-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tzb5RLiGJi+9o3Z6syJKsd/IUhjhVQ6bqzvyiaXyJX1mJDFcbkMt5Pi8NH0TNVy9 F7L/dR84PMuhEH3QE9sULA== 0000912057-99-005994.txt : 19991117 0000912057-99-005994.hdr.sgml : 19991117 ACCESSION NUMBER: 0000912057-99-005994 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYDALL INC /DE/ CENTRAL INDEX KEY: 0000060977 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 060865505 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07665 FILM NUMBER: 99754301 BUSINESS ADDRESS: STREET 1: ONE COLONIAL RD STREET 2: P O BOX 151 CITY: MANCHESTER STATE: CT ZIP: 06045-0151 BUSINESS PHONE: 2036461233 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL BOARD CO DATE OF NAME CHANGE: 19700115 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER: 1-7665 ------------------------ LYDALL, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-0865505 (State or Other Jurisdiction (I.R.S. Employer Identification No.) of Incorporation or Organization) ONE COLONIAL ROAD, P.O.B. 151, 06045-0151 MANCHESTER, CONNECTICUT (zip code) (Address of principal executive offices)
(860) 646-1233 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. ______ Common stock $.10 par value per share. Total Shares outstanding November 11, 1999 15,681,328 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LYDALL, INC. INDEX
PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets................. 3 Consolidated Condensed Statements of Net Income and Comprehensive Income.................................. 4-5 Consolidated Condensed Statements of Cash Flows....... 6 Notes to Consolidated Condensed Financial Statements............................................ 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 11-13 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................... 13 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K.................. 14 Signature................................................... 15
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 3,268 $ 2,254 Accounts receivable, net.................................. 53,027 48,609 Inventories: Finished goods.......................................... 9,933 10,303 Work in process......................................... 10,865 8,859 Raw materials........................................... 12,141 11,003 LIFO reserve............................................ (1,361) (1,216) -------- -------- Total inventories......................................... 31,578 28,949 Taxes receivable.......................................... -- 2,256 Prepaid expenses.......................................... 1,663 1,966 Deferred tax assets....................................... 7,159 6,785 -------- -------- Total current assets................................ 96,695 90,819 Property, plant and equipment, at cost...................... 181,006 172,485 Less accumulated depreciation............................... (71,290) (64,649) -------- -------- 109,716 107,836 Other assets, at cost, less amortization.................... 28,607 28,193 -------- -------- Total assets........................................ $235,018 $226,848 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft............................................ $ 2,689 $ -- Current portion of long-term debt......................... 7,140 2,340 Short-term borrowings..................................... -- 52,324 Accounts payable.......................................... 23,848 22,530 Accrued taxes............................................. 1,824 1,411 Accrued payroll and other compensation.................... 6,611 5,810 Other accrued liabilities................................. 16,478 15,494 -------- -------- Total current liabilities........................... 58,590 99,909 Deferred tax liabilities.................................... 9,964 10,726 Other long-term liabilities................................. 6,998 6,988 Long-term debt.............................................. 43,729 -- Contingencies Stockholders' equity: Preferred stock........................................... -- -- Common stock.............................................. 2,178 2,171 Capital in excess of par value............................ 39,092 38,697 Retained earnings......................................... 140,245 129,310 Accumulated other comprehensive income.................... (4,261) (71) -------- -------- 177,254 170,107 Less: treasury stock, at cost............................. (61,517) (60,882) -------- -------- Total stockholders' equity.......................... 115,737 109,225 -------- -------- Total liabilities and stockholders' equity................ $235,018 $226,848 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA)
THREE MONTHS ENDED SEPTEMBER 30, ----------------------- 1999 1998 -------- -------- (UNAUDITED) Net sales................................................... $76,834 $56,495 Cost of sales............................................... 57,694 40,166 ------- ------- Gross margin................................................ 19,140 16,329 Selling, product development and administrative expenses.... 13,511 11,353 ------- ------- Operating income............................................ 5,629 4,976 Other (income) expense: Investment income......................................... (18) (130) Interest expense.......................................... 701 262 Foreign currency transaction gain......................... (72) (127) Other..................................................... 26 175 ------- ------- 637 180 ======= ======= Income before income taxes.................................. 4,992 4,796 Income tax expense.......................................... 1,743 1,642 ------- ------- Net income.................................................. $ 3,249 $ 3,154 ======= ======= Basic earnings per common share............................. $ .21 $ .20 ------- ------- Weighted average common stock outstanding................... 15,733 15,688 Diluted earnings per common share........................... $ .21 $ .20 ------- ------- Weighted average common stock and equivalents outstanding... 15,848 15,941 Net income.................................................. $ 3,249 $ 3,154 ------- ------- Other comprehensive income, before tax: Foreign currency translation adjustments.................. 292 1,085 Unrealized loss on securities............................. -- (735) ------- ------- Other comprehensive income, before tax...................... 292 350 Income tax expense related to items of other comprehensive income.................................................... -- (122) ------- ------- Other comprehensive income, net of tax...................... 292 228 ------- ------- Comprehensive income........................................ $ 3,541 $ 3,382 ======= =======
See accompanying Notes to Consolidated Condensed Financial Statements. 4 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME (IN THOUSANDS EXCEPT PER-SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1999 1998 -------- -------- (UNAUDITED) Net sales................................................... $244,434 $172,281 Cost of sales............................................... 185,950 122,388 -------- -------- Gross margin................................................ 58,484 49,893 Selling, product development and administrative expenses.... 41,178 34,003 -------- -------- Operating income............................................ 17,306 15,890 Other (income) expense: Investment income......................................... (33) (530) Interest expense.......................................... 2,010 547 Foreign currency transaction gain......................... (1,082) (91) Other..................................................... (86) 7 -------- -------- 809 (67) -------- -------- Income before income taxes.................................. 16,497 15,957 Income tax expense.......................................... 5,561 5,403 -------- -------- Net income.................................................. $ 10,936 $ 10,554 ======== ======== Basic earnings per common share............................. $ .70 $ .66 -------- -------- Weighted average common stock outstanding................... 15,726 15,908 Diluted earnings per common share........................... $ .69 $ .65 -------- -------- Weighted average common stock and equivalents outstanding... 15,819 16,266 Net income.................................................. $ 10,936 $ 10,554 -------- -------- Other comprehensive loss, before tax: Foreign currency translation adjustments.................. (4,190) 977 Unrealized loss on securities............................. -- (1,397) -------- -------- Other comprehensive loss, before tax........................ (4,190) (420) Income tax benefit related to items of other comprehensive loss...................................................... -- 147 Other comprehensive loss, net of tax........................ (4,190) (273) -------- -------- Comprehensive income........................................ $ 6,746 $ 10,281 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. 5 LYDALL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1999 1998 --------- -------- (UNAUDITED) Cash flows from operating activities: Net income.................................................. $ 10,936 $ 10,554 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................ 9,006 6,846 Amortization............................................ 1,336 1,491 Loss on disposition of property, plant and equipment.... 192 383 Foreign currency transaction gain....................... (1,082) (91) Changes in operating assets and liabilities excluding effects from acquisitions: Accounts receivable................................... (5,678) 634 Taxes receivable...................................... 2,256 2,032 Inventories........................................... (877) (2,627) Other assets.......................................... (1,487) (120) Accounts payable...................................... 1,503 1,894 Accrued taxes......................................... 471 (85) Accrued payroll and other compensation................ 1,063 (2,377) Deferred income taxes................................. (968) (663) Other long-term liabilities........................... 40 (296) Other accrued liabilities............................. (1,178) (1,042) --------- -------- Total adjustments....................................... 4,597 5,979 --------- -------- Net cash provided by operating activities................... 15,533 16,533 --------- -------- Cash flows from investing activities: Acquisitions.............................................. (291) (16,889) Additions of property, plant, and equipment............... (14,086) (13,336) Purchase of investments, net.............................. -- (394) --------- -------- Net cash used for investing activities...................... (14,377) (30,619) Cash flows from financing activities: Cash overdraft............................................ 2,689 -- Long-term debt payments................................... (45,102) (3,244) Long-term debt proceeds................................... 82,380 -- Proceeds from short-term borrowings....................... 62,992 56,113 Payments of short-term borrowings......................... (102,712) (37,300) Issuance of common stock.................................. 402 929 Acquisition of common stock............................... (635) (9,899) --------- -------- Net cash provided by financing activities................... 14 6,599 --------- -------- Effect of exchange rate changes on cash..................... (156) 86 --------- -------- Increase (decrease) in cash and cash equivalents............ 1,014 (7,401) Cash and cash equivalents at beginning of period............ 2,254 8,891 --------- -------- Cash and cash equivalents at end of period.................. $ 3,268 $ 1,490 ========= ======== Supplemental Schedule of Cash Flow Information: Cash paid during the period for: Interest.................................................. $ 1,759 $ 476 Income taxes.............................................. 3,902 4,371 Non-cash transactions: Unrealized gains/losses on available-for-sale securities.............................................. -- 908 Reclassification between short and long term assets....... -- 904 Reclassification of deferred tooling revenue from inventory to other accrued liabilities.................. 2,949 --
See accompanying Notes to Consolidated Condensed Financial Statements. 6 LYDALL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The accompanying consolidated condensed financial statements include the accounts of Lydall, Inc. and its wholly owned subsidiaries. All financial information is unaudited for interim periods reported. All significant intercompany transactions have been eliminated in the consolidated condensed financial statements. Management believes that all adjustments, which include only normal recurring accruals, necessary to present a fair statement of the financial position and results of the periods have been included. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. This Form 10-Q should be read in conjunction with Lydall's Annual Report on Form 10-K for the year ended December 31, 1998. 2. Basic earnings per common share are based on net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are based on net income divided by the weighted average number of common shares outstanding during the period, including the effect of stock options and stock awards where such effect is dilutive.
