<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 July 4, 1998
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 No. 0-25502
INFORMATION STORAGE DEVICES, INC.
(Exact name of registrant as specified in its charter)
California 77-0197173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2045 Hamilton Avenue
San Jose, CA 95125
(Address of principal executive offices, including zip code)
(408) 369-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
As of August 1, 1998, there were outstanding 9,914,042 shares of the
Registrant's Common Stock.
<PAGE>
INDEX
Part I - Financial Information Page
- ------------------------------- ----
Item 1. Financial Statements
Condensed Balance Sheets at December 31, 1997
and July 4, 1998...............................................3
Condensed Statements of Operations for the
Three Months and Six Months Ended
June 28, 1997 and July 4, 1998.................................4
Condensed Statements of Cash Flows for the
Six Months Ended June 28, 1997 and July 4, 1998................5
Notes to Condensed Financial Statements...........................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......11
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings................................................12
Item 5. Other Information................................................12
Item 6. Exhibits and Reports on Form 8-K.................................13
Signatures.......................................................13
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEETS
------------------------
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
July 4, 1998 December 31, 1997
------------ -----------------
Assets
Current assets:
Cash and cash equivalents $ 5,845 $ 10,102
Short-term investments 22,688 29,706
Accounts receivable, net 6,529 6,577
Inventories 15,774 7,742
Other current assets 3,089 2,265
------------ ------------
Total current assets 53,925 56,392
Property and equipment, net 7,150 6,317
Other assets 3,310 2,146
Long-term investments 5,422 6,182
------------ ------------
Total Assets $ 69,807 $ 71,037
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,585 $ 1,591
Accounts payable and accrued liabilities 7,880 9,231
Deferred revenue 1,670 1,216
------------ ------------
Total current liabilities 11,135 12,038
Long-term liabilities 1,533 994
------------ ------------
Shareholders' equity 57,139 58,005
------------ ------------
Total Liabilities and Shareholders' Equity $ 69,807 $ 71,037
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
------------------ ----------------
July 4, 1998 June 28, 1997 July 4, 1998 June 28, 1997
------------ ------------- ------------ -------------
Net revenues $ 12,178 $ 11,387 $ 24,332 $ 19,729
Cost of goods sold 6,319 7,234 13,861 12,888
------------ ------------- ------------ -------------
Gross margin 5,859 4,153 10,471 6,841
Operating expenses:
Research and development 2,907 2,901 6,069 5,201
In-process research and development (1) -- -- -- 4,000
Selling, general and administrative 3,389 2,667 6,647 5,089
------------ ------------- ------------ --------------
Total operating expenses 6,296 5,568 12,716 14,290
------------ ------------- ------------ --------------
Income (loss) from operations (437) (1,415) (2,245) (7,449)
Interest and other income, net 447 505 1,041 1,140
------------ ------------- ------------ --------------
Net income (loss) $ 10 $ (910) $ (1,204) $ (6,309)
============ ============= ============ ==============
Basic net income (loss) per share $ 0.00 $ (0.09) $ (0.12) $ (0.66)
============ ============= ============ ==============
Diluted net income (loss) per share $ 0.00 -- -- --
============ ============= ============ ==============
Shares used in computing basic earnings per share 9,855 9,609 9,840 9,598
Shares used in computing diluted earnings per share 9,943 9,609 9,840 9,598
</TABLE>
(1) In-process research and development as a result of the CompactSPEECH(TM)
acquisition.
The accompanying notes are an integral part of these statements.
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
----------------
July 4, 1998 June 28, 1997
------------ -------------
Cash flows from operating activities:
Net (loss) $ (1,204) $ (6,309)
Adjustments to reconcile net (loss) to net cash
used in operating activities-----
Depreciation and amortization 2,110 1,500
Compensation costs related to stock and stock option grant 43 39
In process research and development -- 4,000
Changes in assets and liabilities -----
Accounts receivable 48 (2,390)
Inventories (8,032) 1,137
Other current assets (824) (1,625)
Accounts payable (1,775) 784
Accrued liabilities and bonuses 424 317
Deferred revenue 454 158
Other liabilities -- 803
------------ -------------
Net cash used in operating activities (8,756) (1,586)
Cash flows from investing activities:
Purchase of property and equipment (1,394) (1,299)
Change in other assets (1,301) 1,034
Purchase of CompactSPEECH(TM) -- (5,100)
Purchase of short-term (11,067) (18,462)
investments
Proceeds from maturities and sale of short-term investments 18,088 26,731
Purchase of long-term investments -- --
Proceeds from maturities of long-term investments 760 --
------------ -------------
Net cash provided by investing activities 5,086 2,904
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance costs 292 234
Payments on capitalized lease obligations (879) (707)
------------ -------------
Net cash used in financing activities (587) (473)
Net increase (decrease) in cash and cash equivalents (4,257) 845
Cash and cash equivalents at beginning of period 10,102 21,927
------------ -------------
Cash and cash equivalents at end of period $ 5,845 $ 22,772
============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Notes to Condensed Financial Statements
1. Basis of Presentation:
----------------------
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto for the year ended
December 31, 1997.
The unaudited condensed financial statements included herein reflect
all adjustments (which include only normal, recurring adjustments) that are, in
the opinion of management, necessary to state fairly the financial results for
the periods presented. The results for such periods are not necessarily
indicative of the results to be expected for the full fiscal year.
2. Inventories:
------------
Inventories consist of material, labor and manufacturing overhead and
are stated at the lower of cost (first-in, first-out basis) or market. The
components of inventory are as follows (in thousands):
July 4, 1998 December 31, 1997
------------ -----------------
Work-in-process............................. $ 8,269 $ 4,280
Finished goods.............................. 7,505 3,462
------------ -------------
$ 15,774 $ 7,742
============ =============
3. Earnings Per Share:
-------------------
Basic net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding. Diluted earnings per share
information takes into account the dilution arising from the conversion of stock
options and warrants, and is only presented for those periods in the
accompanying statement of operations when the company has net income.
4. Comprehensive Income:
---------------------
The Company adopted Statement of Financial Accounting Standard No. 130
"Reporting Comprehensive Income" ("SFAS 130") as of January 1, 1998 and has
restated information for all prior periods reported below to conform to this
standard.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
------------------ ----------------
July 4, 1998 June 28, 1997 July 4, 1998 June 28, 1997
------------ ------------- ------------ -------------
Net income (loss)................................. $ 10 $ (910) $ (1,204) $ (6,309)
Other Comprehensive Income:
Unrealized holding gains (losses) on available
for sale securities........................... 11 (13) 19 16
--------- ---------- --------- ----------
Comprehensive income (loss)....................... 21 ( 923) (1,185) (6,293)
========= ========== ========= ==========
</TABLE>
<PAGE>
5. Derivatives:
------------
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Statement 133 is
effective for fiscal years beginning after June 15, 1999. We have not yet
quantified the impacts of adopting Statement 133 on our financial statements and
have not yet determined the timing or the method of our adoption of Statement
133. However, the Statement could increase volatility in earnings and other
comprehensive income.
6. Proposed Acquisition:
---------------------
On July 24, 1998, the Company announced that it had received a written
offer from Winbond Electronics Corporation, ("Winbond"), an existing shareholder
of the Company, to acquire the Company through a cash merger in which Winbond
would acquire all currently outstanding shares of the Company that Winbond does
not now own, for $8.25 per share. Winbond's proposal is non-binding and is
subject to a number of material conditions, including the execution of
definitive agreements, completion of satisfactory due diligence, waiver of the
Company's shareholder rights plan, board approval by both companies, approval by
the Company's shareholders and compliance with other customary legal
requirements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report includes forward-looking statements that involve a number
of risks and uncertainties. Actual results may differ materially because of a
number of factors, including those set forth under "Other Factors That May
Affect Future Operating Results" on page 16 of the ISD 1997 Form 10-K filed with
the Securities and Exchange Commission.
