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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 JANUARY 31, 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 number: 0-26208
-------------------------------
BUSINESS RESOURCE GROUP
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0150337
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2150 NORTH FIRST STREET, SUITE 101
SAN JOSE, CA 95131
(Address of Principal Executive Offices)
(408) 325-3200
(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.
X Yes No
----- -----
At January 31, 1998 there were 4,918,514 shares of the Registrant's Common Stock
outstanding.
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PART I. FINANCIAL INFORMATION
Item 1: Condensed Financial Statements
Condensed Balance Sheets as of
January 31, 1998 and October 31, 1997 ........................ 3
Condensed Statements of Income for the Three
Months ended January 31, 1998
and 1997 ..................................................... 4
Condensed Statements of Cash Flows for the
Three Months ended January 31, 1998 and 1997 ................. 5
Notes to Condensed Financial Statements ...................... 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
Introduction ................................................. 7
Results of Operations ........................................ 7
Financial Condition .......................................... 8
Item 3: Quantitative and Qualitative Disclosures
about Market Risks ........................................... 9
PART II. OTHER INFORMATION
Item 1: Legal Proceedings ............................................ 9
Item 2: Changes in Securities ........................................ 9
Item 3: Defaults Upon Senior Securities .............................. 9
Item 4: Submission of Matters to a Vote of
Security Holders ............................................. 9
Item 5: Other Information ............................................ 9
Item 6: Exhibits and Reports on Form 8-K ............................. 9
SIGNATURES............................................................. 10
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1: CONDENSED FINANCIAL STATEMENTS
BUSINESS RESOURCE GROUP
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
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JANUARY 31, OCTOBER 31,
1998 1997
----------- -----------
(UNAUDITED)
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ASSETS
Current assets:
Cash and equivalents .............................. $ -- $ 274
Accounts receivable, net .......................... 13,834 13,764
Inventory ......................................... 2,348 1,398
Prepaids and other current assets ................. 2,169 2,076
------- -------
Total current assets ........................... 18,351 17,512
Property and equipment, net .......................... 2,353 2,346
Other assets ......................................... 863 902
------- -------
$21,567 $20,760
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft .................................... $ 295 $ --
Accounts payable .................................. 4,190 3,997
Accrued liabilities ............................... 4,232 4,236
Income taxes payable .............................. 95 --
------- -------
Total current liabilities ...................... 8,812 8,233
Deferred income tax liability ........................ 75 75
Shareholders' equity:
Preferred stock ................................... -- --
Common stock ...................................... 49 49
Additional paid-in capital ........................ 10,988 10,897
Retained earnings ................................. 1,643 1,506
------- -------
Total shareholders' equity ..................... 12,680 12,452
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$21,567 $20,760
======= =======
</TABLE>
Note: The balance sheet at October 31, 1997 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements
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BUSINESS RESOURCE GROUP
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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THREE MONTHS ENDED
JANUARY 31,
------------------------
1998 1997
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Net revenues:
Workspace products .......................... $ 15,293 $ 18,448
Workspace services .......................... 2,966 3,813
Vendor commissions .......................... 24 51
-------- --------
Total net revenues ...................... 18,283 22,312
-------- --------
Cost of net revenues:
Workspace products .......................... 12,216 14,830
Workspace services .......................... 2,268 2,733
-------- --------
Total cost of net revenues .............. 14,484 17,563
-------- --------
Gross profit .................................... 3,799 4,749
Selling, general and administrative expenses .... 3,558 3,904
-------- --------
Income from operations .......................... 241 845
Net interest income/(expense) ................... (9) 23
-------- --------
Earnings before income taxes .................... 232 868
Income taxes .................................... 95 359
-------- --------
Net earnings .................................... $ 137 $ 509
======== ========
Net earnings per share:
Basic ....................................... $ .03 $ 0.10
======== ========
Diluted ..................................... $ .03 $ 0.10
======== ========
</TABLE>
See notes to condensed financial statements
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BUSINESS RESOURCE GROUP
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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THREE MONTHS ENDED
JANUARY 31,
---------------------
1998 1997
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OPERATING ACTIVITIES:
Net earnings ....................................................... $ 137 $ 509
Adjustments to reconcile to net cash used by operating activities:
Depreciation and amortization .................................. 165 162
Warrants issued for services ................................... 91 --
Changes in operating assets and liabilities:
Accounts receivable .......................................... (70) (1,046)
Inventory .................................................... (950) 125
Prepaids and other current assets ............................ (93) 23
Accounts payable ............................................. 193 (1,011)
Accrued liabilities .......................................... (4) 160
Income taxes payable ......................................... 95 20
------- -------
Net cash used by operating activities ................ (436) (1,058)
------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment ................................. (130) (445)
Other assets ....................................................... (3) (20)
------- -------
Net cash used by investing activities ....................... (133) (465)
------- -------
FINANCING ACTIVITIES:
Bank overdraft ..................................................... 295 536
Repayment of notes payable and capital lease obligations ........... -- (51)
Issuance of common stock ........................................... -- 48
------- -------
Net cash provided by financing activities ................... 295 533
------- -------
Net decrease in cash and equivalents ................................. (274) (996)
CASH AND EQUIVALENTS BALANCES:
Beginning of period ................................................ 274 1,011
------- -------
End of period ...................................................... $ -- $ 15
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest ........................................................... $ -- $ 1
======= =======
Income taxes ....................................................... $ -- $ 340
======= =======
</TABLE>
See notes to financial statements.