FOR THE QUARTER ENDED FOR THE QUARTER ENDED SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 (UNAUDITED) (UNAUDITED) ------------------------------- ------------------------------- NET NET INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE ($000'S) (000'S) AMOUNT ($000'S) (000'S) AMOUNT -------- -------- --------- -------- -------- --------- Basic earnings per share....................... $ 3,249 15,733 $0.21 $ 3,154 15,688 $0.20 Effect of dilutive securities stock options.... -- 115 0.00 -- 253 0.00 ------- ------ ----- ------- ------ ----- Diluted earnings per share..................... $ 3,249 15,848 $0.21 $ 3,154 15,941 $0.20 ======= ====== ===== ======= ====== =====
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 (UNAUDITED) (UNAUDITED) ------------------------------- ------------------------------- NET NET INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE ($000'S) (000'S) AMOUNT ($000'S) (000'S) AMOUNT -------- -------- --------- -------- -------- --------- Basic earnings per share....................... $10,936 15,726 $0.70 $10,554 15,908 $0.66 Effect of dilutive securities stock options.... -- 93 (.01) -- 358 (.01) ------- ------ ----- ------- ------ ----- Diluted earnings per share..................... $10,936 15,819 $0.69 $10,554 16,266 $0.65 ======= ====== ===== ======= ====== =====
3. Options to purchase 704,331 shares and 630,716 shares of Lydall Common Stock for the year-to-date through September 30, 1999 and the comparable period in 1998, respectively, as well as 560,081 shares and 648,716 shares for the quarters ended September 30, 1999 and 1998, respectively, were not included in the computation of diluted earnings per share. These options were excluded because the exercise price was greater than the average market price of the Common Stock for each respective period, and therefore were antidilutive. 4. On July 14, 1999, Lydall, Inc. and certain subsidiaries entered into a $69 million credit facility with a group of five banking institutions. A Euro-denominated term loan of approximately $19 million, which is held in the name of Lydall's German subsidiary, bears an interest rate based on Euro LIBOR plus a percentage based on the negotiated ratios maintained by the parties to the agreement. The remaining $50 million is a revolving credit facility which is renewed every three years, on which $21 million is currently outstanding. Interest on the revolving credit facility is primarily based on US Dollar LIBOR plus a percentage based on negotiated ratios maintained by the parties to the agreement. 7 LYDALL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) As a result of entering into the new credit facility, the Company is bound by certain financial and non-financial covenants. As of September 30, 1999 the Company was in compliance with all covenants of the facility. 5. On December 30, 1998, a subsidiary of the Company acquired for cash all of the outstanding shares of Gerhardi and Cie GmbH and Co. KG ("Gerhardi"), a privately held German manufacturer of automotive components. Under the terms of the agreement and in consideration for Gerhardi's outstanding shares, the Company's subsidiary paid to Gerhardi a negotiated purchase price of $30.7 million and assumed Gerhardi's existing liabilities, net of cash, of approximately $26.5 million. The purchase price is subject to a post-closing net equity adjustment as defined in the agreement and has been allocated to the acquired assets on a preliminary basis. Lydall, Inc. funded the subsidiary's acquisition through interim borrowing on lines of credit. On July 14, 1999, Lydall converted the majority of the borrowings used to purchase Gerhardi to a Euro-denominated 5 year term loan in the name of Lydall Deutschland Holding GmbH. This acquisition was accounted for under the purchase method of accounting. The fair value of assets acquired exceeded the cost of the acquisition, and as a result, the Company reduced the appraised value of long-term assets by $9.1 million. The operating results of Gerhardi have been included in the Company's consolidated financial statements from the date of acquisition. The following table summarizes the unaudited consolidated pro forma information of Lydall, Inc., assuming that the acquisitions of Charter Medical, Ltd., Engineered Thermal Systems, Inc. ("ETSI"), and Gerhardi and Cie. GmbH and Co. KG ("Gerhardi") completed during 1998 had occurred on January 1, 1998.