Overview
Information Storage Devices, Inc. ("ISD" or the "Company") designs,
develops, and markets semiconductor voice solutions based on analog and digital
technologies and mixed signal expertise. ISD's patented ChipCorder(R) and
CompactSPEECH(R) technologies enable solid state voice recording and playback
applications in the communications, consumer, industrial, and automotive
markets. ChipCorder products deliver single-chip solutions, simple integration,
exceptional sound quality, low power consumption, battery-less voice storage,
and low cost. CompactSPEECH products deliver powerful digital speech processing,
advanced telecommunication capabilities, long recording times, cost effective
high voice quality, multi-language speech synthesis, and battery-less voice
storage.
The Company distributes its products through a direct sales
organization and a worldwide network of over 50 sales representatives and
distributors. The Company was incorporated in California in December 1987 and
commenced production shipments in 1992. ISD is an ISO 9001 certified company.
ISD subcontracts with independent foundries to fabricate the wafers for
all of its products. This approach enables the Company to concentrate its
resources on the design, development, and marketing areas, where the Company
believes it has the greatest competitive advantage, and eliminates the high cost
of owning and operating a semiconductor wafer fabrication facility. The Company
is dependent on these foundries to allocate to the Company a portion of their
foundry capacity sufficient to meet the Company's needs, to produce products of
acceptable quality and with acceptable manufacturing yields, and to deliver
products to the Company on time. Historically, the Company has experienced
difficulties in each of these areas, and the Company expects that it could
experience such difficulties in the future.
<PAGE>
Although the Company believes that current foundry capacity is adequate
to meet the Company's anticipated needs, there can be no assurance that the
Company will be able to qualify additional foundry capacity or otherwise obtain
needed quantities of wafers within expected time frames or at all. Moreover, in
order to reduce future manufacturing costs, the Company is designing smaller die
sizes with smaller geometry processes to increase the number of die produced on
each wafer. Despite these trends in the Company's design of its integrated
circuits, there can be no assurance that the Company's foundries will achieve or
maintain acceptable cost reductions, manufacturing yields, and process control
in the future, or that sudden declines in yields will not occur. Failures to
improve, or fluctuations in, manufacturing yields and process controls,
particularly at times when the Company is experiencing severe pricing pressures
from its customers or its competitors, would have a material adverse effect on
the Company's results of operations.
In March 1998, the Company announced that it had signed a licensing and
joint development agreement with Conversa (Conversational Computing Corporation)
to integrate Conversa's speaker-independent continuous voice recognition
technology into a new family of digital voice processors. The new ISD voice
recognition chips are expected to provide high accuracy, continuous, or
conversational, speaker independent capabilities. Products integrating these new
chips will not have to be trained and will respond to a set of American-English
commands. Additional languages are expected to be supported at a later date.
In April 1998, the Company announced the ISD4000 family, the industry's
only single chip solution with record and playback durations up to 16 minutes.
The ISD4000 family of record and playback chips is based on SuperFlash(R) memory
technology (1). The ISD4000 family, optimized for cellular phone applications,
quadruples ISD's current longest recording duration to 16 minutes. The ISD4000
family consists of three product series: the first series offers two to four
minute durations, the second series offers four to eight minute durations, and
the third series operates from eight to16 minute durations.
(1) SuperFlash is a registered trademark of SST (Silicon Storage Technology,
Inc.).
On July 1, 1998, the Company commenced the transfer of a substantial
portion of its wafer sort and final test manufacturing operation to AMKOR, the
Company's assembly and test subcontractor in the Philippines. This consolidation
will enable ISD to ship wafers directly from its wafer foundries to AMKOR for
turnkey manufacturing and direct shipment of finished product directly to the
customer. The conversion to offshore manufacturing is to be completed during the
third quarter of 1998. The objective of this move is to improve manufacturing
cycle time while reducing work in process, inventory, and manufacturing cost.
ISD's San Jose manufacturing group will focus on engineering, test development
and pre-production efforts for new products.
<PAGE>
Results of Operations
The following table sets forth, as a percentage of net revenues, each
line item in the Company's statements of operations for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
- -----------------------------------------------------------------------------------------------------------------
7/4/98 6/28/97 7/4/98 6/28/97
------ ------- ------ -------
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 51.9 63.5 57.0 65.3
-------- -------- -------- --------
Gross margin 48.1 36.5 43.0 34.7
-------- -------- -------- --------
Operating expenses:
Research and development 23.9 25.5 24.9 26.4
In-process research and development -- -- -- 20.3
Selling, general and administrative 27.8 23.4 27.3 25.8
-------- -------- -------- --------
Total operating expenses 51.7 48.9 52.2 72.5
-------- -------- -------- --------
Income (loss) from operations (3.6) (12.4) (9.2) (37.8)
Interest and other income, net 3.7 4.4 4.3 5.8
Net income (loss) 0.1 (8.0) (4.9) (32.0)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Net Revenues
During the six months ended July 4, 1998, the Company's net revenues
were principally derived from the sale of integrated circuits for voice
recording and playback. Net revenues for the six months ended July 4, 1998 were
$24.3 million. This was a 23% increase from the net revenues of $19.7 million in
the first half of 1997. Net revenues for the second quarter of 1998 were $12.2
million compared to $11.4 million of net revenues for the second quarter of
1997, an increase of 7% over net revenues for the second quarter of 1997. The
ISD33000 family of ChipCorder products accounted for more than 50% of net
revenues for the second quarter of 1998. The failure of new or broader
applications or markets to develop, or the failure of the existing market to
continue to be receptive to these products, could have a material effect on net
revenues and the Company's results of operations.
During the second quarter of 1998, sales to the Company's top ten
customers accounted for 68% of net revenues compared to 83% in the second
quarter of 1997. In the second quarter of 1998, the Company's top five customers
were Matshusita, Siemens, Motorola, Casio, and Aiwa. These customers accounted
for 19%, 18%, 18%, 4% and 3% of second quarter net revenues, respectively. The
loss of, or significant reduction in purchases by, a current major customer
would have a material adverse effect on the Company's financial condition and
results of operations if the Company were unable to obtain the orders from new
or existing customers to offset such losses or reductions.
The communications market in the second quarter each of 1997 and of
1998 accounted for about 80% of net revenues. The consumer and industrial
markets were each about 10% of net revenues for the second quarter of 1997 and
of 1998. These results reflect ISD's continued focus on voice solutions for the
communications market. The Company's communications customers represent
products, which include telephone answering machines, cellular phones, cordless
phones, personal handy phones and pagers. The failure of new applications or
markets to develop, or the failure of existing markets, particularly the
communications market, to continue to be receptive to the Company's products or
to offset reduced revenues from the consumer market, could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
<PAGE>
International sales were 87% of net revenues in the second quarter of
1998 compared to 81% in the second quarter of 1997. Sales to Europe accounted
for 50% of net revenues in the second quarter of 1998, up from 39% in the same
period last year. Sales to Japan were 17% of net revenues in the second quarter
of 1998, down from 27% in the second quarter of 1997, and sales to South East
Asia were 20% in the second quarter of 1998, up from 15% in the second quarter
of 1997. North American sales were 13% in the second quarter of 1998, down from
19% for the same period last year. The Company is subject to the risk of
conducting business internationally, including foreign government regulation and
general geopolitical risks, such as political and economic instability,
potential hostilities, changes in diplomatic and trade relationships, unexpected
changes in, or imposition of, U.S. or foreign regulatory requirements, tariffs,
import and export restrictions and other barriers and restrictions, potentially
adverse tax consequences, the burdens of complying with a variety of foreign
laws and other factors beyond the Company's control. As is common in the
semiconductor industry, certain of the Company's sales are made to distributors
under agreements allowing certain rights of return and price protection on
unsold products. Accordingly, the Company defers recognition of such sales until
the distributor sells the product.
Gross Margin
The Company's gross margin for the second quarter of 1998 was $5.9
million, or 48%, compared to a 37% gross margin for the second quarter of 1997.
The gross margin for the first six months of 1998 was $10.5 million or 43%,
compared to the gross margin for the first six months of 1997 which was $6.8
million or 35%. This improvement in gross margin reflects the result of several
factors: higher manufacturing yields, improved product pricing, more efficient
utilization of facilities, positive absorption of overhead, and strict cost
control.