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BUSINESS RESOURCE GROUP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial information as of January 31, 1998 and for the three month
period ended January 31, 1998 and 1997 is unaudited. In the opinion of
management, such information reflects all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of the
results of such periods. The accompanying condensed financial statements should
be read together with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended October
31, 1997. The financial statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission, but omit certain
information and footnote disclosure necessary to present the statements in
accordance with generally accepted accounting principles.
NOTE 2. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS128). The
Company has adopted SFAS 128 in the first quarter of fiscal 1998 and has
restated earnings per share (EPS) data for prior periods to conform with SFAS
128.
SFAS 128 replaces previous EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
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<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
------------------
1998 1997
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(IN THOUSANDS)
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Net earnings.................................. $ 137 $ 509
====== ======
Weighted average common shares outstanding ... 4,914 4,863
Common equivalent shares:
Stock options.............................. 16 43
------ ------
Total common stock and common
stock equivalents.......................... 4,930 4,906
====== ======
</TABLE>
Options to purchase 298,202 and 279,613 shares of common stock were outstanding
during the first quarter of fiscal 1998 and 1997, respectively, but were not
included in the computation of diluted EPS
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because the options' exercise price was greater than the average market price of
the common shares.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION:
The matters discussed herein include forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and are subject to certain risks and uncertainties that could cause the actual
results to differ materially from those projected. Such forward-looking
statements include, without limitation, statements relating to the Company's
future revenue, gross margins, operating expenses, management's plans and
objectives for the Company's future operations and the sufficiency of financial
resources to support future operations and expenditures. Factors that could
cause actual results to differ materially include, but are not limited to, the
timely availability, delivery and acceptance of new products and services, the
continued strength of sales to Cisco Systems, Inc. (one of the Company's
principal customers), the impact of competitive products and pricing, the
management of growth and acquisitions, and other risks detailed below and
included from time to time in the Company's other SEC reports and press
releases, copies of which are available from the Company upon request. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. Additionally, the results of operations
for the three month period ended January 31, 1998 are not necessarily indicative
of the results to be expected for the full fiscal year. The Company undertakes
no obligation to release publicly the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
References made in this Quarterly Report on Form 10-Q to the "Company"
or the "Registrant" refer to Business Resource Group.
RESULTS OF OPERATIONS:
NET REVENUES were $18.3 million for the three months ended January 31,
1998, a decrease of $4.0 million from the $22.3 million reported for the three
months ended January 31, 1997. This overall decline in revenues was primarily
attributable to timing differences in quarter over quarter project business with
several large customers, which affected both workspace products and services
revenues. The Company continues to maintain an excellent working relationship
with these customers.
GROSS PROFIT decreased to $3.8 million during the first quarter of
fiscal 1998 from $4.7 million during the same period of fiscal 1997, a $900,000
decrease, while decreasing as a percentage of net revenues to 20.8% during the
first quarter of fiscal 1998 from 21.3% during the same quarter of fiscal 1997.
The decline of $900,000 in gross profit was primarily the result of lower
revenues in the quarter. The decline
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as a percent of revenue was attributable to lower workspace services gross
profit primarily due to lower absorption of overhead costs during the first
quarter of fiscal 1998 as compared to the first quarter of fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE expenses decreased $300,000, or 9%,
to $3.6 million from $3.9 million for the same period of the prior year. As a
percentage of net revenue, expenses increased to 19.5% in the first quarter of
fiscal 1998 from 17.5% in the first quarter of fiscal 1997. The decrease in
spending was primarily attributable to lower levels of sales compensation costs
due to lower revenues. The increase as a percentage of net revenue was
attributable to lower revenues in the first quarter of fiscal 1998 as compared
to fiscal 1997.
