UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-26526
MOOVIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-1012733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 BROOKFIELD PARKWAY, SUITE 200
GREENVILLE, SOUTH CAROLINA 29607
(Address of principal executive offices)
(Zip code)
(864) 213-1700
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
The number of shares of common stock, par value $0.001 per share, outstanding at
May 13, 1996 is 8,664,040.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MOOVIES, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
------ ---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,570,084 $ 3,563,788
Receivables 1,737,596 2,780,214
Merchandise inventory 2,390,047 2,617,496
Deferred income tax benefit 308,224 984,136
Prepaid rent 1,030,112 739,804
Other 1,595,951 1,243,708
------------- -------------
Total current assets 12,632,014 11,929,146
Videocassette rental inventory, net 17,356,976 16,728,416
Furnishings and equipment, net 11,116,831 9,858,952
Goodwill 30,535,285 29,080,621
Deposits and other assets 916,183 622,361
------------- -------------
$ 72,557,289 $ 68,219,496
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 12,795,934 $ 2,500,000
Notes payable 500,000 5,935,215
Current portion of long-term debt 448,971 481,064
Accounts payable 8,330,138 10,567,375
Accrued liabilities 3,737,165 3,065,603
------------- -------------
Total current liabilities 25,812,208 22,549,257
Long-term debt, less current portion 3,698,356 2,410,987
Deferred income tax payable 5,305,468 5,796,051
------------- -------------
34,816,032 30,756,295
Commitments
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 25,000,000 shares
authorized; issued and outstanding 8,658,532
shares at March 31, 1996 and December 31, 1995 8,659 8,659
Additional paid-in capital 35,857,767 35,857,767
Retained earnings 1,874,831 1,596,775
------------- --------------
Total stockholders' equity 37,741,257 37,463,201
------------- -------------
$ 72,557,289 $ 68,219,496
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOOVIES, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
<S> <C> <C>
Revenues:
Rental revenues $ 16,957,403 $ 1,114,672
Product sales 2,358,658 108,581
------------- -------------
19,316,061 1,223,253
Operating costs and expenses:
Operating expenses 12,819,016 870,729
Cost of product sales 1,537,095 92,392
Selling, general and administrative 2,328,845 186,502
Amortization of goodwill 361,084 -
------------- -------------
17,046,040 1,149,623
------------- -------------
Operating income 2,270,021 73,630
Interest expense (301,047) (27,097)
Other, net (20,900) -
------------- -------------
Income before income taxes and cumulative
effect of a change in accounting principle 1,948,074 46,533
Income tax expense 779,204 -
------------- -------------
Income before cumulative effect of a change in
accounting principle 1,168,870 46,533
Cumulative effect of a change in accounting principle,
net of taxes (note 2) 890,814 -
------------- ------------
Net income $ 278,056 $ 46,533
============= =============
Earnings per share:
Income before cumulative effect of a change
in accounting principle $ .13 $ N/A
Cumulative effect of a change in accounting principle .10 N/A
------------- -------------
Net income $ .03 $ N/A
============= =============
Weighted average shares outstanding 8,976,332 N/A
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOOVIES, INC.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
<S> <C> <C>
Operating activities:
Net income $ 278,056 $ 46,533
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of a change in accounting principle 890,814 -
Depreciation and amortization 4,360,964 252,902
Amortization of discount on long-term debt - 17,021
Changes in operating assets and liabilities:
Receivables 1,296,993 (42,032)
Merchandise inventory 227,449 (5,615)
Other current assets (642,551) -
Deposits and other assets (293,822) (188,137)
Accounts payable (2,237,237) 811,513
Accrued liabilities 271,562 (25,088)
Deferred income taxes 779,204 -
------------- --------------
Net cash provided by operating activities 4,931,432 867,097
------------- --------------
Investing activities:
Purchases of videocassette rental inventory, net (5,868,674) (539,192)
Purchases of furnishings and equipment (1,483,893) (163,612)
Proceeds from the sale of the grocery division 745,625 -
Business acquisitions (2,434,187) -
-------------- --------------
Net cash used in investing activities (9,041,129) (702,804)
-------------- --------------
Financing activities:
Proceeds from line of credit borrowings, net 10,295,934 -
Proceeds from issuance of long-term debt 2,000,000 600,000
Principal payments on long-term debt (6,179,941) (102,927)
Capitalized initial public offering costs - (582,806)
Capital/partner withdrawals, net - (73,027)
------------- --------------
Net cash (used in) provided by financing activities 6,115,993 (158,760)
------------- --------------
Increase in cash and cash equivalents 2,006,296 5,533
Cash and cash equivalents at beginning of period 3,563,788 169,591
------------- --------------
Cash and cash equivalents at end of period $ 5,570,084 $ 175,124
============= ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 58,007 $ 26,114
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOOVIES, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION
(1) Basis of Presentation
Moovies currently operates 158 video specialty superstores located in
Georgia, South Carolina, North Carolina, Virginia, Pennsylvania, New
Jersey, New York, Connecticut, Ohio, Iowa and Colorado. Moovies'
superstores rent and sell a wide range of videos and video games, rent
video players and video game equipment, and sell video accessories such
as blank cassettes, cleaning equipment and a variety of confectionery
items.
