreement, the Company and CT entered
into an operating agreement which, among other things, grants CT an option (the
"Option") to purchase the Company's 15% equity interest in Newco at any time on
or after the second anniversary of the consummation date of the Company's plan
of reorganization at the then fair market value, subject to reduction in an
amount equal to the sum of: (a) any indemnity obligations of the Company to
Newco, (b) all unreimbursed advances for operating and administrative expenses
(currently estimated to be approximately $300,000 per year) and costs of
defending any indemnifiable claims, if any, incurred by Newco, together with
interest thereon, (c) all advances by Newco to the Company to pay any income tax
liability , together with interest thereon, plus (d) $775,000. Thereafter, the
Company will be liquidated and the net proceeds of the exercise of the Option
will then be distributed to the shareholders. In determining fair market value,
all of CT's transfer of the $15,000,000 will be considered as equity.
In connection with the Purchase Agreement, the Company reached
agreements-in-principle regarding the restructuring of its debt and the
treatment of such debt under a plan of reorganization with substantially all of
its creditors that were impaired under the plan of reorganization. On August 19,
1999, the Company, DNR North America, Inc. and DNR USA, Inc. (collectively, the
"Debtors") filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On September 22, 1999, the Debtors filed the
First Amended Joint Chapter 11 Plan of Reorganization (as amended by the
Amendment to the First
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Amended Joint Chapter 11 Plan of Reorganization, dated as of October 25, 1999,
the "Plan") and a related disclosure statement (the "Disclosure Statement"). By
order dated September 22, 1999, the Bankruptcy Court approved the Disclosure
Statement as containing adequate information. The Disclosure Statement and the
Plan were subsequently distributed to the Debtors' creditors and shareholders
for approval, which approval was subsequently obtained. On October 27, 1999, the
Plan was confirmed by order of the Bankruptcy Court (the "Confirmation Order").
Pursuant to the Confirmation Order, the Bankruptcy Court approved the Plan and
the Purchase Agreement on October 27, 1999.
The Company is no longer engaged in the conduct of business and
operates for the sole purpose of holding and subsequently liquidating its assets
(which consists almost entirely of its equity interest in Newco). The Company is
required to dissolve and liquidate all of its assets no earlier than November
30, 2002, and no later than November 30, 2004. If the Option is not exercised
prior to liquidation, then upon liquidation, the shareholders of the Company
will receive an equity interest in Newco equal to each shareholder's pro rata
share of the Company's 15% equity interest in Newco.
EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF DEBT - An extraordinary
gain of $15.4 million resulted from the Company's restructuring of debt with
Manufacturers and Traders Trust Company ("M&T Bank"), KeyBank National
Association ("KeyBank"), the holder of the Company's Series A bonds and Hypo
Vereinsbank (New York branch). As of the Closing Date, Marker Deutschland GmbH
had debts outstanding with the Hypo Vereinsbank and the Deutsche Bank totaling
$53.4 million. Pursuant to the Purchase Agreement, Marker Deutschland GmbH was
acquired by Newco and is no longer a subsidiary of the Company.
GAIN ON SALE AND VALUATION OF INVESTMENT IN MARKER INTERNATIONAL GMBH -
The Company recognized a gain of $16.5 million from the sale to Newco of
substantially all of the Company's assets and the assumption by Newco of certain
of the Company's liabilities pursuant to the Purchase Agreement. As of December
31, 1999, the Company's 15% equity interest in Newco (the "Investment") was
valued at approximately $1.9 million ($2.7 million less the $775,000 that will
be deducted from the purchase price if CT exercises the Option) and CT's 85%
equity interest in Newco was valued at approximately $15.0 million. An
independent appraiser will conduct a fair market valuation of the Company's 15%
equity interest in Newco on an annual basis and the Investment will be adjusted
accordingly. The actual liquidation value of the Company's 15% equity interest
in Newco may materially differ from the estimate contained herein.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The comparisons set forth below of the results of operations and
related cash flows for the three and nine month periods ended December 31, 1999,
compared to the corresponding periods in the prior fiscal year are not
meaningful due to the consummation of the transactions referenced in the
Purchase Agreement. As discussed in Note 2 to the financial statements, the
Company is no longer engaged in the conduct of business and operates for the
sole purpose of holding and subsequently liquidating its assets.
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1999 WITH THE THREE MONTHS
ENDED DECEMBER 31, 1998
Net sales for the three months ended December 31, 1999 decreased to
$14.1 million, compared to $30.3 million for the corresponding three months of
the prior fiscal year. The decrease in sales is primarily due to: (i) the sale
of substantially all of the Company's assets (including the equity securities of
its subsidiaries) to Newco on November 30, 1999, (ii) the licensing of soft good
sales to Ski & Sports Recreation Company, LLC ("SSRC"), the licensee of Marker
clothing and other soft goods, effective April 1, 1999, and (iii) lower sales in
the U.S. due to unseasonably warm weather and lower market share.
