10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the year ended December 31, 2002

o 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 1-9957

Diagnostic Products Corporation

(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 95-2802182
(IRS Employer
Identification No.)

5700 West 96th Street
Los Angeles, California 90045
(Address of principal executive offices)
Registrant’s telephone number: (310) 645-8200

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each class Common Stock, no par value	on which registered New York Stock Exchange

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
     [ YES  ü]    [NO  ]

     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  ü]    [NO  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
     [  ]

     The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $827,477,000 as of June 30, 2002.

     The number of shares of Common Stock, no par value, outstanding as of March 6, 2003, was 28,623,309.

Documents Incorporated by Reference

Portions of the proxy statement for the 2003 Annual Shareholders Meeting are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. CONTROLS AND PROCEDURES
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATION
EXHIBIT INDEX
Exhibit 3.2
Exhibit 21
Exhibit 23
Exhibit 99.1
Exhibit 99.2

PART I

ITEM 1. BUSINESS

     Diagnostic Products Corporation (“DPC’’ or the “Company’’) develops, manufactures, and markets immuno-diagnostic systems and immunochemistry kits, which are used throughout the world in hospital, reference and physicians’ office laboratories, as well as in veterinary, forensic, and research facilities.

     The test kits utilize state-of-the-art technology, derived from immunology and molecular biology, to obtain precise, rapid identification and measurement of medically significant chemical substances that are often present at infinitesimal concentrations. These include hormones, cytokines, vitamins, drugs, transport proteins, antibodies, and biochemical markers of viruses and other microorganisms.

     The main clinical applications of DPC’s immunoassays (test kits) relate to the diagnosis and management of thyroid, reproductive, and cardiac disorders; allergies, infectious diseases, anemia, diabetes, and certain types of cancer; bone metabolism disorders, and therapeutic drug administration. The testing is performed in vitro: that is, outside the body, in samples of blood, urine, or other bodily fluids and tissues.

     DPC’s IMMULITE^® systems consist of instrumentation and software for automating the Company’s immunoassays and for integrating this process with sample handling and data manipulation steps, to improve the accuracy, efficiency, and cost-effectiveness of in vitro diagnostic (IVD) testing in clinical laboratories, large and small.

     The Company, with manufacturing facilities in the United States, the United Kingdom, and China, markets its products through a national sales force and through a worldwide distribution network covering over 100 countries.

     Unless the context otherwise requires, the terms “DPC” and the “Company” include the Company’s consolidated subsidiaries. For information regarding forward-looking statements contained in this report and risks associated with the Company’s business, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward Looking Statements and Certain Risks.”

     DPC makes available free of charge on its internet website (www.dpcweb.com) its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments thereto, as soon as reasonably practicable after filing with the SEC.

Automated Laboratory Systems

     A systems provider, DPC designs and manufactures laboratory instruments and software to automate the performance of immunodiagnostic assays, facilitating rapid, accurate results, while reducing labor and reagent costs.

     The Company has two principal immunoassay platforms. DPC’s IMMULITE 2000 addresses the needs of high-volume laboratories, while the IMMULITE serves lower volume facilities and niche markets. At the end of 2002, over 5,700 IMMULITE and over 2,300 IMMULITE 2000 systems had been shipped.

     The original IMMULITE system was first introduced in 1993. Computer-driven, it uses a patented solid-phase wash technology and chemiluminescent detection method, which together are capable of measurements at exceptionally low concentrations, as demonstrated by DPC’s state-of-the-art “third generation” assays for TSH and PSA — key tests related to thyroid disorders and prostate cancer, respectively. The system is totally automated with respect to sample and reagent handling, incubation, washing, and substrate addition. DPC’s IMMULITE has the capacity for walk-away processing of up to 120 samples per hour, on a random access basis — meaning that it can perform any test, or combination of tests, on any patient sample at any time.

     In 2002, the Company ceased manufacturing the IMMULITE and began manufacturing the IMMULITE 1000. This system has essentially the same operational features and runs the same tests as the IMMULITE, but it utilizes updated operating software and is capable of performing certain dilutions on-board. In addition, it has a new exterior appearance. Going forward, the Company will refer to the IMMULITE 1000 as the IMMULITE.

     The IMMULITE 2000, DPC’s next generation system, was introduced in the third quarter of 1998. It has a throughput of up to 200 tests per hour, offering the medium- to high-volume laboratory increased efficiency in streamlining its testing workload. The IMMULITE 2000 can run for a full shift without having to replenish on-board supplies. This increased throughput allows DPC to participate in a higher volume segment of the market where the average reagent use per instrument exceeds that of the original IMMULITE. The IMMULITE 2000 includes advanced features such as primary tube sampling and a proprietary autodilution capability. The system can also be interfaced with robotic laboratory sample-handling systems and can be connected to the customer’s computer system for specification of the tests to be run on each sample, as well as for reporting and archiving results. Another innovative feature is its remote diagnostic capability that permits DPC’s service facility to access any IMMULITE

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2000 worldwide for the purpose of diagnosing system problems. Enhancements introduced in September 2001 made it possible for laboratories to perform fully automated in vitro allergy testing.

     In 2002, as in the previous year, the growth of DPC’s business and the Company’s role as an IVD systems provider for high-volume facilities was driven primarily by ongoing demand for the IMMULITE 2000.

     In the first quarter of 2002, the Company obtained distribution rights from Medical Electronic Systems of Israel to a sperm analyzer that DPC will market under the name Spermalite SQA-V. The Spermalite is a stand-alone, benchtop high-performance analyzer that provides rapid reliable semen analysis in less than 75 seconds.

     In 2003, DPC expects to launch a major new instrument, the SMS (Sample Management System), that will provide additional flexibility to the IMMULITE 2000. The SMS will provide a bulk sample platform allowing as many as 220 samples to be loaded or unloaded at any one time. High-volume sample management improves workflow, flexibility, and productivity. The SMS will also eventually function as a universal robotic interface that can be linked to almost any of the workcell/automated systems available.

Immunodiagnostic Test Kits

     DPC manufactures over 400 immunodiagnostic test kits, exploiting several technologies and assay formats. The Company’s monoclonal antibody, molecular engineering, and other basic science capabilities play key roles in optimizing these immunoassays.

     Chemiluminescence-enhanced enzyme immunoassays are the basis for DPC’s automated IMMULITE and IMMULITE 2000 product lines. DPC also manufactures classic radioimmunoassays (RIAs), based on double-antibody, coated-tube, and IRMA formats, as well as enzyme immunoassays (EIAs) in microplate format. Allergy testing uses a proprietary liquid-allergen technology in tube and microplate formats; and it is now fully automated on the IMMULITE 2000. Many of DPC’s assays are available both as manual RIAs and as IMMULITE and IMMULITE 2000 assays.

     The automated, non-isotopic product lines represent the core of DPC’s business. IMMULITE and IMMULITE 2000 assays, instruments, and service represented 78%, 81%, and 85% of sales in 2000, 2001, and 2002, respectively, a trend that is expected to continue. In fiscal year 2002, DPC’s RIAs accounted for 9% of sales, while microplate allergy and other non-IMMULITE products accounted for 5%. (For additional information concerning sales by product line over the last three fiscal years, see “Notes to Consolidated Financial Statements — Note 12.”)

Breadth of Menu

     IMMULITE and IMMULITE 2000 are closed systems; they will not perform other manufacturers’ tests. Accordingly, a most important factor in the successful marketing of these systems is the ability to offer a broad menu of individual assays and assay groups, that is, tests which jointly represent decision-making panels for various disease states, such as thyroid disorders or infertility. Many of the relevant disease states represent either high-volume opportunities in the marketplace, or unique, under-served conditions that allow DPC to fill a market niche.

     During 2002, DPC released eight new assays on the IMMULITE and fourteen new assays on the IMMULITE 2000. As of December 31, 2002, DPC had 100 IMMULITE assays available in the international market, with 74 FDA-cleared for sale in the US. In addition, 70 out of a total of 85 of the most important assays on the second generation IMMULITE 2000 have been released for sale in the US.

     DPC believes that the IMMULITE and IMMULITE 2000 have the most extensive menus of any automated immunoassay systems on the market. The Company’s research and development activities continue to focus on expanding the menus, giving special attention to complete implementations of clinically important assay groups, as well as on developing new generations of instrumentation and software.

The Spectrum of Applications

     Major clinical applications of DPC’s immunoassays include the following areas, where DPC’s extensive and sometimes unique offerings on the IMMULITE and IMMULITE 2000 have enabled the Company to achieve a significant presence in various types of laboratories, large and small.

     Thyroid Disorders — For many hospital and clinical reference laboratories, thyroid testing is a mainstay of their routine immunoassay work. DPC offers a comprehensive spectrum of assays for assessing and monitoring thyroid status on both the IMMULITE and the IMMULITE 2000. The menus include not only assays for free and total thyroid hormones, but also assays with “third generation” capability for thyroid stimulating hormone (TSH) and assays for thyroid autoantibodies and other relevant analytes which are increasingly in demand. This combination represents a complete, high-quality solution for thyroid testing.

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     Therapeutic Drug Monitoring (TDM) — There is a large market for TDM assays: tests for the routine monitoring of certain therapeutic drugs. Nine of the ten most frequently monitored drugs are measured by immunoassay.

     Infertility, Pregnancy — DPC has been an innovator and longtime market leader in reproductive hormone testing, providing an unusually broad spectrum of assays for both routine and specialized laboratories, supplemented by studies to aid in the interpretation of results and software to facilitate data manipulation, when appropriate. Some of DPC’s assays reflect the special needs of fertility clinics and in vitro fertilization (IVF) centers. Others are important for the routine assessment of osteoporosis and hormone balance in postmenopausal women and aging men. DPC offers a comprehensive menu of immunoassays for maternal and fetal diagnosis, monitoring, and risk assessment. The Company’s growing menu relates to medical conditions in every phase of reproductive life in men, women, and children of all ages.

     Cancer — DPC has automated a large number of assays for “tumor markers” on the IMMULITE and IMMULITE 2000, more than any of our competitors. The Company has a number of unique offerings, including “third generation” assays capable of measuring the extremely low PSA concentrations encountered after radical prostatectomy. In partnership with Matritech, in 2002 DPC released the first automated assay for NMP22, a marker for bladder cancer.

     Infectious Diseases — Infectious disease testing is one of the fastest growing segments of the IVD market and one which has generally lagged behind in automation. DPC’s commitment in this area is reflected in its development of one of the broadest menus available on an automated platform; it includes some unique assays, e.g. for H. pylori, an organism responsible for stomach ulcers. In 2002, DPC received FDA approval for a total of 9 hepatitis B assays providing the most complete panel of automated assays available. In addition, the Company introduced assays for the Epstein-Barr virus and Chagas, further increasing its menu of infectious disease tests.

     Allergy — In vitro allergy testing, representing a worldwide market of approximately $200 million, has been dominated for the last 30 years by Pharmacia Corp. Traditionally, such testing has required special laboratory equipment and has been time- and labor-intensive, and somewhat error-prone due to the lack of full automation. With its patented liquid-allergen technology, DPC established itself as the second leading supplier of in vitro allergy test kits. In 2000, the Company introduced assays for selected allergy screening panels on the IMMULITE. Then, in September 2001, DPC introduced a broad spectrum of assays for individual allergens on the IMMULITE 2000, finally making it possible for laboratories to perform high-volume allergy testing along with other routine immunoassays on a fully automated system. The IMMULITE 2000 can provide tests for over 230 allergens, representing over 90% of allergy requests. DPC added 120 new allergens to the IMMULITE 2000 in 2002 and will continue to add assays in the future. As a complement to IMMULITE 2000 Allergy, DPC has developed a product line (AlaBLOT^®) of confirmatory Western blotting assays.

     Inflammatory Conditions — Cytokines, often referred to as “hormones of the immune system,” represent potentially important disease markers, which are being actively investigated in major centers throughout the world. In Europe and elsewhere, assays for clinically relevant cytokines are already in routine use, e.g. for the management of bacterial sepsis (blood poisoning) in intensive care units. DPC is the only company to offer a significant menu of cytokine assays in an automated format. Moreover, DPC offers some novel tests, having obtained, for example, exclusive rights from XOMA Ltd. to market an automated immunoassay for LBP (Lipopolysaccharide Binding Protein), a marker of inflammation reflecting systemic exposure to gram-negative bacteria.

     Cardiovascular Disease — This is the leading cause of morbidity and mortality in developed nations and represents a $300 million worldwide market, which continues to show very strong annual growth. Both on the IMMULITE and the IMMULITE 2000, DPC now offers the most comprehensive cardiac menu available on a single platform. The three principal assays required on an emergency basis due to their role in diagnosing acute myocardial infarction (Troponin I, CK-MB, and Myoglobin) have been implemented on the IMMULITE with Turbo software, which reduces the assay time to 15 minutes, along with other tests needed in an emergency room or intra-operative setting (HCG, PTH). Additional assays on DPC’s automated systems, including High Sensitivity CRP and Homocysteine, put the Company in an excellent position to address all aspects of cardiac testing, from diagnosis and patient management to risk assessment.

Research and Development Activities

     The Company devotes substantial resources to research and development to update and improve its existing products, as well as to develop new products and technologies. In addition to developing and adding allergy testing capabilities to the IMMULITE 2000, the Company’s research and development activities include the development of the next generation IMMULITE system and new operating software for both the IMMULITE and the IMMULITE 2000. R&D capabilities in the United States include fully staffed departments in organic synthesis, biochemistry,

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antisera/hybridoma, protein chemistry, molecular biology, and infectious disease, method development, instrumentation, software, and technology development. During the years ended December 31, 2000, 2001, and 2002, the Company spent $26,464,000, $31,447,000, and $36,817,000, respectively, on research and development.

     The Company is engaged in an aggressive development program for new instrument systems, including the Sample Management System, a robotic sample-handling device that enhances the functionality of the IMMULITE 2000; the IMMULITE 2500 (IMMULITE 2000XT), which incorporates the Turbo function into the IMMULITE 2000; the IMMULITE 3000, a very-high-throughput immunoassay system incorporating several new technologies to deliver optimal assay performance; and the IMMULITE 1500, a scaled-down version of the IMMULITE 3000. In addition, the Company continues to work in the area of molecular diagnostics.

Manufacturing and Service

     The Company’s principal test kit manufacturing facility is located in Los Angeles, California. Approximately 30% of test kit production is conducted at the EURO/DPC facility in the United Kingdom. The Company’s European manufacturing facilities enable the Company to improve its competitiveness in the European Economic Area (EEA) by minimizing import duties and freight charges. Certain kits are also manufactured by DPC in China.

     DPC’s instrument division in New Jersey designs and manufactures IMMULITE instrumentation and engages in software development. Component parts, such as computer hardware, are supplied by original equipment manufacturers. The Company provides a one-year warranty that covers parts and labor. Underwriter’s Laboratories Inc. (UL) list the IMMULITE systems. The Company’s and its distributors’ technical service personnel install new units, train customers in the use of the system, and provide maintenance and service for the instrumentation.

     The EURO/DPC Instrumentation Division in the United Kingdom manufactures certain components of the IMMULITE and IMMULITE 2000 instruments that are then assembled into the final instrument in New Jersey.

     DPC’s Los Angeles, New Jersey, and China facilities are International Standards Organization (ISO) 9001/9002 registered. Euro/DPC Limited, the Company’s wholly owned manufacturing subsidiary in Wales, was the first immunodiagnostics company in the world to be registered under British Standard (BS) 5750. EURO/DPC is also registered to ISO 9002 and the European EN 46002 standards.

     DPC provides technical support for all its products, including reagents, instruments, and software, via telephone and on-site service. In 2002 DPC introduced Real Time Service on the IMMULITE 2000 system. Real Time Service connects an installed IMMULITE instrument to DPC’s technical support department through a secure network connection to provide constant 24-hour monitoring and support. Should a particular system function begin to fail or degrade, an alert will be sent to a technical support representative.

Marketing and Sales

     The Company markets its products to hospital, clinical, forensic, research, reference, and veterinary laboratories, as well as doctors’ offices and U.S. government agencies. The Company markets its products in the United States directly to laboratories and hospitals through its own sales force. The Company sells to the U.S. doctors’ office market through independent distributors as well as through its own sales force. Sales personnel and distributors are trained to demonstrate the Company’s product line in the customer’s laboratory and are supported by the Company’s Los Angeles and New Jersey-based technical services departments.

     The Company’s products are sold on a worldwide basis through distributors in over 100 foreign countries. These distributors, including affiliated distributors, also sell other manufacturer’s products that are not directly competitive with the Company’s products. Foreign sales (including export sales, sales to non-consolidated foreign affiliates, and sales of consolidated subsidiaries) represented approximately 76% in 2000 and 72% in 2001 and 2002. Europe accounted for approximately 44% of total sales in 2000, 41% in 2001, and 40% in 2002. See Notes 5 and 12 of Notes to Consolidated Financial Statements for information regarding foreign operations.

     Sales of test kits to customers and distributors are made against individual purchase orders as well as through volume purchase arrangements. Products are shipped directly from the Company’s facilities in Los Angeles and Wales and are generally delivered domestically within 24 hours and overseas within 48 hours of receipt of order. The Company sells, leases, or rents the IMMULITE instrumentation to hospitals and reference laboratories that perform volume testing. The Company’s backlog at any date is usually insignificant and not a meaningful indicator of future sales.

     The Company’s foreign operations are subject to various risks, including exposure to currency fluctuations, political and economic instability, and trade restrictions. Because the Company’s consolidated foreign distributors’ sales are in the respective local currencies, the Company’s consolidated financial results are affected by foreign currency translation adjustments. In addition, the price competitiveness of the Company’s products abroad is

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impacted by the relative strength or weakness of the U.S. dollar. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of Notes to Consolidated Financial Statements.

Proprietary and Other Rights

     Substantially all of the Company’s products are based on proprietary technologies and know-how. The Company holds various U.S. and foreign patents, including patents on the washing process used in the IMMULITE system that expire in 2009 and patents on its novel liquid-based amplification methodology which forms the basis of the AlaSTAT product lines which expire in 2005. The Company also obtains licenses for chemical components and technologies used in certain of its assays.

     Patents that may be granted to others in the future could inhibit the Company’s expansion or entry into certain areas, or require it to pay royalty fees to do so. Because of rapid technological developments in the immunodiagnostic industry with concurrent extensive patent coverage and the rapid rate of issuance of new patents, certain of the Company’s products may involve controversy concerning infringement of existing patents or patents that may be issued in the future.

     The Company purchases certain chemical compounds that are key components in the IMMULITE system from Lumigen, Inc. and Tropix, Inc., the sole suppliers of these chemical compounds, pursuant to agreements that terminate in 2005. Tropix also supplies the Company with certain other chemical compounds for use in veterinary kits. Upon termination of these supply agreements, the Company will be required to enter into new supply agreements or use alternate technologies. If obtainable, such technology must have the same performance characteristics of the technology currently in use. The Company owns an 8% interest in Lumigen, Inc. and accounts for this interest using the equity method.

Government Regulation

     The Company’s business is affected by government regulations both in the United States and abroad, in particular Western Europe and Japan, aimed at containing the cost of medical services. These regulations have generally had the effect of inhibiting the growth rate of the immunodiagnostic industry. The Company believes that in vitro diagnostic (IVD) testing is an important tool for reducing health expenditures. By providing early diagnosis and therapy management, IVD tests can reduce the high costs of hospitalization, surgery, and recovery. In response to cost containment measures, hospitals, and laboratories have consolidated and have sought to increase productivity by replacing high cost labor with automated testing systems. The Company’s automated systems address these market needs. The Company also seeks to develop more rapid and sensitive tests, such as DPC’s Third Generation TSH assay, that can eliminate the need for redundant testing.

     Manufacturers of immunodiagnostic tests and other clinical products intended for use as human diagnostics are governed by FDA regulations as well as regulations of state agencies and foreign countries. A new in vitro diagnostic product that is “substantially equivalent’’ to one already on the market can generally be sold in the United States after it is cleared for marketing by the FDA. Most of the Company’s products fall within the “substantially equivalent” category. Certain medically critical in vitro diagnostic products and totally new in vitro diagnostic products, for which there are no equivalents on the market, must be approved by the FDA after in-depth review that normally takes about two years prior to marketing.

     The Company’s Los Angeles manufacturing facilities are licensed by the California Department of Health Services and must be operated in conformance with the FDA’s Good Manufacturing Practices governing medical devices. The Company is regulated by the California Department of Health Services with respect to its possession and use of radioactive substances and by the U.S. Drug Enforcement Agency with respect to the use and storage of controlled drugs and pharmaceuticals.

     Given the Company’s high proportion of sales to the European Union (EU) countries, the Company has undertaken the necessary steps to comply with the EU In Vitro Diagnostic Directive (IVDD). The Company was fully compliant with all relevant aspects of the EU IVDD on June 7, 2000 and therefore was qualified to apply the “CE Mark” to most of its IVD kits and instruments as mandated by the Directive. Many other countries outside of the EU have accepted the CE mark to fulfill their local requirements or are developing equivalent regulations. DPC is prepared to comply with these and future IVDD regulations.

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Competition

     The Company’s major competitors are broad-based health care companies such as Roche Diagnostics, Abbott Diagnostics (Abbott Laboratories), Bayer, Johnson & Johnson, Beckman Coulter, and Pharmacia/Upjohn (Sweden). The Company competes on a worldwide basis with a number of large corporations that sell diversified lines of products, including immunodiagnostic products, for laboratory, medical, and hospital use. The fact that these companies offer diversified products to the laboratories at times puts the Company at a competitive disadvantage.

     There are currently over 30 domestic suppliers of immunodiagnostic kits. The Company believes that competition in immunoassay testing is based on quality, service, product convenience, and price and that product innovation is an important source for change in market share.

     The principal competitive factors in automated systems are size of menu (the number of assays that can be performed on the system), ease of use, and price (equipment cost, service, and reagent cost). The Company’s IMMULITE system currently offers one of the widest menus of any automated system and the Company is focusing its development efforts on expanding this menu.

Employees

     As of December 31, 2002, the Company (including its consolidated subsidiaries) had 2,100 employees, including 739 in manufacturing, 353 in research and development, 724 in marketing and sales, and 284 in administration. None of the Company’s employees are represented by a labor union, and the Company considers its employee relations to be good. The Company has experienced no significant problems in recruiting qualified technical and operational personnel.

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ITEM 2. PROPERTIES

     The following is a list of significant properties owned and leased by the Company and its consolidated subsidiaries as of December 31, 2002:

Location	Size	Owned/Leased	Uses
Los Angeles, California	170,000 sq. ft	Owned	Being built-out for corporate offices, research and development, manufacturing, and sales
Los Angeles, California	116,000 sq. ft	Leased1	Corporate offices, manufacturing, warehousing, distribution, and research and development
Los Angeles, California	60,000 sq. ft	Owned	Adjacent to Corporate offices, manufacturing, and warehousing
Los Angeles, California	9,000 sq. ft	Leased	Sales offices
Los Angeles, California	32,000 sq. ft	Leased	Warehousing
Gorman, California	80 acres	Owned	Raw material processing
Flanders, New Jersey	88,000 sq. ft. on 26.382 acres	Owned2	Research, manufacturing, and distribution
Glyn Rhonwy, Wales, U.K.	110,000 sq. ft	Owned	Manufacturing and distribution
Paris, France	10,032 sq. ft	Leased	Distribution
São Paulo, Brazil	19,650 sq. ft	Leased	Distribution
Bad Nauheim, Germany	56,500 sq. ft	Owned	Distribution
Humbeek-Grimbergen, Belgium	5,000 sq. ft	Owned	Distribution
Breda, Netherlands	27,500 sq. ft	Owned	Distribution
Madrid, Spain	10,226 sq. ft	Leased	Distribution
Melbourne, Australia	15,500 sq. ft	Owned	Distribution
Tianjin, China	24,578 sq. ft	Owned	Manufacturing and distribution
Oslo, Norway	8,000 sq. ft	Owned	Distribution
Gotebörg, Sweden	11,970 sq. ft	Owned	Distribution

(1)	Lease expires in 2004. See “Item 13. Certain Relationships and Related Transactions”
(2)	This new facility (opened in December 2001) can be expanded to 150,000 sq. ft. to meet future needs.

     The lease for the Company’s principal facilities in Los Angeles expires at the end of 2004. The Company’s ability to expand its operations at these premises is limited. Therefore, in the first quarter of 2003 the Company purchased a 170,000 sq. ft. building on nine acres of land for approximately $22 million in cash. It is anticipated that the building will be ready for occupancy by the beginning of 2004. At that time, the Company will vacate its leased sales office, and as people are moved from the existing corporate offices, the leased warehouse space will no longer be needed.