The interim financial information included herein is unaudited. The
financial information for the three month period ended March 31, 1995
reflects the operations of Tonight's Feature Limited Partnership II
("Tonight's Feature" or the "Predecessor") which was operated as a
partnership for income tax purposes. Accordingly, income taxes were
paid by the Predecessor's general partners and the Predecessor had no
income tax liability. Moovies, Inc. (the "Company") was incorporated in
November 1994 for the purpose of entering into agreements to acquire
video specialty stores, consummating an initial public offering of
stock and operating video specialty stores. In August 1995,
concurrently with the completion of an initial public offering of
Company stock, the Predecessor was merged into Moovies, Inc. The
financial information for the three month period ended March 31, 1996
reflects the operations of the Company. Certain information and
footnote disclosures normally included in the financial statements have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"), although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. This financial information should be read in
conjunction with the consolidated financial statements and related
notes contained in the Company's Annual Report on Form 10-K which was
previously filed with the SEC. Other than as indicated herein, there
have been no significant changes from the financial data published in
that report. In the opinion of management, such unaudited information
reflects all adjustments, consisting only of normal recurring accruals
and other adjustments as disclosed herein, necessary for a fair
presentation of the unaudited information. The results of operations
for interim periods are not necessarily indicative of the results
expected for the full year.
(2) Change in Amortization Method for Videocassette Rental Inventory
Effective January 1, 1996, the Company adopted an accelerated method of
amortizing its videocassette rental inventory. Under this new method,
videocassette rental inventory, which includes video games, is stated
at cost, including the related costs to prepare such videocassettes for
rent, and is amortized over its estimated economic life of 36 months,
to its estimated salvage value ($6 per videocassette during 1996). All
copies of new release videocassettes are amortized on an accelerated
basis during their first four months to an average net book value of
$15 and then on a straight-line basis to their estimated salvage
value of $6 over the next 32 months.
The method for calculating amortization of videocassette rental
inventory in 1995 was as follows: videocassettes that are considered
base stock ("catalog titles"), together with related costs to prepare
them for rent, are amortized over 36 months on a straight-line basis.
New release videocassettes are amortized as follows: the tenth and any
succeeding copies of each title per store are amortized over nine
months on a straight-line basis; the fourth through ninth copies of
each title per store are amortized 40% in the first year and 30% in
each of the second and third years; and copies one through three of the
titles per store are amortized as base stock.
<PAGE>
The new method of amortization was adopted because the Company believes
that (i) accelerating expense recognition for new release
videocassettes during the first four months more closely matches the
typically higher revenue generated following a title's release, (ii)
$15 represents a reasonable average carrying value for tapes to be
rented or sold after four months, and (iii) $6 represents a reasonable
salvage value for all tapes after 36 months.
The new method of amortization has been applied to videocassette rental
inventory that was held at January 1, 1996. The cumulative effect of
the change as of January 1, 1996 was to reduce net income for the
quarter ended March 31, 1996 by $890,814 net of income taxes of
$593,876. The application of the new method of amortizing videocassette
rental inventory increased first quarter 1996 amortization expense for
the quarter ended March 31, 1996 by approximately $575,000 and reduced
net income by approximately $345,000 and earnings per share by $0.04.
(3) Acquisition and Pending Acquisitions
SHOWTIME. In March 1996, the Company acquired the "Showtime Video"
chain of five stores in an asset purchase transaction for aggregate
consideration of approximately $2.4 million in cash. Showtime operates
three stores in Fort Collins, Colorado, one in Boulder, Colorado, and
one in Greeley, Colorado.
PREMIERE. In April 1996, the Company signed an asset purchase agreement
to purchase certain assets and business of American
Multi-Entertainment, Inc. d/b/a Premiere Video ("Premiere Video") for a
purchase price of approximately $11.5 million, consisting of $8.9
million in cash at closing and a final payment of $2.6 million payable
in January 1997 which will be secured by a bank letter of credit.