FOR THE THREE MONTHS ENDED: IN THOUSANDS EXCEPT PER-SHARE DATA SEPTEMBER 30, 1998 ---------------------------------- ------------------ Sales....................................................... $76,607 Net income.................................................. $ 3,088 Basic earnings per common share............................. $ .20 Diluted earnings per common share........................... $ .19 -------
FOR THE NINE MONTHS ENDED: IN THOUSANDS EXCEPT PER-SHARE DATA SEPTEMBER 30, 1998 ---------------------------------- ------------------ Sales....................................................... $231,006 Net income.................................................. $ 10,269 Basic earnings per common share............................. $ .65 Diluted earnings per common share........................... $ .63 --------
6. In the mid-1980's, the United States Environmental Protection Agency ("EPA") notified a former subsidiary of the Company that it and other entities may be potentially responsible in connection with the release of hazardous substances at a landfill and property located adjacent to a landfill located in Michigan City, Indiana. The preliminary indication, based on the Site Steering Committee's volumetric analysis, is that the alleged contribution to the waste volume at the site of the plant once owned by a former subsidiary is approximately 0.434 percent of the total volume. The portion of the 0.434 percent specifically attributable to the former subsidiary by the current operator of the plant is approximately 0.286 percent. The EPA has completed its Record of Decision for the site and has estimated 8 LYDALL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) the total cost of remediation to be between $17 million and $22 million. Based on the alleged volumetric contribution of its former subsidiary to the site, and on the EPA's estimated remediation costs, Lydall's alleged total exposure would be less than $100 thousand, which has been accrued. There are over 800 potentially responsible parties ("prp") that have been identified by the Site Steering Committee. Of these, 38, not including the Company's former subsidiary, are estimated to have contributed over 80 percent of the total waste volume at the site. These prp's include Fortune 500 companies, public utilities, and the State of Indiana. The Company believes that, in general, these parties are financially solvent and should be able to meet their obligations at the site. The Company has reviewed Dun & Bradstreet reports on several of these prp's and, based on these financial reports, does not believe Lydall will have any material additional volume attributed to it for reparation of this site due to insolvency of other prp's. In June 1995, the Company and its former subsidiary were sued in the Northern District of Indiana by the insurer of the current operator of the former subsidiary's plant seeking contribution. In October 1997, the insurer made a settlement demand of $150,591 to the Company in exchange for a release of the Company's liability at the site and indemnification from the current operator against site-related claims. The Company executed a settlement agreement with the insurer and current operator for a full site release; however, the current operator subsequently backed out of the agreement. In June 1998, a stipulation for dismissal signed by all parties was filed to end current litigation until the total liability at the site is defined. Management believes the ultimate disposition of this matter will not have a material adverse effect upon the Company's consolidated financial position, results of operations, or cash flows. By letter dated July 13, 1998, Lydall Eastern, Inc., a subsidiary of Lydall, Inc. ("Lydall Eastern"), was identified as a "potentially responsible party" by the EPA in connection with the claimed release or threat of release of hazardous substances at a site known as the Rogers Fibre Mill in Buxton, Maine (the "site"). Lydall Eastern merged with the owner and operator of a fiberboard mill at the site whose ownership dated back to approximately 1912. Lydall Eastern ceased operation at the site in 1980. In 1982, Lydall Eastern conveyed its interest in the site. The EPA is spending public funds to investigate and take action with respect to the site. The EPA likely will seek to recover the funds it has spent, and will spend, at the site from potentially responsible parties, including Lydall Eastern. At this time, it is not possible to predict what future liability or costs might be incurred by Lydall Eastern in connection with the site. 7. Lydall's subsidiaries manufacture and fabricate products with various distinct applications and provide logistics services. Lydall is organized and reports results of operations in four segments: Heat-Management, Filtration, Paperboard, Wovens and Other. For a full description of each segment, refer to the "Notes to Consolidated Financial Statements" reported in the Company's 1998 Annual 9 LYDALL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) Report on Form 10-K. The tables below present revenues and operating income by segment for the three months and nine months ended September 30, 1999 and 1998.
IN THOUSANDS HEAT RECONCILING CONSOLIDATED FOR THE THREE MONTHS ENDED MANAGEMENT FILTRATION PAPERBOARD WOVENS OTHER ITEMS TOTALS - -------------------------- ---------- ---------- ---------- -------- -------- ----------- ------------ (UNAUDITED) September 30, 1999 Sales................ $ 39,531 $14,566 $10,943 $ 1,048 $11,755 $(1,009) $ 76,834 Operating income (loss)............. $ 3,478 $ 1,301 $ 150 $ (264) $ 1,620 $ (656) $ 5,629 -------- ------- ------- ------- ------- ------- -------- September 30, 1998 Sales................ $ 19,111 $14,681 $10,094 $ 1,326 $11,618 $ (335) $ 56,495 Operating income (loss)............. $ 1,539 $ 1,839 $ 851 $ (668) $ 1,328 $ 87 $ 4,976 -------- ------- ------- ------- ------- ------- --------
IN THOUSANDS HEAT RECONCILING CONSOLIDATED FOR THE NINE MONTHS ENDED MANAGEMENT FILTRATION PAPERBOARD WOVENS OTHER ITEMS TOTALS - ------------------------- ---------- ---------- ---------- -------- -------- ----------- ------------ (UNAUDITED) September 30, 1999 Sales................ $129,769 $43,984 $32,630 $ 2,660 $38,269 $(2,878) $244,434 Operating income (loss)............. $ 8,157 $ 4,716 $ 1,709 $ (798) $ 4,593 $(1,071) $ 17,306 -------- ------- ------- ------- ------- ------- -------- September 30, 1998 Sales................ $ 59,303 $43,060 $30,285 $ 4,818 $36,356 $(1,541) $172,281 Operating income (loss)............. $ 7,486 $ 4,668 $ 1,933 $(1,926) $ 3,016 $ 713 $ 15,890 -------- ------- ------- ------- ------- ------- --------
8. In June of 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. This statement is effective for fiscal years beginning after June 15, 2000. As of September 30, 1999, the Company had one interest rate swap and one forward currency contract outstanding. Lydall is currently evaluating the effect on the Company's consolidated financial position, results of operations, comprehensive income, and cash flows as a result of implementing this pronouncement. 9. Net income for the quarter ended September 30, 1999 includes an adjustment related to conforming certain accounting policies of Gerhardi to those of Lydall. The adjustment, amounting to approximately $200 thousand, relates to the capitalization of certain items expensed by Gerhardi during the six-month period ended June 30, 1999, which, according to Lydall's accounting policy, should have been capitalized. This adjustment, which is reflected in the third quarter results of operations, does not have a significant impact on Lydall's results of operations for the nine-month period ended September 30, 1999, does not change the trend in reported earnings for 1999 and is not expected to have a significant effect on Lydall's earnings for 1999. Additionally, sales and cost of sales for the quarter ended September 30, 1999 have been reduced by $1.9 million for intercompany transactions which occurred in the first half of 1999 and were not eliminated in the results of operations for the period ended June 30, 1999. This adjustment had no impact on reported earnings for the third quarter of 1999. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, (IN THOUSANDS) 1999 1998 - -------------------------------------------------- ---------------------- ---------------------- Net sales........................................... $ 76,834 100.0% $ 56,495 100.0% Cost of sales..................................... 57,694 75.1 40,166 71.1 -------- ----- -------- ----- Gross margin........................................ 19,140 24.9 16,329 28.9 Selling, product development and administrative expenses........................................ 13,511 17.6 11,353 20.1 -------- ----- -------- ----- Operating income.................................... 5,629 7.3 4,976 8.8 Other expense..................................... 637 0.8 180 0.3 -------- ----- -------- ----- Income before income taxes.......................... 4,992 6.5 4,796 8.5 Income tax expense................................ 1,743 2.3 1,642 2.9 -------- ----- -------- ----- Net income.......................................... $ 3,249 4.2% $ 3,154 5.6%
FOR THE NINE MONTHS ENDED SEPTEMBER 30, (IN THOUSANDS) 1999 1998 - ------------------------------------------------------ ---------------------- ---------------------- Net sales............................................ $244,434 100.0% $172,281 100.0% Cost of sales...................................... 185,950 76.1 122,388 71.0 -------- ----- -------- ----- Gross margin......................................... 58,484 23.9 49,893 29.0 Selling, product development and administrative expenses......................................... 41,178 16.8 34,003 19.7 -------- ----- -------- ----- Operating income..................................... 17,306 7.1 15,890 9.3 Other (income) expense............................. 809 0.3 (67) 0.0 -------- ----- -------- ----- Income before income taxes........................... 16,497 6.8 15,957 9.3 Income tax expense................................. 5,561 2.3 5,403 3.2 -------- ----- -------- ----- Net income........................................... $ 10,936 4.5% $ 10,554 6.1%