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ITEM 3. LEGAL PROCEEDINGS

     The Company is not involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of the last fiscal year, no matter was submitted to a vote of the security holders.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock of the Company is listed on the New York Stock Exchange and traded under the symbol DP.

     The following table sets forth the quarterly high and low price of the Company’s Common Stock and quarterly dividends per share paid during 2002 and 2001. All share and per share amounts in this report have been adjusted to reflect a 2 for 1 stock split effective June 1, 2001.

	2002
	High		Low		Dividend
First Quarter	$	44.21	$	32.79	$	.06
Second Quarter		52.99		34.75		.06
Third Quarter		47.64		30.45		.06
Fourth Quarter		47.30		32.75		.06

	2001
	High		Low		Dividend
First Quarter	$	27.48	$	21.93	$	.06
Second Quarter		40.77		31.86		.06
Third Quarter		43.92		32.22		.06
Fourth Quarter		52.00		36.94		.06

As of March 13, 2003, the Company had 247 holders of record of its Common Stock.

ITEM 6. SELECTED FINANCIAL DATA

(In Thousands, except per Share Data)

Income Statement Data
	Year Ended December 31,
	2002		2001		2000		1999		1998
Sales	$	324,087	$	283,129	$	247,605	$	216,012	$	196,502
Net income		47,313		39,029		28,250		20,488		20,213
Earnings per share:
Basic		1.66		1.39		1.03		.75		.74
Diluted		1.60		1.32		1.00		.74		.73
Weighted average shares outstanding:
Basic		28,487		28,128		27,555		27,342		27,492
Diluted		29,628		29,474		28,149		27,542		27,762
Dividends per share	$	.24	$	.24	$	.24	$	.24	$	.24

Balance Sheet Data
	Year Ended December 31,
	2002		2001		2000		1999		1998
Working capital	$	152,649	$	117,695	$	104,813	$	88,799	$	81,001
Total assets		393,447		325,767		280,484		250,494		246,224
Shareholders’ equity		323,564		266,904		227,024		206,897		200,172

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements and Certain Risks

     Except for the historical information contained herein, this report and the following discussion in particular contain forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” and similar expressions) which are based upon Management’s current expectations and speak only as of the date made. These forward-looking statements are subject to risks, uncertainties, and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements. These risks and uncertainties include -

- our ability to successfully market new and existing products;

- our ability to keep abreast of technological innovations and successfully incorporate them into new products;

- our current dependence on sole suppliers for key chemical components in the IMMULITE assays;

- the risks inherent in the development and release of new products, such as delays, unforeseen costs, technical difficulties, and regulatory approvals;

- competitive pressures, including technological advances and patents obtained by competitors;

- environmental risks related to substances regulated by various Federal, State, and international laws;

- currency risks based on the relative strength or weakness of the U.S. dollar;

- domestic and foreign governmental health care regulation and cost containment measures;

- political and economic instability in certain foreign markets including trade restrictions;

- changes in accounting standards promulgated by the Financial Accounting Standards Board, the Securities and Exchange Commission, or the American Institute of Certified Public Accountants; and

- the effects of governmental or other actions relating to the Chinese subsidiary’s payments.

Results of Operations

Sales

     The Company’s sales increased 15% in 2002 to $324.1 million compared to sales of $283.1 million in 2001, which was a 14% increase over 2000 sales of $247.6 million. 2002 sales of all IMMULITE products (instruments and reagents) were $276.8 million, a 20% increase over 2001. In 2001, sales of all IMMULITE products were $230.4 million, a 19% increase over 2000. Sales of IMMULITE products represented 85% of 2002 sales, 81% of 2001 sales, and 78% of 2000 sales.

     2002 sales of the Company’s original IMMULITE instrument, the IMMULITE One, related reagents, and service were $115.9 million, a 5% decrease from 2001. Sales of IMMULITE One reagents decreased 3% to $96.2 million, while instrument and service sales were down 12% to $19.7 million. In 2001, sales of the IMMULITE product line decreased 1% to $121.3 million. The decrease in IMMULITE sales is a result of IMMULITEs being replaced by IMMULITE 2000s, new IMMULITE replacements going into lower reagent volume environments, and a lower number of instruments being sold. The IMMULITE 2000 instrument had sales including reagents of $160.9 million in 2002, a 47% increase over 2001 sales of $109.1 million. Sales of IMMULITE 2000 reagents increased 55% to $129.3 million, while instrument sales and service increased 24% to $31.6 million. In 2001, sales of the IMMULITE 2000 product line increased 56%.

     In 2002, as in the previous year, the growth of DPC’s business was driven primarily by ongoing demand for the IMMULITE 2000. In the fourth quarter of 2002, the Company began shipping an updated version of the IMMULITE One. Demand for the original IMMULITE continues to be strong, and the Company believes that it remains an important complement to the higher throughput, state-of-the-art IMMULITE 2000. The IMMULITE 2000 has a longer sales process than the IMMULITE One due to the higher sales price. The Company has also experienced a longer time delay between instrument placement and the ramp-up of reagent sales with the IMMULITE 2000.

     As of December 31, 2002, 2001, and 2000, the Company had shipped on a cumulative basis approximately 8,000, 7,000, and 5,900 IMMULITE instruments, respectively. This installed base of instruments and an expanding test kit menu are expected to support continued growth in the coming years.

     Sales of the Company’s mature RIA or isotopic products, $29.9 million in 2002, were down 12% from $33.8 million in 2001. Sales in 2001 increased slightly from 2000. It is expected that these sales levels will decline in the future.

     Sales of other DPC products decreased 14% to $10.4 million in 2002, compared to $12.1 million in 2001. These sales were negatively impacted in 2002 due to the September 2001 introduction of a broad spectrum of allergy assays on the IMMULITE 2000, which has taken sales away from the Company’s microplate-based allergy system. The

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Company also experienced a slight increase in sales of non-DPC products through its consolidated international affiliates to $7.0 million in 2002 from $6.9 million in 2001. It is anticipated that sales of non-DPC products will decline in the future.

     Domestic sales increased 16% in 2002 over 2001, and 33% in 2001 over 2000, reflecting in part the Company’s continued success with larger customers and purchasing organizations and indirect distribution into smaller doctor’s office laboratories.

     Foreign sales (including U.S. export sales, sales to non-consolidated foreign subsidiaries, and sales of consolidated subsidiaries) as a percentage of total sales were approximately 72% in 2002 and 2001 and 76% in 2000. Europe, the Company’s principal foreign market, represented 40%, 41%, and 44% of sales in 2002, 2001, and 2000, respectively. Sales in Germany increased 22% to $40.6 million in 2002 from $33.3 million in 2001, and $30.1 million in 2000, reflecting the success of the IMMULITE 2000 product line. Sales in the Brazil region, which includes certain other Central and South American countries, accounted for approximately 9% of total sales, or $29.0 million, in 2002, compared to $29.6 million in 2001 and $29.5 million in 2000. Although sales rose in local currency, sales were flat in 2002 and declined in 2001 in dollars due to the devaluation of the Brazilian Real, relative to the dollar, which has fallen from less than 2:1 in 2000 to 3.5:1 at the end of 2002. The Company intends to continue to increase prices over time in Brazil, but it may not be able to fully compensate for continuing significant devaluations. To date the Company’s unit sales in Brazil have continued to increase in line with the Company’s overall sales increase.

     Due to the significance of foreign sales, the Company is subject to currency risks based on the relative strength or weakness of the U.S. dollar. In periods when the U.S. dollar is strengthening, the effect of the translation of the financial statements of consolidated foreign affiliates is that of lower sales and net income. In periods when the dollar is weakening, the impact is the reverse. Based on comparative exchange rates in the immediately preceding year, the translation adjustments due to the strong U.S. dollar had a 6% negative impact on 2001 sales and there was a 5% negative impact on 2000 sales. In 2002, the dollar weakened relative to the Euro and net of the negative impact of the Real the currency effect was a slight positive impact. The Company’s hedging strategy in 2002 reduced the positive impact of the strong Euro in the latter part of the year. The Company’s results should reflect the benefits of a strong Euro by the second half of 2003. Due to intense competition, the Company’s foreign distributors are generally unable to increase prices to offset the negative effect when the U.S. dollar is strong.

     In the fourth quarter of fiscal year 2002, the Company discovered internally that its Chinese subsidiary had made payments to certain customers in China that may have violated foreign and U.S. law, including the Foreign Corrupt Practices Act. The Company stopped the payments immediately, and the Board of Directors conducted an independent investigation of the nature of the payments, the involvement of Company personnel, and whether similar situations existed at the Company’s other foreign operations. Based on the results of the investigation, the audit committee concluded that senior management of the Company was not implicated in the payments and that there are no apparent similar issues with respect to the Company’s other foreign operations. The Company’s disclosure committee has conducted a comprehensive review of the Company’s other foreign operations and internal control procedures as they relate to these issues and additional policies and procedures have been implemented to ensure compliance with applicable laws. In 2002, the Company’s Chinese subsidiary had revenues of $9 million, less than 3% of the Company’s total sales. Depending on how these Chinese issues are resolved, the Company’s sales in China could be significantly impacted.

Cost of Sales

     Gross margin improved slightly to 57.5% in 2002 from 57.4% in 2001 and 55.5% in 2000. The improvement in gross margin was due in part to the shift in product mix toward IMMULITE reagents, the shift in customer mix toward domestic end users, and increased manufacturing efficiencies. Although the Company expects these mix trends to continue, it is also experiencing competitive pricing pressures that may negatively impact gross margins. All products manufactured in the United States are sold in Dollars, therefore a weakening Dollar could improve gross margins and a strengthening Dollar could weaken gross margins. Margins in 2002 were also negatively impacted by the devaluation of the Brazilian Real, the effects of which have not been fully overcome by price increases in that region. In 2003, the Company will relocate its Brazilian distribution center, which should result in reduced tariffs and improved gross margins for this region.

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Operating Expenses and Other

     Total operating expenses (Selling, Research and Development, and General and Administrative) as a percentage of sales fell to 37% in 2002, from 38% in 2001 and 39% in 2000, although all categories increased annually in absolute dollars to support the increased levels of sales. General and administrative expenses in 2002 included $1.5 million for costs incurred through year-end 2002 relating to the investigation of the Chinese payments and for estimated penalties and/or fines which the Company may incur to resolve issues relating to this matter.

     Equity in income of affiliates represents the Company’s share of earnings of non-consolidated affiliates, principally the 45%-owned Italian distributor. This amount increased 88% in 2001 relative to 2000 and 16% in 2002 relative to 2001, primarily due to increased earnings of the Italian distributor. In 2001 and 2002, equity in income of affiliates included a $500,000 permanent benefit and a $400,000 benefit, respectively, due to a change in the Italian tax laws.

     Net interest and other income (expense) represents the excess of interest income and interest earned on equipment contracts relating to IMMULITE placements over interest expense and other amounts of income and expense. Net interest income and other income was an expense of $1,220,000 in 2002 versus expense of $7,000 in 2001. The 2002 amount included approximately $500,000 in foreign exchange losses versus approximately $600,000 in 2001. In addition, the Company experienced a $400,000 increase in local tariffs in Brazil. The 2000 amount of $666,000 income included, among other things, a gain of $482,000 on the sale of a product line, a gain of $215,000 on the sale of a building, and foreign exchange losses of $500,000.

Income Taxes and Minority Interest

     The Company’s effective tax rate (31% in 2002 and 2001 and 30% in 2000) includes Federal, State, and foreign taxes. In the fourth quarter of 2002 the Company’s tax provision includes an accrual of $1.4 million relating to the possible non-deductibility of payments in China. The Company expects that its effective tax rate will be lower in 2003.

     Minority interest represents the 44% interest in the Company’s Brazilian distributor held by a third party. Increases or decreases in this amount reflect increases or decreases in the profitability of the Brazilian distributor.

Net Income

     2002 net income of $47.3 million ($1.60 per diluted share) increased 21% over 2001 net income of $39.0 million ($1.32 per diluted share), which was a 38% increase over 2000 net income. These increases were primarily due to increases in sales and gross profit that were greater than percentage increases in operating expenses. Excluding the non-recurring tax accrual of $1.4 million and $1.5 million general and administrative expense discussed above, net income in 2002 would have increased 27% over 2001 to $49.7 million or $1.68 per diluted share.

Critical Accounting Policies

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions include, but are not limited to, allowance for bad debts, allowance for slow moving and obsolete inventories, useful lives selected for depreciating property, plant, and equipment, valuation allowances for deferred income taxes, and estimates used in the recoverability of long-lived assets. Management believes that the methodology it utilizes to determine these amounts results in the reporting of reasonable estimates and that the differences between the estimates and actual results are usually minor and are included in the consolidated financial statements by management as soon as they are known.

Liquidity and Capital Resources

     The Company has adequate working capital and sources of capital to carry on its current business and to meet its existing capital requirements. At December 31, 2002 and December 31, 2001, the Company had $54,284,000 and $31,834,000 in cash and cash equivalents, respectively. Included in the cash and cash equivalents at December 31, 2002 and 2001 is $42,5000,000 and $19,900,000, respectively, of short-term, high-quality, commercial paper.

     Net cash flows from operating activities were $69.0 million in 2002, consisting of $75.6 million provided by net income adjusted for depreciation and amortization and other non-cash items included in net income, less $6.6 million used in changes in operating assets and liabilities. The most significant elements of the net cash used in operating

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assets and liabilities were an $11.1 million increase in inventories, a $4.6 million increase in accounts receivable, partially offset by an $8.3 million increase in accrued liabilities. Net cash flows from operating activities were $61.7 million in 2001 and $41.7 in 2000. Net cash flows in 2001 consisted of $63.7 million provided by net income adjusted for depreciation and amortization and other non-cash items included in net income, less $2.0 million used in changes in operating assets and liabilities. The most significant elements of the net cash used in operating assets and liabilities were an $8.6 million increase in accounts receivable, a $3.6 million increase in inventories and a $3.2 million decrease in accounts payable, partially offset by a $5.5 million increase in income taxes payable.

     Cash flows used for investing activities consist principally of additions to property, plant and equipment, and increases in sales type and operating leases of IMMULITE instrument units.

     Additions to property, plant, and equipment in 2002 were $12.5 million compared to $27.3 million in 2001 and $9.6 million in 2000. Included in 2001 is approximately $9.0 million for the completion of a new manufacturing facility in New Jersey and approximately $4.0 million related the implementation of a new computer system in Los Angeles. Cash used for the placement of IMMULITE systems under sales-type and operating leases and as rentals (for periods of generally three to five years) increased to $31.4 million in 2002, from $28.0 million in 2001, reflecting a higher number of IMMULITE 2000 instruments being placed under operating leases rather than being sold. In 2000, the cash used for sales and operating type leases and rentals was $18.0 million.

     In 2000, the Company purchased land in New Jersey and in 2001 constructed an 89,000 square foot building for a total cost of $14.8 million. The Company moved into this new manufacturing facility in December 2001. The Company implemented its new computer system in Los Angeles in February 2002 at a capitalized cost of approximately $4.8 million. It is anticipated that the computer systems in the United Kingdom and New Jersey will be converted over the next several years. In the first quarter of 2003, the Company purchased a 170,000 sq. ft. building in Los Angeles for approximately $22 million cash. This building will be fitted out over the next four quarters and initial occupancy is anticipated in early 2004. It is anticipated that the cost of fitting out the building will be $7.0 to $9.0 million.

     The Company has a $20 million unsecured line of credit. Standby letters of credit under the line of credit totaled $386,000 at December 31, 2001 and 2000. There were no standby letters of credit outstanding at December 31, 2002. No other borrowings were outstanding at December 31, 2002, 2001, and 2000 under the line of credit. The Company had notes payable (consisting of bank borrowings by the Company’s foreign consolidated subsidiaries payable in the local currency, some of which are guaranteed by the U.S. parent company) of $19.7 million at December 31, 2002 compared to $17.0 million at December 31, 2001 and $15.6 million at December 31, 2000. The terms of the loans are described in “ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.”

     The Company’s foreign operations are subject to risks, such as currency devaluations, associated with political and economic instability.

     The Company has paid a quarterly cash dividend of $.06 per share, on a split-adjusted basis, since 1995.

Contractual Obligations and Commitments

     On April 1, 2002, the Company amended its lease relating to 116,000 square feet of its Los Angeles facility. The original lease expires on December 31, 2002. The amendment extends the term of the lease for two years through December 31, 2004 and increases the rent to approximately $.75 from $.70 per square foot, for a total annual rent of $1,035,000 effective January 1, 2003. The Company also has the option to extend the term for two years at $.79 per square foot. The lease is with a partnership comprised of Michael Ziering, CEO and director, and Ira Ziering, VP and director, Marilyn Ziering, VP, and other children of Mrs. Ziering who are shareholders of the Company. The rent was determined on the basis of an independent appraisal, and the terms of the lease amendment were approved unanimously by the non-interested members of the board of directors. The Company decided not to sign a long-term lease for this facility so that it will have the flexibility to consider all options to meet its future space requirements.

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     The following table discloses the Company’s obligations and commitments to make future payments under contractual obligations at December 31, 2002, which include the Company’s subsidiaries’ notes payable (see “Interest Rate Risks” in Item 7A below and “Note 6 – Notes Payable” of Notes to Consolidated Financial Statements.

(Dollars in thousands)				Payment Due by Period
				Less than
		Total		1 year		1-3 years		4-5 years
Notes Payable		$	19,727	$	6,714	$	7,820	$	5,193
Leases			10,575		4,359		6,216		—
	Total	$	30,302	$	11,073	$	14,036	$	5,193

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill ceased upon adoption of this statement. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. Under SFAS No. 142, goodwill and other intangibles are initially assessed for impairment upon adoption of the statements with subsequent assessments required annually and when there is reason to suspect that their values have been diminished or impaired, with any corresponding write-downs recognized as necessary.

     In connection with the adoption of SFAS No. 142, the Company evaluated its intangibles including goodwill and determined that reclassification of such balances was not necessary. Accordingly, the Company’s intangibles consist solely of goodwill generated in connection with the purchase of certain of its international distributors. Effective January 1, 2002, the Company adopted SFAS No. 142. Accordingly, amortization of goodwill ceased, effective January 2002, and would have been $282,000 in the fourth quarter and $1,117,000 for the year ended December 31, 2002 had the non-amortization provisions of SFAS No. 142 not been adopted. Pro forma net income for the quarter ended December 31, 2001, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $11,619,000, or $.39 per diluted share, versus the $11,337,000 or $.38 per diluted share actually reported. Pro forma net income for the year 2001 would have been $40,146,000, or $1.36 per diluted share, versus the $39,029,000 or $1.32 per diluted share actually reported. Pro forma net income for the year ended December 31, 2000, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $29,318,000, on an after-tax basis, or $1.04 per diluted share versus the $28,250,000 or $1.00 per diluted share actually reported. As required under SFAS No. 142, the Company has completed its annual impairment testing and does not believe impairment of its goodwill is necessary.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The Company does not believe the impact of SFAS No. 143 will be material to the Company’s consolidated position or results of operations.

     In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

     In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds or amends, effective immediately, several other existing authoritative pronouncements to make various technical corrections, clarifying meanings, or describe their applicability under changed conditions. In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the

14

standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe that SFAS Nos. 145 and 146 will have a material impact to its consolidated financial position or results of operations.

     During November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which is an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for financial statements of periods ending after December 15, 2002. This Interpretation addresses the disclosures to be made by a guarantor in its interim, and annual financial statements about its obligations under guarantees, and also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The Company does not believe that FASB Interpretation No. 45 will have a material impact on its consolidated financial statements. The company does not currently provide any third party guarantees.

     In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, “Accounting for Stock-Based Compensation —Transition and Disclosure, an amendment of FASB Statement No. 123,” which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, and amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of December 31, 2002, the Company has adopted the amended disclosure requirements of SFAS No. 148.

Euro Conversion

     The Company has significant sales to European countries (the “participating countries”) which converted to a common legal currency (the “Euro”) on January 1, 2002. The conversion to the Euro has eliminated currency exchange risk among the participating countries.

     The Company sells its products in the participating countries through affiliated and non-affiliated distributors that determine sales prices in their respective territories. The use of a single currency in the participating countries may affect this variable pricing in the various European markets because of price transparency. Nevertheless, other market factors such as local taxes, customer preferences, and product assortment may reduce the need for price equalization. The Euro conversion has not had a material impact on the Company’s business.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to certain market risks arising from transactions in the normal course of its business, principally risk associated with interest rate and foreign currency fluctuations.

Interest Rate Risk

     The Company periodically invests its excess cash in short-term high-quality commercial paper. At December 31, 2002, the Company had $42,500,000 invested in such securities, which yielded an average annual return of approximately 1.10 %. The average maturity of these investments is less than one month.

     Additionally, the Company has debt obligations at its foreign subsidiaries that mature on various dates. Substantially all of the Company’s debt obligations are denominated in European currencies. The table below presents principal cash flows translated into US dollars and related interest rates by fiscal year of maturity:

Notes Payable Information December 31, 2002
(U.S. Dollars in Thousands)

	Expected Year of Maturity
	2003			2004			2005			2006			2007			Total
Germany - Mark:
Variable rate notes	$	1,955		$	1,640		$	1,237		$	1,022		$	2,696		$	8,550
Average interest rate		4.95	%		5.12	%		4.59	%		4.39	%		4.10	%		4.59	%
France - Franc:
Fixed rate notes		2,083			1,941			1,485			1,044			360			6,913
Average interest rate		5.21	%		5.26	%		5.61	%		5.34	%		5.27	%		5.34	%
Spain - Peseta:
Fixed rate notes		1,502			205			88									1,795
Average interest rate		4.01	%		4.01	%		4.01	%								4.01	%
Sweden - Krona:
Variable rate notes		612			612			612			38			33			1,907
Average interest rate		5.0	%		5.0	%		8.5	%		8.5	%		8.5	%		7.1	%
Australia - Aust.$:
Fixed rate notes		562															562
Average interest rate		5.15	%														5.15	%
	$	6,714		$	4,398		$	3,422		$	2,104		$	3,089		$	19,727

Foreign Currency Risk

     The Company may periodically enter into foreign currency contracts in order to manage or reduce foreign currency market risk. The Company’s policies do not permit active trading of or speculation in derivative financial instruments. The Company’s policy is to hedge major foreign currency cash exposures through foreign exchange forward contracts. The Company enters into these contracts with only major financial institutions, which minimizes its risk of credit loss. A discussion of the Company’s primary market risk exposures and the management of those exposures is presented below.

     The Company generates revenues and costs that can fluctuate with changes in foreign currency exchange rates when transactions are denominated in currencies other than the local currency. The Company manufactures its products principally in the United States and the United Kingdom and sells product to distributors, many of which are owned by the Company, throughout the world. Products sold from the United States are denominated in US dollars and products sold from the United Kingdom are denominated in pounds sterling. The distributors in turn have foreign currency risk related to their product purchases. Many of the Company-owned distributors purchase forward currency contracts to offset currency exposures related to these purchase commitments.

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     The table below provides information as of December 31, 2002 concerning the Company’s forward currency exchange contracts related to certain commitments of its subsidiaries denominated in foreign currencies. The table presents the contractual amount, the weighted-average expiration date, the weighted-average contract exchange rates, and the values for its currency contracts outstanding.

Foreign Currency Exchange Contracts Outstanding December 31, 2002

						(000’s)
						Equivalent
						U.S. Dollar
						Value at
		(000’s)		Weighted-Average		December 31,
		U.S. Dollar		Forward Contract		2002		Weighted-Average
	Local Currency	Amount Buy		Rate per U.S. Dollar		Exchange Rates		Maturity Date
Contracts for Purchase of U.S. Dollars:
	Euro	$	12,150,000		.9960	$	12,708,000		03/26/03
	British Pound	$	1,000,000		1.5456	$	1,036,000		03/09/03
	Swedish Krona	$	1,500,000		9.2713	$	1,590,000		04/05/03

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 for a listing of the consolidated financial statements and supplementary data filed with this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     The information contained in the sections entitled “Election of Directors”; “Ownership of Common Stock – Section 16 (a) Beneficial Ownership Reporting Compliance”; and “Executive Officers” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

     The information contained in the sections entitled “Election of Directors–Compensation of Directors,” “Executive Compensation,” and “Compensation Committee Interlocks and Insider Participation” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information contained in the section entitled “Ownership of Common Stock” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

Equity Compensation Plan Information

						Number of securities
						remaining available for
		Number of securities to be		Weighted-average exercise		future issuance under
		issued upon exercise of		price of outstanding		equity compensation plans
		outstanding options,		options, warrants, and		(excluding securities
Plan category		warrants, and rights		rights		reflected in column a)
		(a)		(b)		(c)
Equity compensation plans approved by security holders			2,391,809	$	20.10		1,559,600
Equity compensation plans not approved by security holders			-0-		—		-0-
	Total		2,391,809	$	20.10		1,559,600

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained in the section entitled “Related Transactions” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

     Based on their evaluation of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing of this report, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that such disclosure controls and procedures were effective to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries will be made known to them by others within those entities. Since the date of such evaluation, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective action with regard to significant deficiencies and material weaknesses.