Premiere Video operates 23 stores in Minnesota, Iowa, Wisconsin, South
Dakota and Nebraska. The Company's obligation to complete the
acquisition is contingent upon the availability of financing on terms
acceptable to the Company. The Company anticipates closing the
acquisition concurrently with the completion of a public offering of
stock (see note 4), however, there can be no assurance that the
acquisition will be consummated.
(4) Subsequent Event
On May 1, 1996 the Company filed a Registration Statement with the SEC
covering the possible issuance and sale by Moovies of up to 3,200,000
shares of Common Stock. If the offering is completed, the Company
intends to use $8.9 million of the proceeds therefrom to fund the
acquisition of Premiere Video. The balance of the net proceeds will
be added to the Company's working capital and will be available for
general corporate purposes, including new store openings, possible
future acquisitions and conversion of newly acquired stores to the
Moovies logo and format.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company's results of operations for the three months ended March 31, 1995
reflect only the operations of the Predecessor. The results of operations for
the three months ended March 31, 1996 reflect the operations of the Company and
include the results of the "Showtime Video" acquisition from and after its
acquisition date.
REVENUES. Revenues increased $18,093,000, or 1,479.4%, for the three months
ended March 31, 1996 to $19,316,000 compared to revenues of $1,223,000 for the
same period in 1995. The increased revenues were a result of the additional
stores acquired and opened by the Company concurrently with and subsequent to
the initial public offering in August 1995. Product sales as a percentage of
total revenues increased to 12.2% for 1996 compared to 8.9% for 1995. This
increase is the result of greater emphasis by certain acquired companies on
product sales, including video game sales. In March 1996, the Company sold its
supermarket operation for an amount approximating its net book value. The
supermarket operation had revenues of approximately $355,000 in the quarter
ended March 31, 1996.
OPERATING COSTS AND EXPENSES. Operating expenses increased $11,948,000 to
$12,819,000 for the three months ended March 31,1996 compared to $871,000 for
1995. Operating expenses as a percentage of total revenues were 66.4% for 1996
compared to 71.2% for 1995. This decrease was primarily the result of increased
revenues from product sales in 1996 without a corresponding increase in
operating expenses, partially offset by the impact of the change in the method
of amortization of videocassette rental inventory as described in note 2 to
the consolidated financial statements included herein. The new method of
accounting accelerates the amortization of videocassette rental inventory.
The Company anticipates that the amortization for the last three quarters of
1996 will be greater under the new method of amortization than it would have
been under the previous method.
Cost of product sales increased $1,445,000 to $1,537,000 for 1996 compared to
$92,000 for 1995. This increase is directly related to the increase in product
sales. Cost of product sales as a percentage of product sales was 65.2% for the
three months ended March 31, 1996 compared to 85.1% for 1995. This decrease is
the result of closer management of product sales by certain acquired companies
and increasing the mix of higher margin items.
General and administrative expenses increased $2,142,000 to $2,329,000 for 1996
compared to $187,000 for 1995, reflecting the acquisitions and additional store
openings. General and administrative expenses as a percentage of total revenues
were 12.1% for 1996 compared to 15.3% for 1995. The percentage decrease, despite
the increase in the amount of general and administrative expenses, reflects the
effect of spreading these expenses over significantly greater revenues.
INTEREST EXPENSE. Interest expense increased $274,000 to $301,000 for 1996 from
$27,000 for 1995. The increase is related primarily to (i) the issuance in
April 1995 of a $1.5 million note payable, which was incurred to provide
financing for the completion of the Company's initial public offering and (ii)
additional borrowings under the Company's line of credit agreements and
subordinated credit facility.
INCOME TAX EXPENSE. The Company had no income tax expense for the three months
ended March 31, 1995 because the Predecessor operated as a partnership for
income tax purposes. Income tax expense for the three months ended March 31,
1996 was approximately $779,000, representing an effective income tax rate of
40%.
<PAGE>
Liquidity and Capital Resources
The Company's primary long-term capital needs are for opening and acquiring new
stores. The Company expects to fund such needs through cash flows from
operations, borrowing under credit facilities, operating equipment leases and
the net proceeds from the sale of debt and equity securities.
In December 1995 and January 1996 the Company borrowed a total of $6.5 million
under an existing revolving credit facility from a bank. The proceeds were used
to fund the cash portion of certain acquisitions. In addition, in January 1996
the Company borrowed $2.0 million under a subordinated credit facility (the
"Subordinated Credit Facility"), which is subordinated to the Company's
revolving credit facility. Borrowings outstanding under this Subordinated
Credit Facility bear interest at an annual rate equal to 13% and mature in
January 2001. In conjunction with this financing, the Company issued the
lender a warrant to purchase 20,000 shares of Common Stock at an
exercise price of $10.80 per share.