NET SALES Net sales for the third quarter ended September 30, 1999 were $76.8 million compared with $56.5 million in the same quarter of 1998, representing a $20.3 million, or 36 percent, increase. The acquisition of Gerhardi accounted for $16.0 million of the sales increase in the third quarter of 1999 compared with the same quarter of 1998. Sales from operations other than Gerhardi increased in the third quarter of 1999 by $4.4 million or 8 percent from third quarter 1998. This increase was realized primarily in the Heat-Management and Paperboard segments offset by small declines in the Filtration and Wovens segments. Excluding $64.9 million in incremental 1999 sales from operations acquired during 1998, sales for the nine months ended September 30, 1999 have increased by $7.2 million, or 4 percent. The majority of these sales came from the addition of Gerhardi that is included in the Heat-Management segment. Consistent with the first six months of 1999, organic sales growth is predominantly derived from Heat-Management sales to the automotive market with new products such as Zero Clearance-TM- and dBLyte-TM-. 11 GROSS MARGIN Gross margin in the third quarter of 1999 was 24.9 percent compared with 28.9 percent in the third quarter of 1998. Excluding Gerhardi, gross margin for the third quarter 1999 declined to 27.6 percent. During the third quarter there was a deterioration in the price-to-cost ratio mainly in our Paperboard segment. In addition, changes in sales mix in the Heat-Management segment also had a negative impact. Cost reduction actions have been taken in the fourth quarter within that segment to reduce fixed overhead costs which will benefit the Company in the first quarter of 2000. For the nine months ended September 30, 1999, gross margin was 23.9 percent and, excluding Gerhardi, it was 28.3 percent. This compares to 29.0 percent for the nine months ended September 30, 1998. SELLING, PRODUCT DEVELOPMENT AND ADMINISTRATIVE EXPENSES Selling, product development and administrative expenses in the third quarter of 1999 increased by $2.2 million, or 19.0 percent, over the third quarter of 1998 primarily due to the costs added with the acquisition of Gerhardi. However, selling, product development and administrative expenses were 17.6 percent of sales in the third quarter of 1999, down from 20.1 percent in the same period a year ago. For the nine months ended September 30, 1999, selling, product development and administrative expenses were $41.2 million compared to $34.0 million for the same period in the prior year, representing an increase of $7.2 million, or 21 percent. This increase was also primarily due to costs at acquired businesses. As a percent of sales, selling, product development, and administrative expenses delined from 19.7 percent in the nine months ended September 30, 1998 to 16.8 percent in the comparable period of 1999. INTEREST EXPENSE Interest expense in the third quarter of 1999 was $701 thousand compared with $262 thousand in the same quarter 1998. For the nine months ended September 30, 1999 interest expense was $2.0 million compared to $547 thousand in the same period in the prior year. The increase in interest expense is mainly attributable to debt incurred to finance acquisitions completed in 1998 and to fund capital expenditures. FOREIGN CURRENCY TRANSACTION GAIN In the first quarter of 1999 the Company recorded a foreign currency transaction gain of $1.4 million due to the appreciation in the dollar against the Euro since January. The gain related to the portion of the Gerhardi purchase price funded from domestic credit lines denominated in Euros. The loan, which was paid in full in June of 1999, was hedged with a forward contract early in the second quarter. Foreign currency transaction gains and losses were not significant in the second and third quarters. It is not Lydall's policy to enter into foreign currency denominated transactions for speculative purposes. As a result, transaction gains such as this are not expected to recur. LIQUIDITY AND CAPITAL RESOURCES Operating cash flow increased 20 percent to $9.4 million in the third quarter of 1999. For the nine months ended September 30, 1999 operating cash flow totaled $28 million, an increase of 15 percent from the same period in 1998. During the third quarter of 1999 the Company borrowed an additional $7.0 million on foreign lines of credit and its new credit facility. Operating cash flow and borrowings in the third quarter were used primarily to fund capital expenditures and working capital requirements. 12 Lydall, Inc. and certain subsidiaries entered into a $69 million credit facility with a group of five banking institutions in the third quarter. The facility is comprised of a Euro-denominated term loan of approximately $19 million and a $50 million revolving credit facility which is renewed every three years. ACCOUNTING STANDARDS In June of 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. It requires that all derivatives be recognized as either assets or liabilities on the balance sheet and that those instruments be measured at their fair value. The statement is effective for fiscal years beginning after June 15, 2000. At September 30, 1999, the Company had one interest rate swap and one forward currency contract outstanding. Lydall is currently evaluating the effect on the Company's consolidated financial position, results of operations, comprehensive income, and cash flows as a result of implementing this pronouncement. YEAR 2000 The Company has satisfactorily completed testing of all major systems in a simulated environment on and around sensitive Year 2000 dates. Date sensitive components of machinery and equipment have been reviewed and remediation of any non-compliant parts is essentially complete. The Company has examined information from all major customers and suppliers and has not identified any significant Year 2000 concerns. Interaction with customers and suppliers will continue through year-end to monitor for any potential interruptions that could result from Year 2000 issues. Despite these efforts, the Company can provide no assurance that all customer and vendor Year 2000 compliance plans will be successfully completed to avoid possible interruptions. All operations of the Company have been charged with establishing contingency plans for possible utility, logistic, supply chain and other interruptions. This process will continue through the end of the year and will be adapted for changes in perceived risks as they arise. While the Company could fail to correct or identify a material Year 2000 issue which could result in an interruption in, or failure of, certain normal business activities or operations for an indefinite period of time, management feels that its efforts and the diversity of its businesses help to reduce the potential impact of non-compliance. The Company has capitalized approximately $11.1 million under its comprehensive program to upgrade information systems, called Lydall 2000, which is now complete. The Company does not track internal costs incurred for the Year 2000 project. These costs are principally internal payroll costs. Costs incurred during the fourth quarter of 1999 relating to the Year 2000 issue are estimated to be immaterial to results of operations and cash flows. FORWARD LOOKING INFORMATION In the interest of more meaningful disclosure, Lydall and its management make statements regarding the future outlook of the Company. The Company's actual results could differ materially from those set forth in forward-looking statements. Certain factors that might cause such a difference include risks and uncertainties detailed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in the Company's 1998 Annual Report on Form 10-K. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In July of 1999 Lydall entered into an interest rate swap agreement to convert the base rate component of its variable interest rate on a Euro denominated term-loan to a fixed rate of 3.45 percent to take advantage of favorable long-term borrowing rates in Europe. The addition of a credit spread, which varies as a function of Lydall's consolidated debt to EBITDA ratio, brought the all-in rate to 4.7 percent at 13 September 30, 1999. The weighted average variable interest rate for the third quarter of 1999 was 3.94 percent. The Company also had a forward contract outstanding for the purchase of Euro to make the first installment payment on the Euro denominated term loan on behalf of its subsidiary, Lydall Deutschland Holding GmbH. The forward contract settled in the fourth quarter resulting in no income statement effect. As of the date of this report, there are no other significant changes in market risks from those disclosed in Item 7a of Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1998 Annual Report on Form 10-K. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 3 (ii)--Lydall, Inc. By-laws, adopted October 27, 1999 27.1--Financial Data Schedule, filed herewith b. Reports on Form 8-K The Company did not file any reports on Form 8-K during the three months ended September 30, 1999. 14 SIGNATURE 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. LYDALL, INC. (Registrant) November 12, 1999 By: /s/ JOHN E. HANLEY ----------------------------------------- John E. Hanley VICE PRESIDENT, FINANCE AND TREASURER (PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER)
15 LYDALL, INC. INDEX TO EXHIBITS
EXHIBIT NO. - --------------------- 27.1 Financial Data Schedule.
