-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RULLLsxDLjLcaU7Af9aHGLzPBOgkbppfuZmOU66ocwcEEnB1E7D+YYT8j5noQWj9 LQeYsefnNNEOE83G+62qfQ== 0000736822-02-000022.txt : 20020416 0000736822-02-000022.hdr.sgml : 20020416 ACCESSION NUMBER: 0000736822-02-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20020411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUCOR INC CENTRAL INDEX KEY: 0000736822 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 222408354 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14820 FILM NUMBER: 02607892 BUSINESS ADDRESS: STREET 1: 3130 GATWAY STREET 2: PO BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 BUSINESS PHONE: 7704412051 MAIL ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: P O BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091-5625 10-Q 1 form10q022802.txt FORM10Q022802 FORM 10-Q United States Securities and Exchange Commission Washington, D. C. 20549 (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: February 28, 2002 OR _ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-14820 IMMUCOR, INC. (Exact name of registrant as specified in its charter) Georgia 22-2408354 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3130 Gateway Drive P.O. Box 5625 Norcross, Georgia 30091-5625 (Address of principal executive offices) (Zip Code) Registrant's telephone number: (770) 441-2051 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of April 2, 2002: Common Stock, $0.10 Par Value - 7,326,742
IMMUCOR, INC. CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------- February 28, 2002 May 31, 2001 ------------------------------------------- ASSETS (Unaudited) (Audited) CURRENT ASSETS: Cash and cash equivalents $ 3,938,689 $ 3,124,517 Accounts receivable, trade - Net 26,448,038 21,167,490 Loan to officer - 395,826 Inventories 14,603,330 15,668,637 Income taxes receivable 647,187 402,243 Deferred income taxes 578,015 631,797 Prepaid expenses and other 2,814,173 891,356 --------------------- -------------------- Total current assets 49,029,432 42,281,866 LONG-TERM INVESTMENT - At cost 1,000,000 1,000,000 PROPERTY, PLANT AND EQUIPMENT - Net 16,731,962 18,333,952 DEFERRED INCOME TAXES 1,525,936 1,525,936 OTHER ASSETS - Net 1,911,036 2,104,845 DEFERRED LICENSING COSTS - Net 1,437,281 1,652,102 EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED - Net 27,783,181 28,913,981 --------------------- -------------------- $99,418,828 $95,812,682 ===================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. CONSOLIDATED BALANCE SHEETS (continued) - ------------------------------------------------------------------------------- February 28, 2002 May 31, 2001 -------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) (Audited) CURRENT LIABILITIES: Current portion of borrowings under bank line of credit agreements $ 8,116,689 $ 2,417,121 Current portion of long-term debt 11,116,896 5,563,363 Note payable to related party 50,091 349,654 Current portion of capital lease obligations 778,990 768,142 Accounts payable 9,646,463 8,647,066 Income taxes payable 1,282,496 23,102 Accrued salaries and wages 1,238,122 1,530,772 Deferred income taxes 375,275 98,308 Other accrued liabilities 5,350,549 3,561,676 ---------------------- -------------------- Total current liabilities 37,955,571 22,959,204 BORROWINGS UNDER BANK LINE OF CREDIT AGREEMENTS - 3,268,740 LONG-TERM DEBT 21,792,725 34,839,576 CAPITAL LEASE OBLIGATIONS 1,104,796 1,629,705 DEFERRED INCOME TAXES 2,785,079 3,119,402 OTHER LIABILITIES 188,896 152,588 SHAREHOLDERS' EQUITY: Common stock - authorized 45,000,000 shares, $0.10 par value; 7,284,117 and 7,277,617 issued and outstanding, respectively 728,412 727,762 Additional paid-in capital 15,484,989 15,439,889 Retained earnings 26,255,060 20,261,628 Accumulated other comprehensive loss (6,876,700) (6,585,812) ---------------------- -------------------- Total shareholders' equity 35,591,761 29,843,467 ---------------------- -------------------- $ 99,418,828 $ 95,812,682 ====================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended February 28, February 28, February 28, February 28, 2002 2001 2002 2001 NET SALES............................................. $ 21,124,979 $ 16,861,462 $ 60,683,213 $ 50,755,968 COST OF SALES......................................... 9,198,670 9,825,683 27,669,380 27,232,886 -------------- -------------- -------------- -------------- GROSS MARGIN.......................................... 11,926,309 7,035,779 33,013,833 23,523,082 -------------- -------------- -------------- -------------- OPERATING EXPENSES: Research and development......................... 472,838 498,361 1,452,542 1,499,715 Selling and marketing............................ 2,942,208 3,283,774 8,246,928 9,530,653 Distribution..................................... 1,318,962 1,492,278 4,209,697 4,331,402 General and administrative....................... 2,870,775 3,568,170 8,264,794 8,069,995 Loss on impairment of goodwill................... - 3,308,119 - 3,308,119 Amortization expense............................. 411,289 455,309 1,225,805 1,383,062 -------------- -------------- -------------- -------------- Total operating expenses...................... 8,016,072 12,606,011 23,399,766 28,122,946 -------------- -------------- -------------- -------------- INCOME (LOSS) FROM OPERATIONS......................... 3,910,237 (5,570,232) 9,614,067 (4,599,864) -------------- -------------- -------------- -------------- OTHER INCOME (EXPENSE): Interest income.................................. 17,591 - 21,259 11,159 Interest expense................................. (813,654) (1,191,940) (3,393,591) (2,861,815) Other - net...................................... 143,888 56,698 1,316,074 183,644 -------------- -------------- -------------- -------------- Total other................................... (652,175) (1,135,242) (2,056,258) (2,667,012) -------------- -------------- -------------- -------------- INCOME (LOSS) BEFORE INCOME TAXES..................... 3,258,062 (6,705,474) 7,557,809 (7,266,876) INCOME TAX EXPENSE (BENEFIT).......................... 748,110 (871,898) 1,564,041 (605,620) -------------- --------------- -------------- -------------- NET INCOME (LOSS)..................................... $ 2,509,952 $ (5,833,576) $ 5,993,768 $ (6,661,256) ============== =============== ============== =============== Earnings (loss) per share: Basic............................................ $0.34 $(0.80) $0.82 $(0.91) ============== =============== ============== =============== Diluted.......................................... $0.32 $(0.80) $0.80 $(0.91) ============== =============== ============== =============== Weighted average shares outstanding: Basic............................................ 7,279,901 7,277,617 7,278,378 7,289,012 ============== =============== ============== =============== Diluted.......................................... 7,823,340 7,277,617 7,489,871 7,289,012 ============== =============== ============== ===============
See notes to consolidated financial statements.
IMMUCOR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------- Nine Months Ended February 28, February 28, 2002 2001 ------------------------------------ OPERATING ACTIVITIES: Net income (loss) $5,993,768 $(6,661,256) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 3,499,274 2,451,349 Amortization of other assets and excess of cost over net tangible assets acquired 1,225,805 1,383,062 Impairment of goodwill - 3,308,119 (Gain) loss on retirement of fixed assets (189,455) 42,522 Changes in operating assets and liabilities: Accounts receivable, trade (4,699,392) (1,350,984) Loan payment from officer 395,826 - Income taxes 1,010,876 (1,303,478) Inventories 1,065,307 (112,607) Other current assets (1,605,029) (1,766,926) Accounts payable 999,397 1,762,201 Other current liabilities 1,532,530 1,179,573 ----------------- ----------------- Total adjustments 3,235,139 5,592,831 ----------------- ----------------- Cash provided by (used in) operating activities 9,228,907 (1,068,425) INVESTING ACTIVITIES: Purchases of / deposits on property and equipment (2,328,844) (3,258,769) ----------------- ----------------- Cash used in investing activities (2,328,844) (3,258,769) FINANCING ACTIVITIES: Borrowings under line of credit agreements net of repayments (598,441) 38,191 Proceeds from issuance of long term debt and capital lease obligations - 35,079,771 Repayment of long-term debt and capital lease obligations (4,996,339) (29,231,882) Repayment of notes payable (299,563) - Exercise of stock options (6,500 shares) 45,750 - Purchase and retirement of stock (184,500 shares) - (1,484,713) ----------------- ---------------- Cash (used in) provided by financing activities (5,848,593) 4,401,367 EFFECT OF EXCHANGE RATE CHANGES ON CASH (237,298) (667,511) ----------------- ---------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 814,172 (593,338) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,124,517 3,505,926 ----------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,938,689 $2,912,588 ================= ================
See notes to consolidated financial statements IMMUCOR, INC. Notes to Consolidated Financial Statements (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. However, there has been no material change in the information disclosed in the Company's annual financial statements dated May 31, 2001, except as disclosed herein. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended February 28, 2002 are not necessarily indicative of the results that may be expected for the year ending May 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K/A for the year ended May 31, 2001. 2. INVENTORIES Inventories are stated at the lower of first-in, first-out cost or market: As of As of February 28, 2002 May 31, 2001 ---------------------- ---------------------- Raw materials and supplies $ 5,554,130 $ 5,524,301 Work in process 1,754,220 2,095,363 Finished goods 7,294,980 8,048,973 ---------------------- ---------------------- $14,603,330 $15,668,637 ====================== ====================== 3. EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share.