18

     In the fourth quarter of fiscal year 2002, the Company discovered internally that its Chinese subsidiary had made payments to certain customers in China that may have violated foreign and U.S. law, including the Foreign Corrupt Practices Act. The Company stopped the payments immediately, and the Board of Directors conducted an independent investigation of the nature of the payments, the involvement of Company personnel, and whether similar situations existed at the Company’s other foreign operations. Based on the results of the investigation, the audit committee concluded that senior management of the Company was not implicated in the payments and that there are no apparent similar issues with respect to the Company’s other foreign operations. The Company’s disclosure committee has conducted a comprehensive review of the Company’s internal controls and procedures as they relate to these issues and additional policies and procedures have been implemented to ensure compliance with applicable laws.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Documents filed as part of Report:

1.	Financial Statements:
	Independent Auditors’ Report
	Consolidated Balance Sheets as of December 31, 2002 and 2001.
	Consolidated Statements of Income for each of the three years in the period ended December 31, 2002.
	Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2002.
	Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2002.
	Notes to Consolidated Financial Statements
2.	Supplementary Financial Data.
3.	Exhibits – See “Exhibit Index” which appears after the signature page of this report.

(b)  Reports on Form 8-K – none filed in the fourth quarter of 2002.

19

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders:

We have audited the accompanying consolidated balance sheets of Diagnostic Products Corporation and its subsidiaries (the “Company”) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Diagnostic Products Corporation and its subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

/s/ Deloitte & Touche LLP

Los Angeles, California
February 21, 2003

20

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)		December 31,
		2002			2001
Assets
CURRENT ASSETS:
	Cash and cash equivalents	$	54,284		$	31,834
	Accounts receivable – (including receivables from unconsolidated affiliates of $7,256 and $6,636) – net of allowance for doubtful accounts of $2,181 and $1,719		78,676			74,630
	Inventories		75,860			62,815
	Prepaid expenses and other current assets		5,542			981
	Deferred income taxes		5,616			3,225
	Total current assets		219,978			173,485
PROPERTY, PLANT AND EQUIPMENT:
	Land and buildings		54,021			49,922
	Machinery and equipment		69,069			64,650
	Leasehold improvements		10,022			7,242
	Construction in progress		2,487			6,278
	Total		135,599			128,092
	Less accumulated depreciation and amortization		(65,714	)		(63,989	)
	Property, plant and equipment – net		69,885			64,103
SALES-TYPE AND OPERATING LEASES – net			66,653			56,570
DEFERRED INCOME TAXES			1,367			1,111
INVESTMENTS IN AFFILIATED COMPANIES			22,245			17,242
GOODWILL – net of accumulated amortization of $11,896 and $11,852			13,319			13,256
TOTAL ASSETS		$	393,447		$	325,767
Liabilities and Shareholders’ Equity
CURRENT LIABILITIES:
	Notes payable	$	19,727		$	17,014
	Accounts payable		15,608			15,722
	Accrued liabilities		27,039			19,718
	Income taxes payable		4,955			3,336
	Total current liabilities		67,329			55,790
MINORITY INTEREST			2,554			3,073
SHAREHOLDERS’ EQUITY:
	Common Stock–no par value, authorized 60,000,000 shares at December 31, 2002 and 2001; outstanding 28,603,779 shares and 28,343,170 shares, respectively		60,807			55,068
	Retained earnings		281,228			240,748
	Accumulated other comprehensive loss		(18,471	)		(28,912	)
Total shareholders’ equity			323,564			266,904
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	393,447		$	325,767

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

21

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, except per Share Data)
		Year Ended December 31,
		2002			2001			2000
SALES
	Non-Affiliated Customers	$	293,283		$	256,099		$	222,712
	Unconsolidated Affiliates		30,804			27,030			24,893
	Total Sales		324,087			283,129			247,605
COST OF SALES			137,746			120,690			110,522
GROSS PROFIT			186,341			162,439			137,083
OPERATING EXPENSES:
	Selling		53,471			49,685			44,102
	Research and Development		36,817			31,447			26,464
	General and Administrative		30,682			26,788			26,415
	Equity in Income of Affiliates		(3,841	)		(3,304	)		(1,755	)
OPERATING EXPENSES –NET			117,129			104,616			95,226
OPERATING INCOME			69,212			57,823			41,857
	Interest/Other Income (Expense) –Net		(1,220	)		(7	)		666
INCOME BEFORE INCOME TAXES
	AND MINORITY INTEREST		67,992			57,816			42,523
PROVISION FOR INCOME TAXES			(21,078	)		(17,812	)		(12,864	)
MINORITY INTEREST			399			(975	)		(1,409	)
NET INCOME		$	47,313		$	39,029		$	28,250
EARNINGS PER SHARE:
	BASIC	$	1.66		$	1.39		$	1.03
	DILUTED	$	1.60		$	1.32		$	1.00
WEIGHTED AVERAGE SHARES OUTSTANDING:
	BASIC		28,487			28,128			27,555
	DILUTED		29,628			29,474			28,149

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

22

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in Thousands)			Common Stock
							Retained			Accumulated Other			Comprehensive
			Shares		Amount		Earnings			Comprehensive Loss			Income
BALANCE, JANUARY 1, 2000				27,345,508	$	37,816	$	186,826		$	(17,745	)
Comprehensive income:
	Net income							28,250					$	28,250
		Foreign currency translation adjustment									(8,534	)		(8,534	)
	Total comprehensive income												$	19,716
Income tax benefit received upon exercise of certain stock options						1,219
Issuance of shares upon exercise of stock options				491,280		5,803
Cash dividends ($.24 per share)								(6,611	)
BALANCE, DECEMBER 31, 2000				27,836,788		44,838		208,465			(26,279	)
Comprehensive income:
	Net income							39,029					$	39,029
		Foreign currency translation adjustment									(2,633	)		(2,633	)
	Total comprehensive income												$	36,396
Income tax benefit received upon exercise of certain stock options						3,566
Issuance of shares upon exercise of stock options				506,382		6,664
Cash dividends ($.24 per share)								(6,746	)
BALANCE, DECEMBER 31, 2001				28,343,170		55,068		240,748			(28,912	)
Comprehensive income:
	Net income							47,313					$	47,313
		Foreign currency translation adjustment									10,441			10,441
	Total comprehensive income												$	57,754
Income tax benefit received upon exercise of certain stock options						1,820
Issuance of shares upon exercise of stock options				260,609		3,919
Cash dividends ($.24 per share)								(6,833	)
BALANCE, DECEMBER 31, 2002				28,603,779	$	60,807	$	281,228		$	(18,471	)

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS.

23

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)					Year Ended December 31,
					2002			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	47,313		$	39,029		$	28,250
			Adjustments to reconcile net income to net cash flows from operating activities:
				Depreciation and amortization		34,741			26,912			18,792
				Equity in income of affiliates		(3,841	)		(3,304	)		(1,755	)
				Deferred income taxes		(2,647	)		1,081			112
			Changes in operating assets and liabilities:
				Accounts receivable		(4,570	)		(8,606	)		(15,162	)
				Inventories		(11,094	)		(3,576	)		(2,683	)
				Prepaid expenses and other current assets		(2,856	)		(453	)		20
				Accounts payable		1,224			(3,206	)		11,842
				Accrued liabilities		8,311			8,309			3,319
				Income taxes payable		2,391			5,509			(1,014	)
	Net cash flows from operating activities					68,972			61,695			41,721
CASH FLOWS USED FOR INVESTING ACTIVITIES:
			Additions to property, plant and equipment			(12,468	)		(27,303	)		(9,574	)
			Sales-type and operating leases			(31,415	)		(27,950	)		(18,004	)
			Investment in affiliated companies			(1,202	)		(4,418	)		846
	Net cash used for investing activities					(45,085	)		(59,671	)		(26,732	)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
		Borrowing (repayment) of notes payable				(277	)		2,726			921
		Proceeds from exercise of stock options				3,919			6,664			5,803
		Cash dividends paid				(6,833	)		(6,746	)		(6,611	)
	Net cash (used for) from financing activities					(3,191	)		2,644			113
EFFECT OF EXCHANGE RATE CHANGES ON CASH						1,754			771			(3,254	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						22,450			5,439			11,848
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						31,834			26,395			14,547
CASH AND CASH EQUIVALENTS AT END OF YEAR					$	54,284		$	31,834		$	26,395
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the year for income taxes				$	18,721		$	11,669		$	12,257
	Cash paid during the year for interest				$	1,270		$	1,269		$	1,011

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation

     The consolidated financial statements include the accounts of Diagnostic Products Corporation and its majority-owned subsidiaries (together referred to herein as “DPC” or the “Company”) after elimination of intercompany accounts and transactions. Investments in non-majority-owned companies are accounted for using the equity method. Minority interest represents the 44% of the Company’s Brazilian subsidiary not owned by the Company.

Factors That May Affect Future Results

     The Company’s future operating results are dependent on its ability to research, develop, manufacture, and market innovative products that meet customers’ needs. Inherent in this process are a number of risks that the Company must successfully manage in order to achieve favorable operating results.

     The Company’s products which are sold in the United States, whether manufactured in the United States or elsewhere, require product clearance by the United States Food and Drug Administration.

     The operations of the Company involve the use of substances regulated under various Federal, State, and international laws governing the environment. Environmental costs are presently not material to the Company’s operations or financial position.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     The Company purchases certain chemical compounds that are key components in the IMMULITE system from Lumigen, Inc. and Tropix, Inc., the sole suppliers of these chemical compounds, pursuant to agreements that terminate in 2005. Tropix also supplies the Company with certain other chemical compounds for use in veterinary kits. Upon termination of these supply agreements, the Company will be required to enter into new supply agreements or use alternate technologies. If obtainable, such technology must have the same performance characteristics of the technology currently in use. The Company owns an 8% interest in Lumigen, Inc. and accounts for this interest using the equity method.

     Although the Company believes that it has the products and resources needed for continuing success, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its operations. Because of the foregoing factors, recent trends may not be reliable indicators of future financial performance.

Financial Instruments

     The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company’s cash equivalents are in high quality securities placed with major banks. Concentrations of credit risk with respect to receivables are limited due to the large number of customers and their dispersion across worldwide geographic areas. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The fair value of the Company’s financial instruments approximates cost due to their short-term nature or, in the case of notes payable, because the notes are at interest rates competitive with those that would be available to the Company in the current market environment.

Cash Equivalents

     The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Included in cash and cash equivalents at December 31, 2002 and 2001 is $42,500,000 and $19,900,000, respectively, of short-term, high-quality, commercial paper.

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories

     Inventories are stated at the lower of cost, determined on the first-in, first-out basis, or market.

Property, Plant and Equipment

     Property, plant and equipment is stated at cost, less accumulated depreciation and amortization, which is computed using straight-line and declining-balance methods over the estimated useful lives (5 to 50 years) of the related assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease.

     The Company reviews property, plant, and equipment for impairment whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. An impairment loss, measured by the difference in the estimated fair value and the carrying value of the related asset, is recognized when the future cash flows (based on undiscounted cash flows) are less than the carrying amount of the asset. For purposes of estimating future cash flows for possibly impaired assets, the Company groups assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

Investments in Affiliated Companies

     Investments in affiliated companies represent equity investments in foreign distributors in which the Company owns a 50% or less equity interest. The investments are stated at cost plus advances, plus the Company’s equity in the undistributed net income since acquisition.

Goodwill

     Goodwill represents the difference between the cost and underlying fair value of assets purchased and relates to the purchase of certain of the Company’s foreign distributors. The goodwill was being amortized over 20 years using the straight-line method. Prior to 2002, the Company periodically reviewed goodwill to assess recoverability; an impairment would be recognized if a permanent diminution in value were determined to have occurred. Effective January 1, 2002, amortization of goodwill ceased and the carrying value is subjected to an annual impairment test. See “New Accounting Pronouncements.”

Foreign Currency Translation

     The functional currency for foreign subsidiaries is generally the local currency. Assets and liabilities of foreign subsidiaries and affiliates are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and income and expense accounts are translated at the weighted average rate in effect during the year. Foreign exchange translation adjustments are included as a component of comprehensive income and are accumulated in a separate component of shareholders’ equity. Gains and losses resulting from foreign currency transactions are included in income. Transaction losses of approximately $493,000, $575,000 and $518,000 were included in income for the years ended December 31, 2002, 2001, and 2000 respectively.

Foreign Exchange Instruments

     In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. The Company adopted SFAS 133 on January 1, 2001. The initial adoption of SFAS 133 did not have a material effect on the Company’s consolidated financial position or results of operations.

     The Company hedges specific foreign currency exposures by purchasing foreign exchange contracts. Such foreign exchange contracts are generally entered into by the Company’s European subsidiaries. The subsidiaries purchase foreign exchange contracts to hedge firm or anticipated commitments, denominated in other than their functional currency, to acquire inventory for resale. The Company does not engage in speculative transactions. The Company’s foreign exchange contracts do not subject the Company to exchange rate risk as any gains or losses on the transactions being hedged offset losses or gains on these contracts. The Company had outstanding foreign exchange contracts to buy the U.S. dollars equivalent of approximately $14,650,000 and $500,000, at December 31, 2002 and

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2001, respectively. The carrying value of these contracts at December 31, 2001 did not differ significantly from their fair value.

Revenue Recognition

     The Company recognizes sales of its instruments and kits upon shipment to the customer unless the equipment is subject to an operating lease in which case revenue is recognized over the term of the lease agreement. See Note 4. Service contract revenue is recognized over the related contract life.

Research and Development

     Research and development costs are expensed as incurred.

Stock Options

     Stock options issued by the Company are accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) as permitted by SFAS No. 123, “Accounting for Stock-Based Compensation.” The Company follows the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123,” which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, and amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

     Had the fair value method of accounting been applied to the Company’s stock option plans, the tax-effected impact would be as follows:

(Dollars in Thousands, except per Share Data)		2002			2001			2000
Net income, as reported		$	47,313		$	39,029		$	28,250
Deduct: Compensation expense from stock options determined under fair value based method for all awards, net of related tax effects			(2,692	)		(2,347	)		(1,373	)
Proforma net income		$	44,621		$	36,682		$	26,877
Earnings per share:
	Basic – as reported	$	1.66		$	1.39		$	1.03
	Basic – pro forma	$	1.57		$	1.30		$	0.98
	Diluted – as reported	$	1.60		$	1.32		$	1.00
	Diluted – pro forma	$	1.51		$	1.24		$	0.95

Income Taxes

     Deferred income taxes represent the income tax consequences on future years of differences between the income tax basis of assets and liabilities and their basis for financial reporting purposes multiplied by the applicable statutory income tax rate. Valuation allowances are established against deferred income tax assets if it is more likely than not that they will not be realized.

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approach. Amortization of goodwill ceased upon adoption of this statement on January 1, 2002. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. Under SFAS No. 142, goodwill and other intangibles are initially assessed for impairment upon adoption of the statement with subsequent assessments required annually and when there is reason to suspect that their values have been diminished or impaired, with any corresponding write-downs recognized as necessary.

     In connection with the adoption of SFAS No. 142, the Company evaluated its intangibles including goodwill and determined that reclassification of such balances was not necessary. Accordingly, the Company’s intangibles consist solely of goodwill generated in connection with the purchase of certain of its international distributors. Effective January 1, 2002, the Company adopted SFAS No. 142. Accordingly, amortization of goodwill ceased, effective January 2002, and would have been $282,000 in the fourth quarter and $1,117,000 for the year ended December 31, 2002 had the non-amortization provisions of SFAS No. 142 not been adopted. Pro forma net income for the quarter ended December 31, 2001, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $11,619,000, on an after-tax basis, or $.39 per diluted share versus the $11,337,000 or $.38 per diluted share actually reported. Pro forma net income for the year 2001 would have been $40,146,000, or $1.36 per diluted share versus the $39,029,000 or $1.32 per diluted share actually reported. Pro forma net income for the year ended December 31, 2000, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $29,318,000, on an after-tax basis, or $1.04 per diluted share versus the $28,250,000 or $1.00 per diluted share actually reported. As required under SFAS No. 142, the Company has completed its annual impairment testing and does not believe that goodwill has been impaired.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The Company does not believe the impact of SFAS No. 143 will be material to the Company’s consolidated financial position or results of operations.

     In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. The Company adopted SFAS No. 144 effective January 1,2002. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

     In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds or amends, effective immediately, several other existing authoritative pronouncements to make various technical corrections, clarifying meanings, or describe their applicability under changed conditions. In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe that SFAS Nos. 145 or 146 will have a material impact to its consolidated financial position or results of operations.

     During November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which is an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for financial statements of periods ending after December 15, 2002. This Interpretation addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees, and also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The Company does not believe that FASB Interpretation No. 45 will have a material impact on its consolidated financial statements. The Company does not currently provide any third party guarantees.

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123,” which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, and amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of December 31, 2002, the Company has adopted the amended disclosure requirements of SFAS No. 148.

Reclassifications

     Certain amounts have been reclassified in 2000 and 2001 to conform to the 2002 presentation.

Note 2 – Business Acquisitions

     As of December 31, 2001, the Company’s Brazilian subsidiary acquired a 100% interest in a laboratory testing company in Brazil, Medlab Productos Diagnosticos Ltda. for $2,035,000. This company was previously owned by the Company’s Brazilian subsidiary’s minority shareholder.

     As of January 22, 2002, the Company’s Brazilian subsidiary acquired a 51% interest in DPC Medlab Bolivia Ltda.

     These acquisitions were not material to the Company’s financial position or results of operations.

Note 3 – Inventories

     Inventories by major categories are summarized as follows:

(Dollars in Thousands)	December 31,
	2002		2001
Raw materials	$	35,257	$	27,884
Work in process		30,814		23,611
Finished goods		9,789		11,320
	$	75,860	$	62,815

Note 4 – Sales-Type and Operating Leases

     In addition to outright sales, the Company places IMMULITE instruments with customers under sales-type and operating leases for periods generally from three to five years. Sales-type leases are recorded as revenue and as a receivable at the inception of the lease in an amount equal to the present value of the future minimum lease payments to be received over the lease term. For operating leases, the cost of the equipment is amortized on a straight-line basis over their estimated lives, which range from three to five years. Sales-type and Operating Leases are comprised of the receivable from sales-type leases and the cost of equipment (net of depreciation) subject to operating leases.

     Sales-type and operating leases are summarized as follows:

(Dollars in Thousands)		December 31,
		2002		2001
Operating leases		$	150,141	$	115,437
	Less accumulated amortization		85,235		60,299
	Net		64,906		55,138
Sales-type leases			1,747		1,432
Total		$	66,653	$	56,570

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 – Sales-Type and Operating Leases (cont.)

Future minimum lease payments to be received under these lease agreements as of December 31, 2002 are as follows:

(Dollars in Thousands)
2003	$	19,902
2004		16,785
2005		14,069
2006		8,809
2007		5,341
Total	$	64,906

Note 5 – Investment in Affiliated Companies

     The Company has equity interests in three non-consolidated foreign affiliates. The affiliates distribute the Company’s products in their respective countries. The countries and the Company’s ownership interest are as follows: Portugal, 45%; Italy, 45%; and Greece, 50%.

     The following represents condensed financial information for all of the Company’s investments in non-consolidated affiliated companies and the results of their operations.

(Dollars in Thousands)			December 31,
	2002		2001		2000
Current assets	$	44,065	$	37,746	$	25,610
Property and other assets		44,535		37,536		36,877
Total assets	$	88,600	$	75,282	$	62,487
Current liabilities	$	34,364	$	30,426	$	25,082
Non-current liabilities		10,435		8,854		18,276
Shareholders’ equity		43,801		36,002		19,129
Total liabilities and shareholders’ equity	$	88,600	$	75,282	$	62,487
Sales	$	65,087	$	57,285	$	54,379
Net income	$	7,216	$	6,455	$	4,433

     The Company had sales to non-consolidated affiliates of $30,804,000 in 2002, $27,030,000 in 2001, and $24,893,000 in 2000, including sales to Italy of $23,306,000 in 2002, $20,124,000 in 2001, and $18,453,000 in 2000.

     The Company’s cumulative equity in undistributed earnings of non-consolidated affiliated companies at December 31, 2002 is $15,557,000. It is anticipated that additional income taxes payable on earnings of foreign affiliates, if distributed, would be substantially offset by U.S. tax credits for foreign taxes paid.

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 – Notes Payable

     Notes payable consist of borrowings by certain of the Company’s foreign subsidiaries (some guaranteed by DPC) that are payable in the subsidiaries’ local currency. The notes, translated into U.S. Dollars, are summarized as follows:

(Dollars in Thousands)		December 31,
		2002		2001
Notes payable to a bank in Germany, at an average interest rate of approximately 5%, payable through 2007		$	8,550	$	7,703
Notes payable to a bank in France, at an interest rate of approximately 5%, payable through 2007			6,913		4,977
Notes payable to a bank in Spain, at an interest rate of approximately 4%, payable through 2007			1,795		1,691
Notes payable to a bank in Sweden, at an interest rate of approximately 7%, payable through 2007			1,907		1,916
Other			562		727
	Total	$	19,727	$	17,014

     Aggregate future maturities of long-term debt outstanding at December 31, 2002 are $6,714,000 in 2003, $4,398,000 in 2004, $3,422,000 in 2005, $2,104,000 in 2006, and $3,089,000 in 2007.

     The Company also has a line of credit with a bank, under which it may borrow up to $20 million, which matures in May of 2003. Standby letters of credit under the line of credit totaled $386,000 at December 31, 2001. There were no standby letters of credit outstanding at December 31, 2002. There were no borrowings outstanding at December 31, 2002, 2001, and 2000 under the line of credit.

Note 7 – Employee Benefit Plans

     The Company has a defined contribution money purchase pension plan, the Diagnostic Products Corporation Retirement Plan (the “Plan”), covering substantially all U.S. employees over 21 years of age. The Plan offers three primary benefits to employees: a money purchase pension, a profit-sharing plan, and a salary deferral plan under the provisions of Section 401(k) of the Internal Revenue Code.

     Contributions under the money purchase pension are made annually in an amount equal to 10% of the compensation of all participants for such year. Contributions related to the pension benefit were $5,201,000 for 2002, $4,544,000 for 2001, and $3,864,000 for 2000. Contributions related to the profit-sharing component for any year are made at the discretion of the Board of Directors of the Company, but cannot exceed 15% of the compensation of all participants for such year. The Company contributed $1,001,000 to the profit-sharing component for 2002, $1,384,000 for 2001, and $773,000 for 2000. Contributions under the 401(k) salary deferral are at the option of the employee in percentage increments of the employee’s salary not to exceed the maximum allowable under Federal law. The Company matches these contributions at a rate of 50 percent of the first $1,000 of compensation contributed by the employee. The Company contributed 401(k) employer matches of $489,000 for 2002, $461,000 for 2001, and $431,000 for 2000.

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 – Income Taxes

     Income before income taxes is summarized as follows:

(Dollars in Thousands)		Year Ended December 31,
		2002		2001		2000
	Domestic	$	47,317	$	39,805	$	29,369
	Foreign		20,675		18,011		13,154
Total income before income taxes		$	67,992	$	57,816	$	42,523

     The provision for income taxes is summarized as follows:

(Dollars in Thousands)		Year Ended December 31,
		2002			2001			2000
CURRENT:
	Federal	$	11,841		$	11,881		$	8,018
	State		(133	)		(500	)		258
	Foreign		9,939			5,350			4,476
	Deferred income taxes		(569	)		1,081			112
Total provision for income taxes		$	21,078		$	17,812		$	12,864

The provision for income taxes, for the year ended December 31, 2002, excludes an income tax benefit of approximately $2,078,000 related to exchange losses on permanently invested notes to foreign subsidiaries, as the benefit is recorded against the loss in accumulated other comprehensive loss in the accompanying consolidated balance sheet. Such amounts in the prior years were immaterial.