In March 1996, the Company signed a revolving credit facility (the "Facility")
for up to $22.5 million to replace its existing credit facilities. The available
amount of the Facility will reduce quarterly beginning on March 31, 1997 with
final maturity of June 30, 1998. The interest rate of the Facility is variable
based on LIBOR and the Company may repay the Facility at any time without
penalty. As of March 31, 1996, the Company had outstanding borrowings of $12.8
million and had $4.2 million available under the Facility. The remaining
$5.5 million is expected to become available upon the completion of the
proposed public offering and the proposed acquisition of the Premiere
Video chain as described below. The Company intends to use $2.6 million
of the line of credit to support a letter of credit to secure the
final payment due in January 1996 for the Premiere Video acquisition.
The Company funds its short-term working capital needs, including the
acquisition of videos and other inventory, primarily through cash from
operations. The Company expects that cash from operations will be sufficient to
fund future video and other inventory purchases and other working capital needs.
Under generally accepted accounting principles, rental inventories are treated
as non-current assets because they are not assets that are reasonably expected
to be completely realized in cash or sold in the normal business cycle. Although
the rental of this inventory generates a substantial portion of the Company's
revenue, the classification of these assets as noncurrent excludes them from the
computation of working capital. The cost of video inventory purchases, however,
is reported as a current liability until paid, and accordingly, is included in
the computation of working capital. Consequently, the Company believes working
capital is not an appropriate measure of its liquidity and it anticipates that
it will operate with a working capital deficit during 1996.
The Company's capital expenditures during the remainder of 1996 will focus on
opening new stores, converting newly acquired stores to the Moovies name and
logo and implementing a new MIS. The Company currently intends to open
approximately 42 additional superstores in the last three quarters of 1996.
The Company estimates that the total cash required to open a new Moovies
superstore, including store fixtures and equipment, leasehold improvements and
rental and sale inventory, typically ranges from $250,000 to $300,000 per
superstore. In addition, the Company estimates that the aggregate cost of
converting recently acquired stores to the Moovies name and logo will be
approximately $2.5 million. The Company's MIS is currently being used in
approximately 125 video specialty stores that were acquired. In 1996, the
Company intends to replace the various systems used by its other stores with
this system and to improve the computerized information systems at the corporate
offices at an estimated aggregate cost of approximately $1.0 million.
In April 1996, the Company signed an asset purchase agreement to acquire the
Premiere Video chain. Pursuant to the asset purchase agreement, the Company will
pay $8.9 million in cash concurrently with the closing of a proposed second
offering. The Company intends to fund the cash portion of the purchase price
with proceeds from the proposed offering. In addition, the Company will make a
final payment of $2.6 million in January 1997. The Company's obligation to make
this payment will be secured by a letter of credit.
<PAGE>
The Company believes that cash from operations and borrowing availability under
its existing credit facilities will be sufficient to fund its existing
operations, including its planned capital expenditures and new store openings,
through December 31, 1996.
On May 1, 1996 the Company filed with the Securities and Exchange Commission
a Registration Statement on Form S-1 to register a proposed underwritten
offering of 3.2 million shares of the Company's common stock (and an additional
480,000 shares to cover over-allotments). The proceeds from the proposed
offering would enable the Company to fund the acquisition of Premiere Video and
give the company flexibility to pursue additional acquisitions and store
openings.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(a) None
(b) None
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
(a) None
(b) None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) See Index to Exhibits.
(b) None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this quarterly report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized on May 13, 1996.
MOOVIES, INC.
By: /s/ John L. Taylor
John L. Taylor
President and Chief Executive Officer
(principal executive officer)
By: /s/ F. Andrew Mitchell
F. Andrew Mitchell
Chief Financial Officer and Director
(principal financial officer)
<PAGE>
EXHIBIT INDEX
(a) The following exhibits, which are furnished with this Form 10-Q, are filed
as part of this Form 10-Q:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
<S> <C>
3.1 --Restated Certificate of Incorporation of Moovies, Inc.
(Incorporated by reference to Exhibit 3.1 in the Company's
Registration Statement on Form S-1 (No. 33-93562))
3.2 --Restated Bylaws of Moovies, Inc.