Three Months Ended Nine Months Ended February 28, February 28, February 28, February 28, 2002 2001 2002 2001 ---------------- --------------- ---------------- --------------- Numerator for basic and diluted earnings (loss) per share: Income (loss) available to common shareholders $2,509,952 $(5,833,576) $5,993,768 $(6,661,256) ================ =============== ================ =============== Denominator: For basic earnings (loss) per share - weighted average basis 7,279,901 7,277,617 7,278,378 7,289,012 Effect of dilutive stock options and warrants 543,439 - 211,493 - ---------------- --------------- ---------------- --------------- Denominator for diluted earnings (loss) per share-adjusted weighted-average shares 7,823,340 7,277,617 7,489,871 7,289,012 ================ =============== ================ =============== Basic earnings (loss) per share $0.34 $(0.80) $0.82 $(0.91) ================ =============== ================ =============== Diluted earnings (loss) per share $0.32 $(0.80) $0.80 $(0.91) ================ =============== ================ ===============
4. BANK LINE OF CREDIT AGREEMENTS AND DEBT OBLIGATIONS In September 2001, the Company successfully negotiated a waiver of covenant defaults from its primary lender in the Loan Agreement dated February 23, 2001 and obtained a relaxation of such loan covenants for four quarters in exchange for a cash waiver fee, increased interest rates and other conditions. As amended, the Company is required to meet quarterly and cumulative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) covenants and quarterly funded debt to EBITDA ratios. But once the Company's trailing twelve-month funded debt to EBITDA reaches 2.50 to 1 or less the interest rates on these loans will revert back to the more favorable pricing provided in the original Loan Agreement dated February 23, 2001. The Company is currently in compliance with all of the ratios of the loan modification agreement entered into in September 2001. In order to obtain the waiver, the Company agreed to seek a minimum of $5.0 million in junior capital, in the form of either an equity or subordinated debt investment. The Company has not obtained the investment to date and is no longer actively searching for a junior capital investment partner. Because the Company did not obtain such investment by December 31, 2001, the Company became obligated to pay the lender an additional fee of $450,000 (payable in twelve equal monthly installments beginning January 31, 2002). The Company also became obligated to issue the lender a warrant to purchase 750,000 shares of Immucor, Inc. stock at the market price of the stock on December 31, 2001. In March 2002, the Company agreed to pay the lender $500,000 in cash in lieu of issuing any warrants. See footnote 10. Additionally, since the junior capital investment was not received by December 31, 2001, the revolving lines of credit and Term Note A were re-priced at prime plus 2.0% and Term Note B was re-priced at prime plus 4.0% until the junior capital is received. If the junior capital is not received by April 30, 2002, all existing credit facilities will be reset to mature on February 28, 2003. However, the Company's primary lender recently indicated that if the junior capital was not obtained it intends to work with the Company to extend the maturities of the lines of credit beyond February 28, 2003. The lines of credit under the original Loan Agreement dated February 23, 2001 expire February 28, 2003. These lines of credit are presently classified as current on the balance sheet. The Company is confident that prior to the announcement of fiscal year earnings, the letter of intent from its senior lender will translate into a financing agreement that clearly permits the Company to refinance these lines of credit on a long-term basis. 5. DOMESTIC AND FOREIGN OPERATIONS Information concerning the Company's domestic and foreign operations is summarized below (in 000s):
--------------------------------------------------------------------------------------------------- Three Months Ended February 28, 2002 --------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $14,779 $2,089 $1,473 $1,391 $1,393 $ - $21,125 Affiliates 1,643 213 - 22 58 (1,936) - ---------- ---------- --------- ---------- --------- ------------- ------------- Total 16,422 2,302 1,473 1,413 1,451 (1,936) 21,125 Income (loss) from operations 3,921 (108) (145) 367 (125) - 3,910 --------------------------------------------------------------------------------------------------- Three Months Ended February 28, 2001 --------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $10,654 $2,058 $1,445 $1,225 $1,479 $ - $16,861 Affiliates 1,747 113 - 13 52 (1,925) - ---------- ---------- --------- ---------- --------- ------------- ------------- Total 12,401 2,171 1,445 1,238 1,531 (1,925) 16,861 (Loss) Income from operations (1,846) (7) 186 172 (4,075) - (5,570) --------------------------------------------------------------------------------------------------- Nine Months Ended February 28, 2002 --------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $41,599 $6,774 $4,483 $3,947 $3,880 $ - $60,683 Affiliates 5,227 831 - 69 208 (6,335) - ---------- ---------- --------- ---------- --------- ------------- ------------- Total 46,826 7,605 4,483 4,016 4,088 (6,335) 60,683 Income (loss) from operations 8,510 187 138 1,012 (210) (23) 9,614 --------------------------------------------------------------------------------------------------- Nine Months Ended February 28, 2001 --------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $31,846 $6,179 $4,189 $3,985 $4,557 $ - $50,756 Affiliates 5,134 260 - 58 142 (5,594) - ---------- ---------- --------- ---------- --------- ------------- ------------- Total 36,980 6,439 4,189 4,043 4,699 (5,594) 50,756 (Loss) Income from operations (2,174) 641 479 846 (4,333) (59) (4,600)
The Company's U.S. operation made net export sales to unaffiliated customers of approximately $1,124,000 and $1,281,000 for the three months ended February 28, 2002 and 2001, respectively and $3,871,000 and $4,177,000 for the nine months ended February 28, 2002 and 2001, respectively. The Company's German operation made net export sales to unaffiliated customers of approximately $567,000 and $594,000 for the three months ended February 28, 2002 and 2001, respectively and $1,582,000 and $981,000 for the nine months ended February 28, 2002 and 2001, respectively. The Company's Canadian operation made net export sales to unaffiliated customers of approximately $598,000 and $570,000 for the three months ended February 28, 2002 and 2001, respectively and $1,500,000 and $1,850,000 for the nine months ended February 28, 2002 and 2001, respectively. Product sales to affiliates are valued at market prices. 6. COMPREHENSIVE INCOME (LOSS) The components of comprehensive income (loss) for the three-month and nine-month periods ended February 28, 2002 and 2001 are as follows:
Three Months Ended Nine Months Ended February 28, February 28, February 28, February 28, 2002 2001 2002 2001 ------------------ ------------------ ---------------------------------------- Net income (loss) $ 2,509,952 $ (5,833,576) $ 5,993,768 $ (6,661,256) Net foreign currency translation (982,060) 554,369 137,165 (444,604) Net derivatives qualifying as hedges - - (325,332) - Cumulative effect of the adoption of FAS 133 on June 1, 2001, net of taxes - - (102,721) - ------------------ ------------------ -------------------- -------------------- Comprehensive income (loss) $ 1,527,892 $ (5,279,207) $ 5,702,880 $ (7,105,860) ================== ================== ==================== ====================
Accumulated comprehensive loss as of February 28, 2002 and May 31, 2001 was ($6,876,700) and ($6,585,812), respectively. The balance, consisting primarily of net losses on foreign currency translation adjustments and fluctuations in the fair value of the Company's interest rate swaps, has been disclosed in the shareholders' equity section of the consolidated balance sheets. 7. LOANS TO OFFICERS AND DIRECTORS On June 6, 2000 Edward L. Gallup, President and CEO of Immucor, Inc. entered into a loan agreement with Immucor, Inc. to borrow up to $400,000 in order to meet margin calls related to loans made by brokerage companies. The Company made the loan because it believed that certain benefits would accrue to the Company and its shareholders if such margin calls were satisfied by some means other than having those shares sold by the broker. The loan is payable on demand to the Company and bears interest at the rate charged by the Company under the Company's loan agreement with its principal lender. The loan, including interest, was fully paid in January 2002. 8. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS Effective June 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("Statement 133"). Statement No. 133 requires the Company to recognize all derivatives on the balance sheet at fair value. For derivatives designated as hedges, the change in the fair value of the derivative will either be offset against the change in the fair value of the hedged asset, liability, or firm commitment through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. As of February 28, 2002, the Company had two interest rate swap agreements to hedge against exposure to interest rate risk. The cumulative effect of the adoption of FAS 133 on June 1, 2001 resulted in a comprehensive loss of approximately $103,000, relating to the interest rate swap agreements. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, collectively, the Statements. These Statements drastically change the accounting for business combinations, goodwill and intangible assets. Statement 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Statement 141 also changes the criteria to recognize intangible assets apart from goodwill. Under Statement 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assets that have finite lives will continue to be amortized over their useful lives. The amortization provisions of Statement 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the amortization provisions of Statement 142 are effective upon adoption of Statement 142. Pre-existing goodwill and intangibles will be amortized during the transition period until adoption. Companies are required to adopt Statement 142 in their fiscal year beginning after December 15, 2001. Early adoption is permitted for companies with fiscal years beginning after March 15, 2001. The Company plans to adopt Statement 142 effective June 1, 2002. 9. INCOME TAX (BENEFIT) EXPENSE Income tax (benefit) expense as shown in the statements of consolidated operations differ from the amount that would be computed if income before income taxes was multiplied by the United States federal income tax rate (statutory rate) applicable in each period. The reasons for this difference are as follows:
Three Months Ended Nine Months Ended February 28, February 28, February 28, February 28, 2002 2001 2002 2001 Benefit (expense) at statutory rate $ 1,107,741 $ (2,279,861) $ 2,569,655 $ (2,470,738) Increase (decrease) resulting from: Amortization 139,839 154,805 416,774 470,241 Net operating loss carry-forward (659,365) - (1,812,609) - Foreign operations 256,611 228,325 778,102 196,516 Impairment of goodwill - 1,124,760 - 1,124,760 Other (96,716) (99,927) (387,881) 73,601 ----------------------------------------------------------------------- Tax provision per statement of operations $ 748,110 $ (871,898) $ 1,564,041 $ (605,620) =======================================================================
10. SUBSEQUENT EVENTS In March 2002, the Company agreed to pay its senior lender $500,000 in cash in lieu of 750,000 common stock purchase warrants. The warrants were part of the debt agreement entered into in September 2001 and had not been issued pending negotiations with the lender. The warrants could have been exercised for common stock equivalent to an approximate 10% equity position in the Company. Management believes the cash payment was in the best long-term interest of the Company's existing shareholders, as it eliminated the potential dilution of ownership had the warrants been issued. Also in March 2002, the Company signed a letter of intent to transfer all of its commercial activities in France to Bio-Rad Laboratories. Over the five-year life of the agreement, the Company expects revenue growth of $9.0 million. Bio-Rad has a leading position in the French market, with a dedicated sales force and established infrastructure capable of supporting the Company's automation strategy. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact are forward-looking statements as that term is defined in the Private Securities Reform Act of 1995, including, without limitation, statements concerning the Company's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this discussion are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. It is not certain that the Company will achieve expected sales and the Company's ability to do so could be adversely affected by a variety of factors, including significant price decreases by our competitors and the strengthening of the dollar versus the Euro. In addition, continued weakness in the economy and other factors could cause customers to defer capital spending, which would adversely impact instrument sales. Financial Condition and Liquidity: As of February 28, 2002, the Company's cash position totaled $3.9 million, an approximate 26% increase since May 31, 2001. The increase is due to improved operating results of the Company. Accounts receivable increased by $5.3 million since May 31, 2001 due to the reagent price increases that had a significant impact on the second and third quarters and could further increase as the contract renewal cycle is completed. Prepaid expenses and other increased by $1.9 million due to $0.6 million due from Becton, Dickinson no later than April 1, 2002, $0.3 million in progress payments for refurbishing of the German facility and to deferred costs for instruments that are in the installation process. Accounts payable increased by $1.0 million as the Company conserved operating cash-flows to meet scheduled debt payments. Debt payments of $1.0 million and capital expenditures of $0.5 million related to instruments at customer sites on reagent rental agreements were made during the quarter. Debt payments of $5.9 million and capital expenditures of $2.3 million were made during the fiscal year. Additional debt payments of $1.1 million were made early in the fourth quarter from operating cashflows. The current income tax liability increased $1.3 million with the Company's return to profitability and other accrued liabilities rose $1.8 million mainly with deferred instrument revenue, pending completion of customer training and other contractual requirements. Retained earnings (comprehensive loss) and total shareholders' equity improved by $5.7 million due to the earnings for the nine months, offset by unfavorable changes in the net foreign exchange translation and the effective hedge portion of the interest rate swaps. See footnote 6. In September 2001, the Company successfully negotiated a waiver of covenant defaults from its primary lender in the Loan Agreement dated February 23, 2001 and obtained a relaxation of such loan covenants for four quarters in exchange for a cash waiver fee, increased interest rates and other conditions. As amended, the Company is required to meet quarterly and cumulative EBITDA covenants and quarterly funded debt to EBITDA ratios. But once the Company's trailing twelve-month funded debt to EBITDA reaches 2.50 to 1 or less the interest rates on these loans will revert back to the more favorable pricing provided in the original Loan Agreement dated February 23, 2001. The Company is currently in compliance with all of the ratios of the loan modification agreement entered into in September 2001. In order to obtain the waiver, the Company agreed to seek a minimum of $5.0 million in junior capital, in the form of either an equity or subordinated debt investment. The Company has not obtained the investment to date and is no longer actively searching for a junior capital investment partner. Because the Company did not obtain such investment by December 31, 2001, the Company became obligated to pay the lender an additional fee of $450,000 (payable in twelve equal monthly installments beginning January 31, 2002). The Company also became obligated to issue the lender a warrant to purchase 750,000 shares of Immucor, Inc. stock at the market price of the stock on December 31, 2001. In March 2002, the Company agreed to pay the lender $500,000 in cash in lieu of issuing any warrants. See footnote 10. Additionally, since the junior capital investment was not received by December 31, 2001, the revolving lines of credit and Term Note A were re-priced at prime plus 2.0% and Term Note B was re-priced at prime plus 4.0% until the junior capital is received. If the junior capital is not received by April 30, 2002, all existing credit facilities will be reset to mature on February 28, 2003. However, the Company's primary lender recently indicated that if the junior capital was not obtained it intends to work with the Company to extend the maturities of the lines of credit beyond February 28, 2003. The lines of credit under the original Loan Agreement dated February 23, 2001 expire February 28, 2003. These lines of credit are presently classified as current on the balance sheet. The Company is confident that prior to the announcement of fiscal year earnings, the letter of intent from its senior lender will translate into a financing agreement that clearly permits the Company to refinance these lines of credit on a long-term basis. Prior to December 31, 2001, the Company had a signed letter of intent with a junior capital investment group. Due to the upward movement of the market value of the Company's stock after signing this letter of intent, it was no longer attractive to the Company to obtain an investment from this group on the terms provided for in the letter, and the Company's obligations under such letter of intent have since expired (other than certain confidentiality requirements). Management has opened negotiations with its lender to waive the junior capital requirement from the loan agreement. However, there can be no assurance that the Company will be successful in its negotiations or that the Company will be able to do so in time to avoid the consequences as specified in its loan agreement with its principal lender. Management expects that with the significant price increase, cash and cash equivalents and internally generated funds will be sufficient to support operations and planned capital expenditures for the next 12 months. In addition, Management believes that most capital expenditures planned for the next 12 months can be delayed in the event capital resources become inadequate. Results of Operations: During the quarter the Company improved net income by $8.3 million over the prior year. For the nine-month period, the Company improved net income by $12.7 million over the prior year including the one-time benefit of a $1.2 million settlement with Becton, Dickinson and Company and short-swing trading profits from Kairos Group that contributed $0.36 million to pre-tax income. Prior year net loss for both the quarter and nine-months includes a $3.3 loss on impairment of goodwill related to the acquisition of the Company's Belgian and French subsidiaries, and $1.3 million in nonrecurring expenses related to the implementation of the Company's cost savings plan. The implementation of the cost savings plan in the fourth quarter of fiscal 2001 has had a positive effect on the Company's cash position. The net result of the quarter's cash-flow was a $1 million improvement in cash position compared to the prior year. Results of German and Italian operations continue to suffer from the lack of a competitive automated instrument. The Company expects operating results to improve in these operations with the full launch of Gallileo which is expected to begin in the first quarter of fiscal 2003. Net sales Revenues for the quarter ended February 28, 2002 rose by $4.3 million over the same quarter last fiscal year largely due to the aggressive price increase begun in the third quarter of fiscal year 2001 and new group contracts. Instrument sales for the quarter ended February 28, 2002 were up $0.5 million to $1.3 million, although there remains a backlog of over $1.7 million pending completion of customer training. As a result of the lifting of the ABS2000 safety alert, the Company expects that, over time, instrument sales will return to previous levels. For the first nine months of the year revenues totaled a record $60.7 million, a $9.9 million, or 19.6%, increase over the prior year period. Reagent price increases contributed approximately $10 million to the increase for the year. The Company expects to improve sales by $12.0 million for the fiscal year ending May 31, 2002 as a result of the price increases and a single new group contract. This estimate is based on, among other things, the fact that a substantial portion of the fiscal year is complete and the current level of order backlog and contractually committed purchases. In making this projection, the