Gross profit for the three months ended December 31, 1999 was $5.7
million, or 40.6% of net sales, compared to $8.2 million, or 27.1% of net sales,
for the corresponding period of the prior fiscal year. The decrease in gross
profit is due to the decrease in sales, as explained above.
Operating expenses for the three months ended December 31, 1999
decreased to $3.5 million, compared to $10.1 million for the same period of the
prior fiscal year. The decrease in operating expenses is primarily due to: (i)
the sale of substantially all of the Company's assets (including the equity
securities of its subsidiaries) to Newco on November 30, 1999, and (ii) the
licensing of soft good sales to SSRC, the licensee of Marker clothing and other
soft goods, effective April 1, 1999.
Interest expense for the three months ended December 31, 1999 decreased
to $0.3 million, compared to $2.1 million for the corresponding period of the
prior fiscal year. This decrease was primarily attributable to the sale of
substantially all of the Company's assets and the assumption of certain
liabilities by Newco on November 30, 1999, and also due to the restructuring of
debt, as described in Note 2 to the financial statements.
Other income (expense), net for the three months ended December 31,
1999 increased to $0.7 million, compared to $0.6 million for the corresponding
period of the prior fiscal year. The increase in other income (expense), net is
primarily due to realized and unrealized foreign exchange gains of $0.8 million
for the three months ended December 31, 1999, compared to the realized and
unrealized foreign exchange gains of $0.6 million for the three months ended
December 31, 1998.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED DECEMBER 31, 1999 WITH THE NINE MONTHS ENDED
DECEMBER 31, 1998
Net sales for the nine months ended December 31, 1999 decreased to
$34.1 million, compared to $56.9 million for the corresponding nine months of
the prior fiscal year. The decrease in sales is primarily due to: (i) the sale
of substantially of the Company's assets (including the equity securities of its
subsidiaries) to Newco on November 30, 1999, (ii) the licensing of soft good
sales to SSRC, the licensee of Marker clothing and other soft goods, effective
April 1, 1999, and (iii) lower sales in the U.S. due to unseasonably warm
weather and lower market share.
Gross profit for the nine months ended December 31, 1999 was $12.5
million, or 36.6% of net sales, compared to $17.4 million, or 30.6% of net
sales, for the corresponding period of the prior fiscal year. The decrease in
gross profit is due to the decrease in sales, as explained above. The increase
in the gross profit percentage is primarily due to personnel reductions at the
manufacturing plant. The personnel reductions were a result of the
implementation of production efficiencies.
Operating expenses for the nine months ended December 31, 1999
decreased to $13.2 million, compared to $23.7 million for the same period of
the prior fiscal year. The decrease in operating expenses is primarily due to:
(i) the sale of substantially all of the assets (including the equity
securities of its subsidiaries) of the Company to Newco on November 30, 1999,
(ii) the licensing of soft good sales to SSRC, the licensee of Marker clothing
and other soft goods, effective April 1, 1999, and (iii) cost reductions.
Interest expense for the nine months ended December 31, 1999 decreased
to $2.4 million, compared to $5.3 million for the corresponding period of the
prior fiscal year. This decrease was attributable to lower borrowing
requirements due to the sale of substantially of the Company's assets and the
assumption of substantially all the liabilities by Newco on November 30, 1999,
and the restructuring of debt pursuant to the Plan.
Other income (loss) for the nine months ended December 31, 1999
decreased to $(0.8) million, compared to $2.8 million for the corresponding
period of the prior fiscal year. The decrease in other income (loss) is
primarily due realized and unrealized foreign exchange losses of $0.6 million
for the nine months ended December 31, 1999, compared to the realized and
unrealized foreign exchange gains of $4.2 million for the nine months ended
December 31, 1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are for payroll and professional fees
which are incurred in connection with the preparation of the Company's monthly
financial statements and the required SEC filings.
The Company's only source of working capital is advances from Newco,
which pursuant to the Purchase Agreement cannot exceed $300,000 annually and are
only available until November 30, 2001, the second anniversary of the Closing
Date. The Company currently has no commitments to fund its operations subsequent
to November 30, 2001. As of December 31, 1999, the Company had received $55,000
in advances from Newco. The Company believes that $300,000 should be adequate to
fund the required activities of the Company on an annual basis until November
30, 2001, absent unanticipated or extraordinary circumstances.
OTHER MATTERS
Pursuant to the Plan, the Company changed its name to MKR Holdings.
Pursuant to the Confirmation Order, the Company amended its articles of
incorporation and by-laws to satisfy the provisions of the Purchase Agreement,
the Plan and the Confirmation Order.