10.2.1 --Letter Agreement dated January 16, 1996 between
Moovies, Inc. and Baker & Taylor Entertainment, a
division of Baker & Taylor (Incorporated by reference
to Exhibit 10.3.1 in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995)
11.1 --Statement Re Computation of Per Share Earnings
18.1 --Letter Re Change in Accounting Principle
27.1 --Financial Data Schedule
</TABLE>
<PAGE>
RESTATED BYLAWS
OF
MOOVIES, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of such
other business as may be properly brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by a majority of the Directors then in
office or the Chairman of the Board and shall be called by the President or the
Secretary at the request in writing of stockholders holding together at least a
majority of the number of shares of Common Stock outstanding and entitled to
vote at such meeting. Any special meeting of the Stockholders shall be held on
such date, at such time and at such place within or without the State of
Delaware as the Board of Directors or the officer calling the meeting may
designate. At a special meeting of the stockholders, no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting unless all of the stockholders are present in person or by
proxy, in which case any and all business may be transacted at the meeting even
though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in these
Bylaws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
certificate of Incorporation or by these Bylaws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these Bylaws.
<PAGE>
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present
in person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holder of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. Organization. The President or, in his absence, any Vice
President shall call all meetings of the stockholders to order, and shall act as
Chairman of such meetings. In the absence of the President and all of the Vice
Presidents, the holders of a majority in number of the shares of stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting. It shall be the duty of
the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten days next
preceding the meeting, to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, and shall be produced
and kept at the time and place of the meeting during the whole time thereof and
subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
stockholder upon the books of the Corporation. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise provided by law or by the Certificate of Incorporation, Directors
shall be elected by a plurality of the votes cast at a meeting of stockholders
by the
-2-
<PAGE>
stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of the votes cast at a meeting of stockholders by the
stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided at any meeting of the stockholders by two or more
inspectors who may be appointed by the Board of Directors before the meeting, or
if not so appointed, shall be appointed by the presiding officer at the meeting.
If any person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
none of whom need be stockholders of the Corporation. The number of Directors
constituting the Board of Directors shall he fixed from time to time by
resolution passed by a majority of the Board of Directors. The Directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected at
the annual meeting of stockholders, and shall hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal.
SECTION 2. Removal, Vacancies and Additional Directors. Any Director
may resign at any time upon written notice to the Corporation. The entire Board
of Directors or any individual Director may be removed only for cause and only
at a stockholders' meeting called for that purpose by the affirmative vote of
the holders of at least two-thirds of the shares entitled to vote at an election
of such Director or Directors. Vacancies caused by any such removal and not
filled by the stockholders at the meeting at which such removal shall have been
made, or any vacancy caused by the death or resignation of any Director or for
any other reason, and any newly created directorship resulting from any increase
in the authorized number of Directors, may be filled by the affirmative vote of
a majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal. When one or more Directors shall resign effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as herein provided in
connection with the filling of other vacancies.
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SECTION 3. Place of Meeting. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every Director at least
five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the President, the Chairman of the
Board or by any two of the Directors then in office. Notice of the day, hour and
place of holding of each special meeting shall be given by mailing the same at
least two days before the meeting or by causing the same to be transmitted by
telegraph, cable or wireless at least one day before the meeting to each
Director. Unless otherwise indicated in the notice thereof, any and all business
other than an amendment of these Bylaws may be transacted at any special
meeting, and an amendment of these Bylaws may be acted upon if the notice of the
meeting shall have stated that the amendment of these Bylaws is one of the
purposes of the meeting. At any meeting at which every Director shall be
present, even though without any notice, any business may be transacted,
including the amendment of these Bylaws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this
Article II, a majority of the members of the Board of Directors in office (but
in no case less than one-third of the total number of Directors nor less than
two Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present, a
majority of those present may adjourn the meeting from time to time.
SECTION 7. Organization. The Chairman of the Board shall preside at all
meetings of the Board of Directors. In the absence of the Chairman, an acting
Chairman shall be elected from the Directors present to preside at ouch meeting.
The Secretary of the Corporation shall act as Secretary of all meetings of the
Directors; but in the absence of the Secretary, the Chairman may appoint any
person to act as Secretary of the meeting.
SECTION 8. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a
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majority of the whole Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and the
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
these Bylaws; and unless such resolution, these By-laws, or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted
by the Certificate of Incorporation or by these Bylaws, the members of the Board
of Directors or any committee designated by the Board, may participate in a
meeting of the Board or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting.