Company extrapolated recent past results and assumed existing customers will continue to make purchases at their current rate of purchase at current prices. Further, Immucor has assumed that it will not lose any customers or gain any customers, or that revenues from new customers will offset lost revenues from lost customers. Partially offsetting the reagent price increases and new and group contract renewals is the de-emphasis on sales of low margin OEM products which has the consequence of improving gross profit margin percentage. The Company has also prudently assumed that instrument sales will be consistent with, and not improve over the previous fiscal year. Investors are cautioned against attributing undue certainty to the Company's assessment of the future since there can be no assurance that the Company will achieve this level of revenues. Immucor's ability to do so could be adversely affected by a variety of factors, the most significant of which, in the Company's opinion, are significant price decreases by our competitors, the general condition of the economy (which could deteriorate to such a point that it causes customers to defer capital spending which would adversely impact instrument sales), unexpected expenses and increased regulatory costs, and the value of the Euro versus the Dollar, which would depress the Company's European results if the Euro were to decline. Additionally, the Company has not determined what effect, if any, the stockpiling of Immucor's products by some customers prior to such customers' price increases will have on the reliability of Immucor's projections. Investors are also cautioned that Immucor has not determined whether it will issue projections in the future or update its current projection if not otherwise required to do so by the federal securities laws. Gross profit Gross profit increased $4.9 million as compared to the prior year's quarter and increased $9.5 million compared to the prior year to date due to the aggressive price increases mentioned above. The primary reasons for this increase were increased sales and the discontinuance of the significant costs incurred in prior periods to resolve ABS2000 performance issues and the related costs of product concessions provided to customers who were required to perform backup testing during the safety alert. Operating expenses When compared to the prior year, research and development costs remained relatively constant, primarily related to instrument development initiatives for the Galileo for the European market. The Galileo is designed to fulfill the need in Europe for a high-throughput blood serology-testing device with a test menu that includes antibody screening. The Company is beginning trials outside the United States to be staged for full European market launch in the fall of 2002. Selling and marketing expenses decreased $0.34 million for the quarter and $1.3 million for the year to date, as compared to the same period last year. Until the fourth quarter of fiscal 2001, the Company had been developing an infrastructure to support an increased level of instrument sales. But in light of the issues with the ABS2000 and continued customer migration to purchasing groups, the Company reevaluated the focus of the sales and marketing efforts. The domestic sales staff was significantly reduced and the Netherlands facility was closed, resulting in a positive effect on the quarter and year to date net income. Distribution expenses for the quarter and year to date ended February 28, 2002 decreased slightly compared to the prior year, but as a percentage of sales, have decreased from over 8% to under 7%. Any additional shipping expenses related to the new purchasing group were offset by volume discounts offered by carriers. General and administrative expenses for the quarter and nine-month period ended February 28, 2002 decreased $0.7 million and increased $0.2 million, respectively. Expenses in the prior year periods included $1.1 million of nonrecurring expenses, primarily severance, related to the implementation of the cost savings plan. The increase for the nine-month period is due primarily to legal expenses related to the proxy contest incurred in the second quarter and various bank and professional fees. Amortization expense remained relatively constant compared with the prior period. Interest expense When compared to the prior year three-month and nine-month period, interest expense decreased $0.38 million and increased $0.53 million, respectively. The decrease in the quarter resulted from lower overall market rates. The nine-month increase is the result of the increased borrowings on long-term debt, bank fees related to the Company's inability to maintain the financial covenants contained in its prior loan agreement due to past operating losses, and capitalized leases in fiscal 2001. Other income Other income for the quarter was comprised mainly of exchange gains on foreign currencies and improved over the same period for the prior year with improvements in the Euro exchange rate. Other income for the second quarter was favorably affected by the disgorgement of short-swing trading profits by the Kairos Group that contributed $0.36 million to pre-tax income. Other income for the first quarter of fiscal 2002 was favorably affected by the settlement of the Becton, Dickinson arbitration. The settlement called for Becton to pay Immucor, Inc. a total of $1.8 million, payable in two installments. The first payment of $1.2 million was made on June 11, 2001, and the second installment of $0.6 million was received April 2, 2002. Assets of approximately $1.0 million related to IMAGN were netted against the settlement from Becton. These items of income do not arise from the Company's ongoing business. Income taxes Income tax expense increased during the three-month period and nine-month period ended February 28, 2002 as compared to the prior period, due to higher income. The Net Operating Loss Carry-forwards generated in fiscal 2001 that reduce the current United States tax provision have been fully utilized in the profitable nine-months ended February 28, 2002. The Company increased the third quarter income tax provision based on estimates of fiscal 2002 earnings. During the fourth quarter of fiscal 2001, the Company elected to record a valuation allowance in an amount equal to the net deferred tax assets of the Company, amounting to $1.2 million. Effectively, this non-cash allowance reflected the elimination of domestic deferred taxes as a balance sheet asset and was used to reduce domestic taxes in the current year now that the Company has returned to profitability. ITEM 3. Quantitative and Qualitative Disclosures On Market Risk There have been no material changes regarding the Company's market risk position from the information provided in its Annual Report on Form 10-K/A for the fiscal year ended May 31, 2001. The quantitative and qualitative disclosures about market risk are discussed in Item 7A-Quantitative and Qualitative Disclosures About Market Risk, contained in the Company's Form 10-K/A. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The Company has filed the following exhibits with this report: 3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Immucor, Inc.'s quarterly report on Form 10-Q filed on January 16, 2001). 3.2 Amended and Restated Bylaws (amended and restated as of February 12, 2002). 4.1 Amended and Restated Shareholder Rights Agreement dated as of November 20, 2001 between Immucor, Inc. and EquiServe Trust Company, N.A.as Rights Agent (incorporated by reference to Exhibit 4.1 to Immucor, Inc.'s quarterly report on 10-Q filed on January 14, 2002). (b) The Company did not file any reports on Form 8-K during the three months ended February 28, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMMUCOR, INC. (Registrant) Date: April 10, 2002 By: /s/ Edward L. Gallup ----------------------------- Edward L. Gallup, President (on behalf of Registrant and as Principal Executive Officer) /s/ Steven C. Ramsey ----------------------------- Steven C.Ramsey, Senior Vice President - Finance EX-3 3 exh32amdbylaws.txt AMENDED BYLAWS 021202 BYLAWS OF IMMUCOR, INC. Amended and Restated as of February 12, 2002 BYLAWS OF IMMUCOR, INC. TABLE OF CONTENTS Page ARTICLE I. Office..........................................................1 1.1 Registered Office and Agent....................................1 1.2 Principal Office...............................................1 1.3 Other Offices..................................................1 ARTICLE II. Shareholders' Meetings.........................................1 2.1 Place of Meetings..............................................1 2.2 Annual Meetings................................................2 2.3 Special Meetings...............................................2 2.4 Notice of Meetings.............................................2 2.5 Waiver of Notice...............................................2 2.6 Voting Group; Quorum; Vote Required to Act.....................3 2.7 Voting of Shares...............................................3 2.8 Proxies........................................................3 2.9 Presiding Officer..............................................3 2.10 Adjournments...................................................4 2.11 Conduct of the Meeting.........................................4 2.12 Action of Shareholders Without a Meeting.......................4 2.13 Matters Considered at Annual Meetings..........................5 ARTICLE III. Board of Directors............................................5 3.1 General Powers.................................................5 3.2 Number, Election and Term of Office............................5 3.3 Removal of Directors...........................................6 3.4 Vacancies......................................................6 3.5 Compensation...................................................6 3.6 Committees of the Board of Directors...........................6 3.7 Qualification of Directors.....................................6 3.8 Certain Nomination Requirements................................7 ARTICLE IV. Meetings of the Board of Directors.............................7 4.1 Regular Meetings...............................................7 4.2 Special Meetings...............................................8 4.3 Place of Meetings..............................................8 4.4 Notice of Meetings.............................................8 4.5 Quorum.........................................................8 4.6 Vote Required for Action.......................................8 4.7 Participation by Conference Telephone..........................8 