The Company could experience difficulty in bringing up the offshore
operation disclosed in the "Overview" section and could experience fluctuations
in manufacturing yields, either or both of which could adversely affect gross
margins, particularly if higher yields, efficiency, and quality, and reduced
costs are not achieved. Additionally, the Company could experience variations in
gross margins as a result of declines in its average selling prices or shifts in
product and customer mix.
Research and Development
Research and development expenses were $2.9 million, or 24% of net
revenues, in the second quarter of 1998, compared to $2.9 million, or 26% of net
revenues in the same period of 1997. Research and development expenses could
increase as a result of the Company's technology and new product activity
associated with the technology announcements disclosed in the "Overview"
section. However, there can be no assurance that new products will be
successfully developed or achieve market acceptance, that yield problems on new
or existing products utilizing new foundry processes will not arise in the
future, or that product yields can be improved with respect to new or existing
products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3.4 million, or 28%
of net revenues, in the second quarter of 1998, compared to $2.7 million, or 23%
of net revenues in the second quarter of 1997. Selling, general and
administrative expenses were higher than the comparable quarter of last year
because of commissions associated with increased revenues and legal costs
incurred related to the Atmel claim. Selling, general and administrative
expenses could increase as a result of sales and marketing activities, or legal
expenses incurred in connection with the Atmel litigation matter. (See Part II,
Item 1.)
<PAGE>
Interest and Other Income, Net
Interest and other income was $0.4 million for the second quarter of
1998 compared to $0.5 million for the second quarter of 1997. Interest income
relates to investment earnings from the proceeds of the Company's public
offerings of common stock.
Provision for Income Taxes
Because of the loss incurred in the second half of 1997 and 1998, the
Company has made no provisions for income taxes.
Liquidity and Capital Resources
At July 4, 1998, the Company had cash, cash equivalents, short-term and
long-term investments of $34 million, and working capital of $43 million. The
Company has a line of credit with a commercial bank under which the Company may
borrow up to $15 million based on eligible assets; the term of the credit line
runs through June 30, 1999. As of July 4, 1998, the Company had no borrowings
outstanding under this line of credit, but the credit line was being used to
guarantee certain letters of credit generated by the Company. The line of credit
does not restrict the Company from paying cash dividends on its capital stock
and the only financial covenant is to maintain a minimum of pledged investments
of $17.7 million in the Company's liquidity management account with the bank.
The Company is currently in compliance with this financial covenant under the
line of credit agreement.
The Company's operating activities used net cash of $8.8 million in the
first half of 1998, due to the Company's net loss and to an increase in
inventory of $8.0 million compared to the end of the previous year. Capital
purchases were $1.4 million for the first half of 1998. The Company has entered
into a new operating lease agreement of $1.0 million of which $0.9 million is
available over the two quarters, beginning July 5, 1998.
The Company believes its existing cash, cash equivalents and
investments, together with its available line of credit and current equipment
lease lines, will be sufficient to satisfy the Company's projected working
capital and capital expenditure requirements through at least the next twelve
months.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Year 2000 Issues
The Company has a well defined internal plan which identifies,
eliminates, and verifies that the Company's software and hardware applications
are compliant with the Year 2000 ("Y2K"). The Company's major systems are 100%
compliant and certified. The Company certifies that Y2K issues do not effect its
products, used for voice record and playback. Although management does not
expect Y2K issues to have any material impact on its business or future results
of operations, there can be no assurance that there will not be interruptions of
operations or other limitations of system functionality or that the Company will
not incur significant costs to avoid such interruptions or limitations.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In January 1995, Atmel notified the Company and Samsung of certain
claims and demanded that the Company and Samsung either negotiate
licenses with Atmel or cease manufacturing the Company's products at
Samsung. The Company received an opinion from its patent counsel,
Blakely, Sokoloff, Taylor & Zafman, that the Company does not violate
any of the patents identified in Atmel's notice to the Company, and the
Company believes the patent claims are without merit. The Company also
believes that the other claims in the notice from Atmel were without
merit, and its general counsel, on January 14, 1995, after reviewing
with appropriate senior and knowledgeable personnel at the Company the
factual information surrounding the other claims, provided a written
response to Atmel that these claims were without merit. Atmel filed a
complaint on June 15, 1995 in the United States District Court for the
Northern District of California which alleges causes of action against
the Company for patent infringement, trade secret misappropriation,
breach of written contract, breach of contract implied-in-fact, unjust
enrichment and declaratory relief. Atmel, in addition to damages and
injunctive relief, is seeking a declaration from the Court that Atmel
is a co-owner of the Company's ChipCorder products. All the causes of
action alleged in the complaint appear to be based on the same
circumstances alleged in the January 1995 Atmel notice. The Company
believes the causes of action in the complaint to be without merit and
has had its general counsel file an answer denying any wrongful conduct
and asserting counterclaims for damage caused the Company by Atmel's
termination of the fabrication arrangement between the parties. The
Wafer Foundry Agreement between ISD and Samsung obligates Samsung to
indemnify and hold ISD harmless for any claims or suits on account of
using any technical information provided by Samsung. The Court has
bifurcated the issues related to liability and damages, and the parties
are in the process of conducting final discovery relating to the
liability issues. On February 27, 1998, the Court issued a decision
construing the patent claims. The Company believes that this decision
is at least in part favorable to the Company. On April 14, 1998, the
Court issued a decision invalidating one of the asserted patents. On
July 10, 1998, Atmel agreed not to oppose the entry of summary judgment
of non-infringement for ISD on another of the asserted patents.
Cross-motions for summary judgment are currently pending on the only
remaining patent. While the Company does not believe the ultimate
resolution of this matter will have a material impact on its business
or financial position, it may have a material adverse impact on the
results of operations in the period in which it is resolved.
Item 5. Other Information
The following statement is provided pursuant to Rule 14a-5 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended: Proxies solicited by the Company for the Company's 1999 Annual Meeting
of Shareholders will be voted in the discretion of the persons voting such
proxies with respect to all proposals presented by shareholders for
consideration at such meeting after May 24, 1999.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith.
Exhibit
Number Exhibit Title
- ------- -------------
3.03 - Bylaws as Amended and Restated through June 28, 1998
27.01 - Financial Data Schedule
(b) The Company did not file a report on Form 8-K during the period
ended July 4, 1998.
Signatures
In accordance with 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.
INFORMATION STORAGE DEVICES, INC.
(Registrant)
Date: August 17, 1998
/S/ Felix J. Rosengarten
------------------------
Felix J. Rosengarten
Vice President, Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer and Duly
Authorized Officer)
<PAGE>
- --------------------------------------------------------------------------------
INFORMATION STORAGE DEVICES, INC.
BYLAWS AS AMENDED AND RESTATED THROUGH JUNE 28, 1998
- --------------------------------------------------------------------------------
<PAGE>
BYLAWS
OF
INFORMATION STORAGE DEVICES, INC.