Pursuant to the Plan, as of November 30, 1999, the business and affairs
of the Company have been managed by and under the direction of a Board of
Directors, which consists of the following three members: Kevin Hardy, Henry E.
Tauber and Louis M. Alpern. In addition to being a director and an officer of
the Company, Mr. Hardy serves as the Chief Financial Officer and Secretary and a
director of Marker USA, a subsidiary of Newco.
Effective October 27, 1999, the Company canceled all 1,531,800
remaining stock options.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
With the exception of historical information (information relating to
the Company's financial condition and results of operations at historical dates
or for historical periods), the matters discussed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations are
forward-looking statements that necessarily are based on certain assumptions and
are subject to certain risks and uncertainties. These forward-looking statements
are based on management's expectations as of the date hereof, and the Company
does not undertake any responsibility to update any of these statements in the
future. Actual future performance and results could differ from those contained
in or suggested by these forward-looking statements as a result of the factors
set forth in this Management's Discussion and Analysis of Financial Condition
and Results of Operations and the business risks described in the Company's
Annual Report on Form 10-K for the year ended March 31, 1999, and elsewhere in
the Company's filings with the SEC.
15
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
A description of the Company's voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court is
qualified in its entirety by reference to Part II, Item 1 of the Quarterly
Report on Form 10-Q filed on November 15, 1999, and is herein incorporated by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Section 1129(a)(8) of the Bankruptcy Code requires that in order for a
plan of reorganization to be confirmed, each class of claims and interests
designated under the plan must either: (a) have voted to accept the plan, or
(b) not be impaired under the plan. Accordingly, the Debtors solicited votes to
accept or reject the Plan by transmitting the Plan, Disclosure Statement,
appropriate ballots and other solicitation materials to holders of claims and
interests entitled to vote under the Plan, including, among others, Marker's
common stockholders. Pursuant to Section 1126(d) of the Bankruptcy Code, a class
of interests is deemed to have accepted the plan if holders of at least
two-thirds of the amount of shares actually voting on the plan voted to accept
the plan. As set forth in the Affidavit of Christina Bastas dated October 25,
1999 (the "Bastas Affidavit") filed with the Bankruptcy Court, which certified
the results of the tabulation of ballots for Marker Class 11 (the common
stockholders), more than two-thirds of the shares of Marker common stock that
timely and properly voted on the Plan accepted the Plan. Specifically, the
Bastas Affidavit indicates that of the 6,946,201 shares that voted to accept or
reject the Plan, 6,928,801 shares (99.75%) voted to accept the Plan and 17,400
shares (.25%) voted to reject the Plan. Accordingly, pursuant to Section 1126 of
the Bankruptcy Code, the Plan was accepted by Marker's stockholders (classified
in Marker Class 11).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS:
2.1 Confirmation of the First Amended Chapter 11 Plan of
Reorganization, dated October 27, 1999 (without
exhibits). Filed as exhibit 2.1 to the Company's
Current Report on Form 8-K dated November 12, 1999.
2.2 Amendment to First Amended Joint Chapter 11 Plan of
Reorganization, dated as of October 25, 1999. Filed
as exhibit 2.6 to the Company's Quarterly Report on
Form 10-Q dated November 15, 1999.
3.1 Third Amended and Restated Articles of Incorporation
of Marker International, accepted on December 7, 1999
by the Secretary of State of Utah, changing name to
MKR Holdings.*
3.2 Second Amended and Restated Bylaws of Marker
International, adopted on December 7, 1999, changing
name to MKR Holdings.*
16
<PAGE>
PART II - OTHER INFORMATION - CONTINUED
4.1 Operating Agreement, between Marker International
GmbH, CT Sports Holding AG and Marker International,
dated November 30, 1999. Filed as exhibit 4.1 to the
Company's Amendment No. 1 to Current Report on Form
8-K dated December 13, 1999.
27 Financial Data Schedule. *
- ----------------------
* Filed herewith.
b) REPORTS FILED ON FORM 8-K:
Current Report on Form 8-K filed on November 12, 1999,
reporting under Item 3 the confirmation of the petition for
relief under Chapter 11 of the United States Bankruptcy Code
by Marker International, DNR USA, Inc. and DNR North America,
Inc.
Current Report on Form 8-K filed on December 8, 1999,
reporting under Item 2 the closing of the Asset Purchase
Agreement between MKR Holdings, formerly known as Marker
International, and Marker International GmbH.
Amendment No. 1 to Current Report on Form 8-K filed December
13, 1999, amending Item 7(c) by filing a copy of the Operating
Agreement among Marker International GmbH, CT Sports Holding
AG and Marker International as exhibit 4.1.
17
<PAGE>
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.