Temporary differences comprising the net deferred taxes shown on the consolidated balance sheets are as follows:

(Dollars in Thousands)	Year Ended December 31,
	2002			2001
State net operating losses	$	264		$	258
Inventory		641			2,235
Depreciation and amortization		855			(150	)
Research and development credit carryforwards		1,369			1,369
Tax benefit of exchange losses on permanently invested notes in Foreign subsidiaries		2,078
Other		2,217			1,065
Valuation allowance		(441	)		(441	)
Total	$	6,983		$	4,336

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation between the provision for income taxes computed by applying the federal statutory tax rate to income before income taxes and the actual provision for income taxes is as follows:

(Dollars in Thousands)	Year Ended December 31,
	2002			%			2001			%			2000			%
Provision for income taxes at statutory rate	$	23,797			35		$	20,236			35		$	14,883			35
Foreign income subject to tax other than federal statutory rate		1,154			2			(235	)		(1	)		466			1
Extra Territorial Income/Foreign Sales Corp benefit		(1,892	)		(3	)		(1,375	)		(3	)		(1,281	)		(3	)
Research and development tax credit		(1,236	)		(2	)		(733	)		(1	)		(575	)		(1	)
Equity in income of affiliates		(1,334	)		(2	)		(1,156	)		(2	)		(614	)		(1	)
Valuation allowance								441			1
Other		589			1			634			2			(15	)
Provision for income taxes	$	21,078			31		$	17,812			31		$	12,864			31

Note 9 – Commitments and Contingent Liabilities

     In the fourth quarter of the year ended December 31, 2002, the Company discovered internally that its Chinese subsidiary had made payments to certain customers in China that may have violated foreign and U.S. laws, including the Foreign Corrupt Practices Act. The Company stopped the payments immediately, and the audit committee conducted an independent investigation of the nature of the payments, involvement of Company personnel, and whether similar situations existed at the Company’s other foreign operations. Based on the results of the investigation, the audit committee concluded that senior management of the Company was not implicated in the payments and that there are no apparent similar issues with respect to the Company’s other foreign operations. The Company has implemented additional policies and procedures to ensure compliance with applicable laws. For the year ended December 31, 2002, the Company’s Chinese subsidiary had revenues of approximately $9.0 million, less than 3% of the Company’s total sales. Depending on how this matter is resolved, the Company’s sales in China could be significantly impacted. In connection with this matter the Company accrued $1.5 million for costs incurred through December 31, 2002 and for estimated penalties and/or fines which the Company may incur to resolve this matter. In addition, the Company recorded a charge of $1.4 million to its fourth quarter tax provision related to the possible non-deductibility of the payments in China.

     The Company has a non-cancelable operating lease for a portion of its Los Angeles manufacturing facility with a partnership comprised of persons who are executive officers, directors, and/or shareholders of the Company. The agreement extends through December 31, 2004. The Company paid approximately $966,000 in each of 2000, 2001, and 2002 under the facility lease agreement.

     Future minimum lease commitments as of December 31, 2002 are as follows:

(Dollars in Thousands)	2003		2004		2005		Total
Non-related		3,324		3,103		2,078		8,505
Related party		1,035		1,035		—		2,070
		4,359		4,138		2,078		10,575

     Aggregate rental expense under operating leases approximated $4,429,000 in 2000, $4,302,000 in 2001, and $4,965,000 in 2002.

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 – Earnings per Share

     The following table is a reconciliation of the weighted-average shares used in the computation of basic and diluted EPS for the income statements presented herein.

(Shares in Thousands)	Year Ended December 31,
	2002		2001		2000
Basic		28,487		28,128		27,555
Assumed exercise of stock options		1,141		1,346		594
Diluted		29,628		29,474		28,149

     Net income as presented in the consolidated income statement is used as the numerator in the EPS calculation for both the basic and diluted computations.

     Stock options to purchase 256,000 shares of common stock in 2002 were outstanding but not included in the computation of diluted earnings per common share because the option price was greater than the average market price of the common shares. There were no such options outstanding in 2001 or 2000.

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 – Stock Option Plans

     Under the Company’s stock option plans, incentive stock options may be granted and are exercisable at prices not less than 100% of the fair market value on the date of the grant (110% with respect to optionees who are 10% or more shareholders of the Company). Additionally under the plans, non-qualified stock options may be granted and are exercisable at prices not less than 85% of fair market value at the date of grant. Options generally become exercisable after one year, in installments (generally over 3 to 9 years), and may be exercised on a cumulative basis at any time before expiration. Options expire no later than ten years from the date of grant.

				Weighted
	Number			Average		Weighted
	of			Exercise		Average
	Shares			Price		Fair Value
Options outstanding, December 31, 1999 (961,740 exercisable)		2,702,660		$	13.28
Granted		400,000			15.36	$	7.35
Exercised		(491,280	)		11.81
Canceled		(161,600	)		13.58
Options outstanding, December 31, 2000 (759,978 exercisable)		2,449,780			13.88
Granted		584,000			31.97		13.61
Exercised		(506,382	)		13.31
Canceled		(35,380	)		14.80
Options outstanding December 31, 2001 (547,383 exercisable)		2,492,018			18.22
Granted		179,000			39.26		16.70
Exercised		(260,609	)		15.17
Canceled		(18,600	)		21.96
Options Outstanding December 31, 2002 (742,742 exercisable)		2,391,809		$	20.10

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table summarizes information about stock options outstanding at December 31, 2002:

			Weighted	Weighted				Weighted
Range of	Number		Average	Average		Number		Average
Exercise	Outstanding		Remaining	Exercise		Exercisable		Exercise
Prices	at 12/31/02		Life	Price		at 12/31/02		Price
$5.00-9.99		38,400	1.0 years	$	9.20		30,400	$	9.15
$10.00-19.99		1,548,375	5.1 years	$	13.71		597,774	$	13.49
20.00-29.99		284,634	7.8 years	$	23.75		47,434	$	23.46
30.00-39.99		268,400	8.9 years	$	34.51		34,734	$	33.74
40.00-49.99		252,000	8.9 years	$	41.56		32,400	$	41.20
		2,391,809					742,742

     Pursuant to the plans, 2,391,809 shares of common stock are reserved for issuance upon the exercise of outstanding options. In addition, the Company has 1,559,600 options available for future grant.

     As permitted by SFAS No. 123, the Company has chosen to continue accounting for stock options at their intrinsic value. Accordingly, no compensation expense has been recognized for its stock option compensation plans as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. Had the fair value method of accounting been applied to the Company’s stock option plans, the tax-effected impact would be as follows:

(Dollars in Thousands, except per Share Data)
		2002			2001			2000
Weighted Average Assumptions for Pro forma Disclosure:
Expected option life		7 years			7 years			10 years
Dividend yield			0.75	%		1.00	%		1.00	%
Volatility			36	%		36	%		30.1	%
Risk-free interest rate			4.42	%		5.04	%		5.69	%
Forfeiture rate			5	%		5	%		5	%
Net income, as reported		$	47,313		$	39,029		$	28,250
Deduct: Compensation expense from stock options determined under fair value based method for all awards, net of related tax effects			(2,692	)		(2,347	)		(1,373	)
Pro forma net income		$	44,621		$	36,682		$	26,877
Earnings per share:
	Basic – as reported	$	1.66		$	1.39		$	1.03
	Basic – pro forma	$	1.57		$	1.30		$	0.98
	Diluted – as reported	$	1.60		$	1.32		$	1.00
	Diluted – pro forma	$	1.51		$	1.24		$	0.95

36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - Segment and Product Line Information

     The Company considers its manufactured instruments and medical immunodiagnostic test kits to be one operating segment as defined under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” as the kits are required to run the instruments and utilize similar technology and instrument manufacturing processes. The Company manufactures its instruments and kits principally at facilities located in the United States and the United Kingdom. Kits and instruments are sold to hospitals, medical centers, clinics, physicians, and other clinical laboratories throughout the world through a network of distributors including consolidated distributors located in the United Kingdom, Germany, Czech Republic, Poland, Spain, The Netherlands, Belgium, Luxembourg, Finland, Norway, France, Estonia, Sweden, Australia, China, Brazil, Uruguay, Venezuela, Costa Rica, Honduras, El Salvador, Guatemala, and Panama.

     The Company sells its instruments and immunodiagnostic test kits under several product lines. Product line sales information is as follows:

(Dollars in Thousands)		Year Ended December 31,
		2002		2001		2000
Sales:
	IMMULITE (includes service)	$	276,776	$	230,412	$	192,820
	Radioimmunoassay (“RIA”)		29,859		33,772		33,706
	Other		17,452		18,945		21,079
		$	324,087	$	283,129	$	247,605

     The Company is organized and managed by geographic area. Transactions between geographic segments are accounted for as normal sales for internal reporting and management purposes with all intercompany amounts eliminated in consolidation. Sales are attributed to geographic area based on the location from which the instrument or kit is shipped to the customer. Information reviewed by the Company’s chief operating decision maker on significant geographic segments, as defined under SFAS No. 131, is prepared on the same basis as the consolidated financial statements and is as follows:

(Dollars in Thousands)	December 31, 2002
				Euro/DPC			DPC			DPC
				Limited			Biermann			Medlab						Less:
	United			(United			(German			(Brazilian						Intersegment
	States			Kingdom)			Group)			Group)			Other			Elimination			Total
Sales	$	227,369		$	44,791		$	40,632		$	29,011		$	70,756		$	(88,472	)	$	324,087
Operating expenses		78,316			8,024			9,469			7,570			17,591						120,970
Interest income (expense), net		3,415			(207	)		(1,158	)		(1,280	)		(1,027	)					(257	)
Other income (expense), net		266						1,146			(3,378	)		1,003						(963	)
Minority interest											(120	)					519			399
Provision for income taxes expense		(13,016	)		(4,088	)		(413	)		467			(4,028	)					(21,078	)
Net income		34,302			9,468			625			(906	)		3,305			519			47,313
Segment assets:
Long-lived assets		87,735			18,688			32,995			8,803			23,881						172,102
Total assets		416,758			44,958			49,071			21,055			69,932			(208,327	)		393,447
Capital expenditures		5,955			1,994			853			365			3,301						12,468

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands)	December 31, 2001
				Euro/DPC			DPC			DPC
				Limited			Biermann			Medlab						Less:
	United			(United			(German			(Brazilian						Intersegment
	States			Kingdom)			Group)			Group)			Other			Elimination			Total
Sales	$	210,087		$	37,463		$	33,269		$	29,561		$	56,576			($83,827	)	$	283,129
Operating expenses		70,388			7,289			8,555			7,263			14,425						107,920
Interest income (expense) net		4,135			(450	)		(1,178	)		(1,244	)		(873	)					390
Other income expense (net)		(397	)																	(397	)
Minority interest											975									975
Provision for income taxes expense		12,462			2,755			287			1,142			1,166						17,812
Net income		27,345			6,055			522			1,239			3,868						39,029
Segment assets:
Long-lived assets		72,801			16,695			26,248			11,394			24,033						151,171
Total assets		349,158			38,003			38,860			23,036			57,912			(181,202	)		325,767
Capital expenditures		18,698			2,838			1,272			691			3,804						27,303

(Dollars in Thousands)	December 31, 2000
				Euro/DPC		DPC			DPC
				Limited		Biermann			Medlab						Less:
	United			(United		(German			(Brazilian						Intersegment
	States			Kingdom)		Group)			Group)			Other			Elimination			Total
Sales	$	173,194		$	31,341	$	30,135		$	29,541		$	49,761			($66,367	)	$	247,605
Operating expenses		60,234			6,983		7,554			8,319			13,891						96,981
Interest income (expense), net		3,863					(776	)		(1,306	)		(1,096	)					685
Other income (expense), net		(19	)																(19	)
Minority interest										1,409									1,409
Provision (benefit) for income taxes expense		8,388			1,752		213			1,728			783						12,864
		20,986			4,134		125			1,795			1,210						28,250
Segment assets:
Long-lived assets		50,584			15,811		20,704			11,016			21,560						119,675
Total assets		287,459			24,381		31,865			21,391			51,299			(135,911	)		280,484
Capital expenditures		5,736			1,686		322			403			1,427						9,574

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The Company’s export sales to unaffiliated customers are summarized as follows:

(Dollars in Thousands)	Western		South		Other		Total
	Europe		America		Exports		Exports
2000	$	3,871	$	8,035	$	21,142	$	33,048
2001		3,501		7,666		24,114		35,281
2002		4,358		6,529		25,787		36,674

SUPPLEMENTARY FINANCIAL DATA

     Unaudited quarterly financial information for the years ended December 31, 2002 and 2001 is summarized as follows:

(In Thousands, Except per Share Data)
		Quarter Ended
		March 31,		June 30,		September 30,		December 31,		Year Ended
		2002		2002		2002		2002		2002
Sales		$	74,640	$	84,536	$	79,412	$	85,499	$	324,087
Gross profit			43,970		48,844		45,184		48,343		186,341
Income taxes			4,955		6,276		4,248		5,599		21,078
Net income			10,807		14,050		9,906		12,550		47,313
Earnings per share:
	Basic		.38		.49		.35		.44		1.66
	Diluted		.37		.47		.34		.42		1.60
Weighted Average Shares Outstanding:
	Basic		28,360		28,465		28,540		28,583		28,487
	Diluted		29,517		29,723		29,506		29,700		29,628

		Quarter Ended
		March 31,		June 30,		September 30,		December 31,		Year Ended
		2001		2001		2001		2001		2001
Sales		$	67,719	$	72,741	$	67,779	$	74,890	$	283,129
Gross profit			38,703		41,545		38,930		43,261		162,439
Income taxes			3,833		4,486		4,176		5,317		17,812
Net income			8,552		10,009		9,131		11,337		39,029
Earnings per share:
	Basic		.31		.36		.32		.40		1.39
	Diluted		.29		.34		.31		.38		1.32
Weighted Average Shares Outstanding:
	Basic		27,892		28,081		28,221		28,319		28,128
	Diluted		29,052		29,440		29,601		29,802		29,474

39

SIGNATURES

     Pursuant to the requirements of Section 13 or 15 (d) 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.

DIAGNOSTIC PRODUCTS CORPORATION

/s/ Michael Ziering
Michael Ziering President and
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Director March 28, 2003

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

NAME	TITLE	DATE
/s/ Michael Ziering Michael Ziering	President and Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Director	March 28, 2003
/s/ Sidney A. Aroesty Sidney A. Aroesty	Chief Operating Officer Director	March 28, 2003
/s/ Maxwell H. Salter Maxwell H. Salter	Director	March 28, 2003
/s/ James D. Watson James D. Watson	Director	March 28, 2003
/s/ Frederick Frank Frederick Frank	Director	March 28, 2003
/s/ Kenneth A. Merchant Kenneth A. Merchant	Director	March 28, 2003
/s/ Ira Ziering Ira Ziering	Vice President Director	March 28, 2003
/s/ James L. Brill James L. Brill	Vice President Finance (Principal Financial and Accounting Officer)	March 28, 2003

40

CERTIFICATION

I, Michael Ziering, certify that:

1.	I have reviewed this annual report on Form 10-K of Diagnostic Products Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated March 28, 2003

/s/ Michael Ziering

Michael Ziering, Chief Executive Officer

41

CERTIFICATION

I, James L. Brill, certify that:

1.	I have reviewed this annual report on Form 10-K of Diagnostic Products Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated March 28, 2003

/s/ James L. Brill

James L. Brill, Chief Financial Officer

42

EXHIBIT INDEX

3.1	Amended and Restated Articles of Incorporation (2)
3.2	Bylaws
4.1	Stock Certificate (3)
*10.1	Form of Indemnification Agreement with Officers and Directors (1)
*10.2	1990 Stock Option Plan as amended (5)
10.3	Standard Industrial Lease with 5700 West 96th Street, general partnership, dated February 18, 1991 (4) and second addendum dated April 1, 2002 (7)
*10.4	1997 Stock Option Plan as amended (6)
21	Subsidiaries of Registrant
23	Independent Auditors’ Consent
99.1	Officers’ Certification

*	Management contracts, compensation plans, or arrangements
(1)	Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1988. (File No. 1-9957)
(2)	Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. (File No. 1-9957)
(3)	Incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988. (File No. 1-9957)
(4)	Incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990. (File No. 1-9957)
(5)	Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. (File No. 1-9957)
(6)	Incorporated by reference to Registrant’s registration statement on Form S-8 (file no. 333-60690) filed on May 11, 2001.
(7)	Incorporated by reference to registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2002. (File No. 1-9957)