---------------------------------
TABLE OF CONTENTS
PAGE
----
Article I OFFICES........................................................ 1
Section 1.1: Principal Office............................... 1
Section 1.2: Other Offices.................................. 1
Article II DIRECTORS..................................................... 1
Section 2.1: Exercise of Corporate Powers................... 1
Section 2.2: Number......................................... 1
Section 2.3: Need Not Be Shareholders....................... 1
Section 2.4: Compensation................................... 1
Section 2.5: Election and Term of Office.................... 2
Section 2.6: Vacancies...................................... 2
Section 2.7: Removal........................................ 2
Section 2.8: Powers and Duties.............................. 2
Article III MEETINGS OF DIRECTORS........................................ 4
Section 3.1: Place of Meetings.............................. 4
Section 3.2: Regular Meetings............................... 4
Section 3.3: Special Meetings............................... 4
Section 3.4: Notice of Special Meetings..................... 4
Section 3.5: Quorum......................................... 5
Section 3.6: Conference Telephone........................... 5
Section 3.7: Waiver of Notice and Consent................... 5
Section 3.8: Action Without a Meeting....................... 5
Section 3.9: Committees..................................... 5
Article IV COMMITTEES.................................................... 5
Section 4.1: Appointment and Procedure...................... 5
Section 4.2: Executive Committee Powers..................... 6
Section 4.3: Powers of Other Committees..................... 6
Section 4.4: Limitations on Powers of Committees............ 6
Article V OFFICERS....................................................... 6
Section 5.1: Election and Qualifications.................... 6
Section 5.2: Term of Office and Compensation................ 6
Section 5.3 Chief Executive Officer........................ 7
Section 5.4: Chairman of the Board.......................... 7
Section 5.5: President...................................... 7
Section 5.6: President Pro Tem.............................. 7
Section 5.7: Vice President................................. 7
Section 5.8: Secretary...................................... 8
Section 5.9: Chief Financial Officer........................ 8
Section 5.10: Instruments in Writing......................... 9
Article VI INDEMNIFICATION OF AGENTS..................................... 9
Section 6.1: Indemnification of Directors,
.. Officers and Employees......................... 9
Section 6.2: Advancement of Expenses........................ 9
Section 6.3: Non-Exclusivity of Rights...................... 10
Section 6.4: Indemnification Contracts...................... 10
Section 6.5: Effect of Amendment............................ 10
Article VII MEETINGS OF SHAREHOLDERS..................................... 10
Section 7.1: Place of Meetings.............................. 10
Section 7.2: Annual Meetings................................ 10
Section 7.3: Special Meetings............................... 11
Section 7.4: Notice of Meetings............................. 11
Section 7.5: Consent to Shareholders' Meetings.............. 11
Section 7.6: Quorum......................................... 12
Section 7.7: Adjourned Meetings............................. 12
Section 7.8: Voting Rights.................................. 12
Section 7.9: Action by Written Consents..................... 12
Section 7.10: Election of Directors.......................... 13
Section 7.11: Proxies........................................ 13
Section 7.12: Inspectors of Election......................... 14
Article VIII SUNDRY PROVISIONS........................................... 14
Section 8.1: Shares Held By the Company..................... 14
Section 8.2: Certificates for Shares........................ 14
Section 8.3: Lost Certificates.............................. 14
Section 8.4: Certification and Inspection of Bylaws......... 15
Section 8.5: Annual Reports................................. 15
Article IX CONSTRUCTION OF BYLAWS WITH REFERENCE
TO PROVISIONS OF LAW........................................ 15
Section 9.1: Bylaw Provisions Construed as Additional
and Supplemental to Provisions of Law.......... 15
Section 9.2: Bylaw Provisions Contrary to or Inconsistent
with Provisions of Law......................... 15
Article X ADOPTION, AMENDMENT OR REPEAL OF BYLAWS........................ 15
Section 10.1: By Shareholders................................ 15
Section 10.2: By the Board of Directors...................... 15
Article XI RESTRICTIONS ON TRANSFER OF STOCK............................. 16
Section 11.1: Transfer of Shares............................. 16
Section 11.2: Subsequent Agreement or Bylaw.................. 16
Section 11.3: Termination of Article XI...................... 16
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
INFORMATION STORAGE DEVICES, INC.
---------------------------------
(a California corporation)
As Adopted December 31, 1987
As Amended September 12, 1994
As Amended through June 28, 1995
Article I
OFFICES
Section 1.1: Principal Office. The principal executive office for the
transaction of the business of this company (the "Company") shall be located at
such place as the Board of Directors may from time to time decide. The Board of
Directors is hereby granted full power and authority to change the location of
the principal executive office from one location to another.
Section 1.2: Other Offices. One or more branch or other subordinate
offices may at any time be fixed and located by the Board of Directors at such
place or places within or outside the State of California as it deems
appropriate.
Article II
DIRECTORS
Section 2.1: Exercise of Corporate Powers. Except as otherwise provided
by these Bylaws, by the Articles of Incorporation of the Company or by the laws
of the State of California now or hereafter in force, the business and affairs
of the Company shall be managed and all corporate powers shall be exercised by
or under the ultimate direction of a board of directors (the "Board of
Directors").
Section 2.2: Number. The authorized number of directors of the Company
shall initially be five. The authorized number of directors may be varied from
time to time by resolution of the Board of Directors, provided that the
authorized number shall not be fewer than four (4) nor more than seven (7). The
authorized numbers of directors of the Company shall be variable by the Board of
Directors within such range until changed by an amendment of this Section by the
shareholders of the Company. No amendment of this Section or an amendment of the
Articles of Incorporation reducing the fixed number or the minimum number of
authorized directors to a number less than five can be adopted if the votes cast
against its adoption at a meeting, or the shares not consenting in the case of
action by written consent, are equal to more than 16-2/3% of the outstanding
shares entitled to vote.
Section 2.3: Need Not Be Shareholders. The directors of the Company
need not be shareholders of this Company.
<PAGE>
Section 2.4: Compensation. Directors and members of committees may
receive such compensation, if any, for their services as may be fixed or
determined by resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from serving the Company in any
other capacity and receiving compensation therefor.
Section 2.5: Election and Term of Office. The directors shall be
elected annually by the shareholders at the annual meeting of the shareholders.
The term of office of the directors shall begin immediately after their election
and shall continue until the next annual meeting of the shareholders and until
their respective successors are elected and qualified.
Section 2.6: Vacancies. A vacancy or vacancies on the Board of
Directors shall exist in case of the death, resignation or removal of any
director, or if the authorized number of directors is increased, or if the
shareholders fail, at any annual meeting of shareholders at which any director
is elected, to elect the full authorized number of directors at that meeting.
The Board of Directors may declare vacant the office of a director if he or she
is declared of unsound mind by an order of court or convicted of a felony or if,
within 60 days after notice of his election, he or she does not accept the
office. Any vacancy, except for a vacancy created by removal of a director as
provided in Section 2.7 hereof, may be filled by a person selected by a majority
of the remaining directors then in office, whether or not less than a quorum, or
by a sole remaining director. Vacancies occurring in the Board of Directors by
reason of removal of directors shall be filled only by approval of shareholders.
The shareholders may elect a director at any time to fill any vacancy not filled
by the directors. Any such election by written consent, other than to fill a
vacancy created by removal, requires the consent of a majority of the
outstanding shares entitled to vote. If, after the filling of any vacancy by the
directors, the directors then in office who have been elected by the
shareholders shall constitute less than a majority of the directors then in
office, any holder or holders of an aggregate of 5% or more of the total number
of shares at the time outstanding having the right to vote for such directors
may call a special meeting of shareholders to be held to elect the entire Board
of Directors. The term of office of any director then in office shall terminate
upon such election and qualification of a successor. Any director may resign
effective upon giving written notice to the Chairman of the Board, if any, the
President, the Secretary or the Board of Directors, unless the notice specifies
a later time for the effectiveness of such resignation. If the resignation is
effective at a future time, a successor may be elected to take office when the
resignation becomes effective. A reduction of the authorized number of directors
shall not remove any director prior to the expiration of such director's term of
office.
Section 2.7: Removal. The entire Board of Directors or any individual
director may be removed from office without cause by an affirmative vote of a
majority of the outstanding shares entitled to vote; provided that, unless the
entire Board of Directors is removed, no director shall be removed when the
votes cast against removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election at
which the same total number of votes were cast, or, if such action is taken by
written consent, all shares entitled to vote were voted, and the entire number
of directors authorized at the time of the director's most recent election were
then being elected. If any or all directors are so removed, new directors may be
elected at the same meeting or at a subsequent meeting. If at any time a class
or series of shares is entitled to elect one or more directors under authority
granted by the Articles of Incorporation, the provisions of this Section 2.7
shall apply to the vote of that class or series and not to the vote of the
outstanding shares as a whole.
Section 2.8: Powers and Duties. Without limiting the generality or
extent of the general corporate powers to be exercised by the Board of Directors
pursuant to Section 2.1 of these Bylaws, it is hereby provided that the Board of
Directors shall have full power with respect to the following matters:
<PAGE>
(a) To purchase, lease and acquire any and all kinds of
property, real, personal or mixed, and at its discretion to pay therefor in
money, in property and/or in stocks, bonds, debentures or other securities of
the Company.
(b) To enter into any and all contracts and agreements which
in its judgment may be beneficial to the interests and purposes of the Company.
(c) To fix and determine and to vary from time to time the
amount or amounts to be set aside or retained as reserve funds or as working
capital of the Company or for maintenance, repairs, replacements or enlargements
of its properties.