INTEREST EXPENSE, net of interest income and the Company's other
expenses, was $9,000 for the three months ended January 31, 1998 as compared to
$23,000 for the same period of fiscal 1997. This decrease was due to lower
average cash balances during the quarter.
FINANCIAL CONDITION:
Working capital at January 31, 1998 was $9.5 million, up slightly from
$9.3 million at October 31, 1997. The current ratio of 2.1 as of January 31,
1998 was equal to the current ratio reported as of January 31, 1997. At January
31, 1998 the Company had a bank overdraft of $295,000 as compared to cash and
equivalents of $274,000 reported January 31, 1997 primarily due to higher
inventories at January 31, 1998. Inventory at January 31, 1998 was $2.3 million,
an increase of $900,000 from the $1.4 million reported at January 31, 1997. The
increase in inventory was primarily due to inventory in transit at the end of
the quarter from suppliers pending delivery to customers.
Investments in property and equipment, which were primarily related to
management information systems hardware, were $130,000 in the three months ended
January 31, 1998.
The Company has a $15.0 million credit facility with a bank which
expires on August 8, 1999 with an option on an additional $1.0 million term
loan. As of January 31, 1998 the Company had no bank borrowings under the
existing credit facility. The Company maintains an irrevocable stand-by letter
of credit in the amount of $3.0 million with a major vendor.
The Company believes existing cash, together with cash generated from
operations and the Company's available borrowing capacity will provide
sufficient funds to meet the Company's anticipated working capital requirements
for the foreseeable future.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is not currently subject to any significant legal
proceedings. The Company may from time to time be a party to various legal
proceedings arising in the normal course of its business. These actions could
include product liability, employee related issues and disputes with vendors or
customers.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5: OTHER INFORMATION
Not applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.2: Amended and restated bylaws of Registrant
Exhibit 10.33: Stand by Letter of Credit with Comerica Bank
Exhibit 10.34: Amended Stand by Letter of Credit with Comerica Bank
Exhibit 10.35: Collateral Security Agreement with Teknion, Inc.
Exhibit 27: Financial data schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUSINESS RESOURCE GROUP
-------------------------------------
Registrant
Date: 3/11/98 /s/ John M. Palmer
--------------- -------------------------------------
John M. Palmer
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
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Exhibits
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Exhibit 3.2: Amended and restated bylaws of Registrant
Exhibit 10.33: Stand by Letter of Credit with Comerica Bank
Exhibit 10.34: Amended Stand by Letter of Credit with Comerica Bank
Exhibit 10.35: Collateral Security Agreement with Teknion, Inc.
Exhibit 27: Financial data schedule
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
BUSINESS RESOURCE GROUP
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
BUSINESS RESOURCE GROUP
TABLE OF CONTENTS
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PAGE
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ARTICLE I - CORPORATE OFFICES .................................................................... 1
1.1 PRINCIPAL OFFICE ................................................................... 1
1.2 OTHER OFFICES ...................................................................... 1
ARTICLE II - MEETINGS OF SHAREHOLDERS ............................................................ 1
2.1 PLACE OF MEETINGS .................................................................. 1
2.2 ANNUAL MEETING ..................................................................... 1
2.3 SPECIAL MEETING .................................................................... 1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS ................................................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ....................................... 2
2.6 QUORUM ............................................................................. 3
2.7 ADJOURNED MEETING; NOTICE .......................................................... 3
2.8 VOTING ............................................................................. 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT .................................. 4
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING ............................................................................ 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS ........................................................................... 6
2.12 PROXIES ............................................................................ 6
2.13 INSPECTORS OF ELECTION ............................................................. 7
ARTICLE III - DIRECTORS .......................................................................... 7
3.1 POWERS ............................................................................. 7
3.2 NUMBER OF DIRECTORS ................................................................ 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS ........................................... 8
3.4 RESIGNATION AND VACANCIES .......................................................... 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ........................................... 9
3.6 REGULAR MEETINGS ................................................................... 9
3.7 SPECIAL MEETINGS; NOTICE ........................................................... 9
3.8 QUORUM ............................................................................. 10
3.9 WAIVER OF NOTICE ................................................................... 10
3.10 ADJOURNMENT ........................................................................ 10
3.11 NOTICE OF ADJOURNMENT .............................................................. 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING .................................. 10
3.13 FEES AND COMPENSATION OF DIRECTORS ................................................. 11
3.14 APPROVAL OF LOANS TO OFFICERS* ..................................................... 11
ARTICLE IV - COMMITTEES .......................................................................... 11
</TABLE>
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<TABLE>
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PAGE
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4.1 COMMITTEES OF DIRECTORS ............................................................ 11
4.2 MEETINGS AND ACTION OF COMMITTEES .................................................. 12
ARTICLE V - OFFICERS ............................................................................. 12
5.1 OFFICERS ........................................................................... 12
5.2 ELECTION OF OFFICERS ............................................................... 12
5.3 SUBORDINATE OFFICERS ............................................................... 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS ................................................ 13
5.5 VACANCIES IN OFFICES ............................................................... 13
5.6 CHAIRMAN OF THE BOARD .............................................................. 13
5.7 PRESIDENT .......................................................................... 13
5.8 VICE PRESIDENTS .................................................................... 13
5.9 SECRETARY .......................................................................... 14
5.10 CHIEF FINANCIAL OFFICER ............................................................ 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS ................. 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS .......................................... 15