4.8 Action by Directors Without a Meeting..........................8 4.9 Adjournments...................................................9 4.10 Waiver of Notice...............................................9 ARTICLE V. Officers........................................................9 5.1 Offices........................................................9 5.2 Term...........................................................9 5.3 Compensation..................................................10 5.4 Removal.......................................................10 5.5 Chairman of the Board.........................................10 5.6 Chief Executive Officer.......................................10 5.7 President.....................................................10 5.8 Vice Presidents...............................................11 5.9 Secretary.....................................................11 5.10 Treasurer.....................................................11 ARTICLE VI. Distributions and Dividends...................................11 ARTICLE VII. Shares.......................................................11 7.1 Share Certificates............................................12 7.2 Rights of Corporation with Respect to Regi....................12 7.3 Transfers of Shares...........................................12 7.4 Duty of Corporation to Register Transfer......................12 7.5 Lost, Stolen, or Destroyed Certificates.......................12 7.6 Fixing of Record Date.........................................13 7.7 Record Date if None Fixed.....................................13 ARTICLE VIII. Indemnification.............................................14 8.1 Indemnification of Directors..................................14 8.2 Indemnification of Officers and Others........................14 8.3 Subsidiaries..................................................15 8.4 Determination.................................................15 8.5 Advances......................................................16 8.6 Non-Exclusivity; Continuing Benefits..........................16 8.7 Insurance.....................................................16 8.8 Notice........................................................17 8.9 Security......................................................17 8.10 Amendment.....................................................17 8.11 Agreements....................................................17 8.12 Successors....................................................18 8.13 Additional Indemnification....................................18 ARTICLE IX. Miscellaneous.................................................18 9.1 Inspection of Books and Records...............................18 9.2 Fiscal Year...................................................18 9.3 Corporate Seal................................................18 9.4 Annual Statements.............................................18 9.5 Notice........................................................19 ARTICLE X. Amendments.....................................................19 BYLAWS OF IMMUCOR, INC. - ------------------------------------------------------------------------------ References in these Bylaws to "Articles of Incorporation" are to the Articles of Incorporation of Immucor, Inc., a Georgia corporation (the "Corporation"), as amended and restated from time to time. All of these Bylaws are subject to contrary provisions, if any, of the Articles of Incorporation (including provisions designating the preferences, limitations, and relative rights of any class or series of shares), the Georgia Business Corporation Code (the "Code"), and other applicable law, as in effect on and after the effective date of these Bylaws. References in these Bylaws to "Sections" shall refer to sections of the Bylaws, unless otherwise indicated. - ------------------------------------------------------------------------------- ARTICLE I Office 1.1 Registered Office and Agent. The Corporation shall maintain a registered office and shall have a registered agent whose business office is the same as the registered office. 1.2 Principal Office. The principal office of the Corporation shall be at the place designated in the Corporation's annual registration with the Georgia Secretary of State. 1.3 Other Offices. In addition to its registered office and principal office, the Corporation may have offices at other locations either in or outside the State of Georgia. ARTICLE II Shareholders' Meetings 2.1 Place of Meetings. Meetings of the Corporation's shareholders may be held at any location inside or outside the State of Georgia designated by the Board of Directors or any other person or persons who properly call the meeting, or if the Board of Directors or such other person or persons do not specify a location, at the Corporation's principal office. 2.2 Annual Meetings. The Corporation shall hold an annual meeting of shareholders, at a time determined by the Board of Directors, to elect directors and to transact any business that properly may come before the meeting. The annual meeting may be combined with any other meeting of shareholders, whether annual or special. 2.3 Special Meetings. Special meetings of shareholders of one or more classes or series of the Corporation's shares may be called at any time by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer and shall be called by the Corporation upon the written request (in compliance with applicable requirements of the Code) of the holders of shares representing fifty percent (50%) or more of the votes entitled to be cast on each issue proposed to be considered at the special meeting. The business that may be transacted at any special meeting of shareholders shall be limited to that proposed in the notice of the special meeting given in accordance with Section 2.4 (including related or incidental matters that may be necessary or appropriate to effectuate the proposed business). 2.4 Notice of Meetings. In accordance with Section 9.5 and subject to waiver by a shareholder pursuant to Section 2.5, the Corporation shall give written notice of the date, time, and place of each annual and special shareholders' meeting no fewer than 10 days nor more than 60 days before the meeting date to each shareholder of record entitled to vote at the meeting. The notice of an annual meeting need not state the purpose of the meeting unless these Bylaws require otherwise. The notice of a special meeting shall state the purpose for which the meeting is called. If an annual or special shareholders' meeting is adjourned to a different date, time, or location, the Corporation shall give shareholders notice of the new date, time, or location of the adjourned meeting, unless a quorum of shareholders was present at the meeting and information regarding the adjournment was announced before the meeting was adjourned; provided, however, that if a new record date is or must be fixed in accordance with Section 7.6, the Corporation must give notice of the adjourned meeting to all shareholders of record as of the new record date who are entitled to vote at the adjourned meeting. 2.5 Waiver of Notice. A shareholder may waive any notice required by the Code, the Articles of Incorporation, or these Bylaws, before or after the date and time of the matter to which the notice relates, by delivering to the Corporation a written waiver of notice signed by the shareholder entitled to the notice. In addition, a shareholder's attendance at a meeting shall be (a) a waiver of objection to lack of notice or defective notice of the meeting unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) a waiver of objection to consideration of a particular matter at the meeting that is not within the purpose stated in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Except as otherwise required by the Code, neither the purpose of nor the business transacted at the meeting need be specified in any waiver. 2.6 Voting Group; Quorum; Vote Required to Act. a. Unless otherwise required by the Code or the Articles of Incorporation, all classes or series of the Corporation's shares entitled to vote generally on a matter shall for that purpose be considered a single voting group (a "Voting Group"). If either the Articles of Incorporation or the Code requires separate voting by two or more Voting Groups on a matter, action on that matter is taken only when voted upon by each such Voting Group separately. At all meetings of shareholders, any Voting Group entitled to vote on a matter may take action on the matter only if a quorum of that Voting Group exists at the meeting, and if a quorum exists, the Voting Group may take action on the matter notwithstanding the absence of a quorum of any other Voting Group that may be entitled to vote separately on the matter. Unless the Articles of Incorporation, these Bylaws, or the Code provides otherwise, the presence (in person or by proxy) of shares representing a majority of votes entitled to be cast on a matter by a Voting Group shall constitute a quorum of that Voting Group with regard to that matter. Once a share is present at any meeting other than solely to object to holding the meeting or transacting business at the meeting, the share shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournments of that meeting, unless a new record date for the adjourned meeting is or must be set pursuant to Section 7.6 of these Bylaws. b. Except as provided in Section 3.4, if a quorum exists, action on a matter by a Voting Group is approved by that Voting Group if the votes cast within the Voting Group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation, a provision of these Bylaws that has been adopted pursuant to Section 14-2-1021 of the Code (or any successor provision), or the Code requires a greater number of affirmative votes. 2.7 Voting of Shares. Unless otherwise required by the Code or the Articles of Incorporation, each outstanding share of any class or series having voting rights shall be entitled to one vote on each matter that is submitted to a vote of shareholders. 2.8 Proxies. A shareholder entitled to vote on a matter may vote in person or by proxy pursuant to an appointment executed in writing by the shareholder or by his attorney-in-fact. An appointment of a proxy shall be valid for 11 months from the date of its execution, unless a longer or shorter period is expressly stated in the proxy. 