(d) To declare and pay dividends in cash, shares and/or
property out of any funds of the Company at the time legally available for the
declaration and payment of dividends on its shares.
(e) To adopt such rules and regulations for the conduct of its
meetings and the management of the affairs of the Company as it may deem proper.
(f) To prescribe the manner in which and the person or persons
by whom any or all of the checks, drafts, notes, bills of exchange, contracts
and other corporate instruments shall be executed.
(g) To accept resignations of directors; to declare vacant the
office of a director as provided in Section 2.6 hereof; and, in case of vacancy
in the office of directors, to fill the same to the extent provided in Section
2.6 hereof.
(h) To create offices in addition to those for which provision
is made by law or these Bylaws; to elect and remove at pleasure all officers of
the Company, fix their terms of office, prescribe their titles, powers and
duties, limit their authority and fix their salaries in any way it may deem
advisable that is not contrary to law or these Bylaws.
(i) To designate one or more persons to perform the duties and
exercise the powers of any officer of the Company during the temporary absence
or disability of such officer.
(j) To appoint or employ and to remove at pleasure such agents
and employees as it may see fit, to prescribe their titles, powers and duties,
limit their authority and fix their salaries in any way it may deem advisable
that is not contrary to law or these Bylaws.
(k) To fix a time in the future, which shall not be more than
60 days nor less than 10 days prior to the date of the meeting nor more than 60
days prior to any other action for which it is fixed, as a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting, or entitled to receive any payment of any dividend or other
distribution, or allotment of any rights, or entitled to exercise any rights in
respect of any other lawful action; and in such case only shareholders of record
on the date so fixed shall be entitled to notice of and to vote at the meeting
or to receive the dividend, a distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the Company after any record date fixed as aforesaid. The Board of
Directors may close the books of the Company against transfers of shares during
the whole or any part of such period.
<PAGE>
(l) To fix and locate from time to time the principal office
for the transaction of the business of the Company and one or more branch or
other subordinate offices of the Company within or without the State of
California; to designate any place within or without the State of California for
the holding of any meeting or meetings of the shareholders or the Board of
Directors, as provided in Sections 3.1 and 7.1 hereof; to adopt, make and use a
corporate seal, and to prescribe the forms of certificates for shares and to
alter the form of such seal and of such certificates from time to time as in its
judgment it may deem best, provided such seal and such certificates shall at all
times comply with the provisions of law now or hereafter in effect.
(m) To authorize the issuance of shares of stock of the
Company in accordance with the laws of the State of California and the Articles
of Incorporation.
(n) Subject to the limitation provided in Section 10.2 hereof,
to adopt, amend or repeal from time to time and at any time these Bylaws and any
and all amendments thereof.
(o) To borrow money, make guarantees of indebtedness or other
obligations of third parties and incur indebtedness on behalf of the Company,
including the power and authority to borrow money from any of the shareholders,
directors or officers of the Company; and to cause to be executed and delivered
therefor in the corporate name promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges (or other transfers of property as security or
collateral for a debt), or other evidences of debt and securities therefor; and
the note or other obligation given for any indebtedness of the Company, signed
officially by any officer or officers thereunto duly authorized by the Board of
Directors, shall be binding on the Company.
(p) To approve a loan of money or property to any officer or
director of the Company or any parent or subsidiary company, guarantee the
obligation of any such officer or director, or approve an employee benefit plan
authorizing such a loan or guaranty to any such officer or director; provided
that, on the date of approval of such loan or guaranty, the Company has
outstanding shares held of record by 100 or more persons. Such approval shall
require a determination by the Board of Directors that the loan or guaranty may
reasonably be expected to benefit the Company and must be by vote sufficient
without counting the vote of any interested director.
(q) Generally to do and perform every act and thing whatsoever
that may pertain to the office of a director or to a board of directors.
Article III
MEETINGS OF DIRECTORS
Section 3.1: Place of Meetings. Meetings (whether regular, special or
adjourned) of the Board of Directors of the Company shall be held at the
principal executive office of the Company or at any other place within or
outside the State of California which may be designated from time to time by
resolution of the Board of Directors or which is designated in the notice of the
meeting.
Section 3.2: Regular Meetings. Regular meetings of the Board of
Directors shall be held after the adjournment of each annual meeting of the
shareholders (which regular directors' meeting shall be designated the "Regular
Annual Meeting") and at such other times as may be designated from time to time
by resolution of the Board of Directors. Notice of the time and place of all
regular meetings shall be given in the same manner as for special meetings,
except that no such notice need be given if (a) the time and place of such
meetings are fixed by the Board of Directors or (b) the Regular Annual Meeting
is held at the principal executive office of this Corporation and on the date
specified by the Board of Directors.
<PAGE>
Section 3.3: Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, if any, or
the President, or any Vice President, or the Secretary or by any one director.
Section 3.4: Notice of Special Meetings. Special meetings of the Board
of Directors shall be held upon no less than 4 days' notice by mail or 48 hours'
notice delivered personally or by telephone or telegraph to each director.
Notice need not be given to any director who signs a waiver of notice or a
consent to holding the meeting or an approval of the minutes thereof, whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such director. All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting. Any oral notice given personally
or by telephone may be communicated either to the director or to a person at the
home or office of the director who the person giving the notice has reason to
believe will promptly communicate it to the director. A notice or waiver of
notice need not specify the purpose of any meeting of the Board of Directors. If
the address of a director is not shown on the records of the Company and is not
readily ascertainable, notice shall be addressed to him at the city or place in
which meetings of the directors are regularly held. If a meeting is adjourned
for more than 24 hours, notice of any adjournment to another time or place shall
be given prior to the time of the adjourned meeting to all directors not present
at the time of adjournment.
Section 3.5: Quorum. A majority of the authorized number of directors
constitutes a quorum of the Board of Directors for the transaction of business.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present is the act of the Board of
Directors subject to provisions of law relating to interested directors and
indemnification of agents of the Company. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 3.6: Conference Telephone. Members of the Board of Directors
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all directors participating in such meeting
can hear one another. Participation in a meeting pursuant to this Section
constitutes presence in person at such meeting.
Section 3.7: Waiver of Notice and Consent. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice if a quorum is present, and if, either before or after the meeting, each
of the directors not present signs a written waiver of notice, a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 3.8: Action Without a Meeting. Any action required or permitted
by law to be taken by the Board of Directors may be taken without a meeting, if
all members of the Board of Directors shall individually or collectively consent
in writing to such action. Such written consent or consents shall be filed with
the minutes of the proceedings of the Board of Directors. Such action by written
consent shall have the same force and effect as the unanimous vote of such
directors at a duly held meeting.
Section 3.9: Committees. The provisions of this Article apply also
to committees of the Board of Directors and action by such committees.
<PAGE>
Article IV
COMMITTEES
Section 4.1: Appointment and Procedure. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors, appoint
from among its members one or more committees, including without limitation an
executive committee, an audit committee and a compensation committee, of two or
more directors. Each committee may make its own rules of procedure subject to
Section 3.9 hereof, and shall meet as provided by such rules or by a resolution
adopted by the Board of Directors (which resolution shall take precedence). A
majority of the members of the committee shall constitute a quorum, and in every
case the affirmative vote of a majority of all members of the committee shall be
necessary to the adoption of any resolution.
Section 4.2: Executive Committee Powers. During the intervals between
the meetings of the Board of Directors, the Executive Committee, if any, in all
cases in which specific directions shall not have been given by the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Company in
such manner as the Executive Committee may deem best for the interests of the
Company.
Section 4.3: Powers of Other Committees. Other committees shall have
such powers as are given them in a resolution of the Board of Directors.
Section 4.4: Limitations on Powers of Committees. No committee
shall have the power to act with respect to:
(a) any action for which the laws of the State of
California also require shareholder approval or approval of the outstanding
shares;
(b) the filling of vacancies on the Board of Directors or
in any committee;
(c) the fixing of compensation of the directors for
serving on the Board of Directors or on any committee;
(d) the amendment or repeal of these Bylaws or the
adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the
Board of Directors which by its express terms is not amendable or repealable;
(f) a distribution to the shareholders of the Company, except
at a rate or in a periodic amount or within a price range as set forth in the
articles or determined by the Board of Directors; and
(g) the appointment of other committees of the Board of
Directors or the members thereof.