MKR HOLDINGS
REGISTRANT
Dated: February 14, 2000 /s/ KEVIN HARDY
----------------
Kevin Hardy
President, Chief Executive
Officer and Chief Financial
Officer
18
<PAGE>
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MARKER INTERNATIONAL
The undersigned, pursuant to the Utah Revised Business
Corporation Act, hereby changes its name to MKR Holdings (referred to herein as
the "Corporation") and adopts the following Third Amended and Restated Articles
of Incorporation of Marker International, which articles of incorporation were
originally filed on May 28, 1981, were amended and restated by filing the
Amended and Restated Articles of Incorporation on August 1, 1994, were again
amended and restated by filing the Second Amended and Restated Articles of
Incorporation on August 18, 1994 (as amended) and are hereby amended and
restated in full.
1. The name of the corporation is hereby changed to: MKR
Holdings (formerly known as Marker International).
2. The text of the restated articles of incorporation is as
follows:
ARTICLE I
NAME
The name of the Corporation is MKR Holdings.
ARTICLE II
PURPOSE
The Corporation is organized solely to hold, own and invest in
stock, shares, partnership interests, membership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, any right to subscribe to,
purchase or acquire, any of the foregoing. The Corporation may also take such
actions and enter into such agreements in connection with any of the foregoing.
ARTICLE III
AUTHORIZED SHARES
The Corporation shall have the authority to issue 25,000,000
shares of common shares, $0.01 par value ("Common Stock"). Shares of Common
Stock may be issued, without
<PAGE>
shareholder action, from time to time in one or more series as may from time
to time be determined by the board of directors. The board of directors of
this Corporation is hereby expressly granted authority, without shareholder
action, and within the limits set forth in the Utah Revised Business
Corporation Act and Section 1123(a)(6) of Title 11 of the United States Code,
11 U.S.C. Sections 101, ET SEQ. (the "Bankruptcy Code") (as set forth below),
to:
(a) designate, in whole or in part, the preferences,
limitations, and relative rights, of any class of shares before the
issuance of any shares of that class;
(b) create one or more series within a class of
shares, fix the number of shares of each such series, and designate, in
whole or in part, the preferences, limitations, and relative rights of
the series, all before the issuance of any shares of that series;
(c) alter or revoke the preferences, limitations, and
relative rights granted to or imposed upon any wholly unissued class of
shares or any wholly unissued series of any class of shares; or
(d) increase or decrease the number of shares
constituting any series, the number of shares, of which was originally
fixed by the board of directors, either before or after the issuance of
shares of the series; provided that, the number may not be decreased
below the number of shares of the series then outstanding, or increased
above the total number of authorized shares of the applicable class of
shares available for designation as a part of the series.
Notwithstanding the above, pursuant to Section 1123(a)(6)
of the Bankruptcy Code, the Corporation shall be prohibited from issuing any
non-voting equity securities. Further, the Corporation shall be prohibited
from issuing any additional securities requiring registration under the
Securities Act of 1933, as amended.
ARTICLE IV
BOARD OF DIRECTORS
(a) NUMBER OF DIRECTORS. The number of directors
constituting the entire board of directors shall be not less than three nor
more than fifteen. The specific number of directors constituting the entire
board of directors shall be authorized from time to time exclusively by the
affirmative vote of a majority of the entire board of directors. As used in
these articles of incorporation, the term "entire board of directors" means
the total authorized number of directors that the Corporation would have if
there were no vacancies.
(b) NOMINATIONS. Advance notice of nominations for the
election of directors, other than by the board of directors or a committee
thereof, shall be given within the term and in the manner provided in the
bylaws of the Corporation.
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<PAGE>
(c) VACANCIES. Any vacancies in the board of directors for
any reason, including by reason of any increase in the number of directors or
any removal of an incumbent director, shall, if occurring prior to the
expiration of the term of office of such director, be filled only by the
board of directors, acting by the affirmative vote of a majority of the
remaining directors, whether or not constituting a quorum. A director elected
to fill a vacancy shall be elected for the unexpired term of such director's
predecessor in office or, if such vacancy is the result of an increase in the
number of directors, until the next meeting of shareholders at which
directors are elected.
ARTICLE V
LIMITATION OF LIABILITY OF DIRECTORS
To the fullest extent permitted by the Utah Revised
Business Corporation Act or any applicable law now in effect or as may
hereafter be amended, no director of the Corporation shall be personally
liable to the Corporation or any of its shareholders for monetary damages for
an act or omission in the director's capacity as a director. Neither the
amendment nor repeal of this Article, nor the adoption of any provision of
these Articles of Incorporation inconsistent with this Article shall
adversely affect any right or protection of a director of the Corporation
existing at the time of such amendment, repeal or adoption.
ARTICLE VI
REGISTERED AGENT
The registered agent of the Corporation shall be Jon C.