6.2 INDEMNIFICATION OF OTHERS .......................................................... 15
6.3 PAYMENT OF EXPENSES IN ADVANCE ..................................................... 15
6.4 INDEMNITY NOT EXCLUSIVE ............................................................ 15
6.5 INSURANCE INDEMNIFICATION .......................................................... 16
6.6 CONFLICTS .......................................................................... 16
ARTICLE VII - RECORDS AND REPORTS ................................................................ 16
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER ....................................... 16
7.2 MAINTENANCE AND INSPECTION OF BYLAWS ............................................... 17
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS ............................................................................ 17
7.4 INSPECTION BY DIRECTORS ............................................................ 17
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER .............................................. 18
7.6 FINANCIAL STATEMENTS ............................................................... 18
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ..................................... 18
ARTICLE VIII - GENERAL MATTERS ................................................................... 19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING ............................................................................. 19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS .......................................... 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED .................................. 19
8.4 CERTIFICATES FOR SHARES ............................................................ 20
8.5 LOST CERTIFICATES .................................................................. 20
8.6 CONSTRUCTION; DEFINITIONS .......................................................... 20
ARTICLE IX - AMENDMENTS .......................................................................... 20
9.1 AMENDMENT BY SHAREHOLDERS .......................................................... 20
9.2 AMENDMENT BY DIRECTORS ............................................................. 21
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AMENDED AND RESTATED BYLAWS
OF
BUSINESS RESOURCE GROUP
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the first day
of February in each year at 9:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
<PAGE> 5
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if
sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30))
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have
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been given at the time when delivered personally or deposited in the mail or
sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
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The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
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Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
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, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, 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 secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten
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(10) days before the date of any such meeting nor more than sixty (60) days
before any such action without a meeting, and in such event only shareholders of
record on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided in
the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (l) or three (3). If inspectors are appointed
at a
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meeting pursuant to the request of one (l) or more shareholders or proxies, then
the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (l) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then 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.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to actions required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen
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and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote
thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
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State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commence-
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ment, the lack of notice to such director. All such waivers, consents, and
approvals shall be filed with the corporate records or made part of the minutes
of the meeting. A waiver of notice need not specify the purpose of any regular
or special meeting of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
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* This section is effective only if it has been approved by the shareholders
in accordance with Sections 315(b) and 152 of the Code.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (l) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (l) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also
requires shareholders' 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 or 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 so amendable or repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range determined by
the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the board of directors.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
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officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of
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the corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by
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<PAGE> 18
the corporation in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of the indemnified party to repay
such amount if it shall ultimately be determined that the indemnified party is
not entitled to be indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the articles of
incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the
articles of incorporation, these bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (l%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior
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<PAGE> 19
written demand on the corporation, (ii) obtain from the transfer agent of the
corporation, on written demand and on the tender of such transfer agent's usual
charges for such list, a list of the names and addresses of the shareholders who
are entitled to vote for the election of directors, and their shareholdings, as
of the most recent record date for which that list has been compiled or as of a
date specified by the shareholder after the date of demand. Such list shall be
made available to any such shareholder by the transfer agent on or before the
later of five (5) days after the demand is received or five (5) days after the
date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by
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<PAGE> 20
an agent or attorney. The right of inspection includes the right to copy and
make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the
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<PAGE> 21
board of directors or the president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of
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<PAGE> 22
the consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
an 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 on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
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<PAGE> 23
CERTIFICATE OF ADOPTION OF
AMENDED AND RESTATED BYLAWS
OF
BUSINESS RESOURCE GROUP
The undersigned hereby certifies that he is the duly elected, qualified
and acting Secretary of Business Resource Group, and that the foregoing Amended
and Restated Bylaws, comprising twenty-one (21) pages, were adopted as the
Bylaws of the corporation on April 25, 1995, by the Board of Directors and
shareholders of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 25th day of April 1995.