<PAGE>
Article V
OFFICERS
Section 5.1: Election and Qualifications. The officers of the Company
shall consist of a President and/or a Chief Executive Officer, a Secretary, a
Chief Financial Officer and such other officers, including, but not limited to,
a Chairman of the Board of Directors, one or more Vice Presidents, a Treasurer,
and Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers,
as the Board of Directors shall deem expedient, who shall be chosen in such
manner and hold their offices for such terms as the Board of Directors may
prescribe. Any number of offices may be held by the same person. Any Vice
President, Assistant Treasurer or Assistant Secretary, respectively, may
exercise any of the powers of the President, the Chief Financial Officer or the
Secretary, respectively, as directed by the Board of Directors, and shall
perform such other duties as are imposed upon him or her by these Bylaws or the
Board of Directors.
Section 5.2: Term of Office and Compensation. The term of office and
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board of Directors from time to time at its pleasure, subject to
the rights, if any, of any officer under any contract of employment. Any officer
may resign at any time upon written notice to the Company, without prejudice to
the rights, if any, of the Company under any contract to which the officer is a
party. If any vacancy occurs in any office of the Company, the Board of
Directors may appoint a successor to fill such vacancy.
Section 5.3 Chief Executive Officer. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Company are:
(a) To act as the general manager and, subject to the control
of the Board of Directors, to have general supervision, direction and control of
the business and affairs of the Company.
(b) To preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board of Directors or if there be no Chairman, at
all meetings of the Board of Directors.
(c) To call meetings of the shareholders and meetings of the
Board of Directors to be held at such times and, subject to the limitations
prescribed by law or by these Bylaws, at such places as he or she shall deem
proper.
(d) To affix the signature of the Company to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing which have been authorized by the Board of
Directors or which, in the judgment of the Chief Executive Officer, should be
executed on behalf of the Company; to sign certificates for shares of stock of
the Company; and, subject to the direction of the Board of Directors, to have
general charge of the property of the Company and to supervise and control all
officers, agents and employees of the Company.
The President shall be the Chief Executive Officer of the Company unless the
Board of Directors shall designate the Chairman of the Board or another officer
to be the Chief Executive Officer. If there is no President, then the Chairman
of the Board shall be the Chief Executive Officer.
Section 5.4: Chairman of the Board. The Chairman of the Board
of Directors, if there be one, shall have the power to preside at all meetings
of the Board of Directors and shall have such other powers and shall be subject
to such other duties as the Board of Directors may from time to time prescribe.
<PAGE>
Section 5.5 President. Subject to the supervisory powers of the Chief
Executive Officer, if not the President, and to such supervisory powers as may
be given by the Board of Directors to the Chairman of the Board, if one is
elected, or to any other officer, the President shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
Section 5.6: President Pro Tem. If neither the Chairman of the Board of
Directors, the President, nor any Vice President is present at any meeting of
the Board of Directors, a President pro tem may be chosen by the directors
present at the meeting to preside and act at such meeting. If neither the
President nor any Vice President is present at any meeting of the shareholders,
a President pro tem may be chosen by the shareholders present at the meeting to
preside at such meeting.
Section 5.7: Vice President. The titles, powers and duties of the Vice
President or Vice Presidents, if any, shall be as prescribed by the Board of
Directors. In case of the resignation, disability or death of the President, the
Vice President, or one of the Vice Presidents, shall exercise all powers and
duties of the President. If there is more than one Vice President, the order in
which the Vice Presidents shall succeed to the powers and duties of the
President shall be as fixed by the Board of Directors.
Section 5.8: Secretary. The powers and duties of the Secretary are:
(a) To keep a book of minutes at the principal executive
office of the Company, or such other place as the Board of Directors may order,
of all meetings of its directors and shareholders with the time and place of
holding of such meeting, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings
and the proceedings thereof.
(b) To keep the seal of the Company and to affix the same to
all instruments which may require it.
(c) To keep or cause to be kept at the principal executive
office of the Company, or at the office of the transfer agent or agents, a
record of the shareholders of the Company, giving the names and addresses of all
shareholders and the number and class of shares held by each, the number and
date of certificates issued for shares and the number and date of cancellation
of every certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the
Company, to fill in all certificates issued, and to make a proper record of each
such issuance; provided that, so long as the Company shall have one or more duly
appointed and acting transfer agents of the shares, or any class or series of
shares, of the Company, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents.
(e) To transfer upon the share books of the Company any and
all shares of the Company; provided that, so long as the Company shall have one
or more duly appointed and acting transfer agents of the shares, or any class or
series of shares, of the Company, such duties with respect to such shares shall
be performed by such transfer agent or transfer agents, and the method of
transfer of each certificate shall be subject to the reasonable regulations of
the transfer agent to whom the certificate is presented for transfer and, if the
Company then has one or more duly appointed and acting registrars, subject to
the reasonable regulations of the registrar to which a new certificate is
presented for registration; and, provided further, that no certificate for
shares of stock shall be issued or delivered or, if issued or delivered, shall
have any validity whatsoever until and unless it has been signed or
authenticated in the manner provided in Section 8.2 hereof.
<PAGE>
(f) To make service and publication of all notices that may be
necessary or proper in connection with meetings of the Board of Directors of the
shareholders of the Company. In case of the absence, disability, refusal or
neglect of the Secretary to make service or publication of any notices, then
such notices may be served and/or published by the President or a Vice
President, or by any person thereunto authorized by either of them, or by the
Board of Directors, or by the holders of a majority of the outstanding shares of
the Company.
(g) Generally to do and perform all such duties as pertain to
such office and as may be required by the Board of Directors.
Section 5.9: Chief Financial Officer. The powers and duties of the
Chief Financial Officer are:
(a) To supervise and control the keeping and maintaining of
adequate and correct accounts of the Company's properties and business
transactions, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. The books of account
shall at all reasonable times be open to inspection by any director.
(b) To have the custody of all funds, securities, evidences of
indebtedness and other valuable documents of the Company and, at his or her
discretion, to cause any or all thereof to be deposited for the account of the
Company with such depository as may be designated from time to time by the Board
of Directors.
(c) To receive or cause to be received, and to give or cause
to be given, receipts and acquittances for monies paid in for the account of the
Company.
(d) To disburse, or cause to be disbursed, all funds of the
Company as may be directed by the President or the Board of Directors, taking
proper vouchers for such disbursements.
(e) To render to the President or to the Board of Directors,
whenever either may require, accounts of all transactions as Chief Financial
Officer and of the financial condition of the Company.
(f) Generally to do and perform all such duties as pertain to
such office and as may be required by the Board of Directors.
Section 5.10: Instruments in Writing. All checks, drafts, demands for
money, notes and written contracts of the Company shall be signed by such
officer or officers, agent or agents, as the Board of Directors may from time to
time designate. No officer, agent, or employee of the Company shall have the
power to bind the Company by contract or otherwise unless authorized to do so by
these Bylaws or by the Board of Directors.
<PAGE>
Article VI
INDEMNIFICATION
Section 6.1: Indemnification of Directors. Officers and Employees. The
Company shall indemnify each person who was or is a party, or is threatened to
be made a party, to any threatened, pending completed action or proceeding,
whether civil, criminal, administrative or investigative a "Proceeding" by
reason of the fact that such person is or was a director, officer or employee of
the Company, or is or was serving at the request of the Company as a director,
officer or employee of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or was a director, officer or employee
of a foreign or domestic corporation which was a predecessor corporation of the
Company or of another enterprise at the request of such predecessor corporation,
to the fullest extent permitted by the California Corporations Code, against all
expenses, including, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such Proceeding, and
such indemnification shall continue as to a person who has ceased to be such a
director, officer or employee, and shall inure to the benefit of the heirs,
executors and administrators of such person; provided, however, that the Company
shall indemnify any such person seeking indemnity in connection with a
Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Company.