Heaton and the address of the registered office of the Corporation shall be
175 East 400 South, Suite 900, Salt Lake City, UT 84111.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify its officers, directors,
agents, incorporators and other persons against liabilities incurred by them
that result from their acts that are performed in furtherance of the business
of the corporation to the full extent now or hereafter permitted by the laws
of the State of Utah, the bylaws of the Corporation or as authorized by the
board of directors. Such right to indemnification and advancement of expenses
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The indemnification and advancement of
expenses provided for herein shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
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ARTICLE VIII
INAPPLICABILITY OF CONTROL SHARES ACQUISITION ACT
Pursuant to the provisions of UTAH CODE ANN. ss. 61-6-6,
the Control Shares Acquisition Act, UTAH CODE ANN. Section 61-6-1 ET Seq.
(1994), shall not be applicable to the Corporation.
ARTICLE IX
BUSINESS AT ANNUAL MEETING
1. At an annual meeting of shareholders, only such business
shall be conducted, and only such proposals shall be acted upon, as shall
have been brought before the annual meeting (a) by, or at the direction of, a
majority of the directors, or (b) by any shareholder of the Corporation who
complies with the notice procedures set forth in the bylaws of the
Corporation. Notwithstanding anything to the contrary contained in these
articles, no amendment, repeal, or provision inconsistent with the provisions
of this Article IX or related provision in the bylaws of the Corporation
shall be adopted unless it is approved by the vote of two-thirds of the votes
entitled to be cast.
2. Pursuant to (i) Section 10.10.2 of the First Amended
Joint Chapter 11 Plan of Reorganization of Marker International, DNR USA,
Inc. and DNR North America, Inc., dated September 22, 1999 (as amended,
supplemented or otherwise modified, the "Plan") and (ii) paragraph 7(j) of
the Order of the United States Bankruptcy Court for the District of Delaware
dated October 27, 1999 Confirming the Plan, no action by the shareholders or
board of directors of the Corporation is required in amending the articles of
incorporation and adopting these Third Amended and Restated Articles of
Incorporation.
The undersigned affirms and acknowledges, under penalties
of perjury, that the foregoing instrument is the act and deed of the
Corporation and that the stated facts herein are true.
DATED this 3rd day of December, 1999.
MKR HOLDINGS
By: /s/ Peter C. Weaver
--------------------------------------
Peter C. Weaver
President and Chief Executive Officer
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<PAGE>
ACKNOWLEDGEMENT
This undersigned accepts and acknowledges his appointment as agent
for service of process for MKR HOLDINGS.
/s/ Jon C. Heaton
--------------------------------------
Jon C. Heaton
Registered Agent
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<PAGE>
SECOND AMENDED AND RESTATED BYLAWS OF
MKR HOLDINGS
Adopted on December 7, 1999
ARTICLE I
OFFICES
The principal office of the Corporation shall be located in
Salt Lake City, Utah. The Corporation may have such other offices, either within
or without the State of Utah, as the Board of Directors may designate or as the
business of the Corporation may require from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
shareholders shall be held on the date and at the time fixed by the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the chairman of the board, president or by the Board
of Directors, and shall be called by the president at the request of the holders
of not less than one-tenth (1/10) of all outstanding shares of the Corporation
entitled to vote at the meeting. Special meetings shall be held on the date and
at the time fixed by the Board of Directors.
SECTION 3. PLACE OF MEETING. The Board of Directors may
designate any place, either within or without the State of Utah, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. Whenever the Board of Directors shall fail to designate such place,
the meeting shall be held at the registered office of the Corporation in Utah.
SECTION 4. NOTICE OF MEETING. Written notice of all meetings
shall be given, stating the place, day and hour of the meeting. The notice of an
annual meeting shall state that the meeting is called for the election of
directors and for the transaction of other business which may properly come
before the meeting, and shall (if any other action which could be taken at a
special meeting is to be taken at the annual meeting), state such other action
or actions as are known at the time of such notice. The notice of a special
meeting shall in all instances state the
<PAGE>
purpose or purposes for which the meeting is called. A copy of a notice of
any meeting, shall, unless otherwise prescribed by statute, be delivered not
less than ten (10) nor more than fifty (50) days before the date of the
meeting, unless lapse of the prescribed period of time shall have been
waived, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting at
such shareholder's address as it appears on the records of the Corporation.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid. If a meeting is adjourned to another time, not more than thirty days
hence, and/or to another place, and if an announcement of the adjourned time
and place is made at the meeting, it shall not be necessary to give notice of
the adjourned meeting unless the Board of Directors, after adjournment, fixes
a new record date for the adjourned meeting. Notice need not be given to any
shareholder who submits a written waiver of notice before or after the time
stated therein. Attendance of a person at a meeting of shareholders shall
constitute a waiver of notice of such meeting, except when the shareholder
attends a 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. Neither the business to be transacted at, nor
the purpose of, any annual or special meeting of the shareholders need be
specified in any written waiver of notice.