/s/ Jeffrey Tuttle
-----------------------------------------
Jeffrey Tuttle, Secretary
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<PAGE> 24
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Jeffrey Tuttle, hereby certifies that:
1. He is the duly elected and incumbent Secretary of Business
Resource Group (the "Company").
2. By action of the Board of Directors of the Company by Unanimous
Written Consent effective February 20, 1997, the second sentence of Article III,
Section 3.2 of the Bylaws of the Company was amended to read as follows:
"The exact number of directors shall be six (6) until changed, within
the limits specified above, by a bylaw amending this Section 3.2, duly adopted
by the board of directors or by the shareholders."
3. The matters set forth in this certificate are true and correct
of my own knowledge.
Date: February 20, 1997
/s/ Jeffrey Tuttle
----------------------------------------
Jeffrey Tuttle, Secretary
<PAGE> 25
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Jeffrey Tuttle, hereby certifies that:
1. He is the duly elected and incumbent Secretary of Business
Resource Group (the "Company").
2. By action of the Board of Directors of the Company by Unanimous
Written Consent made on February 2, 1998 and effective as of March 2, 1998, the
second sentence of Article III, Section 3.2 of the Bylaws of the Company was
amended to read as follows:
"The exact number of directors shall be five (5) until changed, within
the limits specified above, by a bylaw amending this Section 3.2, duly adopted
by the board of directors or by the shareholders."
3. The matters set forth in this certificate are true and correct
of my own knowledge.
Date: March 2, 1998
/s/ Jeffrey Tuttle
----------------------------------------
Jeffrey Tuttle, Secretary
<PAGE> 1
[COMERICA BANK LOGO]
EXHIBIT 10.33
TELEX: 3774155 CMACAL LETTER OF CREDIT DIVISION
SWIFT: MNBDUS6S COMERICA BANK-CALIFORNIA
FAX : (408) 556-5216 INTERNATIONAL BANKING DEPARTMENT
333 W. SANTA CLARA ST., 2ND FLOOR
SAN JOSE, CA 95113
BENEFICIARY: ISSUANCE DATE: OCTOBER 2, 1997
TEKNION, INC.
901 LINCOLN DRIVE WEST
MARLTON, NJ, 08053
WE HEREBY ISSUE FOR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 541808 IN YOUR
FAVOR, FOR ACCOUNT OF BUSINESS RESOURCE GROUP, 2150 NORTH FIRST STREET, SUITE
101, SAN JOSE, CA 95131 FOR A SUM NOT EXCEEDING USD 1,800,000.00 (ONE MILLION,
EIGHT HUNDRED THOUSAND AND 00/100'S U.S. DOLLARS) AVAILABLE BY YOUR DRAFT AT
SIGHT ON COMERICA BANK-CALIFORNIA WHEN ACCOMPANIED BY:
+ BENEFICIARY'S SIGNED STATEMENT READING PRECISELY AS FOLLOWS: "THE AMOUNT OF
THIS DRAWING UNDER COMERICA BANK-CALIFORNIA'S L/C NO. 541808 REPRESENTS FUNDS
DUE US AS BUSINESS RESOURCE GROUP IS IN DEFAULT UNDER THE TERMS OF OUR AGREEMENT
AND INVOICES ARE PAST DUE AND REMAIN UNPAID".
PARTIAL DRAWINGS ARE ALLOWED.
ALL DOCUMENTS ARE TO BE FORWARDED TO US IN ONE COVER BY AIR COURIER AT
BENEFICIARY'S EXPENSE. OUR ADDRESS IS 333 W. SANTA CLARA STREET, ATTN
INTERNATIONAL BANKING 2ND FLOOR, SAN JOSE, CA 95113. DIRECT INQUIRIES TO SWIFT
ADDRESS MNBDUS6S, TELEX 3774155 CMACAL.
ALL DRAFTS DRAWN UNDER THIS CREDIT MUST BE MARKED "DRAWN UNDER COMERICA BANK'S
LETTER OF CREDIT NO. 541808".
THIS LETTER OF CREDIT IS SUBJECT TO AND GOVERNED BY THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE, 1993
REVISION, PUBLICATION 500.