Section 6.2: Advancement of Expenses. The Company shall pay all
expenses incurred by such a director, officer or employee in defending any
Proceeding as they are incurred in advance of its final disposition; provided,
however, that if the California Corporations Code then so requires, the payment
of such expenses incurred by a director, officer or employee in advance of the
final disposition of a Proceeding shall be made only upon receipt by the Company
of an undertaking by or on behalf of such director, officer or employee to repay
such amount if it shall be determined ultimately that such person is not
entitled to be indemnified under this Article VI or otherwise; and provided
further that the Company shall not be required to advance any expenses to a
person against whom the Company brings an action, alleging that such person
committed an act or omission not in good faith or that involved intentional
misconduct or a knowing violation of law, or that was contrary to the best
interest of the Company, or derived an improper personal benefit from a
transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be deemed exclusive of any other rights that
such person may have or hereafter acquire under any statute, bylaw, agreement,
vote of shareholders or disinterested directors or to otherwise, both as
shareholders of disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. Additionally, nothing in this Article VI shall limit the ability of the
Company, in its discretion, to indemnify or advance expenses to persons whom the
Company is not obligated to indemnify or advance expenses to pursuant to this
Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
authorized to cause the Company to enter into a contract with any director,
officer, employee or agent of the Company, or any person serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, providing for
indemnification rights equivalent to or, if the Board of Directors so
determines, greater than (to the extent permitted by the Company's Articles of
Incorporation and the California Corporations Code), those provided for in this
Article VI.
<PAGE>
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
Article VII
MEETINGS OF SHAREHOLDERS
Section 7.1: Place of Meetings. Meetings (whether regular, special or
adjourned) of the shareholders of the Company shall be held at the principal
executive office for the transaction of business of the Company, or at any place
within or outside the State of California which may be designated by written
consent of all the shareholders entitled to vote thereat, or which may be
designated by resolution of the Board of Directors. Any meeting shall be valid
wherever held if held by the written consent of all the shareholders entitled to
vote thereat, given either before or after the meeting and filed with the
Secretary of the Company.
Section 7.2: Annual Meetings. The annual meetings of the shareholders
shall be held at the place provided pursuant to Section 7.1 hereof and at such
time in a particular year as may be designated by written consent of all the
shareholders entitled to vote thereat or which may be designated by resolution
of the Board of Directors of the Company. Said annual meetings shall be held for
the purpose of the election of directors, for the making of reports of the
affairs of the Company and for the transaction of such other business as may
properly come before the meeting.
Section 7.3: Special Meetings. Special meetings of the shareholders for
any purpose or purposes whatsoever may be called at any time by the President,
the Chairman of the Board of Directors or by the Board of Directors, or by two
or more members thereof, or by one or more members thereof, or by one or more
holders of shares entitled to cast not less than 10% of the votes at the
meeting. Upon request in writing sent by registered mail to the Chairman of the
Board of Directors, President, Vice President or Secretary, or delivered to any
such officer in person, by any person entitled to call a special meeting of
shareholders, it shall be the duty of such officer forthwith to cause notice to
be given to the shareholders entitled to vote that a meeting will be held at a
time requested by the person or persons calling the meeting, which (except where
called by the Board of Directors) shall be not less than 35 days nor more than
60 days after the receipt of such request. If the notice is not given within 20
days after receipt of the request, the person entitled to call the meeting may
give the notice. Notices of meetings called by the Board of Directors shall be
given in accordance with Section 7.4.
Section 7.4: Notice of Meetings. Notice of any meeting of shareholders
shall be given in writing not less than 10 (or, if sent by third-class mail, 30)
nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat by the Secretary or an Assistant Secretary, or such
other person charged with that duty, or if there be no such officer or person,
or in case of his or her neglect or refusal, by any director or shareholder. The
notice shall state the place, date and hour of the meeting and (a) in the case
of a special meeting, the general nature of the business to be transacted, and
no other business may be transacted, or (b) in the case of the annual meeting,
those matters which the Board of Directors, at the time of the mailing of the
notice, intends to present for action by the shareholders, but any proper matter
may be presented at the meeting for such action, except that notice must be
given or waived in writing of any proposal relating to approval of contracts
between the Company and any director of the Company, amendment of the Articles
of Incorporation, reorganization of the Company or winding up of the affairs of
the Company. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the Board of Directors for election. Notice of a shareholders'
meeting or any report shall be given to any shareholder, either (a) personally
or (b) by first-class mail, or, in case the Company has outstanding shares held
of record by 500 or more persons on the record date for the shareholder's
meeting, notice may be sent by third-class mail, or other means of written
communication, charges prepaid, addressed to such shareholder at such
shareholder's address appearing on the books of the Company or given by such
shareholder to the Company for the purpose of notice. If a shareholder gives no
address or no such address appears on the books of the Company, notice shall be
deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal executive office of the
<PAGE>
Company is located, or if published at least once in a newspaper of general
circulation in the county in which such office is located. The notice or report
shall be deemed to have been given at the time when delivered personally or
deposited in the United States mail, postage prepaid, or sent by other means of
written communication and addressed as herein before provided. An affidavit or
declaration of delivery or mailing of any notice or report in accordance with
the provisions of this Section 7.4, executed by the Secretary, Assistant
Secretary or any transfer agent, shall be prima facie evidence of the giving of
the notice or report. If any notice or report addressed to the shareholder at
the address of such shareholder appearing on the books of the Company is
returned to the Company by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver the notice or report
to the shareholder at such address, all future notices or reports shall be
deemed to have been duly given without further mailing if the same shall be
available for the shareholder upon written demand of the shareholder at the
principal executive office of the Company for a period of one year from the date
of the giving of the notice or report to all other shareholders.
Section 7.5: Consent to Shareholders' Meetings. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present, either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by law to be included in the notice but not so
included, if such objection is expressly made at the meeting. Neither the
business to be transacted at nor the purpose of any regular or special meeting
of shareholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes thereof, except as to
approval of contracts between the Company and any of its directors, amendment of
the Articles of Incorporation, reorganization of the Company or winding up the
affairs of the Company.
Section 7.6: Quorum. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting of the shareholders
shall constitute a quorum for the transaction of business. Shares shall not be
counted to make up a quorum for a meeting if voting of such shares at the
meeting has been enjoined or for any reason they cannot be lawfully voted at the
meeting. Shareholders present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at a majority of the shares
required to constitute a quorum. Except as provided herein, the affirmative vote
of a majority of the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively also constitute at
least a majority of the required quorum) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required.
Section 7.7: Adjourned Meetings. Any shareholders' meeting, whether or
not a quorum is present, may be adjourned from time to time by the vote of a
majority of the shares, the holders of which are either present in person or
represented by proxy thereat, but, except as provided in Section 7.6 hereof, in
the absence of a quorum, no other business may be transacted at such meeting.
When a meeting is adjourned for more than 45 days or if after adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at a
meeting. Except as aforesaid, it shall not be necessary to give any notice of
the time and place of the adjourned meeting or of the business to be transacted
thereat other than by announcement at the meeting at which such adjournment is
taken. At any adjourned meeting the shareholders may transact any business which
might have been transacted at the original meeting.
<PAGE>
Section 7.8: Voting Rights. Only persons in whose names shares entitled
to vote stand on the stock records of the Company at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held or, if some other day be fixed for the
determination of shareholders of record pursuant to Section 2.8(k) hereof, then
on such other day, shall be entitled to vote at such meeting. The record date
for determining shareholders entitled to give consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors has
been taken, shall be the day on which the first written consent is given. In the
absence of any contrary provision in the Articles of incorporation or in any
applicable statute relating to the election of directors or to other particular
matters, each such person shall be entitled to one vote for each share.
Section 7.9: Action by Written Consents. Any action which may be taken
at any annual or special meeting of shareholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Unless the consents of all shareholders entitled to vote have been
solicited in writing, notice of any shareholder approval of (a) contracts
between the Company and any of its directors, (b) indemnification of any person,
(c) reorganization of the Company or (d) distributions to shareholders upon
winding up of the affairs of the Company without a meeting by less than
unanimous written consent shall be given at least 10 days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented iii writing. All notices given
thereunder shall conform to the requirements of Section 7.4 hereto and
applicable law. When written consents are given with respect to any shares, they
shall be given by and accepted from the persons in whose names such shares stand
on the books of the Company at the time such respective consents are given, or
their proxies. Any shareholder giving a written consent, or any shareholder's
proxy holder, or a transferee of the shares or a personal representative of the
shareholder or their respective proxy holders, may revoke the consent by a
writing received by the Company prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the Secretary of the Company, but may not do so thereafter. Such revocation is
effective upon its receipt by the Secretary of the Company. Notwithstanding
anything herein to the contrary, and subject to Section 305(b) of the California
Corporations Code, directors may not be elected by written consent except by
unanimous written consent of all shares entitled to vote for the election of
directors.