SECTION 5. CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD
DATE. For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or determining
shareholders entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall be
closed for a stated period, not less than ten (10) days, but not to exceed, in
any case, fifty (50) days. In lieu of closing the stock transfer books, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and, in the case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or the
determination of shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the shareholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the shareholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted,
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<PAGE>
and which record date shall be not more than sixty (60) days prior to such
action. If no record date has been fixed, the record date for determining
shareholders for any such purpose shall be at the close of business on the
day in which the Board of Directors adopts the resolution relating thereto.
SECTION 6. VOTING RECORD. The officer or agent having charge
of the stock transfer books for shares of the Corporation shall make, at least
ten (10) days before every meeting of shareholders, a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, showing the address of each shareholder and the number of shares
registered in the name of each shareholder. Such list shall be open to the
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting either at a place within the city where the meeting is to held, which
place shall be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any shareholder who is present. The stock ledger shall be
the only evidence as to who are the shareholders entitled to examine the stock
ledger, the list required by this section or the books of the Corporation, or to
vote at any meeting of shareholders.
SECTION 7. CONDUCT OF MEETING. Meetings of the shareholders
shall be presided over by one of the following officers in order of seniority
and if present and acting: the Chairman of the Board, if any, the Vice-Chairman
of the Board, if any, the President, a Vice President, a chairman of the meeting
chosen by the Board of Directors or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the shareholders. The
Secretary of the Corporation or, in such person's absence, an Assistant
Secretary, shall act as the secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary of the meeting.
SECTION 8. QUORUM. Except as Utah law or these bylaws may
otherwise provide, a majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders.
SECTION 9. INSPECTORS AND JUDGES. The Board of Directors, in
advance of any meeting, may, but need not, appoint one or more inspectors of
election or judges of the vote, as the case may be, to act at the meeting or any
adjournment thereof. If an inspector or inspectors or judge or judges are not
appointed by the Board of Directors, the person presiding at the meeting may,
but need not, appoint one or more persons inspectors or judges. In case any
person who may be appointed as an inspector or judge fails to act or appear, the
vacancy may be filled by appointment made by the person presiding thereat. Each
inspector or judge, if any, before entering upon the discharge of such person's
duties, shall take and sign an oath to faithfully execute the duties of
inspector or judge at such meeting with strict impartiality and according to
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<PAGE>
the best of his ability. The inspectors and judges, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum and the
validity and effect of proxies, receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right
to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such other acts as are proper to conduct the election or vote
with fairness to all shareholders. On request of the person presiding at the
meeting, the inspector or inspectors or judge or judges, if any, shall make a
report in writing of any challenge, question or matter determined by such
person or persons and execute a certificate of any fact so found.
SECTION 10. PROXIES. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by the
shareholder or by his or her duly authorized attorney in fact. Every proxy must
be signed by the shareholder or by such person's attorney-in-fact. No proxy
shall be voted or acted upon after three years from its date unless such proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and, if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy may be
made irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the Corporation generally.
SECTION 11. VOTING OF SHARES. Each shareholder entitled to
vote in accordance with the Articles of Incorporation and of these bylaws, or,
with respect to the issuance of any preferred stock, in accordance with the
terms of a resolution or resolutions of the Board of Directors, shall be
entitled to one (1) vote, in person or by proxy, for each share of stock
entitled to vote held by such shareholder. Any shareholder action shall be
authorized by a majority of the votes cast except where the Articles of
Incorporation or the Utah Revised Business Corporation Act prescribes a
different percentage of votes and/or a different exercise of voting power.