43 EX-3.2 3 v88182exv3w2.txt EXHIBIT 3.2 EXHIBIT 3.2 BYLAWS OF DIAGNOSTIC PRODUCTS CORPORATION A CALIFORNIA CORPORATION TABLE OF CONTENTS ARTICLE I OFFICES.................................................................. 1 Section 1. Principal Executive Office...................................... 1 Section 2. Other Offices................................................... 1 ARTICLE II MEETINGS OF SHAREHOLDERS................................................. 1 Section 1. Place of Meetings............................................... 1 Section 2. Annual Meetings................................................. 1 Section 3. Special Meetings................................................ 2 Section 4. Notice of Meetings of Shareholders.............................. 2 Section 5. Quorum.......................................................... 4 Section 6. Adjourned Meetings and Notice Thereof........................... 4 Section 7. Voting.......................................................... 5 Section 8. Waiver of Notice and Consent of Absentees....................... 8 Section 9. Action Without a Meeting........................................ 9 Section 10. Proxies......................................................... 11 Section 11. Inspectors of Election.......................................... 12 Section 12. Nomination of Directors......................................... 13 Section 13. Business At Annual Meetings..................................... 13 Section 14. Conduct of Meetings............................................. 14 ARTICLE III DIRECTORS................................................................ 15 Section 1. Powers.......................................................... 15 Section 2. Number and Qualification of Directors........................... 15 Section 3. Election and Term of Office..................................... 15 Section 4. Resignation and Removal of Directors............................ 16 Section 5. Vacancies....................................................... 16 Section 6. Place of Meetings............................................... 16 Section 7. Regular Meetings................................................ 17 Section 8. Special Meetings................................................ 17 Section 9. Quorum; Action by Directors..................................... 17 Section 10. Waiver of Notice or Consent..................................... 17 Section 11. Adjournment..................................................... 18 Section 12. Meetings By Conference Telephone................................ 18 Section 13. Action Without a Meeting........................................ 18 Section 14. Fees and Compensation........................................... 18 Section 15. Committees...................................................... 18 Section 16. Indemnification of Agents....................................... 19 Section 17. Loans to Directors and Officers................................. 22 i ARTICLE IV OFFICERS................................................................. 23 Section 1. Officers........................................................ 23 Section 2. Elections....................................................... 23 Section 3. Other Officers.................................................. 23 Section 4. Removal and Resignation......................................... 24 Section 5. Vacancies....................................................... 24 Section 6. Chairman of the Board........................................... 24 Section 7. Chief Executive Officer......................................... 24 Section 8. President....................................................... 25 Section 9. Vice President.................................................. 25 Section 10. Secretary....................................................... 25 Section 11. Chief Financial Officer......................................... 25 ARTICLE V MISCELLANEOUS............................................................ 26 Section 1. Inspection of Corporate Records................................. 26 Section 2. Checks, Drafts, etc............................................. 27 Section 3. Annual and Other Reports........................................ 27 Section 4. Contracts, etc., How Executed................................... 28 Section 5. Certificate For Shares.......................................... 28 Section 6. Representation of Shares of Other Corporations.................. 29 Section 7. Inspection of Bylaws............................................ 29 Section 8. Seal............................................................ 30 Section 9. Construction and Definitions.................................... 30 ARTICLE VI ADOPTION, AMENDMENT OR REPEAL............................................ 30 Section 1. Power of Shareholders........................................... 30 Section 2. Power of Directors.............................................. 30 ii BYLAWS OF DIAGNOSTIC PRODUCTS CORPORATION A CALIFORNIA CORPORATION ARTICLE I OFFICES Section 1. Principal Executive Office. The principal executive office of the corporation shall be located at such place as the board of directors shall from time to time determine. Section 2. Other Offices. Other business offices may at any time be established by the board of directors at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place of Meetings. All meetings of shareholders shall be held at the principal executive office of the corporation or at any other place within or without the State of California which may be designated either by the board of directors or by the shareholders in accordance with these bylaws. Section 2. Annual Meetings. The board of directors by resolution shall designate the time, place and date (which shall be in the case of the first annual meeting, not more than 15 months after the organization of the corporation and, in the case of all other annual meetings, no more than 15 months after the date of the last annual meeting) of the annual meeting of the shareholders for the election of directors and the transaction of any other business properly brought before the meeting in accordance with these bylaws. Section 3. Special Meetings. Special meetings of the shareholders, for the purpose of taking any action which is within the powers of the shareholders, may be called by the chairman of the board, the chief executive officer, the president, or the board of directors, or by the holders of shares entitled to cast not less than ten percent of the votes at the meeting. For a special meeting of the shareholders to be properly called by any shareholder(s) pursuant to the preceding sentence, the shareholders(s) calling the meeting must have given timely notice thereof in writing to the secretary of the corporation and the business proposed to be conducted at such meeting must otherwise be a proper matter for shareholder action. To be timely, such notice shall be delivered to the secretary at the principal executive offices of the corporation not later than 60 days nor earlier than 75 days prior to the date of the meeting proposed by the shareholder(s) calling the meeting. Such notice shall set forth (a) the proposed date and time of the meeting; (b) as to each person whom the shareholder(s) calling the meeting proposes to nominate for election or reelection as a director, all information relating to such nominee that is required to be disclosed in a solicitation of proxies for election of directors in an election contest, or that is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) (the "Proxy Rules") and Rule 14a-11 thereunder (or any successors thereto) (including such nominee's written consent to be named in the proxy statement as a nominee and to serve as a director if elected); (c) as to any other business that the shareholder(s) calling the meeting proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder(s) and any other person or entity, if any, on whose behalf the proposal is made; and (d) as to any shareholder(s) giving the notice (i) the name and address of such shareholder(s), as they appear on the corporation's books and (ii) the class and number of shares of the corporation that are owned beneficially and of record by such shareholder(s). Upon notice meeting the requirements of this Section 3 by any shareholder(s) entitled to call a special meeting of shareholders, the corporation shall cause notice to be given to shareholders entitled to vote that a meeting will be held. Notice of special meetings shall be given in the manner set forth in Section 4 of Article II of these bylaws. Section 4. Notice of Meetings of Shareholders. (a) Written notice of each meeting of shareholders, whether annual or special, shall be given to each shareholder entitled to vote thereat, either personally or by first class mail or by other means of written communication, charges prepaid, addressed to such shareholder at the address of such shareholder appearing on the books of the corporation or given by such shareholder to the corporation for the purpose of notice. If any notice addressed to the shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at such address, all future mailing of the same shall be available for the shareholder upon written demand of the shareholder at the principal executive 2 office of the corporation for a period of one year from the date of the giving of the notice to all other shareholders. If no address appears on the books of the corporation or is given by the shareholder to the corporation for the purpose of notice, notice shall be deemed to have been given to such shareholder if given either personally or by first class mail or other means of written communication addressed to the place where the principal executive office of the corporation is located, or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. (b) All such notices shall be given not less than ten days nor more than 60 days before the meeting to each shareholder entitled to vote thereat. Any such notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any such notice in accordance with the foregoing provisions, executed by the secretary, assistant secretary or any transfer agent of the corporation shall be prima facie evidence of the giving of the notice. (c) All such notices shall state the place, date and hour of such meeting. In the case of a special meeting such notice shall also state the general nature of the business to be transacted at such meeting, and no other business may be transacted thereat. In the case of an annual meeting, such notice shall also state those matters which the board of directors at the time of the mailing of the notice intends to present for action by the shareholders, but, subject to the provisions of subsection (d) of this Section 4 and Sections 12 and 13 of this Article II, any proper matter may be presented at an annual meeting of shareholders though not stated in the notice. (d) Unless the general nature of a proposal to be approved by the shareholders relating to the following matters is stated in the notice or in a written waiver of notice, any such shareholders approval will require unanimous approval of all shareholders entitled to vote: (1) A proposal to approve a contract or other transaction between the corporation and one or more of its directors or any corporation, firm or association in which one or more of its directors has a material financial interest or is also a director; (2) A proposal to amend the articles of incorporation; (3) A proposal to approve the principal terms of a reorganization as defined in Section 181 of the General Corporation Law; (4) A proposal to elect voluntarily to wind up and dissolve the corporation; and (5) If the corporation has both preferred and common shares outstanding and the corporation is in the process of winding up a proposal to adopt a plan of distribution of shares, obligations or securities of any other corporation, domestic or foreign, or assets other than money which is not in accordance with the liquidation rights of the preferred shares as specified in the articles. 3 (e) The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the board for election. (f) Upon request in writing that a special meeting of shareholders be called for any proper purpose which satisfies the requirements of Section 3 of this Article II, directed to the secretary by any person (other than the chairman, the chief executive officer, president or the board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, which meeting time shall be not less than 35 nor more than 60 days after receipt of the request. (g) Any previously scheduled or noticed meeting of shareholders (other than a special meeting called by one or more shareholders) may be cancelled by resolution of the board of directors upon public notice given by a mailing to shareholders or a general press release prior to the date previously scheduled for such meeting. Section 5. Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 6. Adjourned Meetings and Notice Thereof. (a) Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the chairman of the meeting or by the vote of a majority of the shares, the holders of which are either present in person or by proxy thereat, but in the absence of a quorum no other business may be transacted at any such meeting, except as provided in Section 5 of this Article II. (b) When a shareholders' meeting is adjourned to another time or place, except as provided in this subsection (b), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. 4 Section 7. Voting. (a) Voting Rights of Shares and Shareholders. (1) Except as provided in Section 708 of the General Corporation Law and except as may be otherwise provided in the articles of incorporation of this corporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders. (2) Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares such shareholder is entitled to vote. (3) Except as provided in Section 5 of this Article II or subsection (f) of this Section 7, the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law or the articles of incorporation. (b) Record Date Requirements. (1) In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. (2) If no record date is fixed: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall at the close of business on the business day preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (ii) Except as provided in Section 9 of Article II hereof, the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board has been taken, shall be the day on which the first written consent is given. 5 (iii) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later. (3) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board fixes a new record date for the adjourned meeting, but the board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting. (4) Shareholders at the close of business on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the articles of incorporation or by agreement or in the General Corporation Law. (c) Voting of Shares by Fiduciaries, Receivers, Pledgeholders and Minors. (1) Subject to subdivision (3) of subsection (d) hereof, shares held by an administrator, executor, guardian, conservator or custodian may be voted by such holder either in person or by proxy, without a transfer of such shares into the holder's name; and shares standing in the name of a trustee may be voted by the trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the trustee's name. (2) Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver's name if authority to do so is contained in the order of the court by which such receiver was appointed. (3) Subject to the provisions of Section 10 of this Article II and except where otherwise agreed in writing between the parties, a shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (4) Shares standing in the name of a minor may be voted and the corporation may treat all rights incident thereto as exercisable by the minor, in person or by proxy, whether or not the corporation has notice, actual or constructive, of the nonage, unless a guardian of the minor's property has been appointed and written notice of such appointment given to the corporation. (d) Voting of Shares by Corporations. (1) Shares of this corporation standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxyholder as the bylaws of such 6 other corporation may prescribe or, in the absence of such provision, as the board of such other corporation may determine or, in the absence of such determination, by the chairman of the board, president or any vice president of such other corporation, or by any other person authorized to do so by the chairman of the board, president or any vice president of such other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of this subsection, unless the contrary is shown. (2) Shares of this corporation owned by a subsidiary of this corporation shall not be entitled to vote on any matter. (3) Shares of this corporation held by this corporation or a subsidiary of this corporation in a fiduciary capacity shall not be entitled to vote on any matter, except to the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give this corporation or the subsidiary of this corporation binding instructions as to how to vote such shares. (e) Voting of Shares Owned of Record by Two or More Persons. (1) If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirely, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxyholders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) If only one votes, such act binds all; (ii) If more than one vote, the act of the majority so voting binds all; (iii) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately. If the instrument so filed or the registration of the shares shows that any such tenancy is held in unequal interest, a majority or even split for the purpose of this subdivision shall be a majority or even split in interest. 7 (f) Election of Directors; Cumulative Voting. (1) Every shareholder complying with subdivision (2) and entitled to vote in any election of directors may cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are normally entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder thinks fit. (2) No shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) unless such candidate or candidates' names have been placed in nomination prior to the voting in accordance with the provisions of Section 12 of this Article II and the shareholder has given notice at the meeting prior to the voting of the shareholder's intention to cumulate the shareholder's votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. (3) In any election of directors, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected; votes against the director and votes withheld shall have no legal effect. (4) Elections of directors need not be by ballot unless a shareholder demands election by ballot at the meeting and before the voting begins. Section 8. Waiver of Notice and Consent of Absentees. The transactions of any meeting of shareholders, however called and noticed and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting, or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice but not so included if such objection is expressly made at the meeting, provided however that any person making such objection at the beginning of the meeting or to the consideration of matters required to be but not included in the notice may orally withdraw by signing a written waiver thereof or a consent to the holding of the meeting or approval of the minutes of the meeting. Neither the business to be transacted at nor the purpose of any annual or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, except as specified in subdivisions (1) through (5) of subsection (d) of Section 4 of this Article II. 8 Section 9. Action Without a Meeting. (a) Directors may be elected without a meeting by consent in writing, setting forth the action so taken, signed by all of the persons who would be entitled to vote for the election of directors, provided that, a director may be elected at any time to fill a vacancy (other than a vacancy created by removal) by the written consent of a majority of the outstanding shares entitled to vote for the election of directors. (b) Any other action which under any provision of the General Corporation Law may be taken at any annual or special meeting of the shareholders may be taken without a meeting and without prior notice, except as hereinafter set forth, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. (c) Unless the consents of all shareholders entitled to vote have been solicited in writing: (1) Notice of any shareholder approval without a meeting, by less than a unanimous written consent, of (i) a contract or other transaction between the corporation and one or more of its directors or any corporation, firm or association in which one or more of its directors has a material financial interest or is also a director, (ii) indemnification of an agent of the corporation as authorized by Section 16 of Article III of these bylaws, (iii) a reorganization of the corporation as defined in Section 181 of the General Corporation Law, or (iv) if the corporation has both preferred and common shares outstanding and the corporation is in the process of winding up, the distribution of shares, obligations or securities of any other corporation, domestic or foreign, or assets other than money which is not in accordance with the liquidation rights of preferred shares, shall be given at least ten days before the consummation of the action authorized by such approval; and (2) Prompt notice shall be given of the taking of any other corporate action including the filling of a vacancy on the board of directors approved by shareholders without a meeting by less than unanimous written consent, to those shareholders entitled to vote who have not consented in writing. Such notices shall be given in the manner and shall be deemed to have been given as provided in Section 4 of Article II of these bylaws. (d) Any shareholder giving a written consent, or the shareholder's proxyholders, or a transferee of the shares of a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing received by the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the secretary of the corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the secretary of the corporation. 9 (e) Any shareholder of record or other person or entity seeking to have the shareholders authorize or take corporate action by written consent shall, by written notice to the secretary, request the board of directors to fix a record date pursuant to Section 7(b) of Article II hereof. The board of directors may, at any time within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date (unless a record date has previously been fixed pursuant to Section 7(b) of Article II hereof). If no record date has been fixed by the board of directors pursuant to Section 7(b) of Article II hereof or otherwise within ten (10) days of the date on which such a request is received, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the secretary of the corporation at its principal place of business. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by applicable law, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the board of directors adopts the resolution taking such prior action. In the event of the delivery, in the manner provided by this Section 9(e), to the corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the corporation may engage independent inspectors of elections for the purpose of performing promptly a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, in the event such inspectors are appointed, no action by written consent without a meeting shall be effective until such date as such appointed independent inspectors certify to the corporation that the consents delivered to the corporation in accordance herewith represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this Section 9(e) shall in any way be construed to suggest or imply that the board of directors or any shareholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after any certification by any independent 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). Every written consent shall bear the date of signature of each shareholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated written consent received in accordance with this Section 9(e), a written consent or consents signed by a sufficient number of holders to take such action are delivered to the corporation in the manner prescribed herein. 10 Section 10. Proxies. (a) Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. Any proxy purporting to be signed and transmitted in accordance with the provisions of Section 178 of the General Corporation Law shall be presumptively valid. (b) No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this section. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. (c) A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the corporation. (d) Except when other provision shall have been made by written agreement between the parties, the record holder of shares which such person holds as pledgee or otherwise as security or which belong to another shall issue to the pledgor or to the owner of such shares, upon demand therefor and payment of necessary expenses thereof, a proxy to vote or take other action thereon. (e) A proxy which states that it is irrevocable is irrevocable for the period specified therein (notwithstanding subsection (c)) when it is held by any of the following or a nominee of any of the following: (1) A pledgee; (2) A person who has purchased or agreed to purchase or holds an option to purchase the shares or a person who has sold a portion of such person's shares in the corporation to the maker of the proxy; (3) A creditor or creditors of the corporation or the shareholder who extended or continued credit to the corporation or the shareholder in consideration of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit and the name of the person extending or continuing credit; 11 (4) A person who has contracted to perform services as an employee of the corporation, if a proxy is required by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for; (5) A person designated by or under an agreement under Section 706 of the General Corporation Law; or (6) A beneficiary of a trust with respect to shares held by the trust. Notwithstanding the period of irrevocability specified, the proxy becomes revocable when the pledge is redeemed, the option or agreement to purchase is terminated or the seller no longer owns any shares of the corporation or dies, the debt of the corporation or the shareholder is paid, the period of employment provided for in the contract of employment has terminated, the agreement under Section 706 of the General Corporation Law has terminated, or the person ceases to be a beneficiary of the trust. In addition to the foregoing clauses (1) through (5), a proxy may be made irrevocable (notwithstanding subsection (c)) if it is given to secure the performance of a duty or to protect a title, either legal or equitable, until the happening of events which, by its terms discharge the obligations secured by it. (f) A proxy may be revoked notwithstanding a provision making it irrevocable, by a transferee of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability appears on the certificate representing such shares. Section 11. Inspectors of Election. (a) In advance of any meeting of shareholders, the board of directors may appoint inspectors of election to act at such meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed. (b) The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. 12 (c) The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three inspectors of election the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. Section 12. Nomination of Directors. Subject to the rights of holders of any outstanding preferred stock, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the corporation. Nominations for election of directors at an annual meeting of shareholders may be made either by the board of directors or by any shareholder who is a shareholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of shareholders entitled to vote at such annual meeting. An eligible shareholder may nominate persons for election as directors at an annual meeting of shareholders only if such shareholder has caused proper written notice with respect thereto to be delivered to, or mailed and received at, the principal executive offices of the corporation not more than 90 nor less than 60 days prior to the first anniversary of the day on which notice of the date of the prior year's annual meeting was mailed. For such notice by an eligible shareholder to be proper, such notice shall set forth: (a) the name and business or residential address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) the principal occupation or employment of the shareholder; (c) the class and number of shares of capital stock of the corporation that are owned beneficially and of record by such shareholder; (d) a representation that such shareholder intends to appear in person or by proxy as a holder of record at the meeting to nominate the person or persons specified in the notice; (e) a description of all arrangements or understandings between such shareholder and each nominee proposed by the shareholder and any other person or persons (identifying such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (f) the principal occupation or employment of, and the classes and number of shares of capital stock of the corporation that are owned beneficially and of record by, the person or persons to be nominated and such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement pursuant to the Proxy Rules; and (g) the consent of each nominee to serve as a director of the corporation if so elected. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 12. If the facts show that a nomination was not made in accordance with the foregoing provisions, the chairman of the meeting shall so determine and declare to the meeting, whereupon the defective nomination shall be disregarded. Section 13. Business At Annual Meetings. No business may be transacted at an annual meeting of shareholders other than business that is (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (ii) otherwise properly brought before the annual meeting by 13 or at the direction of the board of directors or (iii) otherwise properly brought before the annual meeting by a shareholder who (y) is a shareholder of record on the date of the giving of the notice provided for in this Section 13 and on the record date for the determination of shareholders entitled to vote at such annual meeting and (z) complies with the notice procedures set forth in this Section 13. An eligible shareholder may bring business before an annual meeting only if such shareholder has caused proper written notice with respect thereto to be delivered to, or mailed and received at, the principal executive offices of the corporation not more than 90 days nor less than 60 days prior to the first anniversary of the day on which notice of the date of the prior year's annual meeting was mailed. For such notice by an eligible shareholder to be proper, such notice must set forth as to each matter such shareholder proposes to bring before the annual meeting: (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and business or residential address of the shareholder who intends to propose such business; (c) the class and number of shares of capital stock of the corporation that are owned beneficially and of record by such shareholder; (d) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of the shareholder or such other persons in such business; (e) any other information that is required by the Proxy Rules to be provided by the shareholder in his capacity as a proponent of a stockholder proposal; and (f) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 13, provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 13 shall be deemed to preclude discussions by any shareholder of any such business. If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. Notwithstanding the foregoing provisions of this Section 13, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section 13 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 14. Conduct of Meetings. At every meeting of shareholders, the chairman of the board, or, if a chairman has not been appointed or is absent, the person appointed by the board of directors, shall act as chairman of the meeting. The secretary, or, in his absence, the person appointed by the chairman of the meeting, shall act as secretary of the meeting. The chairman of the meeting shall have the 14 absolute right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the sole judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, and there shall be no appeal from the ruling of the chairman. Unless and to the extent determined by the board of directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE III DIRECTORS Section 1. Powers. Subject to the provisions of the General Corporation Law and any limitations in the articles of incorporation of this corporation relating to action requiring approval by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. Section 2. Number and Qualification of Directors. The number of directors of the corporation shall not be less than five (5) nor more than seven (7) until changed by amendment of the articles of incorporation or by a bylaw amending this Section 2 duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided that a proposal to reduce the authorized number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than 16-2/3 percent of the outstanding shares entitled to vote. The exact number of directors shall be fixed from time to time, within the limits specified in the articles of incorporation or in this Section 2, by a bylaw or amendment to the bylaws duly adopted by the vote of a majority of the shares entitled to vote represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the written consent of the holders of a majority of the outstanding shares entitled to vote, or by resolution of the board of directors. Subject to the foregoing provisions for changing the number of directors, the number of directors of this corporation has been fixed at six (6). Section 3. Election and Term of Office. The directors shall be elected at each annual meeting of shareholders, but if any such annual meeting is not held or the directors are not elected at any annual meeting, the directors may be elected at any special meeting of shareholders held for that purpose. Each director, 15 including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until his successor has been elected and qualified. Section 4. Resignation and Removal of Directors. Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time a successor may be elected to take office when the resignation becomes effective. Any or all of the directors may be removed without cause if such removal is approved by the affirmative vote of a majority of the outstanding shares entitled to vote provided that no director may be removed (unless the entire board is removed) when the votes cast against removal or not consenting in writing to such removal would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director's most recent election were then being elected. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 5. Vacancies. A vacancy or vacancies on the board of directors shall exist on the death, resignation or removal of any director, or if the board declares vacant the office of a director if he is declared of unsound mind by an order of court or is convicted of a felony, or if the authorized number of directors is increased or if the shareholders fail to elect the full authorized number of directors to be voted for at any shareholders' meeting at which an election of directors is held. Vacancies on the board of directors (except vacancies created by the removal of a director) may be filled by action of the board in accordance with Section 9 of this Article III or if the number of directors then in office is less than a quorum by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with these bylaws, or (3) by a sole remaining director. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Any such election by written consent of shareholders (other than to fill a vacancy created by removal, which shall require the unanimous written consent of all shares entitled to vote for the election of directors) shall require the consent of a majority of the outstanding shares entitled to vote. Section 6. Place of Meetings. Regular and special meetings of the board of directors may be held at any place within or without the State of California which has been designated in the notice of the meeting, or, if not stated in the notice or there is no notice, designated by resolution or by written consent of all of the members of the board of directors. If the place of a regular or special meeting is not 16 designated in the notice or fixed by a resolution of the board or consented to in writing by all members of the board of directors, it shall be held at the corporation's principal executive office. Section 7. Regular Meetings. Regular meetings of the board may be held without notice if the time and place of the meetings are fixed in these bylaws or by resolution of the board of directors. Section 8. Special Meetings. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two directors. A special meeting of the board of directors may be held upon 48 hours' notice delivered personally or by telephone, including a voice messaging system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail, or other electronic means. If notice is mailed, it shall be deposited in the United States mail at least four days before the meeting. Such mailing, facsimile or delivery, personally or by telephone or other electronic means, as provided in this Section 8 of Article III, shall be due, legal and personal notice to such director. The notice shall state the time and place of a special meeting, but need not specify the purpose of any regular or special meeting of the board of directors. Section 9. Quorum; Action by Directors. A majority of the authorized number of directors shall constitute a quorum of the board for the transaction of business. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the board of directors, subject to the provisions of Section 310 (Transactions Between Corporations and Directors or Corporations Having Interrelated Directors) and subdivision (e) of Section 317 (Indemnification of Corporate "Agent") of the General Corporation Law. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, provided that any action taken is approved by at least a majority of the required quorum for such meeting. Section 10. Waiver of Notice or Consent. The transactions of any meetings of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if either before or after the meeting, each of the directors not present or who, though present, has prior to the meeting or at its commencement, protested the lack of proper notice to him, signs a written waiver of notice, or a consent to holding the meeting, or an approval of the minutes of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the directors. Notices of a meeting need not be given to any director who attends the meeting without protesting, prior to or at the commencement, the lack of notice to such director. 17 Section 11. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of the adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. Section 12. Meetings By Conference Telephone. Members of the board of directors may participate in a meeting through use of conference telephone equipment so long as all members participating in such meeting can hear one another, or through use of electronic video screen communication or other communications equipment so long as the requirements of Section 307(a)(6) of the General Corporation Law have been satisfied. Participation by directors in a meeting in the manner provided in this section constitutes presence in person at such meeting. Section 13. Action Without a Meeting. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 14. Fees and Compensation. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the board. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation for such services. Section 15. Committees. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. The board may delegate to any such committee, to the extent provided in such resolution, any of the board's powers and authority in the management of the corporation's business and affairs except with respect to: 18 (a) The approval of any action for which the General Corporation Law also requires shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the board of directors or any committee; (c) The fixing of compensation of directors for serving on the board or on any committee; (d) The amendment or repeal of bylaws or the adoption of new bylaws; (e) The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable; (f) A distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board; and (g) The appointment of other committees of the board or the members thereof. The board may prescribe appropriate rules, not inconsistent with these bylaws, by which proceedings of any such committee shall be conducted. The provisions of these bylaws relating to the calling of meetings of the board, notice of meetings of the board and waiver of such notice, adjournments of meetings of the board, written consents to board meetings and approval of minutes, action by the board by consent in writing without a meeting, the place of holding such meetings, meetings by conference telephone or similar communications equipment, the quorum for such meetings, the vote required at such meetings and the withdrawal of directors after commencement of a meeting shall apply to committees of the board and action by such committees. In addition, any member of the committee designated by the board as the chairman or as secretary of the committee or any two members of a committee may call meetings of the committee. Regular meetings of any committee may be held without notice if the time and place of such meetings are fixed by the board of directors or the committee. Section 16. Indemnification of Agents. (a) Definitions. For purposes of this Section, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee of agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; and "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative. (b) Indemnification of Directors and Officers. The corporation shall indemnify and hold harmless each of its directors and officers, acting in any capacity as an agent of the 19 corporation, to the fullest extent permissible under California law, as now in effect or as hereafter amended, including those circumstances in which indemnification would otherwise be discretionary, against any and all costs charges, expenses, liabilities and losses (including, without limitation, attorneys' fees, judgments, fines, amounts paid in settlement and ERISA excise taxes or penalties, and including attorneys' fees and any expenses of establishing a right to indemnification under this Section) reasonably incurred or suffered by such person in connection with any proceedings, whether brought by or in the right of the corporation or otherwise, in which such person may be involved, as a party or otherwise, by reason of such person being or having been an agent of the corporation, and such right of indemnification shall inure to the benefit of such person's heirs, executors, personal representatives and estate. Expenses incurred in defending any proceeding shall be advanced by the corporation before the final disposition of the proceeding upon receipt of a written undertaking by or on behalf of an agent covered by this Section to repay the amount of the advance if it shall be determined ultimately that the agent is not entitled to be indemnified as authorized by these bylaws, law, the articles of incorporation or agreement. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere shall not, of itself, create a presumption that a person is not entitled to indemnification hereunder. The corporation shall determine whether a person has met the applicable standard under California law to be permitted to indemnification hereunder by any of the following: (i) a majority vote of a quorum consisting of directors who are not parties to the involved proceeding, (ii) if such quorum of directors is not obtainable, by independent legal counsel, selected by the mutual agreement of the corporation and the person seeking indemnification, in a written opinion, or (iii) approval by the affirmative vote of a majority of the shares of the corporation entitled to vote; provided, that, for purposes of determining the required quorum of any meeting of shareholders called to approve indemnification of such person and the vote or written consent required therefor, the shares owned by the person to be indemnified shall not be considered outstanding and shall not be entitled to vote thereon. The rights of a person covered by this subsection (b) to bring suit against the corporation shall include the following: (i) In the case of a director, if there has been no determination by the corporation, or if the corporation determines, that the director substantively would not be permitted to be indemnified in whole or in part under the General Corporation Law, such director shall have the right to bring suit seeking an initial determination by the court or challenging any such determination by the corporation or any aspect thereof, and the corporation, by this subsection (b), consents to service of process and to appear in any such proceeding. Any determination by the corporation otherwise shall be conclusive and binding on the corporation and such director. 20 (ii) If a claim for advances under this Section is not paid in full by the corporation within 30 days after a written demand and appropriate undertakings has been received by the corporation, such person may at any time thereafter bring suit against the corporation to +-recover the unpaid amount. If successful, in whole or in part, such person shall be entitled to be paid also the expenses of prosecuting such claim. In any action brought by a person to enforce a right of indemnification hereunder, or by the corporation to recover payments by the corporation of expenses incurred by such person in connection with a proceeding in advance of its final disposition, the burden of proving that such person is not entitled to be indemnified under this Section or otherwise shall be on the corporation. Neither the failure of the corporation to have made a determination prior to the commencement of a proceeding that indemnification of a person covered by this Section is proper in the circumstances because such person has met the applicable standard of conduct under the General Corporation Law, nor an actual determination by the corporation that such person has not met the applicable standard of conduct shall create a presumption that such person has not met the applicable standard of conduct or, in the case of an action brought by such person, be a defense to the action. (c) Indemnification of Other Agents. The corporation shall have the power, but except as provided in subsection (b) shall not be obligated, to indemnify each of its agents to the fullest extent permissible under the General Corporation Law, as now in effect or as hereafter amended, including those circumstances in which indemnification would otherwise be discretionary, against any and all costs, charges, expenses, liabilities and losses (including, without limitation, attorneys' fees, judgments, fines and ERISA excise taxes or penalties) reasonably incurred or suffered by such person in connection with any proceedings, whether brought by or in the right of the corporation or otherwise, in which such person may be involved, as a party or otherwise, by reason of such person being or having been an agent of the corporation, and any such indemnification shall inure to the benefit of such person's heirs, executors, personal representatives and estate. Expenses incurred in defending any proceeding may, in the discretion of the corporation, be advanced by the corporation before the final disposition of the proceeding upon receipt of a written undertaking by or on behalf of an agent covered by this Section to repay the amount of the advance if it shall be determined ultimately that the agent is not entitled to be indemnified as authorized by these bylaws, law, the articles of incorporation or agreement. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, shall not, of itself, create a presumption that a person is not eligible to be indemnified hereunder. The corporation shall determine whether a person seeking indemnification hereunder is eligible to be so indemnified and whether the corporation shall indemnify such person or shall provide advances to such person by any of the following, at the corporation's sole option: (i) a majority vote of a quorum consisting of directors who are not parties to the involved proceeding; (ii) if such a quorum is not obtainable, by independent legal 21 counsel in a written opinion; or (iii) approval by the affirmative vote of a majority of the shares of the corporation entitled to vote represented at a duly held meeting at which a quorum is present or by the written consent of holders of a majority of the outstanding shares entitled to vote; provided, that, for purposes of determining the required quorum of any meeting of shareholders called to approve indemnification of or advances to such person and the vote or written consent required therefor, the shares owned by the person to be indemnified or to whom advances are to be made shall not be considered outstanding and shall not be entitled to vote thereon. Any such determination by the corporation shall be conclusive and binding on the corporation and such person. (d) Nonexclusivity of Bylaws; Nature and Extent of Rights. The indemnification provided for in this Section 16 shall not be deemed exclusive of any other rights to indemnification which any person may have or hereafter acquire under any statute, provision of the articles of incorporation or bylaws, agreement, vote of shareholders or disinterested directors or otherwise. The right of indemnification under Section 16(b) shall be deemed to create contractual rights in favor of persons entitled to indemnification thereunder. The provisions of this Section 16 shall be applicable to claims commenced after the adoption hereof, whether arising from acts or omissions occurring before or after the adoption hereof. (e) Amendment or Repeal. Neither the amendment nor repeal of this Section 16, nor the adoption of any provision of the articles of incorporation or bylaws or of any statute inconsistent with this Section 16, shall adversely affect any right or protection of a director, officer or agent of the corporation existing at the time of such a provision. Section 17. Loans to Directors and Officers. (a) The corporation shall not make any loan of money or property to, or guarantee the obligation of, any director or officer of the corporation or of its parent, unless the transaction or an employee benefit plan authorizing such loans or guaranties, after disclosure of the right under such a plan to include officers or directors, is approved by a majority of the shareholders entitled to act thereon as provided in Section 315(g) of the General Corporation Law. (b) Notwithstanding subsection (a) above, if the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the General Corporation Law) on the date of approval by the board of directors, a loan or guaranty to an officer, whether or not a director, or an employee benefit plan authorizing such a loan or guaranty to an officer, may be approved by the board of directors alone by a vote sufficient without counting the vote of any interested director or directors if the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation. (c) The corporation shall not make any loan of money or property to, or guarantee the obligation of, any person upon the security of shares of the corporation or of its parent if the corporation's recourse in the event of default is limited to the security for the loan or guaranty, 22 unless the loan or guaranty is adequately secured without considering these shares, or the loan or guaranty is approved by a majority of the shareholders entitled to act thereon as provided in Section 315(g) of the General Corporation Law. (d) Notwithstanding subsection (a) above, the corporation may advance money to a director or officer of the corporation or of its parent for any expenses reasonably anticipated to be incurred in the performance of the duties of the director or officer, provided that in the absence of the advance the director or officer would be entitled to be reimbursed for the expenses by the corporation, its parent, or any subsidiary. (e) The provisions of subsection (a) above do not apply: (i) to the payment of premiums in whole or in part by the corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by the proceeds of the policy and its cash surrender value; or (ii) to any transaction, plan, or agreement permitted under Section 408 of the General Corporation Law. ARTICLE IV OFFICERS Section 1. Officers. The officers of the corporation shall be a chairman of the board or a chief executive officer or a president, or all three, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. Any number of offices may be held by the same person. Section 2. Elections. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 of this Article IV, shall be chosen by, and shall serve at the pleasure of, the board of directors. Section 3. Other Officers. The board of directors may appoint, and may empower the chairman of the board or the chief executive officer or both of them to appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors or such appointing officer may from time to time determine. 23 Section 4. Removal and Resignation. Any officer may be removed with or without cause either by the board of directors or, except for an officer chosen by the board, by an officer upon whom the power of removal may be conferred by the board (subject, in each case, to the rights, if any, of any officer under any contract of employment). Any officer may resign at any time upon written notice to the corporation (without prejudice however, to the rights, if any, of the corporation under any contract to which the officer is a party). Any such resignation shall take effect upon receipt of such notice or at any later time specified therein. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective. Unless a resignation specifies otherwise, its acceptance by the corporation shall not be necessary to make it effective. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the bylaws for regular appointments to such office. Section 6. Chairman of the Board. The board of directors may, in its discretion, elect a chairman of the board, who, unless otherwise determined by the board of directors, shall preside at all meetings of the board of directors at which he is present and shall exercise and perform any other powers and duties assigned to him by the board or prescribed in the bylaws. If the office of chief executive officer is vacant, the chairman of the board shall exercise the duties of the chief executive officer as set forth in Section 7. He shall preside as chairman at all meetings of the shareholders unless otherwise determined by the board of directors. Section 7. Chief Executive Officer. Subject to any supervisory powers, if any, that may be given by the board of directors or the bylaws to the chairman of the board, if there be such an officer, the chief executive officer shall, subject to the control of the board of directors, have general supervision, direction and control of the business, affairs and officers of the corporation. Unless otherwise determined by the board of directors, in the absence of the chairman of the board, or if there be none, the chief executive officer shall have the powers and perform the duties of the chairman of the board, shall have any other powers and duties that are prescribed by the board of directors or the bylaws and he shall be primarily responsible for carrying out all orders and resolutions of the board of directors. 24 Section 8. President. The president of the corporation shall be the chief operating officer of the corporation and shall have the responsibility for the day-to-day operation and management of the business of the corporation, subject to the general supervision and direction of the chief executive officer. The president shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. Section 9. Vice President. Each vice president shall have the powers and perform the duties that from time to time may be prescribed for him the by board of directors or the bylaws or the chief executive officer. Section 10. Secretary. The secretary shall keep or cause to be kept a book of minutes of all meetings and actions by written consent of directors, shareholders and committees of the board of directors. The minutes of each meeting shall state the time and place that it was held and such other information as shall be necessary to determine whether the meeting was held in accordance with law and these bylaws and the actions taken thereat. The secretary shall keep or cause to be kept at the corporation's principal executive office, or at the office of its transfer agent or registrar, a record of the shareholders of the corporation giving the names and addresses of all shareholders and the number and class of shares held by each. The secretary shall give, or cause to be given, notice of all meetings of shareholders, directors and committees required to be given under these bylaws or law, shall keep or cause the keeping of the corporate seal in safe custody and shall have any other powers and perform any other duties that are prescribed by the board of directors or the bylaws or the chief executive officer. If the secretary refuses or fails to give notice of any meeting lawfully called, any other officer of the corporation may give notice of such meeting. The assistant secretary, or if there be more than one, any assistant secretary may perform any or all of the duties and exercise any or all of the powers of the secretary unless prohibited from doing so by the board of directors, the chief executive officer or the secretary, and shall have such other powers and perform any other duties as are prescribed for him by the board of directors or the chief executive officer. Section 11. Chief Financial Officer. The chief financial officer, who shall also be deemed to be the treasurer, when a treasurer may be required, shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of account. The chief financial officer shall cause all money and other valuables in the name and to the credit of the corporation to be deposited at the depositories designated by the board of directors or by any person authorized by the board of directors to designate such depositories. He shall render to the chief executive officer and board of directors when requested by either of them, an account of all his transactions as chief financial officer and of the financial condition of the corporation; and shall have any other powers and perform any 25 other duties that are prescribed by the board of directors or the bylaws or the chief executive officer. The assistant treasurer, or if there be more than one, any assistant treasurer, may perform any or all of the duties and exercise any or all of the powers of the chief financial officer unless prohibited from doing so by the board of directors, the chief executive officer or the chief financial officer, and shall have such other powers and perform any other duties as are prescribed for him by the board of directors, the chief executive officer or the chief financial officer. ARTICLE V MISCELLANEOUS Section 1. Inspection of Corporate Records. The accounting books and records and record of shareholders, and minutes of proceedings of the shareholders and the board and committees of the board of this corporation or a subsidiary of this corporation shall be open to inspection upon the written demand on the corporation of any shareholder or holder of a voting trust certificate at any time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of such voting trust certificate. Such inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. The corporation shall keep at its principal executive office or at the office of its transfer agent or registrar, if either be designated and as determined by resolution of the board of directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder or shareholders holding at least five percent in the aggregate of the outstanding voting shares of the corporation or who hold at least one percent of such voting shares and have filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors of the corporation shall have (in person, or by agent or attorney) the absolute right to do either or both of the following: (a) inspect and copy the record of shareholders' names and addresses and shareholdings during usual business hours upon five business days' prior written demand upon the corporation or (b) obtain from the transfer agent for the corporation, upon written demand and upon the tender of its usual charges, a list of the shareholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which it has been compiled or as of a date specified by the shareholder subsequent to the date of demand. The list shall be made available on or before the later of five business days after the demand is received or the date specified therein as the date as of which the list is to be compiled. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of this 26 corporation and any subsidiary of this corporation. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. Section 2. Checks, Drafts, etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. The board of directors may authorize one or more officers, of the corporation to designate the person or persons authorized to sign such documents and the manner in which such documents shall be signed. Section 3. Annual and Other Reports. (a) The board of directors of the corporation shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year and at least 15 days, if sent by first class mail, or 35 days, if sent by third class mail, prior to the annual meeting of shareholders. Such report shall contain a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, accompanied by any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that such statements were prepared without audit from the books and records of the corporation. (b) If no annual report for the last fiscal year has been sent to the shareholders, the corporation shall, upon the request of any shareholder made more than 120 days after the close of such fiscal year, deliver or mail to the person making the request within 30 days thereafter the annual report for the last year. A shareholder or shareholders holding at least five percent of the outstanding shares of any class of the corporation may make a written request to the corporation for an income statement of the corporation for the three month, six month or nine month period of the current fiscal year ended more than 30 days prior to the date of the request and a balance sheet of the corporation as of the end of such period and, in addition, if no annual report for the last fiscal year has been sent to shareholders, then the annual report for the last fiscal year. The statements shall be delivered or mailed to the person making the request within 30 days thereafter. A copy of such statements shall be kept on file in the principal executive office of the corporation for 12 months and they shall be exhibited at all reasonable times to any shareholder demanding an examination of them or a copy shall be mailed to such shareholder. (c) The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that such financial statements were prepared without audit from the books and records of the corporation. 27 (d) Unless otherwise determined by the board of directors or the chief executive officer, the chief financial officer and any assistant treasurer are each authorized officers of the corporation to execute the certificate that the annual report and quarterly income statements and balance sheets referred to in this section were prepared without audit from the books and records of the corporation. Any report sent to the shareholders shall be given personally or by mail or other such means of written communication, charges prepaid, addressed to such shareholder at the address of such shareholder appearing on the books of the corporation or given by such shareholder to the corporation for the purpose of notice as set forth in the written request of the shareholder as provided in this section. If any report addressed to the shareholder at the address of such shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the report to the shareholder at such address, all future reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the report to all other shareholders. If no address appears on the books of the corporation or is given by the shareholder to the corporation for the purpose of notice or is set forth in the written request of the shareholder as provided in this section, such report shall be deemed to have been given to such shareholder if sent by mail or other means of written communication addressed to the place where the principal executive office of the corporation is located, or if by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Any such report shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any such report in accordance with the foregoing provisions, executed by the secretary, assistant secretary or any transfer agent of the corporation shall be prima facie evidence of the giving of the report. Section 4. Contracts, etc., How Executed. The board of directors, except as the bylaws or articles of incorporation otherwise provide, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation and such authority may be general or confined to specific instances. Section 5. Certificate For Shares. (a) Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the chairman or vice chairman of the board or the president or a vice president and by the chief financial officer or any assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any and all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or 28 registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. (b) Any such certificate shall also contain such legend or other statement as may be required by Section 418 of the General Corporation Law, the Corporate Securities Law of 1968, and any agreement between the corporation and the issue thereof, and may contain such legend or other statement as may be required by any other applicable law or regulation or agreement. (c) Certificates for shares may be issued prior to full payment thereof, under such restrictions and for such purposes, as the board of directors or the bylaws may provide, provided, however, that any such certificates so issued prior to full payment shall state the total amount of the consideration to be paid therefor and the amount paid thereon. (d) No new certificate for shares shall be issued in place of any certificate theretofore issued unless the latter is surrendered and cancelled at the same time; provided, however, that a new certificate may be issued without the surrender and cancellation of the old certificate if the certificate theretofore issued is alleged to have been lost, stolen or destroyed. In case of any such allegedly lost, stolen or destroyed certificate, the corporation may require the owner thereof or the legal representative of such owner to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuances of such new certificate. Section 6. Representation of Shares of Other Corporations. Unless the board of directors shall otherwise determine, the chairman of the board, the chief executive officer, the president, any vice president and the secretary of this corporation are each authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to such officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized to do so by proxy or power of attorney or other document duly executed by any such officer. Section 7. Inspection of Bylaws. The corporation shall keep at its principal executive office in California, or if its principal executive office is not in California, at its principal business office in California, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the corporation has no office in California it shall upon the request of any shareholder, furnish to him a copy of the bylaws as amended to date. 29 Section 8. Seal. The corporation may have a corporate seal. Section 9. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction an definitions contained in the General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular, and the term "person" includes a corporation as well as a natural person. ARTICLE VI ADOPTION, AMENDMENT OR REPEAL Section 1. Power of Shareholders. New bylaws may be adopted or these bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote or by the written consent of shareholders entitled to vote such shares, except as otherwise provided by law or by the articles of incorporation of this corporation. Section 2. Power of Directors. Subject to the right of shareholders as provided in Section 1 of this Article VI to adopt, amend or repeal bylaws, and except for a bylaw or amendment thereof changing the authorized number of directors, the board of directors may adopt, amend or repeal these bylaws. 30 CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting secretary of DIAGNOSTIC PRODUCTS CORPORATION, a California corporation; and (2) That the foregoing bylaws, comprising 30 pages, constitute the bylaws of such corporation as duly adopted by the board of directors of the corporation by unanimous written consent as of February 10, 2003. Dated: February 10, 2003 /S/ Marilyn Ziering -------------------------------- Marilyn Ziering, Secretary EX-21 4 v88182exv21.txt EXHIBIT 21 EXHIBIT 21 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES

Place of Name Incorporation % Ownership ---- ------------- ----------- DPC Cirrus Inc. USA/Delaware 100% EURO/DPC Limited United Kingdom 100% Diagnostic Products International, Inc. Barbados 100% DPC Holding GmbH Germany 100% DPC Biermann GmbH Germany 100% DPC Czech s.r.o. Czech Republic 100% DPC d.o.o. Zagreb Croatia 50% DPC Polska sp.z.o.o. Poland 100% Diagnostic Products Corporation Benelux B.V. Netherlands 100% Diagnostic Products Corporation Nederland B.V. Netherlands 100% Diagnostic Products Corporation Belgium b.v.b.A. Belgium 100% /s.p.r.l. Diagnostic Products Corporation DPC Finland OY Finland 100% Bio-Mediq DPC Pty. Ltd. Australia 100% DPC Dipesa, S.A. Spain 100% DPC France, SAS France 100% Tianjin De Pu (DPC) China 100% Biotechnological and Medical Products, Inc. Diagnostic Products DPC Norway, AS Norway 100% DPC Medlab Productos Medico Hospitalares Ltda. Brazil 56% DPC Venezuela C.A. Venezuela 56% DPC Medlab de Uruguay S.A. Uruguay 56% DPC Medlab Centroamerica S.A. Costa Rica 29% Nippon DPC Corporation USA/California 50% DPC Skafte AB Sweden 100% DPC Scandinavia Sweden 100% DPC Baltic Estonia Sweden 95% DPC Baltic Latvia Sweden 100% DPC Baltic Lithuania Sweden 100% D.P.C.-N. Tsakiris S.A. Greece 50% Medical Systems, S.p.A. Italy 45% Amerlab, Lda. Portugal 45%

EX-23 5 v88182exv23.txt EXHIBIT 23 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 2-81631, 33-17575, 33-43043, 333-34665, and 333-60690 on Form S-8 of our report dated February 21, 2003, included in this Annual Report on Form 10-K of Diagnostic Products Corporation for the year ended December 31, 2002. /s/ DELOITTE & TOUCHE LLP Los Angeles, California March 25, 2003 EX-99.1 6 v88182exv99w1.htm EXHIBIT 99.1

EXHIBIT 99.1

CERTIFICATION

I, Michael Ziering, certify that:

1.	I have reviewed this annual report on Form 10-K of Diagnostic Products Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated March 28, 2003

/s/ Michael Ziering

Michael Ziering, Chief Executive Officer

41 EX-99.2 7 v88182exv99w2.htm EXHIBIT 99.2

EXHIBIT 99.2

CERTIFICATION

I, James L. Brill, certify that:

1.	I have reviewed this annual report on Form 10-K of Diagnostic Products Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated March 28, 2003

/s/ James L. Brill

James L. Brill, Chief Financial Officer

42 -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.2

                                                                     EXHIBIT 3.2

                                     BYLAWS

                                       OF

                         DIAGNOSTIC PRODUCTS CORPORATION

                            A CALIFORNIA CORPORATION





                                                  TABLE OF CONTENTS

                                                                                             
ARTICLE I         OFFICES..................................................................      1
         Section 1.        Principal Executive Office......................................      1
         Section 2.        Other Offices...................................................      1

ARTICLE II        MEETINGS OF SHAREHOLDERS.................................................      1
         Section 1.        Place of Meetings...............................................      1
         Section 2.        Annual Meetings.................................................      1
         Section 3.        Special Meetings................................................      2
         Section 4.        Notice of Meetings of Shareholders..............................      2
         Section 5.        Quorum..........................................................      4
         Section 6.        Adjourned Meetings and Notice Thereof...........................      4
         Section 7.        Voting..........................................................      5
         Section 8.        Waiver of Notice and Consent of Absentees.......................      8
         Section 9.        Action Without a Meeting........................................      9
         Section 10.       Proxies.........................................................     11
         Section 11.       Inspectors of Election..........................................     12
         Section 12.       Nomination of Directors.........................................     13
         Section 13.       Business At Annual Meetings.....................................     13
         Section 14.       Conduct of Meetings.............................................     14

ARTICLE III       DIRECTORS................................................................     15
         Section 1.        Powers..........................................................     15
         Section 2.        Number and Qualification of Directors...........................     15
         Section 3.        Election and Term of Office.....................................     15
         Section 4.        Resignation and Removal of Directors............................     16
         Section 5.        Vacancies.......................................................     16
         Section 6.        Place of Meetings...............................................     16
         Section 7.        Regular Meetings................................................     17
         Section 8.        Special Meetings................................................     17
         Section 9.        Quorum; Action by Directors.....................................     17
         Section 10.       Waiver of Notice or Consent.....................................     17
         Section 11.       Adjournment.....................................................     18
         Section 12.       Meetings By Conference Telephone................................     18
         Section 13.       Action Without a Meeting........................................     18
         Section 14.       Fees and Compensation...........................................     18
         Section 15.       Committees......................................................     18
         Section 16.       Indemnification of Agents.......................................     19
         Section 17.       Loans to Directors and Officers.................................     22



                                       i



                                                                                             
ARTICLE IV        OFFICERS.................................................................     23
         Section 1.        Officers........................................................     23
         Section 2.        Elections.......................................................     23
         Section 3.        Other Officers..................................................     23
         Section 4.        Removal and Resignation.........................................     24
         Section 5.        Vacancies.......................................................     24
         Section 6.        Chairman of the Board...........................................     24
         Section 7.        Chief Executive Officer.........................................     24
         Section 8.        President.......................................................     25
         Section 9.        Vice President..................................................     25
         Section 10.       Secretary.......................................................     25
         Section 11.       Chief Financial Officer.........................................     25

ARTICLE V         MISCELLANEOUS............................................................     26
         Section 1.        Inspection of Corporate Records.................................     26
         Section 2.        Checks, Drafts, etc.............................................     27
         Section 3.        Annual and Other Reports........................................     27
         Section 4.        Contracts, etc., How Executed...................................     28
         Section 5.        Certificate For Shares..........................................     28
         Section 6.        Representation of Shares of Other Corporations..................     29
         Section 7.        Inspection of Bylaws............................................     29
         Section 8.        Seal............................................................     30
         Section 9.        Construction and Definitions....................................     30

ARTICLE VI        ADOPTION, AMENDMENT OR REPEAL............................................     30
         Section 1.        Power of Shareholders...........................................     30
         Section 2.        Power of Directors..............................................     30



                                       ii



                                     BYLAWS

                                       OF

                         DIAGNOSTIC PRODUCTS CORPORATION

                            A CALIFORNIA CORPORATION

                                    ARTICLE I

                                     OFFICES

         Section 1.        Principal Executive Office.

         The principal executive office of the corporation shall be located at
such place as the board of directors shall from time to time determine.

         Section 2.        Other Offices.

         Other business offices may at any time be established by the board of
directors at any place or places where the corporation is qualified to do
business.

                                   ARTICLE II

                            MEETINGS OF SHAREHOLDERS

         Section 1.        Place of Meetings.

         All meetings of shareholders shall be held at the principal executive
office of the corporation or at any other place within or without the State of
California which may be designated either by the board of directors or by the
shareholders in accordance with these bylaws.

         Section 2.        Annual Meetings.

         The board of directors by resolution shall designate the time, place
and date (which shall be in the case of the first annual meeting, not more than
15 months after the organization of the corporation and, in the case of all
other annual meetings, no more than 15 months after the date of the last annual
meeting) of the annual meeting of the shareholders for the election of directors
and the transaction of any other business properly brought before the meeting in
accordance with these bylaws.


         Section 3.        Special Meetings.

         Special meetings of the shareholders, for the purpose of taking any
action which is within the powers of the shareholders, may be called by the
chairman of the board, the chief executive officer, the president, or the board
of directors, or by the holders of shares entitled to cast not less than ten
percent of the votes at the meeting. For a special meeting of the shareholders
to be properly called by any shareholder(s) pursuant to the preceding sentence,
the shareholders(s) calling the meeting must have given timely notice thereof in
writing to the secretary of the corporation and the business proposed to be
conducted at such meeting must otherwise be a proper matter for shareholder
action.

         To be timely, such notice shall be delivered to the secretary at the
principal executive offices of the corporation not later than 60 days nor
earlier than 75 days prior to the date of the meeting proposed by the
shareholder(s) calling the meeting. Such notice shall set forth (a) the proposed
date and time of the meeting; (b) as to each person whom the shareholder(s)
calling the meeting proposes to nominate for election or reelection as a
director, all information relating to such nominee that is required to be
disclosed in a solicitation of proxies for election of directors in an election
contest, or that is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (or any successor thereto)
(the "Proxy Rules") and Rule 14a-11 thereunder (or any successors thereto)
(including such nominee's written consent to be named in the proxy statement as
a nominee and to serve as a director if elected); (c) as to any other business
that the shareholder(s) calling the meeting proposes to bring before the
meeting, a brief description of such business, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder(s) and any other person or entity, if any, on whose behalf the
proposal is made; and (d) as to any shareholder(s) giving the notice (i) the
name and address of such shareholder(s), as they appear on the corporation's
books and (ii) the class and number of shares of the corporation that are owned
beneficially and of record by such shareholder(s). Upon notice meeting the
requirements of this Section 3 by any shareholder(s) entitled to call a special
meeting of shareholders, the corporation shall cause notice to be given to
shareholders entitled to vote that a meeting will be held. Notice of special
meetings shall be given in the manner set forth in Section 4 of Article II of
these bylaws.

         Section 4.        Notice of Meetings of Shareholders.

         (a)      Written notice of each meeting of shareholders, whether annual
or special, shall be given to each shareholder entitled to vote thereat, either
personally or by first class mail or by other means of written communication,
charges prepaid, addressed to such shareholder at the address of such
shareholder appearing on the books of the corporation or given by such
shareholder to the corporation for the purpose of notice. If any notice
addressed to the shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
to the shareholder at such address, all future mailing of the same shall be
available for the shareholder upon written demand of the shareholder at the
principal executive

                                       2



office of the corporation for a period of one year from the date of the giving
of the notice to all other shareholders. If no address appears on the books of
the corporation or is given by the shareholder to the corporation for the
purpose of notice, notice shall be deemed to have been given to such shareholder
if given either personally or by first class mail or other means of written
communication addressed to the place where the principal executive office of the
corporation is located, or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office is
located.

         (b)      All such notices shall be given not less than ten days nor
more than 60 days before the meeting to each shareholder entitled to vote
thereat. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation shall be prima facie evidence of the giving of
the notice.

         (c)      All such notices shall state the place, date and hour of such
meeting. In the case of a special meeting such notice shall also state the
general nature of the business to be transacted at such meeting, and no other
business may be transacted thereat. In the case of an annual meeting, such
notice shall also state those matters which the board of directors at the time
of the mailing of the notice intends to present for action by the shareholders,
but, subject to the provisions of subsection (d) of this Section 4 and Sections
12 and 13 of this Article II, any proper matter may be presented at an annual
meeting of shareholders though not stated in the notice.

         (d)      Unless the general nature of a proposal to be approved by the
shareholders relating to the following matters is stated in the notice or in a
written waiver of notice, any such shareholders approval will require unanimous
approval of all shareholders entitled to vote:

                  (1)      A proposal to approve a contract or other transaction
between the corporation and one or more of its directors or any corporation,
firm or association in which one or more of its directors has a material
financial interest or is also a director;

                  (2)      A proposal to amend the articles of incorporation;

                  (3)      A proposal to approve the principal terms of a
reorganization as defined in Section 181 of the General Corporation Law;

                  (4)      A proposal to elect voluntarily to wind up and
dissolve the corporation; and

                  (5)      If the corporation has both preferred and common
shares outstanding and the corporation is in the process of winding up a
proposal to adopt a plan of distribution of shares, obligations or securities of
any other corporation, domestic or foreign, or assets other than money which is
not in accordance with the liquidation rights of the preferred shares as
specified in the articles.

                                       3



         (e)      The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the board for election.

         (f)      Upon request in writing that a special meeting of shareholders
be called for any proper purpose which satisfies the requirements of Section 3
of this Article II, directed to the secretary by any person (other than the
chairman, the chief executive officer, president or the board) entitled to call
a special meeting of shareholders, the officer forthwith shall cause notice to
be given to the shareholders entitled to vote that a meeting will be held at a
time requested by the person or persons calling the meeting, which meeting time
shall be not less than 35 nor more than 60 days after receipt of the request.

         (g)      Any previously scheduled or noticed meeting of shareholders
(other than a special meeting called by one or more shareholders) may be
cancelled by resolution of the board of directors upon public notice given by a
mailing to shareholders or a general press release prior to the date previously
scheduled for such meeting.