Unless otherwise restricted by the Certificate of Incorporation or by these
Bylaws, any action required or permitted to be-taken at any meeting of the Board
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
ARTICLE III
OFFICERS
SECTION 1. Officers. The officers of the Corporation may be a
President, one or more Vice Presidents, a Secretary and a Treasurer, and such
additional officers, if any, as shall be elected by the Board of Directors
pursuant to the provisions of Section 6 of this Article III. The President, one
or more Vice Presidents, the Secretary and the Treasurer shall be elected by the
Board of Directors at its first meeting after each annual meeting of the
stockholders. The failure to hold such election shall not of itself terminate
the term of office of any officer. All officers shall hold office at the
pleasure of the Board of Directors. Any officer may resign at any time upon
written notice to the Corporation. Officers may, but need not, be Directors. Any
number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them. Any vacancy caused by the death of any officer,
his resignation, his removal, or otherwise, may be filled by the Board of
Directors, and any officer so elected shall hold
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office at the pleasure of the Board of Directors. In addition to the powers and
duties of the officers of the Corporation as set forth in these Bylaws, the
officers shall have such authority and shall perform such duties as from time to
time may be determined by the Board of Directors.
SECTION 2. Powers and Duties of the Chief Executive Officer. Subject to
the control of the Board of Directors, the Chief Executive Officer shall have
general charge and control of all of its business and affairs and shall have all
powers and shall perform all duties incident to the office of the Chief
Executive Officer. He shall preside at all meetings of the stockholders and at
all meetings of the Board of Directors and shall have such other powers and
perform such other duties as may from time to time be assigned to him by these
Bylaws or the Board of Directors.
SECTION 3. Powers and Duties of the President. Subject to the control
of the Board of Directors or the direction of the Chief Executive Officer, the
President shall have general charge and control of all its business and affairs
and shall have all powers and shall perform all duties incident to the office of
President. He shall have such other powers and perform such other duties as may
from time to time be assigned to him by these Bylaws, the Board of Directors or
the Chief Executive Officer.
SECTION 4. Powers and Duties of the Vice Presidents. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such other
duties as may from time to time be assigned to him by these Bylaws or by the
Board of Directors, the President or the Chief Executive Officer.
SECTION 5. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the President or the
Chief Executive Officer shall authorize and direct; he shall have charge of the
stock certificate books, transfer books and stock ledgers and such other books
and papers as the Board of Directors, the President or the Chief Executive
Officer shall direct, all of which shall at all reasonable times be open to the
examination of any Director, upon application, at the office of the Corporation
during business hours; and he shall have all powers and shall perform all duties
incident to the office of Secretary and shall also have such other powers and
shall perform such other duties as may from time to time be assigned to him by
these Bylaws or by the Board of Directors, the President or the Chief Executive
Officer.
SECTION 6. Powers and Duties of the Chief Financial Officer. The Chief
Financial Officer shall have custody of, and when proper shall pay out, disburse
or otherwise dispose of, all funds and securities of the Corporation which may
have come into his hands; he may endorse on behalf of the Corporation for
collection checks, notes and other obligations and shall deposit the same to the
credit of the Corporation in such bank or banks or depositary or depositaries as
the Board of Directors may designate; he shall sign all receipts and vouchers
for payments made
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to the Corporation; he shall enter or cause to be entered regularly in the books
of the Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and whenever required by the
Board of Directors, the President or the Chief Executive Officer shall render
statements of such accounts; he shall, at all reasonable times, exhibit his
books and accounts to any Director of the Corporation upon application at the
office of the Corporation during business hours; and he shall have all powers
and shall perform all duties incident of the office of Chief Financial Officer
and shall also have such other powers and shall perform such other duties as may
from time to time be assigned to him by these Bylaws or by the Board of
Directors, the President or the Chief Executive Officer.
SECTION 7. Additional Officers. The Board of Directors may from time to
time elect such other officers (who may but need not be Directors), including
Chief Operating Officers, a Treasurer, a Controller, Assistant Treasurers,
Assistant Secretaries and Assistant Controllers, as the Board may deem advisable
and such officers shall have such authority and shall perform such duties as may
from time to time be assigned to them by the Board of Directors, the President
or the Chief Executive Officer. The Board of Directors may from time to time by
resolution delegate to any Assistant Treasurer or Assistant Treasurers any of
the powers or duties herein assigned to the Treasurer; and may similarly
delegate to any Assistant Secretary or Assistant Secretaries any of the powers
or duties herein assigned to the Secretary. Each of the Board of Directors, the
President or Chief Executive Officer of the Company is hereby authorized to
appoint and remove from time to time such officers of the Company, who will hold
positions of vice president or assistant vice president and who will not be
corporate officers but shall be administrative officers of the Company, as the
Board of Directors, the President or the Chief Executive Officer of the Company
may deem advisable and such officers shall have such authority and shall perform
such duties as may from time to time be assigned to them by the Board of
Directors, the President or the Chief Executive Officer of the Company.