THIS ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS THERETO MUST BE SUBMITTED TO
US TOGETHER WITH ANY DRAWINGS HEREUNDER FOR OUR ENDORSEMENT OF ANY PAYMENTS
EFFECTED BY US AND/OR FOR CANCELLATION.
WE ENGAGE WITH YOU THAT EACH DRAFT UNDER AND IN COMPLIANCE WITH THE TERMS OF
THIS CREDIT WILL BE DULY HONORED ON DELIVERY OF THE DOCUMENTS AS SPECIFIED IF
PRESENTED AT THIS OFFICE ON OR BEFORE FEBRUARY 26, 1998.
YOURS VERY TRULY,
[SIG]
--------------------
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 10.34
[COMERICA LOGO]
TELEX NO: 3774155 CMACAL COMERICA BANK-CALIFORNIA
FAX NO: (408) 556-5416 INTERNATIONAL BANKING DEPARTMENT
SWIFT: MNBDUS6S 333 W. SANTA CLARA ST., 2ND FLOOR
SAN JOSE, CA 95113
[NON NEGOTIABLE COPY]
AMENDMENT TO LETTER OF CREDIT CREDIT NUMBER OF
ISSUING BANK: 541808
JANUARY 29, 1998
APPLICANT:
BUSINESS RESOURCE GROUP
2150 NORTH FIRST STREET
SUITE 101
SAN JOSE, CA 95131
BENEFICIARY: AMENDMENT NUMBER: 01
TEKNION, INC.
901 LINCOLN DRIVE WEST
MARLTON, NJ 08053
THIS AMENDMENT IS TO BE CONSIDERED
AS PART OF THE ABOVE CREDIT AND MUST
BE ATTACHED THERETO
GENTLEMEN:
IN ACCORDANCE WITH INSTRUCTIONS RECEIVED FROM OUR PRINCIPALS, THE ABOVE
CAPTIONED CREDIT HAS BEEN AMENDED AS FOLLOWS:
THE AMOUNT OF THIS CREDIT HAS INCREASED BY 1,200,000.00 USD.
THE AMOUNT OF THIS CREDIT ISSUED NOW TOTALS 3,000,000.00 USD.
THE NEW EXPIRY DATE OF THIS INSTRUMENT IS NOW OCTOBER 31, 1998 IN OUR COUNTERS,
SAN JOSE.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
VERY TRULY YOURS,
COMERICA BANK
[SIG]
--------------------
AUTHORIZED SIGNATURE
--------------
RELEASED
DATE: 1/30/98
BY: [INITIALS]
--------------
<PAGE> 1
EXHIBIT 10.35
COLLATERAL SECURITY AGREEMENT
This Agreement effective the 1st day of November 1997 by and between Teknion,
Inc. ("Teknion") a New Jersey corporation with offices at 901 Lincoln Drive
West, Marlton, New Jersey 08053, and Business Resource Group ("BRG"), a
California corporation with offices at 2150 North 1st Street, Suite 101, San
Jose, California 95131, (collectively, the "Parties").
WITNESSETH:
-----------
WHEREAS, by the execution of this Agreement, the Parties intend to provide
security from BRG to Teknion in consideration of the acceptance by Teknion of
purchase orders for Teknion products from BRG;
NOW, THEREFORE, intending to be legally bound hereby and in consideration of the
mutual covenants contained herein, the Parties agree as follows:
1. This Agreement shall commence as of the date above written and shall
expire on October 31, 1998 unless terminated prior to that date by
Teknion, within its sole discretion, upon written notice to BRG
pursuant to Section 10. Provided, that notwithstanding such
termination, this Agreement shall continue to apply to BRG purchase
orders that have not shipped as of such termination, and to Teknion
invoices to BRG that remain unpaid, until all such purchase orders
have been shipped, and all Teknion invoices to BRG have been paid in
full at which point BRG shall have no further obligation to Teknion
under this Agreement.
2. In consideration of the account terms that Teknion may from time to
time extend to BRG, BRG hereby irrevocably agrees to each of the
following conditions as a precondition to Teknion's acceptance of a
BRG purchase order for Teknion product. Provided, however, that this
Agreement shall not be construed to require Teknion to accept any BRG
purchase orders or to affect any aspect of the purchase and sale
transaction between Teknion and BRG except as expressly provided
herein and, except as set forth in this Agreement, all purchases and
sales of Teknion's products shall be governed by Teknion's standard
terms and conditions of sale.