         Section 5.        Quorum.

         The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting shall constitute a quorum for the
transaction of business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.

         Section 6.        Adjourned Meetings and Notice Thereof.

         (a)      Any shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the chairman of the
meeting or by the vote of a majority of the shares, the holders of which are
either present in person or by proxy thereat, but in the absence of a quorum no
other business may be transacted at any such meeting, except as provided in
Section 5 of this Article II.

         (b)      When a shareholders' meeting is adjourned to another time or
place, except as provided in this subsection (b), notice need not be given of
the adjourned meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken. At the adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than 45 days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting.

                                       4



         Section 7.        Voting.

         (a)      Voting Rights of Shares and Shareholders.

                  (1)      Except as provided in Section 708 of the General
Corporation Law and except as may be otherwise provided in the articles of
incorporation of this corporation, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote of
shareholders.

                  (2)      Any holder of shares entitled to vote on any matter
may vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, other than elections to
office, but, if the shareholder fails to specify the number of shares such
shareholder is voting affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect to all shares such shareholder is
entitled to vote.

                  (3)      Except as provided in Section 5 of this Article II or
subsection (f) of this Section 7, the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a majority
of the required quorum) shall be the act of the shareholders, unless the vote of
a greater number or voting by classes is required by the General Corporation Law
or the articles of incorporation.

         (b)      Record Date Requirements.

                  (1)      In order that the corporation may determine the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days prior to the date of such meeting nor more than 60 days prior to
any other action.

                  (2)      If no record date is fixed:

                           (i)      The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall at the close
of business on the business day preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.

                           (ii)     Except as provided in Section 9 of Article
II hereof, the record date for determining shareholders entitled to give consent
to corporate action in writing without a meeting, when no prior action by the
board has been taken, shall be the day on which the first written consent is
given.

                                       5



                           (iii)    The record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
board adopts the resolution relating thereto, or the 60th day prior to the date
of such other action, whichever is later.

                  (3)      A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any adjournment
of the meeting unless the board fixes a new record date for the adjourned
meeting, but the board shall fix a new record date if the meeting is adjourned
for more than 45 days from the date set for the original meeting.

                  (4)      Shareholders at the close of business on the record
date are entitled to notice and to vote or to receive the dividend, distribution
or allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the articles of incorporation
or by agreement or in the General Corporation Law.

         (c)      Voting of Shares by Fiduciaries, Receivers, Pledgeholders and
Minors.

                  (1)      Subject to subdivision (3) of subsection (d) hereof,
shares held by an administrator, executor, guardian, conservator or custodian
may be voted by such holder either in person or by proxy, without a transfer of
such shares into the holder's name; and shares standing in the name of a trustee
may be voted by the trustee, either in person or by proxy, but no trustee shall
be entitled to vote shares held by such trustee without a transfer of such
shares into the trustee's name.

                  (2)      Shares standing in the name of a receiver may be
voted by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which such
receiver was appointed.

                  (3)      Subject to the provisions of Section 10 of this
Article II and except where otherwise agreed in writing between the parties, a
shareholder whose shares are pledged shall be entitled to vote such shares until
the shares have been transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the shares so transferred.

                  (4)      Shares standing in the name of a minor may be voted
and the corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice, actual
or constructive, of the nonage, unless a guardian of the minor's property has
been appointed and written notice of such appointment given to the corporation.

         (d)      Voting of Shares by Corporations.

                  (1)      Shares of this corporation standing in the name of
another corporation, domestic or foreign, may be voted by such officer, agent or
proxyholder as the bylaws of such

                                       6



other corporation may prescribe or, in the absence of such provision, as the
board of such other corporation may determine or, in the absence of such
determination, by the chairman of the board, president or any vice president of
such other corporation, or by any other person authorized to do so by the
chairman of the board, president or any vice president of such other
corporation. Shares which are purported to be voted or any proxy purported to be
executed in the name of a corporation (whether or not any title of the person
signing is indicated) shall be presumed to be voted or the proxy executed in
accordance with the provisions of this subsection, unless the contrary is shown.

                  (2)      Shares of this corporation owned by a subsidiary of
this corporation shall not be entitled to vote on any matter.

                  (3)      Shares of this corporation held by this corporation
or a subsidiary of this corporation in a fiduciary capacity shall not be
entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to give this
corporation or the subsidiary of this corporation binding instructions as to how
to vote such shares.

         (e)      Voting of Shares Owned of Record by Two or More Persons.

                  (1)      If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirely,
voting trustees, persons entitled to vote under a shareholder voting agreement
or otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:

                  (i)      If only one votes, such act binds all;

                  (ii)     If more than one vote, the act of the majority so
voting binds all;

                  (iii)    If more than one vote, but the vote is evenly split
on any particular matter, each faction may vote the securities in question
proportionately.

If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interest, a majority or even split for the purpose of
this subdivision shall be a majority or even split in interest.

                                       7



         (f)      Election of Directors; Cumulative Voting.

                  (1)      Every shareholder complying with subdivision (2) and
entitled to vote in any election of directors may cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as the shareholder thinks fit.

                  (2)      No shareholder shall be entitled to cumulate votes
(i.e., cast for any candidate a number of votes greater than the number of votes
which such shareholder normally is entitled to cast) unless such candidate or
candidates' names have been placed in nomination prior to the voting in
accordance with the provisions of Section 12 of this Article II and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination.

                  (3)      In any election of directors, the candidates
receiving the highest number of affirmative votes of the shares entitled to be
voted for them up to the number of directors to be elected by such shares are
elected; votes against the director and votes withheld shall have no legal
effect.

                  (4)      Elections of directors need not be by ballot unless a
shareholder demands election by ballot at the meeting and before the voting
begins.

         Section 8.        Waiver of Notice and Consent of Absentees.

         The transactions of any meeting of shareholders, however called and
noticed and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting, or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance of a person at
a meeting shall constitute a waiver of notice of and presence at such meeting,
except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required to be included in the notice but
not so included if such objection is expressly made at the meeting, provided
however that any person making such objection at the beginning of the meeting or
to the consideration of matters required to be but not included in the notice
may orally withdraw by signing a written waiver thereof or a consent to the
holding of the meeting or approval of the minutes of the meeting. Neither the
business to be transacted at nor the purpose of any annual or special meeting of
shareholders need be specified in any written waiver of notice, consent to the
holding of the meeting or approval of the minutes thereof, except as specified
in subdivisions (1) through (5) of subsection (d) of Section 4 of this Article
II.

                                       8



         Section 9.        Action Without a Meeting.

         (a)      Directors may be elected without a meeting by consent in
writing, setting forth the action so taken, signed by all of the persons who
would be entitled to vote for the election of directors, provided that, a
director may be elected at any time to fill a vacancy (other than a vacancy
created by removal) by the written consent of a majority of the outstanding
shares entitled to vote for the election of directors.

         (b)      Any other action which under any provision of the General
Corporation Law may be taken at any annual or special meeting of the
shareholders may be taken without a meeting and without prior notice, except as
hereinafter set forth, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.

         (c)      Unless the consents of all shareholders entitled to vote have
been solicited in writing:

                  (1)      Notice of any shareholder approval without a meeting,
by less than a unanimous written consent, of (i) a contract or other transaction
between the corporation and one or more of its directors or any corporation,
firm or association in which one or more of its directors has a material
financial interest or is also a director, (ii) indemnification of an agent of
the corporation as authorized by Section 16 of Article III of these bylaws,
(iii) a reorganization of the corporation as defined in Section 181 of the
General Corporation Law, or (iv) if the corporation has both preferred and
common shares outstanding and the corporation is in the process of winding up,
the distribution of shares, obligations or securities of any other corporation,
domestic or foreign, or assets other than money which is not in accordance with
the liquidation rights of preferred shares, shall be given at least ten days
before the consummation of the action authorized by such approval; and

                  (2)      Prompt notice shall be given of the taking of any
other corporate action including the filling of a vacancy on the board of
directors approved by shareholders without a meeting by less than unanimous
written consent, to those shareholders entitled to vote who have not consented
in writing. Such notices shall be given in the manner and shall be deemed to
have been given as provided in Section 4 of Article II of these bylaws.

         (d)      Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.

                                       9



         (e)      Any shareholder of record or other person or entity seeking to
have the shareholders authorize or take corporate action by written consent
shall, by written notice to the secretary, request the board of directors to fix
a record date pursuant to Section 7(b) of Article II hereof. The board of
directors may, at any time within ten (10) days after the date on which such a
request is received, adopt a resolution fixing the record date (unless a record
date has previously been fixed pursuant to Section 7(b) of Article II hereof).
If no record date has been fixed by the board of directors pursuant to Section
7(b) of Article II hereof or otherwise within ten (10) days of the date on which
such a request is received, the record date for determining shareholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the board of directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the secretary of the corporation at its
principal place of business. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
applicable law, the record date for determining shareholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the date on which the board of directors adopts the resolution
taking such prior action.

                  In the event of the delivery, in the manner provided by this
Section 9(e), to the corporation of the requisite written consent or consents to
take corporate action and/or any related revocation or revocations, the
corporation may engage independent inspectors of elections for the purpose of
performing promptly a ministerial review of the validity of the consents and
revocations. For the purpose of permitting the inspectors to perform such
review, in the event such inspectors are appointed, no action by written consent
without a meeting shall be effective until such date as such appointed
independent inspectors certify to the corporation that the consents delivered to
the corporation in accordance herewith represent at least the minimum number of
votes that would be necessary to take the corporate action. Nothing contained in
this Section 9(e) shall in any way be construed to suggest or imply that the
board of directors or any shareholder shall not be entitled to contest the
validity of any consent or revocation thereof, whether before or after any
certification by any independent 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).

                  Every written consent shall bear the date of signature of each
shareholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated written consent received in accordance with this Section
9(e), a written consent or consents signed by a sufficient number of holders to
take such action are delivered to the corporation in the manner prescribed
herein.

                                       10


         Section 10.       Proxies.

         (a)      Every person entitled to vote shares may authorize another
person or persons to act by proxy with respect to such shares. Any proxy
purporting to be signed and transmitted in accordance with the provisions of
Section 178 of the General Corporation Law shall be presumptively valid.

         (b)      No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy continues
in full force and effect until revoked by the person executing it prior to the
vote pursuant thereto, except as otherwise provided in this section. Such
revocation may be effected by a writing delivered to the corporation stating
that the proxy is revoked or by a subsequent proxy executed by the person
executing the prior proxy and presented to the meeting, or as to any meeting by
attendance at

such meeting and voting in person by the person executing the proxy. The dates
contained on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed.

         (c)      A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the corporation.

         (d)      Except when other provision shall have been made by written
agreement between the parties, the record holder of shares which such person
holds as pledgee or otherwise as security or which belong to another shall issue
to the pledgor or to the owner of such shares, upon demand therefor and payment
of necessary expenses thereof, a proxy to vote or take other action thereon.

         (e)      A proxy which states that it is irrevocable is irrevocable for
the period specified therein (notwithstanding subsection (c)) when it is held by
any of the following or a nominee of any of the following:

                  (1)      A pledgee;

                  (2)      A person who has purchased or agreed to purchase or
holds an option to purchase the shares or a person who has sold a portion of
such person's shares in the corporation to the maker of the proxy;

                  (3)      A creditor or creditors of the corporation or the
shareholder who extended or continued credit to the corporation or the
shareholder in consideration of the proxy if the proxy states that it was given
in consideration of such extension or continuation of credit and the name of the
person extending or continuing credit;

                                       11



                  (4)      A person who has contracted to perform services as an
employee of the corporation, if a proxy is required by the contract of
employment and if the proxy states that it was given in consideration of such
contract of employment, the name of the employee and the period of employment
contracted for;

                  (5)      A person designated by or under an agreement under
Section 706 of the General Corporation Law; or

                  (6)      A beneficiary of a trust with respect to shares held
by the trust.

         Notwithstanding the period of irrevocability specified, the proxy
becomes revocable when the pledge is redeemed, the option or agreement to
purchase is terminated or the seller no longer owns any shares of the
corporation or dies, the debt of the corporation or the shareholder is paid, the
period of employment provided for in the contract of employment has terminated,
the agreement under Section 706 of the General Corporation Law has terminated,
or the person ceases to be a beneficiary of the trust. In addition to the
foregoing clauses (1) through (5), a proxy may be made irrevocable
(notwithstanding subsection (c)) if it is given to secure the performance of a
duty or to protect a title, either legal or equitable, until the happening of
events which, by its terms discharge the obligations secured by it.

         (f)      A proxy may be revoked notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability appears on
the certificate representing such shares.

         Section 11.       Inspectors of Election.

         (a)      In advance of any meeting of shareholders, the board of
directors may appoint inspectors of election to act at such meeting and any
adjournment thereof. If inspectors of election are not so appointed, or if any
persons so appointed fail to appear or refuse to act, the chairman of any such
meeting may, and on the request of any shareholder or his proxy shall, appoint
inspectors of election (or persons to replace those who so fail or refuse) at
the meeting. The number of inspectors shall be either one or three. If appointed
at a meeting on the request of one or more shareholders or proxies, the majority
of shares represented in person or by proxy shall determine whether one or three
inspectors are to be appointed.

         (b)      The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and effect of
proxies, receive votes, ballots or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders.

                                       12



         (c)      The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as
is practical. If there are three inspectors of election the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of election
is prima facie evidence of the facts stated therein.

         Section 12.       Nomination of Directors.

         Subject to the rights of holders of any outstanding preferred stock,
only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the corporation. Nominations for
election of directors at an annual meeting of shareholders may be made either by
the board of directors or by any shareholder who is a shareholder of record on
the date of the giving of the notice provided for in this Section 12 and on the
record date for the determination of shareholders entitled to vote at such
annual meeting. An eligible shareholder may nominate persons for election as
directors at an annual meeting of shareholders only if such shareholder has
caused proper written notice with respect thereto to be delivered to, or mailed
and received at, the principal executive offices of the corporation not more
than 90 nor less than 60 days prior to the first anniversary of the day on which
notice of the date of the prior year's annual meeting was mailed. For such
notice by an eligible shareholder to be proper, such notice shall set forth: (a)
the name and business or residential address of the shareholder who intends to
make the nomination and of the person or persons to be nominated; (b) the
principal occupation or employment of the shareholder; (c) the class and number
of shares of capital stock of the corporation that are owned beneficially and of
record by such shareholder; (d) a representation that such shareholder intends
to appear in person or by proxy as a holder of record at the meeting to nominate
the person or persons specified in the notice; (e) a description of all
arrangements or understandings between such shareholder and each nominee
proposed by the shareholder and any other person or persons (identifying such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (f) the principal occupation or employment of, and the
classes and number of shares of capital stock of the corporation that are owned
beneficially and of record by, the person or persons to be nominated and such
other information regarding each nominee proposed by such shareholder as would
be required to be included in a proxy statement pursuant to the Proxy Rules; and
(g) the consent of each nominee to serve as a director of the corporation if so
elected.

         No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 12. If the facts show that a nomination was not made in accordance with
the foregoing provisions, the chairman of the meeting shall so determine and
declare to the meeting, whereupon the defective nomination shall be disregarded.

         Section 13.       Business At Annual Meetings.

         No business may be transacted at an annual meeting of shareholders
other than business that is (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors, (ii)
otherwise properly brought before the annual meeting by

                                       13



or at the direction of the board of directors or (iii) otherwise properly
brought before the annual meeting by a shareholder who (y) is a shareholder of
record on the date of the giving of the notice provided for in this Section 13
and on the record date for the determination of shareholders entitled to vote at
such annual meeting and (z) complies with the notice procedures set forth in
this Section 13. An eligible shareholder may bring business before an annual
meeting only if such shareholder has caused proper written notice with respect
thereto to be delivered to, or mailed and received at, the principal executive
offices of the corporation not more than 90 days nor less than 60 days prior to
the first anniversary of the day on which notice of the date of the prior year's
annual meeting was mailed. For such notice by an eligible shareholder to be
proper, such notice must set forth as to each matter such shareholder proposes
to bring before the annual meeting: (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (b) the name and business or residential address of the
shareholder who intends to propose such business; (c) the class and number of
shares of capital stock of the corporation that are owned beneficially and of
record by such shareholder; (d) a description of all arrangements or
understandings between such shareholder and any other person or persons
(including their names) in connection with the proposal of such business by such
shareholder and any material interest of the shareholder or such other persons
in such business; (e) any other information that is required by the Proxy Rules
to be provided by the shareholder in his capacity as a proponent of a
stockholder proposal; and (f) a representation that such shareholder intends to
appear in person or by proxy at the annual meeting to bring such business before
the meeting.

         No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 13, provided, however, that once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 13 shall be deemed to preclude discussions
by any shareholder of any such business. If the chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.

         Notwithstanding the foregoing provisions of this Section 13, a
shareholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder with respect to the matters set forth in this Section 13.
Nothing in this Section 13 shall be deemed to affect any rights of shareholders
to request inclusion of proposals in the Company's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.

         Section 14.       Conduct of Meetings.

         At every meeting of shareholders, the chairman of the board, or, if a
chairman has not been appointed or is absent, the person appointed by the board
of directors, shall act as chairman of the meeting. The secretary, or, in his
absence, the person appointed by the chairman of the meeting, shall act as
secretary of the meeting. The chairman of the meeting shall have the

                                       14



absolute right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the sole judgment of such chairman,
are necessary, appropriate or convenient for the proper conduct of the meeting,
and there shall be no appeal from the ruling of the chairman. Unless and to the
extent determined by the board of directors or the chairman of the meeting,
meetings of shareholders shall not be required to be held in accordance with
rules of parliamentary procedure.

                                  ARTICLE III

                                    DIRECTORS

         Section 1.        Powers.

         Subject to the provisions of the General Corporation Law and any
limitations in the articles of incorporation of this corporation relating to
action requiring approval by the shareholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.

         Section 2.        Number and Qualification of Directors.

         The number of directors of the corporation shall not be less than five
(5) nor more than seven (7) until changed by amendment of the articles of
incorporation or by a bylaw amending this Section 2 duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled to
vote; provided that a proposal to reduce the authorized number of directors to a
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting, or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3 percent of the outstanding shares
entitled to vote. The exact number of directors shall be fixed from time to
time, within the limits specified in the articles of incorporation or in this
Section 2, by a bylaw or amendment to the bylaws duly adopted by the vote of a
majority of the shares entitled to vote represented and voting at a duly held
meeting at which a quorum is present (which shares voting affirmatively also
constitute a majority of the required quorum), or by the written consent of the
holders of a majority of the outstanding shares entitled to vote, or by
resolution of the board of directors.

         Subject to the foregoing provisions for changing the number of
directors, the number of directors of this corporation has been fixed at six
(6).

         Section 3.        Election and Term of Office.

         The directors shall be elected at each annual meeting of shareholders,
but if any such annual meeting is not held or the directors are not elected at
any annual meeting, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director,

                                       15



including a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and until his successor has been
elected and qualified.

         Section 4.        Resignation and Removal of Directors.

         Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the resignation is effective at a future time a
successor may be elected to take office when the resignation becomes effective.
Any or all of the directors may be removed without cause if such removal is
approved by the affirmative vote of a majority of the outstanding shares
entitled to vote provided that no director may be removed (unless the entire
board is removed) when the votes cast against removal or not consenting in
writing to such removal would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes were cast
(or, if such action is taken by written consent, all shares entitled to vote
were voted) and the entire number of directors authorized at the time of the
director's most recent election were then being elected. No reduction of the
authorized number of directors shall have the effect of removing any director
prior to the expiration of his term of office.

         Section 5.        Vacancies.

         A vacancy or vacancies on the board of directors shall exist on the
death, resignation or removal of any director, or if the board declares vacant
the office of a director if he is declared of unsound mind by an order of court
or is convicted of a felony, or if the authorized number of directors is
increased or if the shareholders fail to elect the full authorized number of
directors to be voted for at any shareholders' meeting at which an election of
directors is held. Vacancies on the board of directors (except vacancies created
by the removal of a director) may be filled by action of the board in accordance
with Section 9 of this Article III or if the number of directors then in office
is less than a quorum by (1) the unanimous written consent of the directors then
in office, (2) the affirmative vote of a majority of the directors then in
office at a meeting held pursuant to notice or waivers of notice complying with
these bylaws, or (3) by a sole remaining director. The shareholders may elect a
director at any time to fill any vacancy not filled by the directors. Any such
election by written consent of shareholders (other than to fill a vacancy
created by removal, which shall require the unanimous written consent of all
shares entitled to vote for the election of directors) shall require the consent
of a majority of the outstanding shares entitled to vote.

         Section 6.        Place of Meetings.

         Regular and special meetings of the board of directors may be held at
any place within or without the State of California which has been designated in
the notice of the meeting, or, if not stated in the notice or there is no
notice, designated by resolution or by written consent of all of the members of
the board of directors. If the place of a regular or special meeting is not

                                       16



designated in the notice or fixed by a resolution of the board or consented to
in writing by all members of the board of directors, it shall be held at the
corporation's principal executive office.

         Section 7.        Regular Meetings.

         Regular meetings of the board may be held without notice if the time
and place of the meetings are fixed in these bylaws or by resolution of the
board of directors.

         Section 8.        Special Meetings.

         Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors. A special meeting of the board of
directors may be held upon 48 hours' notice delivered personally or by
telephone, including a voice messaging system or technology designed to record
and communicate messages, telegraph, facsimile, electronic mail, or other
electronic means. If notice is mailed, it shall be deposited in the United
States mail at least four days before the meeting. Such mailing, facsimile or
delivery, personally or by telephone or other electronic means, as provided in
this Section 8 of Article III, shall be due, legal and personal notice to such
director. The notice shall state the time and place of a special meeting, but
need not specify the purpose of any regular or special meeting of the board of
directors.

         Section 9.        Quorum; Action by Directors.

         A majority of the authorized number of directors shall constitute a
quorum of the board for the transaction of business. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present is the act of the board of directors, subject to the
provisions of Section 310 (Transactions Between Corporations and Directors or
Corporations Having Interrelated Directors) and subdivision (e) of Section 317
(Indemnification of Corporate "Agent") of the General Corporation Law. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided that any action taken is
approved by at least a majority of the required quorum for such meeting.

         Section 10.       Waiver of Notice or Consent.

         The transactions of any meetings of the board of directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present, and if
either before or after the meeting, each of the directors not present or who,
though present, has prior to the meeting or at its commencement, protested the
lack of proper notice to him, signs a written waiver of notice, or a consent to
holding the meeting, or an approval of the minutes of the meeting. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the directors. Notices of a
meeting need not be given to any director who attends the meeting without
protesting, prior to or at the commencement, the lack of notice to such
director.

                                       17



         Section 11.       Adjournment.

         A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If the meeting is
adjourned for more than 24 hours, notice of the adjournment to another time or
place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of the adjournment.

         Section 12.       Meetings By Conference Telephone.

         Members of the board of directors may participate in a meeting through
use of conference telephone equipment so long as all members participating in
such meeting can hear one another, or through use of electronic video screen
communication or other communications equipment so long as the requirements of
Section 307(a)(6) of the General Corporation Law have been satisfied.
Participation by directors in a meeting in the manner provided in this section
constitutes presence in person at such meeting.

         Section 13.       Action Without a Meeting.

         Any action required or permitted to be taken by the board of directors
may be taken without a meeting, if all members of the board shall individually
or collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors.

         Section 14.       Fees and Compensation.

         Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the board. This Section 14 shall not be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent, employee or otherwise, and receiving compensation for such
services.

         Section 15.       Committees.

         The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. The
appointment of members or alternate members of a committee requires the vote of
a majority of the authorized number of directors. The board may delegate to any
such committee, to the extent provided in such resolution, any of the board's
powers and authority in the management of the corporation's business and affairs
except with respect to:

                                       18



         (a)      The approval of any action for which the General Corporation
Law also requires shareholders' approval or approval of the outstanding shares;

         (b)      The filling of vacancies on the board of directors or any
committee;

         (c)      The fixing of compensation of directors for serving on the
board or on any committee;

         (d)      The amendment or repeal of bylaws or the adoption of new
bylaws;

         (e)      The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable;

         (f)      A distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board; and

         (g)      The appointment of other committees of the board or the
members thereof.