SECTION 8. Giving of Bond by Officers. All officers of the Corporation,
if required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.
SECTION 9. Voting upon Stocks. Unless otherwise ordered by the Board of
Directors, the President or any Vice President shall have full power and
authority on behalf of the Corporation to attend and to act and to vote, or in
the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any corporation in which the Corporation may hold stock, and at
any such meeting shall possess and may exercise, in person or by proxy, any and
all rights, powers and privileges incident to the ownership of such stock. The
Board of Directors may from time to time, by resolution, confer like powers upon
any other person or persons.
SECTION 10. Compensation of Officers. The officers of the Corporation
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors.
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ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys,
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, quit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall he made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. Successful Defense. To the extent that a Director officer,
or an indemnified employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 of this Article IV or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
SECTION 3. Determination that Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the
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Corporation under Section 1 (unless ordered by a court) may be made by the
Corporation upon a determination that indemnification of the employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1. Any such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 4. Advance Payment of Expenses. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IV.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or proceeding.
SECTION 5. Survival: Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each such Director and officer and any repeal or modification
thereof shall not affect any right or obligation then existing with respect to
any state of facts then or previously existing or any action, suit, or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a contract right may not be modified
retroactively without the consent of such Director or officer. The
indemnification provided by this Article IV shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, officer, or indemnified employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. The
Corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses
including attorneys fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
SECTION 6. Severability. If this Article IV or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
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SECTION 7. Subrogation. In the event of payment of indemnification to a
person described in Section 1 of this Article IV, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
SECTION 8. No Duplication of Payments. The Corporation shall not be
liable under this Article IV to make any payment in connection with any claim
made against a person described in Section 1 of this Article IV to the extent
such person has otherwise received payment (under any insurance policy, by-law
or otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. Certificates For Shares of Stock. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction
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of any such certificate or the issuance of a new certificate in replacement
therefor. Thereupon the Corporation may cause to he issued to such person a new
certificate in replacement for the certificate alleged to have been lost, stolen
or destroyed. Upon the stub of every new certificate so issued shall be noted
the fact of such issue and the number, date and the name of the registered owner
of the lost, stolen or destroyed certificate in lieu of which the new
certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferred on the books of the Corporation by the holder thereof, in person
or by his attorney duly authorized in writing, upon surrender and cancellation
of certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article IV.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than sixty (60) nor less than ten (10) days before
the date of such meeting, or (ii) in the case of corporate action to be taken by
consent in writing without a meeting, prior to, or more than ten (10) days
after, the date upon which the resolution fixing the record date is adopted by
the Board of Directors, or (iii) more than sixty (60) days prior to any other
action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is delivered to the Corporation; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law. Subject to the
provisions of the Certificate of Incorporation, any dividends declared upon the
stock of the Corporation shall be payable on such date or dates as the Board of
Directors
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shall determine. If the date fixed for the payment of any dividend shall in any
year fall upon a legal holiday, then the dividend payable on such date shall be
paid on the next day not a legal holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be used
by any officer of the Corporation designated by the Board of Directors or the
President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be
such fiscal year as the Board of Directors from time to time by resolution shall
determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, counter-signed by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate. Checks, drafts, bills of exchange, acceptances,
notes, obligations and orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation with a
duly authorized depository by the Treasurer and/or such other officers or
persons as the Board of Directors from time to time may designate.
SECTION 2. Loans. No material loans and no renewals of any material
loans shall be contracted on behalf of the Corporation except as authorized by
the Board of Directors. When authorized to do so, any officer or agent of the
Corporation may effect loans and advances for the Corporation from any bank,
trust company or other institution or from any firm, corporation or individual,
and for such loans and advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the Corporation. When authorized so
to do, any officer or agent of the Corporation may pledge, hypothecate or
transfer, an security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, any and all stocks, securities
and other personal property at any time held by the Corporation, and to that end
may endorse, assign and deliver the same. Such authority may be general or
confined to specific instances.
SECTION 3. Contracts. Except as otherwise provided in these Bylaws or
by law or as otherwise directed by the Board of Directors, the President or any
Vice President shall be authorized to execute and deliver, in the name and on
behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages,
and other instruments, either for the Corporation's own account or in a
fiduciary or other capacity, and the seal of the Corporation, if appropriate,
shall be affixed thereto by any of such officers or the Secretary or an
Assistant Secretary. The Board of Directors, the President or any Vice President
designated by the Board of Directors may authorize any other officer, employee
or agent to execute and deliver, in the name and on behalf of the Corporation,
agreements, bonds, contracts, deeds, mortgages, and other instruments,
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either for the corporation's own account or in a fiduciary or other capacity,
and, if appropriate, to affix the seal of the Corporation thereto. The grant of
such authority by the Board or any such officer may be general or confined to
specific instances.