Voting by ballot shall not be required for corporate action except as otherwise
provided by the Utah Revised Business Corporation Act.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action
required to be taken at a meeting of the shareholders, or any action which may
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those shareholders who have not consented in writing
and shall be delivered to the Corporation by delivery to its registered office
in Utah, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
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<PAGE>
SECTION 13. BUSINESS AT ANNUAL MEETING. Only business that has
been brought before an annual meeting of shareholders that has been brought by,
or at the direction of, a majority of the directors, or by any shareholder who
provides notice of the business to be brought forth at the meeting no less than
120 calendar days prior to the date in the then current fiscal year on which the
Corporation's notice of annual meeting and related proxy or information
statement were mailed to shareholders in connection with the previous year's
annual meeting of shareholders. If, however, no annual meeting was held in the
preceding year, or if the date of the annual meeting in the current fiscal year
has been changed by more than 30 calendar days from the date on which the annual
meeting was held in the preceding fiscal year, the shareholders' notice must be
received not less than 30 days prior to the date of the current year's annual
meeting (or if less than 40 days' notice of the date of the annual meeting is
given to shareholders, not later than the tenth day following the date on which
the notice of the date of the annual meeting was mailed). The shareholders'
notice to the Corporation must be set forth in writing as to each matter the
shareholder proposes to bring before the annual meeting; a brief description of
the business to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; the name and address, as they
appear on the Corporation's books, of the shareholder of record proposing such
business; the class and number of shares of the Corporation's capital stock that
are beneficially owned by such shareholder; and any material interest of the
shareholder in such proposal. The determination as to whether the notice
provisions have been met will be made by the presiding officer at the annual
meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the Corporation shall be not less than three nor more than fifteen
directors. The number of directors shall be fixed from time to time by the Board
of Directors. Each director shall hold office until the next annual meeting of
shareholders and until his or her successor shall have been elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the Corporation. Directors need not be
residents of the State of Utah or shareholders of the Corporation.
SECTION 3. NOMINATION OF DIRECTORS. Directors may be nominated
for election as directors by a majority of the Board of Directors or by any
shareholder of the Corporation if the shareholder: Delivers or mails written
notice of the shareholder's nominations to the principal offices of the
Corporation not less than 30 days prior to the annual meeting at which the
election is to be held (or if less than 60 days notice of the date of the annual
meeting is given or made to the shareholders, no later than the tenth day
following the date on which notice of the date of the annual meeting was
mailed).
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<PAGE>
SECTION 4. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw, immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Utah, for the holding of additional regular meetings
without other notice than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or any two directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Utah, as the place for holding any special meeting of the Board of
Directors called by them.
SECTION 6. NOTICE. No notice shall be required for regular
meetings for which the time and place have been fixed. Written, oral or any
other mode of notice of time and place of any special meeting shall be given at
least twenty-four (24) hours prior to the meeting by written notice delivered
personally or mailed to each director at his or her business address. Notice may
be given by telephone or telefax (in which case it is effective when given) or
by mail (in which case it is effective seventy-two hours after mailing by
prepaid first class mail). The notice of any meeting need not specify the
purpose of the meeting. Any requirement of furnishing a notice shall be waived
by any director who signs a written waiver of such notice before or after the
time stated therein. The attendance of a director at a meeting shall constitute
a waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened.
SECTION 7. QUORUM AND ACTION. A majority of the whole Board
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided that such majority shall constitute at least one-third (1/3) of
the whole Board. Any director may participate in a meeting of the Board by means
of a conference telephone or similar communications equipment by means of which
all directors participating in the meeting can hear each other, and such
participation in a meeting of the Board shall constitute presence in person at
such meeting. A majority of the directors present, whether or not a quorum is
present, may adjourn a meeting to another time and place. Except as herein
otherwise provided, and except as otherwise provided by the Utah Revised
Business Corporation Act, the act of the Board shall be the act by vote of a
majority of the directors present at a meeting, a quorum being present. The
quorum and voting provisions herein stated shall not be construed as conflicting
with any provisions of the Utah Revised Business Corporation Act and these
bylaws which govern a meeting of directors held to fill vacancies and newly
created directorships in the Board.
SECTION 8. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Directors or any committee thereof at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors and filed with the
minutes of proceedings of the Board of Directors or committee.
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<PAGE>
SECTION 9. REMOVAL OF DIRECTORS. Any and all of the directors
may be removed for cause or without cause by the shareholders.
SECTION 10. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors, whether or not constituting a quorum of the Board of Directors. A
director elected to fill a vacancy shall be elected for the unexpired term of
his or her predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 11. COMPENSATION. By resolution of the Board of
Directors, the Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors, and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
Director. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
SECTION 1. DESIGNATION; POWERS. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so determine, an executive committee, each
such committee to consist of one or more of the directors of the Corporation.
Any such designated committee shall have and may exercise such of the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation as may be provided in such resolution, except that no
such committee shall have the power or authority of the Board of Directors in
reference to amending the Articles of Incorporation, adopting an agreement of
merger or consolidation, recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation, or amending,
altering or repealing the bylaws or adopting new bylaws for Corporation and,
unless such resolution or the Articles of Incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Any such designated committee shall have such
other powers and limitations of authority as may be determined from time to time
by resolution adopted by the Board of Directors. In the absence or
disqualification of any member of any such committee or committees, the members
thereof present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
SECTION 2. PROCEDURE; MEETINGS; QUORUM. Any committee
designated pursuant to Section 1 of this Article shall choose its own chairman,
shall keep regular minutes of its proceedings and report the same to the Board
of Directors when requested, shall fix its own rules and procedures, and shall
meet at such times and at such place or places as may be provided by
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<PAGE>
such rules, or by resolution of such committee or of the Board of Directors.