2.9 Presiding Officer. Except as otherwise provided in this Section 2.9, the Chairman of the Board, and in his absence or disability the Chief Executive Officer, shall preside at every shareholders' meeting (and any adjournment thereof) as its chairman, if either of them is present and willing to serve. If neither the Chairman of the Board nor the Chief Executive Officer is present and willing to serve as chairman of the meeting, and if the Chairman of the Board has not designated another person who is present and willing to serve, then a majority of the Corporation's directors present at the meeting shall be entitled to designate a person to serve as chairman. If no director of the Corporation is present at the meeting or if a majority of the directors who are present cannot be established, then a chairman of the meeting shall be selected by a majority vote of (a) the shares present at the meeting that would be entitled to vote in an election of directors, or (b) if no such shares are present at the meeting, then the shares present at the meeting comprising the Voting Group with the largest number of shares present at the meeting and entitled to vote on a matter properly proposed to be considered at the meeting. The chairman of the meeting may designate other persons to assist with the meeting. 2.10 Adjournments. At any meeting of shareholders (including an adjourned meeting), a majority of shares of any Voting Group present and entitled to vote at the meeting (whether or not those shares constitute a quorum) may adjourn the meeting, but only with respect to that Voting Group, to reconvene at a specific time and place. If more than one Voting Group is present and entitled to vote on a matter at the meeting, then the meeting may be continued with respect to any such Voting Group that does not vote to adjourn as provided above, and such Voting Group may proceed to vote on any matter to which it is otherwise entitled to do so; provided, however, that if (a) more than one Voting Group is required to take action on a matter at the meeting and (b) any one of those Voting Groups votes to adjourn the meeting (in accordance with the preceding sentence), then the action shall not be deemed to have been taken until the requisite vote of any adjourned Voting Group is obtained at its reconvened meeting. The only business that may be transacted at any reconvened meeting is business that could have been transacted at the meeting that was adjourned, unless further notice of the adjourned meeting has been given in compliance with the requirements for a special meeting that specifies the additional purpose or purposes for which the meeting is called. Nothing contained in this Section 2.10 shall be deemed or otherwise .construed to limit any lawful authority of the chairman of a meeting to adjourn the meeting. 2.11 Conduct of the Meeting. At any meeting of shareholders, the chairman of the meeting shall be entitled to establish the rules of order governing the conduct of business at the meeting. 2.12 Action of Shareholders Without a Meeting. Action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if the action is taken by all shareholders entitled to vote on the action or, if permitted by the Articles of Incorporation, by persons who would be entitled to vote at a meeting shares having voting power to cast the requisite number of votes (or numbers, in the case of voting by groups) that would be necessary to authorize or take the action at a meeting at which all shareholders entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by shareholders entitled to take action without a meeting, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Where required by Section 14-2-704 or other applicable provision of the Code, the Corporation shall provide shareholders with written notice of actions taken without a meeting. 2.13 Matters Considered at Annual Meetings. Notwithstanding anything to the contrary in these Bylaws, the only business that may be conducted at an annual meeting of shareholders shall be business brought before the meeting (a) by or at the direction of the Board of Directors prior to the meeting, (b) by or at the direction of the Chairman of the Board or the Chief Executive Officer, or (c) by a shareholder of the Corporation who is entitled to vote with respect to the business and who complies with the notice procedures set forth in this Section 2.13. For business to be brought properly before an annual meeting by a shareholder, the shareholder must have given timely notice of the business in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered or mailed to and received at the principal offices of the Corporation not later than 60 days before the date that corresponds to the month and day of the prior year on which the Corporation first mailed its proxy materials for the prior year's annual meeting of shareholders. A shareholder's notice to the Secretary shall set forth a brief description of each matter of business the shareholder proposes to bring before the meeting and the reasons for conducting that business at the meeting; the name, as it appears on the Corporation's books, and address of the shareholder proposing the business; the series or class and number of shares of the Corporation's capital stock that are beneficially owned by the shareholder; and any material interest of the shareholder in the proposed business. The chairman of the meeting shall have the discretion. to declare to the meeting that any business proposed by a shareholder to be considered at the meeting is out of order and that such business shall not be transacted at the meeting if (i) the chairman concludes that the matter has been proposed in a manner inconsistent with this Section 2.13 or (ii) the chairman concludes that the subject matter of the proposed business is inappropriate for consideration by the shareholders at the meeting. ARTICLE III Board of Directors 3.1 General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by, the Board of Directors, subject to any limitation set forth in the Articles of Incorporation, in bylaws approved by the shareholders, or in agreements among all the shareholders that are otherwise lawful. 3.2 Number, Election and Term of Office. The number of directors of the Corporation shall be fixed by resolution of the Board of Directors from time to time and, until otherwise so fixed, shall be eight (8), and in no event shall be more than thirteen (13); provided, however, that no decrease in the number of directors shall have the effect of shortening the term of an incumbent director. Except as provided elsewhere in this Section 3.2 and in Section 3.4, the directors whose terms expire in accordance with Article Ninth of the Articles of Incorporation shall be elected at each annual meeting of shareholders, or at a special meeting of shareholders called for purposes that include the election of directors, by a plurality of the votes cast by the shares entitled to vote and present at the meeting. Despite the expiration of a director's term, he shall continue to serve until his successor, if there is to be any, has been elected and has qualified. 3.3 Removal of Directors. Subject to the rights, if any, of the holders of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, but only for cause, provided that directors elected by a particular Voting Group may be removed only by the shareholders in that Voting Group. Removal action may be taken only at a shareholders' meeting for which notice of the removal action has been given. A removed director's successor, if any, may be elected at the same meeting to serve the unexpired term. 3.4 Vacancies. A vacancy occurring in the Board of Directors may be filled for the unexpired term, unless the shareholders have elected a successor, by the affirmative vote of a majority of the remaining directors, whether or not the remaining directors constitute a quorum; provided, however, that if the vacant office was held by a director elected by a particular Voting Group, only the holders of shares of that Voting Group or the remaining directors elected by that Voting Group shall be entitled to fill the vacancy; provided further, however, that if the vacant office was held by a director elected by a particular Voting Group and there is no remaining director elected by that Voting Group, the other remaining directors or director (elected by another Voting Group or Groups) may fill the vacancy during an interim period before the shareholders of the vacated director's Voting Group act to fill the vacancy. A vacancy or vacancies in the Board of Directors may result from the death, resignation, disqualification, or removal of any director, or from an increase in the number of directors. 3.5 Compensation. Directors may receive such compensation for their services as directors as may be fixed by the Board of Directors from time to time. A director may also serve the Corporation in one or more capacities other than that of director and receive compensation for services rendered in those other capacities. 3.6 Committees of the Board of Directors. The Board of Directors may designate from among its members an executive committee or one or more other standing or ad hoc committees, each consisting of one or more directors, who serve at the pleasure of the Board of Directors. Subject to the limitations imposed by the Code, each committee shall have the authority set forth in the resolution establishing the committee or in any other resolution of the Board of Directors specifying, enlarging, or limiting the authority of the committee. 3.7 Qualification of Directors. No person elected to serve as a director of the Corporation shall assume office and begin serving unless and until duly qualified to serve, as determined by reference to the Code, the Articles of Incorporation, and any further eligibility requirements established in these Bylaws. 