Section 7.10: Election of Directors. Every shareholder entitled to vote
at any election of directors of the Company may cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as such shareholder thinks fit. No
shareholder, however, may cumulate such shareholder's votes for one or more
candidates unless such candidate's or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting, prior to voting, of such shareholder's intention to cumulate such
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The
candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected. Votes against the director and votes
withheld shall have no legal effect. Election of directors need not be by ballot
except upon demand made by a shareholder at the meeting and before the voting
begins.
<PAGE>
Section 7.11: Proxies. Every person entitled to vote or execute
consents shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or such person's duly
authorized agent and filed with the Secretary of the Company. No proxy shall be
valid (a) after revocation thereof, unless the proxy is specifically made
irrevocable and otherwise conforms to this Section and applicable law: or (b)
after the expiration of eleven months from the date thereof, unless the person
executing it specifies therein the length of time for which such proxy is to
continue in force. Revocation may be effected by a writing delivered to the
Secretary of the Company stating that the proxy is revoked or by a subsequent
proxy executed by the person executing the prior proxy and presented to the
meeting, or as to any meeting by attendance at the meeting and voting in person
by the person executing the proxy. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, a written notice of
such death or incapacity is received by the Secretary of the Company. In
addition, a proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability appears on
the certificate representing such shares.
Section 7.12: Inspectors of Election. Before any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
for office to act as inspectors of election. This appointment shall be valid at
the meeting and at any subsequent meeting that is a continuation of the meeting
at which the persons were originally appointed to be inspectors. If no
inspectors of election are so appointed, the Chairman of the meeting may, and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one or three. If inspectors are appointed at a meeting on the request of one or
more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one or three inspectors
are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the Chairman of the meeting may, and upon the request
of any shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy. These inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots, or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
<PAGE>
Article VIII
SUNDRY PROVISIONS
Section 8.1: Shares Held By the Company. Shares in other companies
standing in the name of the Company may be voted or represented and all rights
incident thereto may be exercised on behalf of the Company by any officer of the
Company authorized to do so by resolution of the Board of Directors.
Section 8.2: Certificates for Shares. There shall be issued to every
holder of shares in the Company a certificate or certificates signed in the name
of the Company by the Chairman of the Board, if any, or the President or a Vice
President and by the Chief Financial Officer or an Assistant Chief Financial
Officer or the Secretary or any Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Company
with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
Section 8.3: Lost Certificates. Where the owner of any certificate for
shares of the Company claims that the certificate has been lost, stolen or
destroyed, a new certificate shall be issued in place of the original
certificate if the owner (a) so requests before the Company has notice that the
original certificate has been acquired by a bona fide purchaser and (b)
satisfies any reasonable requirements imposed by the Company, including without
limitation the filing with the Company of an indemnity bond or agreement in such
form and in such amount as shall be required by the President or a Vice
President of the Company. The Board of Directors may adopt such other provisions
and restrictions with reference to lost certificates, not inconsistent with
applicable law, as it shall in its discretion deem appropriate.
Section 8.4: Certification and Inspection of Bylaws. The Company shall
keep at its principal executive office the original or a copy of these Bylaws as
amended or otherwise altered to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
Section 8.5: Annual Reports. Provided that the Company has 100 or
shareholders, the making of annual reports to the shareholders is dispensed with
and the requirement that such annual reports be made to shareholders is
expressly waived, except as may be directed from time to time by the Board of
Directors or the President.
Article IX
CONSTRUCTION OF BYLAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 9.1: Bylaw Provisions Construed as Additional and Supplemental
to Provisions of Law. All restrictions, limitations, requirements and other
provisions of these Bylaws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the subject
matter thereof and shall be fully complied with in addition to the said
provisions of law unless such compliance shall be illegal.
Section 9.2: Bylaws Provisions Contrary to or Inconsistent with
Provisions of Law. Any article, section, subsection, subdivision, sentence,
clause or phrase of these Bylaws which, upon being construed in the manner
provided in Section 9.1 hereof, shall be contrary to or inconsistent with any
applicable provision of law, shall not apply so long as said provisions of law
shall remain in effect, but such result shall not affect the validity or
applicability of any other portion of these Bylaws, it being hereby declared
that these Bylaws, and each article, section, subsection, subdivision, sentence,
clause or phrase thereof, would have been adopted irrespective of the fact that
any one or more articles, sections, subsections, subdivisions, sentences,
clauses or phrases is or are illegal.
<PAGE>
Article X
ADOPTION, AMENDMENT OR REPEAL OF BYLAWS
Section 10.1: By Shareholders. Bylaws may be adopted, amended or
repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote. Bylaws specifying or changing a fixed
number of directors or the maximum or minimum number or changing from a fixed to
a variable board or vice versa may be adopted only by the shareholders.
Section 10.2: By the Board of Directors. Subject to the right of
shareholders to adopt, amend or repeal Bylaws, and other than a Bylaw or
amendment thereof specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa, these Bylaws may be adopted, amended or repealed by the Board of
Directors. A Bylaw adopted by the shareholders may restrict or eliminate the
power of the Board of Directors to adopt, amend or repeal Bylaws.
Article XI
RESTRICTIONS ON TRANSFER OF STOCK
Section 11.1: Transfer of Shares. Before any shareholder of the Company
may sell, assign, gift, pledge or otherwise transfer any shares of the Company's
capital stock, such shareholder shall first notify the Company in writing of
such transfer and such transfer may not be effected unless and until legal
counsel for the Company has concluded that such transfer, when effected as
proposed by such shareholder, will comply with all applicable provisions of any
applicable state and federal securities laws, including but not limited to the
Securities Act of 1933, as amended (the "Act"), and the California Corporate
Securities Law of 1968, as amended.
Section 11.2: Subsequent Agreement or Bylaw. If (a) any two or more
shareholders of the Company shall enter into any agreement abridging, limiting
or restricting the rights of any one or more of them to sell, assign, transfer,
mortgage, pledge, hypothecate or transfer on the books of the Company any or all
of the shares of the Company held by them, and if a copy of said agreement shall
be filed with the Company, or if (b) shareholders entitled to vote shall adopt
any Bylaw provision abridging, limiting or restricting the aforesaid rights of
any shareholders, then, and in either of such events, all certificates of shares
of stock subject to such abridgments, limitations or restrictions shall have a
reference thereto endorsed thereon by an officer of the Company and such
certificates shall not thereafter be transferred on the books of the Company
except in accordance with the terms and provisions of such as the case may be;
provided that, no restriction shall be binding with respect to shares issued
prior to adoption of the restriction unless the holders of such shares voted in
favor of or consented in writing to the restriction.
Section 11.3: Termination of Article XI. The provisions of this Article
XI will terminate in their entirety on the effective date of a registration
statement filed with the Securities and Exchange Commission under the Act with
respect to registration of shares of the Company's capital stock for sale to the
public.
<PAGE>
EXHIBIT A
CERTIFICATION OF BYLAWS BY SECRETARY
KNOW ALL BY THESE PRESENTS:
I, Bruce W. Jenett, certify that I am Secretary of Information Storage
Devices, Inc., a California company (the "Company"), that I am duly authorized
to make this certification, that the attached Bylaws are a true and correct copy
of the Amended and Restated Bylaws as duly adopted by the Board of Directors of
the Company and that the same are the Bylaws of the Company now in effect.
Dated: As of June 28, 1998
--------------
/S/ Bruce W. Jenett
-------------------
Bruce W. Jenett, Secretary
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-05-1998
<PERIOD-END> JUL-04-1998
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<CASH> 5,845
<SECURITIES> 22,688
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0
0
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<CGS> 6,319
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