16 EX-3 2 EXHIBIT 3 Exhibit 3 TABLE OF CONTENTS ARTICLE I: OFFICES AND FISCAL YEAR...............................................................................1 SECTION 1.01. REGISTERED OFFICE................................................................................1 SECTION 1.02. FISCAL YEAR......................................................................................1 ARTICLE II: NOTICE - WAIVERS - MEETINGS..........................................................................1 SECTION 2.01. NOTICE, WHAT CONSTITUTES.........................................................................1 SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS.........................................................2 SECTION 2.03. NOTICE OF MEETINGS OF STOCKHOLDERS...............................................................2 SECTION 2.04. ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND OTHER BUSINESS.....................................2 SECTION 2.05. WAIVERS OF NOTICE................................................................................5 SECTION 2.06. EXCEPTION TO REQUIREMENTS OF NOTICE..............................................................5 ARTICLE III: MEETINGS OF STOCKHOLDERS............................................................................6 SECTION 3.01. PLACE OF MEETING.................................................................................6 SECTION 3.02. ANNUAL MEETING...................................................................................6 SECTION 3.03. SPECIAL MEETINGS.................................................................................6 SECTION 3.04. QUORUM, MANNER OF ACTING AND ADJOURNMENT.........................................................6 SECTION 3.05. ORGANIZATION AND CONDUCT OF MEETINGS.............................................................7 SECTION 3.06. VOTING...........................................................................................8 SECTION 3.07. VOTING LISTS.....................................................................................9 SECTION 3.08. INSPECTORS OF ELECTION...........................................................................9 ARTICLE IV: PROCEDURES FOR ACTION BY WRITTEN CONSENT.............................................................10 SECTION 4.01. REQUEST FOR RECORD DATE.....................................................................10 SECTION 4.02 FORM OF CONSENT.............................................................................11 SECTION 4.03 DELIVERY OF CONSENT.........................................................................11 ARTICLE V: BOARD OF DIRECTORS....................................................................................12 SECTION 5.01. POWERS..........................................................................................12 SECTION 5.02. NUMBER..........................................................................................13 SECTION 5.03. TERM OF OFFICE..................................................................................13 SECTION 5.04. VACANCIES.......................................................................................13 SECTION 5.05. RESIGNATIONS....................................................................................13 SECTION 5.06. ORGANIZATION....................................................................................13 SECTION 5.07. PLACE OF MEETING................................................................................14 SECTION 5.08. REGULAR MEETINGS................................................................................14 SECTION 5.09. SPECIAL MEETINGS................................................................................14 SECTION 5.10. QUORUM, MANNER OF ACTING AND ADJOURNMENT.......................................................14 SECTION 5.11. COMMITTEES OF THE BOARD.........................................................................14 SECTION 5.12. COMPENSATION OF DIRECTORS.......................................................................15 SECTION 5.13. QUALIFICATIONS AND ELECTION OF DIRECTORS........................................................15 SECTION 5.14. VOTING OF STOCK.................................................................................15 SECTION 5.15. ENDORSEMENT OF SECURITIES FOR TRANSFER..........................................................16 ARTICLE VI: OFFICERS............................................................................................16 SECTION 6.01. NUMBER, QUALIFICATIONS AND DESIGNATION..........................................................16 SECTION 6.02. ELECTION AND TERM OF OFFICE.....................................................................16 SECTION 6.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS.....................................................16 SECTION 6.04. THE CHAIRMAN OF THE BOARD.......................................................................17 SECTION 6.05. THE PRESIDENT...................................................................................17 SECTION 6.06. THE SECRETARY...................................................................................17 SECTION 6.07. THE TREASURER...................................................................................17 SECTION 6.08. OFFICERS' BONDS.................................................................................18 SECTION 6.09. SALARIES........................................................................................18 ARTICLE VII: CERTIFICATES OF STOCK, TRANSFER, ETC...............................................................18 SECTION 7.01. FORM AND ISSUANCE..............................................................................18 SECTION 7.02. TRANSFER........................................................................................19 SECTION 7.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES...............................................19 SECTION 7.04. RECORD HOLDER OF SHARES.........................................................................19 SECTION 7.05. DETERMINATION OF STOCKHOLDERS OF RECORD.........................................................19 ARTICLE VIII: GENERAL PROVISIONS................................................................................20 SECTION 8.01. DIVIDENDS.......................................................................................20 SECTION 8.02. CONTRACTS.......................................................................................20 SECTION 8.03. CORPORATE SEAL..................................................................................20 SECTION 8.04. CHECKS, NOTES, ETC..............................................................................20 SECTION 8.05. CORPORATE RECORDS...............................................................................21 SECTION 8.06. AMENDMENT OF BYLAWS.............................................................................21
BY-LAWS OF LYDALL, INC. (A DELAWARE CORPORATION) ARTICLE I OFFICES AND FISCAL YEAR SECTION 1.01. REGISTERED OFFICE. The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware until otherwise established by resolution of the Board of Directors, and a certificate certifying the change is filed in the manner provided by statute. SECTION 1.02. FISCAL YEAR. The fiscal year of the corporation shall end on the 31st day of December in each year. ARTICLE II NOTICE - WAIVERS - MEETINGS SECTION 2.01. NOTICE, WHAT CONSTITUTES. Whenever, under the provisions of the Delaware General Corporation Law ("DGCL") or the certificate of incorporation or these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by telephone or facsimile transmission to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the corporation, or in the case of directors, supplied to the corporation for the purpose of notice. If the notice is sent by mail, telegram or courier service, it shall be deemed to be given when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched, or in the case of facsimile transmission, when received. SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a regular meeting of the Board of Directors need not be given. Notice of every special meeting of the Board of Directors shall be given to each director in person or by telephone or in writing at least 24 hours (in the case of notice in person or by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegram, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board need be specified in a notice of the meeting. SECTION 2.03. NOTICE OF MEETINGS OF STOCKHOLDERS. Written notice of the place, date and hour of every meeting of the stockholders, whether annual or special, shall be given to each stockholder of record entitled to vote at the meeting not less than ten nor more than 60 days before the date of the meeting. Every notice of a special meeting shall state the purpose or purposes thereof. SECTION 2.04. ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND OTHER BUSINESS. (a) ANNUAL MEETINGS OF STOCKHOLDERS (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation's notice of meeting delivered pursuant to Section 2.03 of these Bylaws, (B) by and at the direction of the Board of Directors, or (C) by any stockholder for the Corporation who is entitled to vote at the meeting, who complied with the notice procedures set forth in clauses (2) and (3) of this paragraph (a) and who was a stockholder of record at the time such notice was delivered to the Secretary of the Corporation. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to paragraph (a)(1)(C) above, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER, that in the event the date the annual meeting is called for is a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder to be timely must be so delivered not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or public announcement of the date of the Annual Meeting was made, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of an Annual Meeting of stockholders commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. (b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a special meeting of stockholders as shall have been described in the Corporation's notice of meeting given pursuant to Section 2.03 of these Bylaws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board of Directors or (2) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as are specified in the Corporation's Notice of Meeting, if the stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. (c) GENERAL (1) Only persons who are nominated in accordance with the procedures set forth in this Section 2.04 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.04. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section and, if any proposed nomination or business is not in accordance with this Section (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicits (or is part of a group which solicits), or fails to so solicit (as the case may be), proxies in support of such stockholder's nominee in compliance with such stockholder's representation as required by this Section), to declare that such defective proposal or nomination shall be disregarded. Any decision by the Chairman of the meeting shall be conclusive and binding upon all stockholders of the corporation for any purpose. (2) For purposes of this Section 2.04, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). (3) Notwithstanding the foregoing provisions of this Section 2.04, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section. Nothing in this Section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. (d) CONTENTS OF STOCKHOLDER'S NOTICE FOR NOMINATIONS OF DIRECTORS. Any stockholder's notice required by this Section shall set forth as to each person whom the stockholder proposes to nominate for election or reelection as a Director (i) the name, age, business address and residence address of the person, (ii) the principal occupation and employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of Directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. Such stockholder's notice further shall set forth as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder and of such beneficial owner, as they appear on the Corporation's books, (ii) the class and number of shares of the capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, as to the stockholder giving the notice, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the Annual Meeting to nominate the person named in its notice, (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (1) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to elect the nominee and/or (2) otherwise solicit proxies from stockholders in support of such nomination, and (vi) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of Directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serving as a Director if elected. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Director of the Corporation. (e) CONTENTS OF STOCKHOLDER'S NOTICE FOR PROPOSED BUSINESS. Any stockholder's notice required by this Section shall set forth for each item of business that the stockholder proposes for consideration (i) a description of the business desired to be brought before the stockholder meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), (iii) the reasons for conducting such business at the stockholder meeting, (iv) any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (v) any other information relating to the stockholder, the beneficial owner, or proposed business that would be required to be disclosed in a proxy statement or other filing in connection with solicitations of proxies relating to the proposed item of business pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. Such stockholder's notice further shall set forth as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (i) the name and address of such stockholder as they appear on the Corporation's books and of such beneficial owner, (ii) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owners, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) pursuant to which the proposals are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the Annual Meeting to propose the items of business set forth in the notice, (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (1) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal and/or (2) otherwise solicit from stockholders in support of such proposal, and (vi) any other information relating to such stockholder, beneficial owner, or proposed business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of such proposal pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder. The Corporation may require the stockholder to furnish such other information as it may reasonably require to determine whether each proposed item of business is a proper matter for stockholder action. SECTION 2.05 WAIVERS OF NOTICE. (a) WRITTEN WAIVER. Whenever notice is required to be given under any provisions of the DGCL or the certificate of incorporation or these Bylaws, a written waiver, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice of such meeting. (b) WAIVER BY ATTENDANCE. Attendance of a person at a meeting, either in person or by proxy, shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. SECTION 2.06. EXCEPTION TO REQUIREMENTS OF NOTICE. (a) GENERAL RULE. Whenever notice is required to be given, under any provision of the DGCL or of the certificate of incorporation or these Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. (b) STOCKHOLDERS WITHOUT FORWARDING ADDRESSES. Whenever notice is required to be given, under any provision of the DGCL or the certificate of incorporation or these Bylaws, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a 12 month period, have been mailed addressed to such person at his address as shown on the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth the person's then current address, the requirement that notice be given to such person shall be reinstated. ARTICLE III MEETINGS OF STOCKHOLDERS SECTION 3.01. PLACE OF MEETING. All meetings of the stockholders of the corporation shall be held at such place within or without the State of Delaware as shall be designated by the Board of Directors in the notice of such meeting in accordance with Section 3.02 or 3.03. SECTION 3.02. ANNUAL MEETING. The Board of Directors may fix and designate the date and time of the annual meeting of the stockholders. At said meeting the stockholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. SECTION 3.03. SPECIAL MEETINGS. Special meetings of the stockholders of the corporation may be called at any time by a majority of the Board of Directors. The Board of Directors shall have the sole power to determine the date, time and place of any Special Meeting of stockholders and the business to be transacted at such meeting. The Board of Directors shall have the sole power to set a record date for the determination of stockholders entitled to vote at any Special Meeting. Nothing contained in this Section 3.03 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. SECTION 3.04. QUORUM, MANNER OF ACTING AND ADJOURNMENT. (a) QUORUM. The holders of a majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders except as otherwise provided by the DGCL, by the certificate of incorporation or by these Bylaws. (b) POSTPONEMENT, CANCELLATION AND ADJOURNMENT OF STOCKHOLDER MEETINGS. Any previously scheduled Annual or Special Meeting of the stockholders may be postponed, and any previously scheduled Annual or Special Meeting of the stockholders called by the Board may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders. Any meeting of stockholders, Annual or Special, may be adjourned solely by the chair of the meeting from time to time to reconvene at the same or some other time, date and place. The stockholders present at a meeting shall not have authority to adjourn the meeting. Notice need not be given of any such adjourned meeting if the time, date and place thereof are announced at the meeting at which the adjournment is taken and if the adjournment is for not more than 30 days. If the time, date and place are not so announced, the Secretary of the Corporation shall give written notice of the time, date and place of the adjourned meeting not less than ten days prior to the date of the adjourned meeting. At any adjourned meeting at which a quorum is present, the stockholders may transact any business, which might have been transacted at the original meeting. Once a share is represented for any purpose at a meeting, it shall be present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. A new record date must be set if the meeting is adjourned in a single adjournment to a date more than 120 days after the original date fixed for the meeting. If after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting consistent with the new record date. (c) MANNER OF ACTING. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote at the meeting on the election of directors. In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote and voting thereon shall be the act of the stockholders, unless the question is one upon which, by express provision of the applicable statute, the certificate of incorporation or these Bylaws, a different vote is required in which case such express provision shall govern and control the decision of the question. The stockholders present in person or by proxy at a duly organized meeting can continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum. SECTION 3.05. ORGANIZATION AND CONDUCT OF MEETINGS. At every meeting of the stockholders, the Chairman of the Board, if there be one, or in the case of a vacancy in the office or absence of the Chairman of the Board, the President shall act as chairman, and the secretary, or, in the absence of the secretary, an assistant secretary or in the absence of the secretary and the assistant secretaries, a person appointed by the chairman, shall act as secretary. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be determined by the chair of the meeting and announced at the meeting. The Board of Directors may adopt by resolution such rules, regulations, and procedures for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chair of any meeting of stockholders shall have the exclusive right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chair of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chair of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chair of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. SECTION 3.06. VOTING. (a) GENERAL RULE. Unless otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock having voting power held by such stockholder. (b) VOTING AND OTHER ACTION BY PROXY. (1) A stockholder may execute a written document authorizing another person or persons to act for the stockholder as proxy. Such execution may be accomplished by the stockholder or the authorized officer, director, employee or agent of the stockholder signing such document or causing his or her signature to be affixed to such document by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorize another person or persons to act for the stockholder as proxy by transmitting or authorizing the transmission of a telegram, facsimile, telephone call, electronic mail, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission if such telegram, facsimile, telephone call, electronic mail, or other means of electronic transmission sets forth or is submitted with information from which it can be determined that the telegram, facsimile, telephone call, electronic mail, or other electronic transmission was authorized by the stockholder. (2) No proxy shall be voted or acted upon after three years from its date unless the proxy provides for a longer period. (3) A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. SECTION 3.07. VOTING LISTS. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting. The list shall be arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting 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. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 3.08. INSPECTORS OF ELECTION. (a) APPOINTMENT. All elections of directors shall be by written ballot; the vote upon any other matter need not be by ballot. In advance of any meeting of stockholders' the Board of Directors may appoint one or more inspectors, who need not be stockholders' to act at the meeting and to make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the person's best ability. (b) DUTIES. The inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (c) POLLS. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the Polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (d) RECONCILIATION OF PROXIES AND BALLOTS. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information transmitted in accordance with section 3.06, ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b) shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. ARTICLE IV PROCEDURES FOR ACTION BY WRITTEN CONSENT SECTION 4.01. REQUEST FOR RECORD DATE. (a) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Section 4.01. Any person seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice addressed to the Secretary and delivered to the Corporation and signed by a stockholder of record, request that a record date be fixed for such purpose. The written notice shall contain at a minimum the information set forth in Section 4.01 (b) below. The Board of Directors shall have ten (10) days following the date of receipt of the notice to determine the validity of the request. Following the determination of the validity of the request, and (subject to Section 4.01(b) no later than ten (10) days after the date on which such request is received by the Corporation, the Board of Directors may fix a record date for such purpose which shall be no more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date such resolution is adopted. If the Board of Directors fails within ten (10) days after the date the Corporation receives such notice to fix a record date for such purpose, the record date shall be the day on which the first written consent is delivered to the Corporation in the manner described in Section 4.03 below unless prior action by the Board of Directors is required under the General Corporation Law of the State of Delaware (the "GCL"), in which event the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (b) Any stockholder's notice required by this Section 4.01 shall describe each action that the stockholder proposes to take by consent. For each such proposal, the notice shall set forth (i) the text of the proposal (including the text of any resolutions to be adopted by consents and the language of any proposed amendment to the Bylaws of the Corporation), (ii) the reasons for soliciting consent for the proposal, (iii) any material interest in the proposal held by the stockholder and the beneficial owner, if any, on whose behalf the action is to be taken, and (iv) any other information relating to the stockholder, the beneficial owner, or the proposal that would be required to be disclosed in filings in connection with the solicitation of proxies or consents pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. To the extent the proposed action by consent involves the election of Directors, the notice shall set forth as to each person whom the stockholder proposes to elect as a Director (i) the name, age, business address, residence address and nationality of the person, (ii) the principal occupation and employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in filings required to be made in connection with solicitations of proxies or consents for the election of Directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. In addition to the foregoing, the notice shall set forth as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the notice is given (i) the name and address of such stockholder as they appear on the Corporation's books, and the name and address of such beneficial owner, (ii) the class and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons relating to the proposed action by consent, (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (1) deliver a proxy statement and/or consent solicitation statement to holders of at least the percentage of the Corporation's outstanding capital stock required to effect the action by consent either to solicit consents or to solicit proxies to execute consents, and/or (2) otherwise solicit proxies or consents from stockholders in support of the action to be taken by consent, and (v) any other information relating to such stockholder and beneficial owner that would be required to be disclosed in filings required to be made in connection with solicitation of proxies or consents relating to the proposed action by consent pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. During the ten (10) day period following the date of the receipt of the notice required under Section 4.01(a), the Corporation may require the stockholder of record and/or beneficial owner requesting a record date for proposed stockholder action by consent to furnish such other information as it may reasonably require to determine the validity of the request for a record date. SECTION 4.02 FORM OF CONSENT. Every written consent purporting to take or authorize the taking of corporate action and/or related revocations (a "Consent") shall bear the date of signature of each stockholder who signs the Consent, and no Consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest date the Consent is delivered in the manner required by Section 2.07, Consents signed by a sufficient number of stockholders to take such action are so delivered to the Corporation. SECTION 4.03 DELIVERY OF CONSENT. A Consent shall be delivered to the Corporation by delivery to its registered office in the State of Delaware or to the Secretary of the Corporation at the Corporation's principal place of business. Delivery to the Corporation's registered office shall be made by hand or by certified or registered mail, return receipt requested. In the event of the delivery to the Corporation of a Consent, the Secretary of the Corporation shall provide for the safe-keeping of such Consent and shall promptly conduct such ministerial review of the sufficiency of the Consents and of the validity of the action to be taken by stockholder consent as the Secretary deems necessary or appropriate, including, without limitation, whether the holders of a number of shares having the requisite voting power to authorize or take the action specified in the Consent have given consent; PROVIDED, HOWEVER, that if the corporate action to which the Consent relates is the removal or replacement of one or more members of the Board of Directors, the Secretary of the Corporation shall promptly designate two persons, who shall not be members of the Board of Directors, to serve as Inspectors with respect to such Consent and such Inspectors shall discharge the functions of the Secretary of the Corporation under this Section 4.03. If after such investigation the Secretary or the Inspectors (as the case may be) shall determine that the Consent is valid and that the action therein specified has been validly authorized, that fact shall forthwith be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders, and the Consent shall be filed in such records, at which time the Consent shall become effective as stockholder action. In conducting the investigation required by this Section 4.03, the Secretary or the Inspectors (as the case may be) may, at the expense of the Corporation retain special legal counsel and any other necessary or appropriate professional advisors, and such other personnel as they may deem necessary or appropriate to assist them, and shall be fully protected in relying in good faith upon the opinion of such counsel or advisors. No action by written consent without a meeting shall be effective until such date as the Secretary or the Inspectors (as the case may be) certify to the Corporation that the Consents delivered to the Corporation in accordance with this Section 4.03 represent at least the minimum number of votes that would be necessary to take the action. To the extent the proposed action by consent involves the election of Directors, if such consent is less than unanimous, such action by written consent may be in lieu of holding an Annual Meeting only if all of the directorships to which Directors could be elected at an Annual Meeting held at the effective time of such action are vacant and are filled by such action. Nothing contained in Section 4.01, 4.02 or 4.03 shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any Consent or revocation thereof, whether before or after such certification by the Secretary or the Inspectors, or to take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). ARTICLE V BOARD OF DIRECTORS SECTION 5.01. POWERS. All powers vested by law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the Board of Directors. SECTION 5.02. NUMBER. Subject to the provisions of the certificate of incorporation, the Board of Directors shall consist of such number of directors as may be determined from time to time by resolution adopted by a vote of a majority of the entire Board of Directors. SECTION 5.03. TERM OF OFFICE. Directors of the corporation shall hold office until the next annual meeting of stockholders and until their successors shall have been elected and qualified, except in the event of death, resignation or removal. SECTION 5.04. VACANCIES. (a) Vacancies resulting from an increase in the number of directorships shall be filled by a vote of the majority of the shares entitled to vote in elections of Directors. Vacancies resulting from any other reason may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and a director so chosen shall hold office until the next annual election of the class for which such director shall have been elected and until a successor is duly elected and qualified. If there are no directors in office, then an election of directors may be held in the manner provided by statute. SECTION 5.05. RESIGNATIONS. Any director may resign at any time upon written notice to the chairman, president or secretary of the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation and, unless otherwise specified in the notice, the acceptance of the resignation shall not be necessary to make it effective. SECTION 5.06. ORGANIZATION. At every meeting of the Board of Directors, the Chairman of the Board, if there be one, or, in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following officers present in the order stated: the president, the vice chairman, if one has been appointed, the vice presidents in their order of rank and seniority, or a chairman chosen by a majority of the directors present, shall preside, and the secretary, or, in the absence of the secretary, an assistant secretary, or in the absence of the secretary and the assistant secretaries, any person appointed by the chairman of the meeting, shall act as secretary. SECTION 5.07. PLACE OF MEETING. Meetings of the Board of Directors, both regular and special, shall be held at such place within or without the State of Delaware as the Board of Directors may from time to time determine, or as may be designated in the notice of the meeting. SECTION 5.08. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held without notice at such time and place as shall be designated from time to time by resolution of the Board of Directors. SECTION 5.09. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman or by a majority of the Directors. SECTION 5.10. QUORUM, MANNER OF ACTING AND ADJOURNMENT. (a) GENERAL RULE. At all meetings of the board a majority of the total number of directors in office shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by the DGCL or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. (b) UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by the certificate of incorporation, these by-laws or the DGCL any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board. (c) Members of the Board may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. SECTION 5.11. COMMITTEES OF THE BOARD. (a) ESTABLISHMENT. The Board of Directors may, by resolution adopted by a majority of the entire board, establish one or more committees, each committee to consist of one or more directors. 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 and the alternate or alternates, if any, designated for such member, the member or members of the committee present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. (b) POWERS. Any such committee, to the extent provided in the resolution establishing such committee, shall have and may exercise all the power and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any By-law of the corporation. Such committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee so formed shall keep regular minutes of its meetings and report the same to the Board of Directors when required. (c) COMMITTEE PROCEDURES. The term "Board of Directors" or "board," when used in any provision of these Bylaws relating to the organization or procedures of or the manner of taking action by the Board of Directors, shall be construed to include and refer to any committee of the board. SECTION 5.12. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the certificate of incorporation, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 5.13. QUALIFICATIONS AND ELECTION OF DIRECTORS. (a) All directors of the corporation shall be natural persons of full age, but need not be residents of Delaware or stockholders of the corporation. Except in the case of vacancies, directors shall be elected by the stockholders (b) Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors. (c) Nominations of persons for election to the Board of Directors of the corporation may also be made by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in Section 2.04 SECTION 5.14. VOTING OF STOCK. Unless otherwise ordered by the Board of Directors, each of the Chairman of the Board, the president, and the principal accounting officer (as identified in the corporation's most recent report filed with the United States Securities and Exchange Commission) shall have full power and authority, on behalf of the corporation, to attend and to act and vote, in person or by proxy, at any meeting of the stockholders of any company in which the corporation may hold stock, and at any such meeting shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock which, as the owner thereof, the corporation might have possessed and exercised if present. The Board of Directors, by resolution adopted from time to time, may confer like powers upon any other person or persons. SECTION 5.15. ENDORSEMENT OF SECURITIES FOR TRANSFER. Each of the Chairman of the Board, the president, and the principal accounting officer shall have the power to endorse and deliver for sale, assignment or transfer certificates for stock, bonds or other securities, registered in the name of or belonging to the corporation, whether issued by the corporation or by any other corporation, government, state or municipality or agency thereof, and the Board of Directors from time to time may confer like power upon any other officer, agent or person by resolution adopted from time to time. Every such endorsement shall be countersigned by the treasurer or an assistant treasurer. ARTICLE VI OFFICERS SECTION 6.01. NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the corporation shall be chosen by the Board of Directors and shall be a president, one or more vice presidents, a secretary, a treasurer, and such other officers as may be elected in accordance with the provisions of section 6.03 of this Article. Any number of offices may be held by the same person. Officers may, but need not, be directors or stockholders of the corporation. The Board of Directors may elect from among the members of the board a Chairman of the Board and a vice Chairman of the Board. SECTION 6.02. ELECTION AND TERM OF OFFICE. The officers of the corporation, except as elected by delegated authority pursuant to section 6.03 of this Article, shall be elected annually by the Board of Directors, and each such officer shall hold office for a term of one year and until a successor is elected and qualified, or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. SECTION 6.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The Board of Directors may from time to time elect such other officers and appoint such committees, employees or other agents as it deems necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as are provided in these Bylaws, or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. SECTION 6.04. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all the meetings of the stockholders and of the Board of Directors, and shall have general supervision over the business and operations of the corporation, subject, however, to the control of the Board of Directors, and shall perform all duties incidental to his or her office which may be required by law and all such other duties as are properly required of him or her by the Board of Directors. He or She shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. In the absence or disability of the President, the Chairman shall perform the duties of and have the authority of the President. SECTION 6.05. THE PRESIDENT. The president shall, subject to the chairman, be the most senior executive, the Chief Executive Officer, of the corporation and shall assist the Chairman of the Board in the administration and operation of the corporation's business and general supervision of its policies and affairs. The president shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of stockholders and of the Board of Directors. The president shall perform such other duties as may from time to time be assigned to him by the Board of Directors or by the Chairman of the Board. SECTION 6.06. THE SECRETARY. The secretary, or an assistant secretary, shall attend all meetings of the stockholders and of the Board of Directors and shall record the proceedings of the stockholders and of the directors in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the corporation as required by law; shall be the custodian of the seal of the corporation and see that it is affixed to all documents to be executed on behalf of the corporation under its seal; and, in general, shall perform all duties incident to the office of secretary, and such other duties as may from time to time be assigned by the Board of Directors or the Chairman of the Board. SECTION 6.07. THE TREASURER. The treasurer, or an assistant treasurer, shall have or provide for the custody of the funds or other property of the corporation; shall collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the corporation shall deposit all funds in his or her custody as treasurer in such banks or other places of deposit as the Board of Directors may from time to time designate; whenever so required by the Board of Directors, shall render an account showing his or her transactions as treasurer and the financial condition of the corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors or the Chairman of the Board. SECTION 6.08. OFFICERS' BONDS. No officer of the corporation need provide a bond to guarantee the faithful discharge of the officer's duties unless the Board of Directors shall by resolution so require a bond in which event such officer shall give the corporation a bond (which shall be renewed if and as required) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of office. SECTION 6.09. SALARIES. The salaries of the officers and agents of the corporation elected by the Board of Directors shall be fixed from time to time by the Board of Directors. ARTICLE VII CERTIFICATES OF STOCK, TRANSFER, ETC. SECTION 7.01. FORM AND ISSUANCE. (a) ISSUANCE. The shares of the corporation shall be represented by certificates unless the Board of Directors shall by resolution provide that some or all of any class or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the corporation. Notwithstanding the adoption of any resolution providing for uncertificated shares, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice Chairman of the Board of Directors, or the president or vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary, representing the number of shares registered in certificate form. (b) FORM AND RECORDS. Stock certificates of the corporation shall be in such form as approved by the Board of Directors. The stock record books and the blank stock certificate books shall be kept by the secretary or by any agency designated by the Board of Directors for that purpose. The stock certificates of the corporation shall be numbered and registered in the stock ledger and transfer books of the corporation as they are issued. (c) SIGNATURES. Any of or all the signatures upon the stock certificates of the corporation may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar, before the certificate is issued, it may be issued with the same effect as if the signatory were such officer, transfer agent or registrar at the date of its issue. SECTION 7.02. TRANSFER. Transfers of shares shall be made on the share register or transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. SECTION 7.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. The Board of Directors may direct a new certificate of stock or uncertificated shares to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or the legal representative of the owner, to give the corporation a bond sufficient to indemnify against any claim that may be made against the corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate or uncertificated shares. SECTION 7.04. RECORD HOLDER OF SHARES. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. SECTION 7.05. DETERMINATION OF STOCKHOLDERS OF RECORD. (a) MEETINGS OF STOCKHOLDERS. 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, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, 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. 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 unless the Board of Directors fixes a new record date for the adjourned meeting. (b) DIVIDENDS AND OTHER LAWFUL ACTION. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action (other then stockholder action by written consent), the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VIII GENERAL PROVISIONS SECTION 8.01. DIVIDENDS. Subject to the restrictions contained in the DGCL and any restrictions contained in the certificate of incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the corporation. SECTION 8.02. CONTRACTS. Except as otherwise provided in these Bylaws, the Board of Directors may authorize any officer or officers including the chairman and vice Chairman of the Board of Directors, or any agent or agents, to enter into any contract or to execute or deliver any instrument on behalf of the corporation and such authority may be general or confined to specific instances. Any officer so authorized may, unless the authorizing resolution otherwise provides, delegate such authority to one or more subordinate officers, employees or agents, and such delegation may provide for further delegation. SECTION 8.03. CORPORATE SEAL. The corporation shall have a corporate seal, which shall have inscribed thereon the name of the corporation, the year of its organization and the word "Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. SECTION 8.04. CHECKS, NOTES, ETC. All checks, notes and evidences of indebtedness of the corporation shall be signed by such person or persons as the Board of Directors may from time to time designate. SECTION 8.05. CORPORATE RECORDS. (a) EXAMINATION BY STOCKHOLDERS. Every stockholder shall, upon written demand under oath stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business, for any proper purpose, the stock ledger, list of stockholders, books or records of account, and records of the proceedings of the stockholders and directors of the corporation, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. Where the stockholder seeks to inspect the books and records of the corporation, other than its stock ledger or list of stockholders, the stockholder shall first establish (1) that the stockholder has complied with the provisions of this section respecting the form and manner of making demand for inspection of such documents; and (2) that the inspection sought is for a proper purpose. Where the stockholder seeks to inspect the stock ledger or list of stockholders of the corporation and has complied with the provisions of this section respecting the form and manner of making demand for inspection of such documents, the burden of proof shall be upon the corporation to establish that the inspection sought is for an improper purpose. (b) EXAMINATION BY DIRECTORS. Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to the person's position as a director. SECTION 8.06. AMENDMENT OF BYLAWS. Except as otherwise provided herein, these Bylaws may be altered, amended or repealed or new Bylaws may be adopted, if notice thereof is contained in the notice of the meeting, either (1) by majority vote of the stockholders at a duly organized annual or special meeting of stockholders or (2) by vote of a majority of the entire Board of Directors at any regular or special meeting of directors. EX-27 3 EXHIBIT 27
5 1,000 9-MOS DEC-31-1999 JUL-01-1999 SEP-30-1999 3,268 0 52,065 (1,406) 31,578 96,695 181,006 71,290 235,018 58,590 50,869 0 0 2,178 113,559 235,018 244,434 244,434 185,950 185,950 (1,168) 35 2,010 16,497 5,561 10,936 0 0 0 10,936 0.70 0.69
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