3.8 Certain Nomination Requirements. No person may be nominated for election as a director at any annual or special meeting of shareholders unless (a) the nomination has been or is being made pursuant to a recommendation or approval of the Board of Directors of the Corporation or a properly constituted committee of the Board of Directors previously delegated authority to recommend or approve nominees for director; (b) the person is nominated by a shareholder of the Corporation who is entitled to vote for the election of the nominee at the subject meeting, and the nominating shareholder has furnished written notice to the Secretary of the Corporation, at the Corporation's principal office, not later than 60 days before the date that corresponds to the month and day of the prior year on which the Corporation first mailed its proxy materials for the prior year's annual meeting of shareholders, and the notice (i) sets forth with respect to the person to be nominated his or her name, age, business and residence addresses, principal business or occupation during the past five years, any affiliation with or material interest in the Corporation or any transaction involving the Corporation, and any affiliation with or material interest in any person or entity having an interest materially adverse to the Corporation, and (ii) is accompanied by the sworn or certified statement of the shareholder that the nominee has consented to being nominated and that the shareholder believes the nominee will stand for election and will serve if elected; or (c) (i) the person is nominated to replace a person previously identified as a proposed nominee (in accordance with the provisions of subpart (b) of this Section 3.8) who has since become unable or unwilling to be nominated or to serve if elected, (ii) the shareholder who furnished such previous identification makes the replacement nomination and delivers to the Secretary of the Corporation (at the time of or prior to making the replacement nomination) an affidavit or other sworn statement affirming that the shareholder had no reason to believe the original nominee would be so unable or unwilling, and (iii) such shareholder also furnishes in writing to the Secretary of the Corporation (at the time of or prior to making the replacement nomination) the same type of information about the replacement nominee as required by subpart (b) of this Section 3.8 to have been furnished about the original nominee. The chairman of any meeting of shareholders at which one or more directors are to be elected, for good cause shown and with proper regard for the orderly conduct of business at the meeting, may waive in whole or in part the operation of this Section 3.8. ARTICLE IV Meetings of the Board of Directors 4.1 Regular Meetings. A regular meeting of the Board of Directors shall be held in conjunction with each annual meeting of shareholders. In addition, the Board of Directors may, by prior resolution, hold regular meetings at other times. 4.2 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer, or any two directors in office at that time. 4.3 Place of Meetings. Directors may hold their meetings at any place in or outside the State of Georgia that the Board of Directors may establish from time to time. 4.4 Notice of Meetings. Directors need not be provided with notice of any regular meeting of the Board of Directors. Unless waived in accordance with Section 4.10, the Corporation shall give at least two days' notice to each director of the date, time, and place of each special meeting. Notice of a meeting shall be deemed to have been given to any director in attendance at any prior meeting at which the date, time, and place of the subsequent meeting was announced. 4.5 Quorum. At meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business. 4.6 Vote Required for Action. If a quorum is present when a vote is taken, the vote of a majority of the directors present at the time of the vote will be the act of the Board of Directors, unless the vote of a greater number is required by the Code, the Articles of Incorporation, or these Bylaws. A director who is present at a meeting of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (a) he objects at the beginning of the meeting (or promptly upon his arrival) to holding the meeting or transacting business at it; (b) his dissent or abstention from the action taken is entered in the minutes of the meeting; or (c) he delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the Corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken. 4.7 Participation by Conference Telephone. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment through which all persons participating may hear and speak to each other. Participation in a meeting pursuant to this Section 4.7 shall constitute presence in person at the meeting. 4.8 Action by Directors Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if a written consent, describing the action taken, is signed by each director and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. The consent may be executed in counterparts, and shall have the same force and effect as a unanimous vote of the Board of Directors at a duly convened meeting. 4.9 Adjournments. A meeting of the Board of Directors, whether or not a quorum is present, may be adjourned by a majority of the directors present to reconvene at a specific time and place. It shall not be necessary to give notice to the directors of the reconvened meeting or of the business to be transacted, other than by announcement at the meeting that was adjourned, unless a quorum was not present at the meeting that was adjourned, in which case notice shall be given to directors in the same manner as for a special meeting. At any such reconvened meeting at which a quorum is present, any business may be transacted that could have been transacted at the meeting that was adjourned. 4.10 Waiver of Notice. A director may waive any notice required by the Code, the Articles of Incorporation, or these Bylaws before or after the date and time of the matter to which the notice relates, by a written waiver signed by the director and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. Attendance by a director at a meeting shall constitute waiver of notice of the meeting except where a director at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or to transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. ARTICLE V Officers 5.1 Offices. The officers of the Corporation shall consist of a President, a Secretary, and a Treasurer, and may include a Chief Executive Officer separate from the President, each of whom shall be elected or appointed by the Board of Directors. The Board of Directors may also elect a Chairman of the Board from among its members. The Board of Directors from time to time may, or may authorize the Chief Executive Officer to, create and establish the duties of other offices and may, or may authorize the Chief Executive Officer to, elect or appoint, or authorize specific senior officers to appoint, the persons who shall hold such other offices, including one or more Vice Presidents (including Executive Vice Presidents, Senior Vice Presidents, Assistant Vice Presidents, and the like), one or more Assistant Secretaries, and one or more Assistant Treasurers. Whether or not so provided by the Board of Directors, the Chairman of the Board or the Chief Executive Officer may appoint one or more Assistant Secretaries and one or more Assistant Treasurers. Any two or more offices may be held by the same person. 5.2 Term. Each officer shall serve at the pleasure of the Board of Directors (or, if appointed by the Chief Executive Officer or a senior officer pursuant to this Article Five, at the pleasure of the Board of Directors, the Chief Executive Officer, or the senior officer authorized to have appointed the officer) until his death, resignation, or removal, or until his replacement is elected or appointed in accordance with this Article Five. 5.3 Compensation. The compensation of all officers of the Corporation shall be fixed by the Board of Directors or by a committee or officer appointed by the Board of Directors. Officers may serve without compensation. 5.4 Removal. All officers (regardless of how elected or appointed) may be removed, with or without cause, by the Board of Directors, and any officer appointed by the Chief Executive Officer or another senior officer may also be removed, with or without cause, by the Chief Executive Officer or by any senior officer authorized to have appointed the officer to be removed. Removal will be without prejudice to the contract rights, if any, of the person removed, but shall be effective notwithstanding any damage claim that may result from infringement of such contract rights. 5.5 Chairman of the Board. The Chairman of the Board (if there be one) shall preside at and serve as chairman of meetings of the shareholders and of the Board of Directors (unless another person is selected under Section 2.9 to act as chairman). The Chairman of the Board shall perform other duties and have other authority as may from time to time be delegated by the Board of Directors. 5.6 Chief Executive Officer. The Chief Executive Officer (if there be one) shall be charged with the general and active management of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect, shall have the authority to select and appoint employees and agents of the Corporation, and shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board. The Chief Executive Officer shall perform any other duties and have any other authority as may be delegated from time to time by the Board of Directors, and shall be subject to the limitations fixed from time to time by the Board of Directors. 5.7 President. If there shall be no separate Chief Executive officer of the Corporation, then the President shall be the chief executive officer of the Corporation and shall have all the duties and authority given under these Bylaws to the Chief Executive Officer. The President shall otherwise be the chief operating officer of the Corporation and shall, subject to the authority of the Chief Executive Officer, have responsibility for the conduct and general supervision of the business operations of the Corporation. The President shall perform such other duties and have such other authority as may from time to time be delegated by the Board of Directors or the Chief Executive Officer. In the absence or disability of the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer. 5.8 Vice Presidents. The Vice President (if there be one) shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, whether the duties and powers are specified in these Bylaws or otherwise. If the Corporation has more than one Vice President, the one designated by the Board of Directors or the Chief Executive Officer (in that order of precedence) shall act in the event of the absence or disability of the President. Vice Presidents shall perform any other duties and have any other authority as from time to time may be delegated by the Board of Directors, the Chief Executive Officer, or the President. 5.9 Secretary. The Secretary shall be responsible for preparing minutes of the meetings of shareholders, directors, and committees of directors and for authenticating records of the Corporation. The Secretary or any Assistant Secretary shall have authority to give all notices required by law or these Bylaws. The Secretary shall be responsible for the custody of the corporate books, records, contracts, and other documents. The Secretary or any Assistant Secretary may affix the corporate seal to any lawfully executed documents requiring it, may attest to the signature of any officer of the Corporation, and shall sign any instrument that requires the Secretary's signature. The Secretary or any Assistant Secretary shall perform any other duties and have any other authority as from time to time may be delegated by the Board of Directors, the Chief Executive Officer, or the President. 