At every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of
any resolution.
SECTION 3. SUBSTITUTION OF MEMBERS. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, if so elected by the Board of Directors, a President, one
or more Vice Presidents, a Secretary, one or more Assistant Secretaries, and a
Treasurer, each of whom shall be elected by a majority of the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his or her successor shall have
been duly elected and shall have qualified or until his or her death or until he
or she shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 3. REMOVAL. Any officer may be removed by the Board of
Directors, with or without cause, whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. AUTHORITY AND DUTIES. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the
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<PAGE>
Corporation as may be provided in these bylaws, or, to the extent not so
provided, by the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. If elected, the Chairman of
the Board shall preside at all meetings of the shareholders and of the Board of
Directors, otherwise, the Vice-Chairman of the Board, if any and if present and
acting, or the President, if present and acting, or any other director chosen by
the Board, shall preside. The Chairman of the Board shall also have such other
powers and duties as designated in these bylaws and as from time to time may be
assigned to him by the Board of Directors.
SECTION 7. PRESIDENT. The President shall be the principal
executive officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation.
SECTION 8. VICE-PRESIDENTS. In the absence of the President or
in the event of his or her death, inability or refusal to act, any
vice-president shall perform the duties of the president, in the order of their
seniority, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the president.
SECTION 9. SECRETARY. The secretary shall: (a) keep the
minutes of the proceedings of the meetings of the shareholders and of the Board
of Directors in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (c) be custodian of the corporate records and of the seal of
the Corporation and see that the seal of the Corporation, if such a seal has
been adopted by the Board of Directors, is affixed to all documents the
execution of which on behalf of the Corporation under its seal is duly
authorized; (d) keep a register of the post office address of each shareholder;
(e) sign with the president, or the vice-president, certificates for shares of
the Corporation, the issuance of which shall have been authorized by resolution
of the Board of Directors; (f) have general charge of the stock transfer books
of the Corporation; and (g) in general perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
or her by the president or by the Board of Directors.
SECTION 10. TREASURER. The treasurer shall: (a) have charge
and custody of and be responsible for all funds and valuable effects, including
securities of the Corporation; (b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these Bylaws; and (c) in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him or her by the president or by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the President and
directors, at the regular meetings of the Board, or whenever they may require
it, an account of all transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond for such term, in such sum
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<PAGE>
and with such surety or sureties as shall be satisfactory to the Board for
the faithful performance of the duties of such office and for the restoration
to the Corporation, in case of such person's death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in such person's possession or under such person's
control belonging to the Corporation.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Every holder of stock in
the Corporation shall be entitled to have a certificate signed by, or in the
name of, the Corporation by the Chairman or Vice-Chairman of the Board of
Directors, if any, or by the President or a Vice-President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares owned by such person in the
Corporation. If such certificate is countersigned by a transfer agent other than
the Corporation or one of its employees or by a registrar other than the
Corporation or one of its employees, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent, or registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock, and
whenever the Corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon the statements prescribed by
the Utah Revised Business Corporation Act. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series shall be
noted conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock in place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Board of Directors may require the owner of any lost,
stolen or destroyed certificate, or such person's legal representative, to give
the Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of any such new certificate.
SECTION 2. FRACTIONAL SHARE INTERESTS. The Corporation may,
but shall not be required to, issue fractions of a share.
SECTION 3. TRANSFER OF SHARES. Transfer or registration of
transfer of shares of the Corporation shall be made only on the stock transfer
books of the Corporation by the registered holder of record thereof or by his or
her legal representative, who shall furnish proper evidence
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<PAGE>
of authority to transfer, or by his or her attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the
Corporation or with a transfer agent or a registrar, if any, and on surrender
for cancellation of the certificate for such shares of stock properly
endorsed and the payment of all taxes due thereon. The person in whose name
shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed on the first
day of April and end on the thirty-first day of March in each year, and shall be
subject to change, by the Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in the manner, and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX
AMENDMENTS
These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the Board of Directors or by the shareholders at any
regular or special meeting.
ARTICLE X
INDEMNIFICATION
To the full extent permitted by law, the Corporation shall
indemnify any director or officer or former director or officer of the
Corporation, or any person who may have served at its request as a director or
officer of another corporation in which it owns shares or of which it is a
creditor, against expenses actually and reasonably incurred by him or her, in
connection with the defense of any action, suit or proceeding, civil or
criminal, in which he or she is made a party by reason of being or having been
such director or officer, except in relation to matters as to which he or she
shall be adjudged in such action, suit or proceeding to be liable for negligence
or misconduct in the performance of duty; and to make such other indemnification
as shall be authorized by the shareholders of the Corporation.
-11-
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