(A) Within 10 business days following the execution of this
Agreement by the Parties, BRG shall procure and maintain in
favor of Teknion, as security for BRG's payment to Teknion of the
purchase price and all other obligations due from BRG to Teknion
associated with the purchase of Teknion products, an irrevocable
stand-by letter of credit ("Letter of Credit") in the form of
Exhibit "A" annexed hereto and made a part hereof in the amount
of $3,000,000 with an expiration date not less than 12 months
from the effective date of this Agreement. Provided, further,
that BRG shall take whatever steps may be necessary during the
initial term or any renewed term of this Agreement to issue to
Teknion, at least ten (10) business days prior to the expiration
of the initial or any renewal term of this Agreement a new
Letter of Credit in an amount not less than $3,000,000 in favor
of Teknion with an expiration date not less than 12 months from
the expiration of the initial or any renewed term of this
Agreement.
<PAGE> 2
(B) BRG hereby covenants and agrees to pay all invoices rendered by
Teknion on account of BRG purchases of Teknion product within 30
calendar days following the receipt by BRG of such invoice.
3. Notwithstanding the fulfillment of the preconditions set forth in Section 2
above by BRG, Teknion shall be entitled, within its sole and absolute
discretion, to deem itself insecure with respect to BRG's ability to
perform pursuant to the terms and conditions of this Agreement in the
event: (1) that BRG fails to pay any one or more of Teknion's invoices
governed hereby within thirty (30) calendar days following the receipt of
such invoices by BRG but only if the amount of any invoice exceeds $10,000
individually or cumulatively, $100,000; and/or (ii) in the event the Letter
of Credit fails to remain in existence and available for draws by Teknion
as described in Section 2(A) above in a form and issued by an issuer
continuously satisfactory to Teknion, in Teknion's sole and absolute
discretion.
In the event that Teknion shall deem itself insecure and notify BRG of such
decision in writing, Teknion shall have the rights recited in Section (A)
of this Section 3 together with all rights and remedies available to
Teknion under applicable law. In addition to Teknion's rights and remedies
available under applicable law and under Section 3(A) below, BRG shall
notify Teknion within three (3) business days following receipt of
Teknion's notice of insecurity of its choice of remedy between those set
forth in Sections (B) and (C) of this Section 3. In the event BRG fails to
elect such choice of remedy within such three (3) business day time frame,
BRG shall be deemed for all purposes of this agreement to have elected the
remedy set forth in Section (C) of this Section 3 and the Parties shall
perform accordingly.
(A) Teknion shall have the right, in its sole and absolute discretion, to
draw upon the Letter of Credit to the extent of Teknion invoices
outstanding to BRG at any time and from time to time during the term
hereof.
(B) Within five (5) business days following receipt of Teknion's notice of
insecurity as set forth above, BRG shall provide Teknion with
additional Letters of Credit in the dollar amount of purchase orders
previously submitted by BRG to Teknion for Teknion products which have
not yet been shipped to BRG or its customers. Said Letter of Credit
shall be in form of Exhibit "A" annexed hereto and made a part hereof
and shall have an initial term of 12 calendar months; or
(C) BRG shall, within five (5) business days following receipt of
Teknion's notice of insecurity set forth above, in writing in the form
of Exhibit "B" annexed hereto and made a part hereof, empower Teknion
and authorize and direct all or any of BRG's customers to reissue to
the order of Teknion those open purchase orders previously submitted
to BRG, and in turn submitted by BRG to Teknion for Teknion products,
eliminating BRG from the purchase and sale transaction. BRG hereby
further empowers and authorizes Teknion to communicate and deal
directly with such BRG customers on all matters pertaining to BRG's
purchase order for Teknion products governed hereby.
2
<PAGE> 3
(1) In the event BRG elects this remedy in lieu of item (B)
above, BRG hereby forever waives all of its right to the
purchase orders of such BRG customers other than the right
of payment set forth in Section (2) of this Section 3 (C)
below, previously submitted to it by such customers and
assigns to Teknion all of BRG's right, title and interest in
and to such purchase orders to every nature whatsoever
including, without limitation, any collateral security
therefore.
Provided, further, that in the event BRG elects this remedy
in lieu of item (B) above, BRG shall, in addition to the
requirements set forth in this Section (1), remit to Teknion
within five (5) business days following receipt of Teknion's
notice of insecurity all deposits received by it on orders
chosen by Teknion to be reissued in accordance with this
Section 3 (C). In the event that BRG shall fail to so remit
the required deposits, Teknion shall have the right, in its
sole discretion, to offset excess payments to BRG on one or
more of the customer orders redirected to Teknion against
such unpaid deposit obligations.