         The board may prescribe appropriate rules, not inconsistent with these
bylaws, by which proceedings of any such committee shall be conducted. The
provisions of these bylaws relating to the calling of meetings of the board,
notice of meetings of the board and waiver of such notice, adjournments of
meetings of the board, written consents to board meetings and approval of
minutes, action by the board by consent in writing without a meeting, the place
of holding such meetings, meetings by conference telephone or similar
communications equipment, the quorum for such meetings, the vote required at
such meetings and the withdrawal of directors after commencement of a meeting
shall apply to committees of the board and action by such committees. In
addition, any member of the committee designated by the board as the chairman or
as secretary of the committee or any two members of a committee may call
meetings of the committee. Regular meetings of any committee may be held without
notice if the time and place of such meetings are fixed by the board of
directors or the committee.

         Section 16.       Indemnification of Agents.

         (a)      Definitions. For purposes of this Section, "agent" means any
person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee of agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation that was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; and "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative.

         (b)      Indemnification of Directors and Officers. The corporation
shall indemnify and hold harmless each of its directors and officers, acting in
any capacity as an agent of the

                                       19



corporation, to the fullest extent permissible under California law, as now in
effect or as hereafter amended, including those circumstances in which
indemnification would otherwise be discretionary, against any and all costs
charges, expenses, liabilities and losses (including, without limitation,
attorneys' fees, judgments, fines, amounts paid in settlement and ERISA excise
taxes or penalties, and including attorneys' fees and any expenses of
establishing a right to indemnification under this Section) reasonably incurred
or suffered by such person in connection with any proceedings, whether brought
by or in the right of the corporation or otherwise, in which such person may be
involved, as a party or otherwise, by reason of such person being or having been
an agent of the corporation, and such right of indemnification shall inure to
the benefit of such person's heirs, executors, personal representatives and
estate.

         Expenses incurred in defending any proceeding shall be advanced by the
corporation before the final disposition of the proceeding upon receipt of a
written undertaking by or on behalf of an agent covered by this Section to repay
the amount of the advance if it shall be determined ultimately that the agent is
not entitled to be indemnified as authorized by these bylaws, law, the articles
of incorporation or agreement.

         The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere shall not, of itself, create a
presumption that a person is not entitled to indemnification hereunder. The
corporation shall determine whether a person has met the applicable standard
under California law to be permitted to indemnification hereunder by any of the
following: (i) a majority vote of a quorum consisting of directors who are not
parties to the involved proceeding, (ii) if such quorum of directors is not
obtainable, by independent legal counsel, selected by the mutual agreement of
the corporation and the person seeking indemnification, in a written opinion, or
(iii) approval by the affirmative vote of a majority of the shares of the
corporation entitled to vote; provided, that, for purposes of determining the
required quorum of any meeting of shareholders called to approve indemnification
of such person and the vote or written consent required therefor, the shares
owned by the person to be indemnified shall not be considered outstanding and
shall not be entitled to vote thereon.

         The rights of a person covered by this subsection (b) to bring suit
against the corporation shall include the following:

                  (i)  In the case of a director, if there has been no
         determination by the corporation, or if the corporation determines,
         that the director substantively would not be permitted to be
         indemnified in whole or in part under the General Corporation Law, such
         director shall have the right to bring suit seeking an initial
         determination by the court or challenging any such determination by the
         corporation or any aspect thereof, and the corporation, by this
         subsection (b), consents to service of process and to appear in any
         such proceeding. Any determination by the corporation otherwise shall
         be conclusive and binding on the corporation and such director.

                                       20



                  (ii) If a claim for advances under this Section is not paid in
         full by the corporation within 30 days after a written demand and
         appropriate undertakings has been received by the corporation, such
         person may at any time thereafter bring suit against the corporation to
         +-recover the unpaid amount. If successful, in whole or in part, such
         person shall be entitled to be paid also the expenses of prosecuting
         such claim.

         In any action brought by a person to enforce a right of indemnification
hereunder, or by the corporation to recover payments by the corporation of
expenses incurred by such person in connection with a proceeding in advance of
its final disposition, the burden of proving that such person is not entitled to
be indemnified under this Section or otherwise shall be on the corporation.
Neither the failure of the corporation to have made a determination prior to the
commencement of a proceeding that indemnification of a person covered by this
Section is proper in the circumstances because such person has met the
applicable standard of conduct under the General Corporation Law, nor an actual
determination by the corporation that such person has not met the applicable
standard of conduct shall create a presumption that such person has not met the
applicable standard of conduct or, in the case of an action brought by such
person, be a defense to the action.

         (c)      Indemnification of Other Agents. The corporation shall have
the power, but except as provided in subsection (b) shall not be obligated, to
indemnify each of its agents to the fullest extent permissible under the General
Corporation Law, as now in effect or as hereafter amended, including those
circumstances in which indemnification would otherwise be discretionary, against
any and all costs, charges, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, fines and ERISA excise taxes or
penalties) reasonably incurred or suffered by such person in connection with any
proceedings, whether brought by or in the right of the corporation or otherwise,
in which such person may be involved, as a party or otherwise, by reason of such
person being or having been an agent of the corporation, and any such
indemnification shall inure to the benefit of such person's heirs, executors,
personal representatives and estate.

         Expenses incurred in defending any proceeding may, in the discretion of
the corporation, be advanced by the corporation before the final disposition of
the proceeding upon receipt of a written undertaking by or on behalf of an agent
covered by this Section to repay the amount of the advance if it shall be
determined ultimately that the agent is not entitled to be indemnified as
authorized by these bylaws, law, the articles of incorporation or agreement.

         The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, shall not, of itself, create a
presumption that a person is not eligible to be indemnified hereunder. The
corporation shall determine whether a person seeking indemnification hereunder
is eligible to be so indemnified and whether the corporation shall indemnify
such person or shall provide advances to such person by any of the following, at
the corporation's sole option: (i) a majority vote of a quorum consisting of
directors who are not parties to the involved proceeding; (ii) if such a quorum
is not obtainable, by independent legal

                                       21



counsel in a written opinion; or (iii) approval by the affirmative vote of a
majority of the shares of the corporation entitled to vote represented at a duly
held meeting at which a quorum is present or by the written consent of holders
of a majority of the outstanding shares entitled to vote; provided, that, for
purposes of determining the required quorum of any meeting of shareholders
called to approve indemnification of or advances to such person and the vote or
written consent required therefor, the shares owned by the person to be
indemnified or to whom advances are to be made shall not be considered
outstanding and shall not be entitled to vote thereon. Any such determination by
the corporation shall be conclusive and binding on the corporation and such
person.

         (d)      Nonexclusivity of Bylaws; Nature and Extent of Rights. The
indemnification provided for in this Section 16 shall not be deemed exclusive of
any other rights to indemnification which any person may have or hereafter
acquire under any statute, provision of the articles of incorporation or bylaws,
agreement, vote of shareholders or disinterested directors or otherwise. The
right of indemnification under Section 16(b) shall be deemed to create
contractual rights in favor of persons entitled to indemnification thereunder.
The provisions of this Section 16 shall be applicable to claims commenced after
the adoption hereof, whether arising from acts or omissions occurring before or
after the adoption hereof.

         (e)      Amendment or Repeal. Neither the amendment nor repeal of this
Section 16, nor the adoption of any provision of the articles of incorporation
or bylaws or of any statute inconsistent with this Section 16, shall adversely
affect any right or protection of a director, officer or agent of the
corporation existing at the time of such a provision.

         Section 17.       Loans to Directors and Officers.

         (a)      The corporation shall not make any loan of money or property
to, or guarantee the obligation of, any director or officer of the corporation
or of its parent, unless the transaction or an employee benefit plan authorizing
such loans or guaranties, after disclosure of the right under such a plan to
include officers or directors, is approved by a majority of the shareholders
entitled to act thereon as provided in Section 315(g) of the General Corporation
Law.

         (b)      Notwithstanding subsection (a) above, if the corporation has
outstanding shares held of record by 100 or more persons (determined as provided
in Section 605 of the General Corporation Law) on the date of approval by the
board of directors, a loan or guaranty to an officer, whether or not a director,
or an employee benefit plan authorizing such a loan or guaranty to an officer,
may be approved by the board of directors alone by a vote sufficient without
counting the vote of any interested director or directors if the board of
directors determines that such a loan or guaranty or plan may reasonably be
expected to benefit the corporation.

         (c)      The corporation shall not make any loan of money or property
to, or guarantee the obligation of, any person upon the security of shares of
the corporation or of its parent if the corporation's recourse in the event of
default is limited to the security for the loan or guaranty,

                                       22



unless the loan or guaranty is adequately secured without considering these
shares, or the loan or guaranty is approved by a majority of the shareholders
entitled to act thereon as provided in Section 315(g) of the General Corporation
Law.

         (d)      Notwithstanding subsection (a) above, the corporation may
advance money to a director or officer of the corporation or of its parent for
any expenses reasonably anticipated to be incurred in the performance of the
duties of the director or officer, provided that in the absence of the advance
the director or officer would be entitled to be reimbursed for the expenses by
the corporation, its parent, or any subsidiary.

         (e)      The provisions of subsection (a) above do not apply: (i) to
the payment of premiums in whole or in part by the corporation on a life
insurance policy on the life of a director or officer so long as repayment to
the corporation of the amount paid by it is secured by the proceeds of the
policy and its cash surrender value; or (ii) to any transaction, plan, or
agreement permitted under Section 408 of the General Corporation Law.

                                   ARTICLE IV

                                    OFFICERS

         Section 1.        Officers.

         The officers of the corporation shall be a chairman of the board or a
chief executive officer or a president, or all three, a secretary and a chief
financial officer. The corporation may also have, at the discretion of the board
of directors, one or more vice presidents, one or more assistant secretaries,
one or more assistant treasurers and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV. Any number of
offices may be held by the same person.

         Section 2.        Elections.

         The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 of this Article IV,
shall be chosen by, and shall serve at the pleasure of, the board of directors.

         Section 3.        Other Officers.

         The board of directors may appoint, and may empower the chairman of the
board or the chief executive officer or both of them to appoint such other
officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the bylaws or as the board of directors or such appointing officer
may from time to time determine.

                                       23



         Section 4.        Removal and Resignation.

         Any officer may be removed with or without cause either by the board of
directors or, except for an officer chosen by the board, by an officer upon whom
the power of removal may be conferred by the board (subject, in each case, to
the rights, if any, of any officer under any contract of employment). Any
officer may resign at any time upon written notice to the corporation (without
prejudice however, to the rights, if any, of the corporation under any contract
to which the officer is a party). Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective. Unless a resignation specifies
otherwise, its acceptance by the corporation shall not be necessary to make it
effective.

         Section 5.        Vacancies.

         A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the bylaws for regular appointments to such office.

         Section 6.        Chairman of the Board.

         The board of directors may, in its discretion, elect a chairman of the
board, who, unless otherwise determined by the board of directors, shall preside
at all meetings of the board of directors at which he is present and shall
exercise and perform any other powers and duties assigned to him by the board or
prescribed in the bylaws. If the office of chief executive officer is vacant,
the chairman of the board shall exercise the duties of the chief executive
officer as set forth in Section 7. He shall preside as chairman at all meetings
of the shareholders unless otherwise determined by the board of directors.

         Section 7.        Chief Executive Officer.

         Subject to any supervisory powers, if any, that may be given by the
board of directors or the bylaws to the chairman of the board, if there be such
an officer, the chief executive officer shall, subject to the control of the
board of directors, have general supervision, direction and control of the
business, affairs and officers of the corporation. Unless otherwise determined
by the board of directors, in the absence of the chairman of the board, or if
there be none, the chief executive officer shall have the powers and perform the
duties of the chairman of the board, shall have any other powers and duties that
are prescribed by the board of directors or the bylaws and he shall be primarily
responsible for carrying out all orders and resolutions of the board of
directors.

                                       24



         Section 8.        President.

         The president of the corporation shall be the chief operating officer
of the corporation and shall have the responsibility for the day-to-day
operation and management of the business of the corporation, subject to the
general supervision and direction of the chief executive officer. The president
shall have such other powers and duties as may be prescribed by the board of
directors or the bylaws.

         Section 9.        Vice President.

         Each vice president shall have the powers and perform the duties that
from time to time may be prescribed for him the by board of directors or the
bylaws or the chief executive officer.

         Section 10.       Secretary.

         The secretary shall keep or cause to be kept a book of minutes of all
meetings and actions by written consent of directors, shareholders and
committees of the board of directors. The minutes of each meeting shall state
the time and place that it was held and such other information as shall be
necessary to determine whether the meeting was held in accordance with law and
these bylaws and the actions taken thereat. The secretary shall keep or cause to
be kept at the corporation's principal executive office, or at the office of its
transfer agent or registrar, a record of the shareholders of the corporation
giving the names and addresses of all shareholders and the number and class of
shares held by each. The secretary shall give, or cause to be given, notice of
all meetings of shareholders, directors and committees required to be given
under these bylaws or law, shall keep or cause the keeping of the corporate seal
in safe custody and shall have any other powers and perform any other duties
that are prescribed by the board of directors or the bylaws or the chief
executive officer. If the secretary refuses or fails to give notice of any
meeting lawfully called, any other officer of the corporation may give notice of
such meeting. The assistant secretary, or if there be more than one, any
assistant secretary may perform any or all of the duties and exercise any or all
of the powers of the secretary unless prohibited from doing so by the board of
directors, the chief executive officer or the secretary, and shall have such
other powers and perform any other duties as are prescribed for him by the board
of directors or the chief executive officer.

         Section 11.       Chief Financial Officer.

         The chief financial officer, who shall also be deemed to be the
treasurer, when a treasurer may be required, shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of account.
The chief financial officer shall cause all money and other valuables in the
name and to the credit of the corporation to be deposited at the depositories
designated by the board of directors or by any person authorized by the board of
directors to designate such depositories. He shall render to the chief executive
officer and board of directors when requested by either of them, an account of
all his transactions as chief financial officer and of the financial condition
of the corporation; and shall have any other powers and perform any

                                       25



other duties that are prescribed by the board of directors or the bylaws or the
chief executive officer. The assistant treasurer, or if there be more than one,
any assistant treasurer, may perform any or all of the duties and exercise any
or all of the powers of the chief financial officer unless prohibited from doing
so by the board of directors, the chief executive officer or the chief financial
officer, and shall have such other powers and perform any other duties as are
prescribed for him by the board of directors, the chief executive officer or the
chief financial officer.

                                    ARTICLE V

                                  MISCELLANEOUS

         Section 1.        Inspection of Corporate Records.

         The accounting books and records and record of shareholders, and
minutes of proceedings of the shareholders and the board and committees of the
board of this corporation or a subsidiary of this corporation shall be open to
inspection upon the written demand on the corporation of any shareholder or
holder of a voting trust certificate at any time during usual business hours,
for a purpose reasonably related to such holder's interests as a shareholder or
as the holder of such voting trust certificate. Such inspection by a shareholder
or holder of a voting trust certificate may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts.

         The corporation shall keep at its principal executive office or at the
office of its transfer agent or registrar, if either be designated and as
determined by resolution of the board of directors, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shareholder.

         A shareholder or shareholders holding at least five percent in the
aggregate of the outstanding voting shares of the corporation or who hold at
least one percent of such voting shares and have filed a Schedule 14B with the
Securities and Exchange Commission relating to the election of directors of the
corporation shall have (in person, or by agent or attorney) the absolute right
to do either or both of the following: (a) inspect and copy the record of
shareholders' names and addresses and shareholdings during usual business hours
upon five business days' prior written demand upon the corporation or (b) obtain
from the transfer agent for the corporation, upon written demand and upon the
tender of its usual charges, a list of the shareholders' names and addresses,
who are entitled to vote for the election of directors, and their shareholdings,
as of the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall be
made available on or before the later of five business days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled.

         Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of this

                                       26



corporation and any subsidiary of this corporation. Such inspection by a
director may be made in person or by agent or attorney and the right of
inspection includes the right to copy and make extracts.

         Section 2.        Checks, Drafts, etc.

         All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation,
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the board of directors.
The board of directors may authorize one or more officers, of the corporation to
designate the person or persons authorized to sign such documents and the manner
in which such documents shall be signed.

         Section 3.        Annual and Other Reports.

         (a)      The board of directors of the corporation shall cause an
annual report to be sent to the shareholders not later than 120 days after the
close of the fiscal year and at least 15 days, if sent by first class mail, or
35 days, if sent by third class mail, prior to the annual meeting of
shareholders. Such report shall contain a balance sheet as of the end of such
fiscal year and an income statement and statement of changes in financial
position for such fiscal year, accompanied by any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that such statements were prepared without audit from
the books and records of the corporation.

         (b)      If no annual report for the last fiscal year has been sent to
the shareholders, the corporation shall, upon the request of any shareholder
made more than 120 days after the close of such fiscal year, deliver or mail to
the person making the request within 30 days thereafter the annual report for
the last year. A shareholder or shareholders holding at least five percent of
the outstanding shares of any class of the corporation may make a written
request to the corporation for an income statement of the corporation for the
three month, six month or nine month period of the current fiscal year ended
more than 30 days prior to the date of the request and a balance sheet of the
corporation as of the end of such period and, in addition, if no annual report
for the last fiscal year has been sent to shareholders, then the annual report
for the last fiscal year. The statements shall be delivered or mailed to the
person making the request within 30 days thereafter. A copy of such statements
shall be kept on file in the principal executive office of the corporation for
12 months and they shall be exhibited at all reasonable times to any shareholder
demanding an examination of them or a copy shall be mailed to such shareholder.

         (c)      The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.

                                       27



         (d)      Unless otherwise determined by the board of directors or the
chief executive officer, the chief financial officer and any assistant treasurer
are each authorized officers of the corporation to execute the certificate that
the annual report and quarterly income statements and balance sheets referred to
in this section were prepared without audit from the books and records of the
corporation.

         Any report sent to the shareholders shall be given personally or by
mail or other such means of written communication, charges prepaid, addressed to
such shareholder at the address of such shareholder appearing on the books of
the corporation or given by such shareholder to the corporation for the purpose
of notice as set forth in the written request of the shareholder as provided in
this section. If any report addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the report to the shareholder
at such address, all future reports shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the report
to all other shareholders. If no address appears on the books of the corporation
or is given by the shareholder to the corporation for the purpose of notice or
is set forth in the written request of the shareholder as provided in this
section, such report shall be deemed to have been given to such shareholder if
sent by mail or other means of written communication addressed to the place
where the principal executive office of the corporation is located, or if by
publication at least once in a newspaper of general circulation in the county in
which the principal executive office is located. Any such report shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by other means of written communication. An affidavit of mailing of
any such report in accordance with the foregoing provisions, executed by the
secretary, assistant secretary or any transfer agent of the corporation shall be
prima facie evidence of the giving of the report.

         Section 4.        Contracts, etc., How Executed.

         The board of directors, except as the bylaws or articles of
incorporation otherwise provide, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the corporation and such authority may be general or confined to
specific instances.

         Section 5.        Certificate For Shares.

         (a)      Every holder of shares in the corporation shall be entitled to
have a certificate signed in the name of the corporation by the chairman or vice
chairman of the board or the president or a vice president and by the chief
financial officer or any assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any and all of the signatures on the certificate may
be facsimile. In case any officer, transfer agent or

                                       28



registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.

         (b)      Any such certificate shall also contain such legend or other
statement as may be required by Section 418 of the General Corporation Law, the
Corporate Securities Law of 1968, and any agreement between the corporation and
the issue thereof, and may contain such legend or other statement as may be
required by any other applicable law or regulation or agreement.

         (c)      Certificates for shares may be issued prior to full payment
thereof, under such restrictions and for such purposes, as the board of
directors or the bylaws may provide, provided, however, that any such
certificates so issued prior to full payment shall state the total amount of the
consideration to be paid therefor and the amount paid thereon.

         (d)      No new certificate for shares shall be issued in place of any
certificate theretofore issued unless the latter is surrendered and cancelled at
the same time; provided, however, that a new certificate may be issued without
the surrender and cancellation of the old certificate if the certificate
theretofore issued is alleged to have been lost, stolen or destroyed. In case of
any such allegedly lost, stolen or destroyed certificate, the corporation may
require the owner thereof or the legal representative of such owner to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuances of such new certificate.

         Section 6.        Representation of Shares of Other Corporations.

         Unless the board of directors shall otherwise determine, the chairman
of the board, the chief executive officer, the president, any vice president and
the secretary of this corporation are each authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all shares
of any other corporation or corporations standing in the name of this
corporation. The authority herein granted to such officers to vote or represent
on behalf of this corporation any and all shares held by this corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any person authorized to do so by proxy or power of attorney or
other document duly executed by any such officer.

         Section 7.        Inspection of Bylaws.

         The corporation shall keep at its principal executive office in
California, or if its principal executive office is not in California, at its
principal business office in California, the original or a copy of the bylaws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours. If the corporation has no office in
California it shall upon the request of any shareholder, furnish to him a copy
of the bylaws as amended to date.

                                       29



         Section 8.        Seal.

         The corporation may have a corporate seal.

         Section 9.        Construction and Definitions.

         Unless the context otherwise requires, the general provisions, rules of
construction an definitions contained in the General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural and the plural number includes the singular, and the
term "person" includes a corporation as well as a natural person.

                                   ARTICLE VI

                          ADOPTION, AMENDMENT OR REPEAL

         Section 1.        Power of Shareholders.

         New bylaws may be adopted or these bylaws may be amended or repealed by
the affirmative vote of a majority of the outstanding shares entitled to vote or
by the written consent of shareholders entitled to vote such shares, except as
otherwise provided by law or by the articles of incorporation of this
corporation.

         Section 2.        Power of Directors.

         Subject to the right of shareholders as provided in Section 1 of this
Article VI to adopt, amend or repeal bylaws, and except for a bylaw or amendment
thereof changing the authorized number of directors, the board of directors may
adopt, amend or repeal these bylaws.

                                       30



                            CERTIFICATE OF SECRETARY

         I, the undersigned, do hereby certify:

         (1)      That I am the duly elected and acting secretary of DIAGNOSTIC
PRODUCTS CORPORATION, a California corporation; and

         (2)      That the foregoing bylaws, comprising 30 pages, constitute the
bylaws of such corporation as duly adopted by the board of directors of the
corporation by unanimous written consent as of February 10, 2003.

Dated: February 10, 2003

                                    /S/ Marilyn Ziering
                                    --------------------------------
                                    Marilyn Ziering, Secretary

EX-21

                                                                      EXHIBIT 21

                       DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
                                          EXHIBIT 21
                                         SUBSIDIARIES



                                                        Place of
                   Name                               Incorporation            % Ownership
                   ----                               -------------            -----------
                                                                         
DPC Cirrus Inc.                                       USA/Delaware                100%

EURO/DPC Limited                                      United Kingdom              100%

Diagnostic Products International, Inc.               Barbados                    100%

DPC Holding GmbH                                      Germany                     100%

DPC Biermann GmbH                                     Germany                     100%

DPC Czech s.r.o.                                      Czech Republic              100%

DPC d.o.o. Zagreb                                     Croatia                     50%

DPC Polska sp.z.o.o.                                  Poland                      100%

Diagnostic Products Corporation Benelux B.V.          Netherlands                 100%

Diagnostic Products Corporation Nederland B.V.        Netherlands                 100%

Diagnostic Products Corporation Belgium b.v.b.A.      Belgium                     100%
/s.p.r.l.

Diagnostic Products Corporation DPC Finland OY        Finland                     100%

Bio-Mediq DPC Pty. Ltd.                               Australia                   100%

DPC Dipesa, S.A.                                      Spain                       100%

DPC France, SAS                                       France                      100%

Tianjin De Pu (DPC)                                   China                       100%
Biotechnological and Medical Products, Inc.

Diagnostic Products DPC Norway, AS                    Norway                      100%

DPC Medlab Productos Medico Hospitalares Ltda.        Brazil                      56%

DPC Venezuela C.A.                                    Venezuela                   56%

DPC Medlab de Uruguay S.A.                            Uruguay                     56%

DPC Medlab Centroamerica S.A.                         Costa Rica                  29%

Nippon DPC Corporation                                USA/California              50%

DPC Skafte AB                                         Sweden                      100%

DPC Scandinavia                                       Sweden                      100%

DPC Baltic Estonia                                    Sweden                      95%

DPC Baltic Latvia                                     Sweden                      100%

DPC Baltic Lithuania                                  Sweden                      100%

D.P.C.-N. Tsakiris S.A.                               Greece                      50%

Medical Systems, S.p.A.                               Italy                       45%

Amerlab, Lda.                                         Portugal                    45%

EX-23

                                                                      EXHIBIT 23

                         INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in Registration Statements Nos.
2-81631, 33-17575, 33-43043, 333-34665, and 333-60690 on Form S-8 of our report
dated February 21, 2003, included in this Annual Report on Form 10-K of
Diagnostic Products Corporation for the year ended December 31, 2002.


/s/ DELOITTE & TOUCHE LLP

Los Angeles, California
March 25, 2003

EX-99.1

Exhibit 99.1

EX-99.2

Exhibit 99.2