SECTION 4. Waivers of Notice. Whenever any notice whatever is required
to be given by law, by the Certificate of Incorporation or by these Bylaws to
any person or persons a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
SECTION 5. Offices Outside of Delaware. Except as otherwise required by
the laws of the State of Delaware, the Corporation may have an office or offices
and keep its books, documents and papers outside of the State of Delaware at
such place or places as from time to time may be determined by the Board of
Directors or the President.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended or repealed as specified in the
Certificate of Incorporation.
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EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three
Months Ended
Years Ended December 31, March 31,
--------------------------------------------------------
1993 1994 1995 1996
<S> <C> <C> <C> <C>
Income per share calculations:
Income before cumulative effect
of a change in accounting principle $ 235,188 $ 281,102 $ 1,765,118 $ 1,168,870
Cumulative effect of a change in
accounting principle, net of taxes - - - 890,814
----------------- ----------------- ---------------- ----------------
Net income $ 235,188 $ 281,102 $ 1,765,118 $ 278,056
================= ================= ================ ================
Weighted average number
of common and common
equivalent shares are as
follows:
Weighted average common
shares outstanding 3,183,839 8,658,532
Shares issued from assumed
exercise of options and
warrants (1) 211,161 317,800
----------------- ----------------- ---------------- ----------------
Weighted average number
of shares outstanding N/A N/A 3,395,000 8,976,332
================= ================= ================ ================
Income per common and common
equivalent shares:
Income before cumulative effect
of a change in accounting principle $ 0.52 $ 0.13
Cumulative effect of a change in
accounting principle, net of taxes - 0.10
----------------- ----------------- ---------------- ----------------
Net income N/A N/A $ 0.52 $ 0.03
================= ================= ================ ================
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- - -----------------------------------------------
(1) Shares issued from assumed exercise of options and warrants include the
number of incremental shares which would result from applying the "treasury
stock method" for options and warrants, APB 15, paragraph 38 and Staff
Accouting Bulletin No. 83.
<PAGE>
Exhibit 18.1
May 13, 1996
Moovies, Inc.
Greenville, South Carolina
Gentlemen:
We have been furnished with a copy of Form 10-Q of Moovies, Inc. for the three
months ended March 31, 1996, and have read the Company's statements contained
in Note 2 to the condensed consolidated financial statements included therein.
As stated in Note 2, the Company changed its method of accounting for
amortization of videocassette rental inventory and states that the newly
adopted accounting principle is preferable in the circumstances because the
Company believes accelerating expense recognition for new release videocassettes
during the first four months more closely matches the typically higher revenue
generated following a title's release, and believes $15 represents a reasonable
average carrying value for tapes to be rented or sold after four months and
$6 represents a reasonable salvage value for all tapes after 36 months. In
accordance with your request, we have reviewed and discussed with Company
officials the circumstances and business judgment and planning upon which the
decision to make this change in the method of accounting was based.
We have not audited any consolidated financial statements of Moovies, Inc.
as of any date or for any period subsequent to December 31, 1995, nor have we
audited the information set forth in the aforementioned Note 2 to the
condensed consolidated financial statements; accordingly, we do not express an
opinion concerning the factual information contained therein.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes of
Moovies, Inc.'s compliance with the requirements of the Securities and Exchange
Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
Very truly yours,
KPMG Peat Marwick LLP
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,570,084
<SECURITIES> 0
<RECEIVABLES> 1,737,596
<ALLOWANCES> 0
<INVENTORY> 2,390,047
<CURRENT-ASSETS> 12,632,014
<PP&E> 17,126,035
<DEPRECIATION> 6,009,204
<TOTAL-ASSETS> 72,557,289
<CURRENT-LIABILITIES> 25,812,208
<BONDS> 3,698,356
0
0
<COMMON> 8,659
<OTHER-SE> 37,732,598
<TOTAL-LIABILITY-AND-EQUITY> 37,741,257
<SALES> 2,358,658
<TOTAL-REVENUES> 19,316,061
<CGS> 1,537,095
<TOTAL-COSTS> 14,356,111
<OTHER-EXPENSES> 2,689,929
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321,947
<INCOME-PRETAX> 1,948,074
<INCOME-TAX> 779,204
<INCOME-CONTINUING> 1,168,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 890,814
<NET-INCOME> 278,056
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