(2) In the event that BRG shall choose this remedy and Teknion
shall directly receive purchase orders from BRG customers
for Teknion products, then, and in that event, upon receipt
by Teknion of payment on account of such purchase orders,
all such funds received from BRG's customers shall be
utilized to first satisfy the amount due Teknion from BRG
pursuant to the original purchase order placed by BRG with
Teknion and Teknion shall thereafter remit any excess
payments received from such BRG customer directly to BRG.
(D) Provided, however, that in the event this Section 3 is invoked,
Teknion shall have no obligation to ship Teknion product related to
BRG purchase orders which have not been dealt with to Teknion's sole
and absolute satisfaction as described in either Sections (B) or (C)
above as of the scheduled date of shipment.
4. BRG covenants and agrees, that during the term of this Agreement it shall
allow Teknion reasonable access during normal business hours to all
information and documentation of BRG relating to BRG's customer's purchase
orders governed hereby for Teknion products.
5. The failure of either Party to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right
at any other time.
6. This Agreement shall be binding upon and inure to the benefit of the
Parties, their respective successors and assigns.
7. This Agreement, including all documents incorporated by reference, embodies
all of the terms and conditions between the Parties with respect to the
subject matter hereof and may not be altered orally. Any prior agreements
whether written or oral, are hereby merged into this document.
3
<PAGE> 4
8. Neither Party shall assign the benefits and burdens of this Agreement
without the consent of the other party, which consent shall not be
unreasonably withheld.
9. Notices - Any notices required or permitted to be given or made in this
Agreement shall be in writing. Such notice shall be deemed to be duly
given or made when it shall have been delivered by certified mail, return
receipt requested, or by overnight courier to the Party to which it is
required to be given or made at such Party's address specified below.
Buyer: Business Resource Group
2150 North 1st Street
Suite 101
San Jose, California 95131
Attention: John Peth, President
Teknion: Teknion, Inc.
901 Lincoln Drive West
Marlton, New Jersey 08053
Attention: Stephen M. Miner, President
10. Teknion shall have the right to terminate this Agreement, within its sole
discretion, at any time. Such termination shall be effective as of the
first day of BRG's fiscal quarter immediately following the date of
Teknion's notice of termination, provided, however, notwithstanding such
termination, this Agreement shall continue to apply to BRG purchase orders
that have not shipped as of such termination, and Teknion invoices to BRG
that remain unpaid, until all such purchase orders have been shipped, and
all Teknion invoices to BRG have been paid in full at which point BRG
shall have no further obligation to Teknion under this Agreement.
11. Teknion shall reimburse BRG for the fiscal cost to BRG of any Letter of
Credit issued pursuant to the terms of this Agreement, provided, that in
no event shall the amount of such reimbursement exceed one percent (1%) of
the face amount of such Letter of Credit. Teknion will submit such
reimbursement to BRG within ten (10) days of receipt by Teknion of an
invoice from the issuer of the Letter of Credit.
12. This Agreement may be executed in any number of copies, and by the Parties
hereto on the same or separate counterparts, each of which shall be deemed
to be an original instrument. This Agreement shall be legally enforceable
and binding upon a Party hereto no later than upon receipt by the other
Party of an executed copy of this Agreement by facsimile.
13. This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
14. This Agreement may be amended only by a written instrument executed and
delivered by each Party hereto.
4
<PAGE> 5
15. This Agreement, including all documents incorporated by reference,
embodies all of the terms and conditions between the Parties with respect to
the subject matter hereof. Any prior agreements whether written or oral, are
hereby merged into this document.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the date indicated.
Date 1-26-98 TEKNION, INC.
--------- -------------
By /s/ STEPHEN M. MINER
---------------------------
Stephen M. Miner, President
Date 1-23-98 BUSINESS RESOURCE GROUP
--------- -----------------------
By: /s/ JOHN PETH
---------------------------
John Peth, President
5
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 13,939
<ALLOWANCES> 105
<INVENTORY> 2,348
<CURRENT-ASSETS> 18,351
<PP&E> 3,704
<DEPRECIATION> 1,351
<TOTAL-ASSETS> 21,567
<CURRENT-LIABILITIES> 8,812
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 16,335
<TOTAL-LIABILITY-AND-EQUITY> 21,567
<SALES> 15,293
<TOTAL-REVENUES> 18,283
<CGS> 12,216
<TOTAL-COSTS> 14,484
<OTHER-EXPENSES> 3,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 232
<INCOME-TAX> 95
<INCOME-CONTINUING> 137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