5.10 Treasurer. Unless otherwise provided by the Board of Directors, the Treasurer shall be responsible for the custody of all funds and securities belonging to the Corporation and for the receipt, deposit, or disbursement of these funds and securities under the direction of the Board of Directors. The Treasurer shall cause full and true accounts of all receipts and disbursements to be maintained and shall make reports of these receipts and disbursements to the Board of Directors, the Chief Executive Officer and President upon request. The Treasurer or Assistant Treasurer shall perform any other duties and have any other authority as from time to time may be delegated by the Board of Directors, the Chief Executive Officer, or the President. ARTICLE VI Distributions and Dividends Unless the Articles of Incorporation provide otherwise, the Board of Directors, from time to time in its discretion, may authorize or declare distributions or share dividends in accordance with the Code. ARTICLE VII Shares 7.1 Share Certificates. The interest of each shareholder in the Corporation shall be evidenced by a certificate or certificates representing shares of the Corporation, which shall be in such form as the Board of Directors from time to time may adopt in accordance with the Code. Share certificates shall be in registered form and shall indicate the date of issue, the name of the Corporation, that the Corporation is organized under the laws of the State of Georgia, the name of the shareholder, and the number and class of shares and designation of the series, if any, represented by the certificate. Each certificate shall be signed by the President or a Vice President (or in lieu thereof, by the Chairman of the Board or Chief Executive Officer, if there be one) and may be signed by the Secretary or an Assistant Secretary; provided, however, that where the certificate is signed (either manually or by facsimile) by a transfer agent, or registered by a registrar, the signatures of those officers may be facsimiles. 7.2 Rights of Corporation with Respect to Registered Owners. Prior to due presentation for transfer of registration of its shares, the Corporation may treat the registered owner of the shares (or the beneficial owner of the shares to the extent of any rights granted by a nominee certificate on file with the Corporation pursuant to any procedure that may be established by the Corporation in accordance with the Code) as the person exclusively entitled to vote the shares, to receive any dividend or other distribution with respect to the shares, and for all other purposes; and the Corporation shall not be bound to recognize any equitable or other claim to or interest in the shares on the part of any other person, whether or not it has express or other notice of such a claim or interest, except as otherwise provided by law. 7.3 Transfers of Shares. Transfers of shares shall be made upon the books of the Corporation kept by the Corporation or by the transfer agent designated to transfer the shares, only upon direction of the person named in the certificate or by an attorney lawfully constituted in writing. Before a new certificate is issued, the old certificate shall be surrendered for cancellation or, in the case of a certificate alleged to have been lost, stolen, or destroyed, the provisions of Section 7.5 of these Bylaws shall have been complied with. 7.4 Duty of Corporation to Register Transfer. Notwithstanding any of the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty to register the transfer of its shares only if: (a) the share certificate is endorsed by the appropriate person or persons; (b) reasonable assurance is given that each required endorsement is genuine and effective; (c) the Corporation has no duty to inquire into adverse claims or has discharged any such duty; (d) any applicable law relating to the collection of taxes has been complied with; (e) the transfer is in fact rightful or is to a bona fide purchaser; and (f) the transfer is in compliance with applicable provisions of any transfer restrictions of which the Corporation shall have notice. 7.5 Lost, Stolen, or Destroyed Certificates. Any person claiming a share certificate to be lost, stolen, or destroyed shall make an affidavit or affirmation of this claim in such a manner as the Corporation may require and shall, if the Corporation requires, give the Corporation a bond of indemnity in form and amount, and with one or more sureties satisfactory to the Corporation, as the Corporation may require, whereupon an appropriate new certificate may be issued in lieu of the one alleged to have been lost, stolen or destroyed. 7.6 Fixing of Record Date. For the purpose of determining shareholders (a) entitled to notice of or to vote at any meeting of shareholders or, if necessary, any adjournment thereof, (b) entitled to receive payment of any distribution or dividend, or (c) for any other proper purpose, the Board of Directors may fix in advance a date as the record date. The record date may not be more than 70 days (and, in the case of a notice to shareholders of a shareholders' meeting, not less than 10 days) prior to the date on which the particular action, requiring the determination of shareholders, is to be taken. A separate record date may be established for each Voting Group entitled to vote separately on a matter at a meeting. 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 of Directors shall fix a new record date for the reconvened meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 7.7 Record Date if None Fixed. If no record date is fixed as provided in Section 7.6, then the record date for any determination of shareholders that may be proper or required by law shall be, as appropriate, the date on which notice of a shareholders' meeting is mailed, the date on which the Board of Directors adopts a resolution declaring a dividend or authorizing a distribution, or the date on which any other action is taken that requires a determination of shareholders. ARTICLE VIII Indemnification 8.1 Indemnification of Directors. The Corporation shall indemnify and hold harmless any person (an "Indemnified Person") who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (including any action or suit by or in the right of the corporation) by reason of the fact that he is or was a director of the corporation, against expenses (including, but not limited to, attorney's fees and disbursements, court costs and expert witness fees), and against any judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding; provided, that no indemnification shall be made in respect of (a) expenses, judgments, fines and amounts paid in settlement attributable to (i) any appropriation, in violation of such person's duty to the corporation, of any business opportunity of the corporation, (ii) acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) liability under Section 14-2-832 of the Georgia Business Corporation Code, and (iv) any transaction from which such person derived an improper personal benefit, or (b) any other judgments, fines and amounts paid in settlement to the extent that such amounts do not exceed liability limits, if any, set forth in the corporation's articles of incorporation. 8.2 Indemnification of Officers and Others. a. The Board of Directors shall have the power to cause the Corporation to provide to officers, employees, and agents of the Corporation all or any part of the right to indemnification and other rights of the type provided under Sections 8.1, 8.5, and 8.11 of this Article Eight (subject to the conditions, limitations, and obligations specified therein, but not subject however to the limitation imposed under clause (b) of Section 8.1 of this Article Eight), upon a resolution to that effect identifying officers, employees, or agents (by position or name) and specifying the particular rights provided, which may be different for each of the officers, employees and agents identified. Each officer, employee, or agent of the Corporation so identified shall be an "Indemnified Person" for purposes of the provisions of this Article Eight. b. The Corporation shall indemnify and hold harmless each officer identified as an executive officers in the Corporation's reports and filings with the United States Securities and Exchange Commission (an "Executive Officer") who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (including any action or suit by or in the right of the corporation) by reason of the fact that he is or was an officer or agent of the corporation, against expenses (including, but not limited to, attorney's fees and disbursements, court costs and expert witness fees), and against any judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding; provided, that no indemnification shall be made in respect of expenses, judgments, fines and amounts paid in settlement attributable to (i) any appropriation, in violation of such person's duty to the corporation, of any business opportunity of the corporation, (ii) acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) liability under Section 14-2-832 of the Georgia Business Corporation Code, and (iv) any transaction from which such person derived an improper personal benefit. Each Executive Officer shall be an "Indemnified Person" for purposes of the provisions of this Article Eight. 8.3 Subsidiaries. The Board of Directors shall have the power to cause the Corporation to provide to any director, officer, employee, or agent of the Corporation who also is a director, officer, trustee, general partner, employee, or agent of a Subsidiary (as defined below), all or any part of the right to indemnification and other rights of the type provided under Sections 8.1, 8.2, 8.5, and 8.11 of this Article Eight (subject to the conditions, limitations, and obligations specified therein with regard to amounts actually and reasonably incurred by such person by reason of the fact that he is or was a director, officer, trustee, general partner, employee or agent of the Subsidiary. The Board of Directors shall exercise such power, if at all, through a resolution identifying the person or persons to be indemnified (by position or name) and the Subsidiary (by name or other classification), and specifying the particular rights provided, which may be different for each of the directors, officers, employees and agents identified. Each person so identified shall be an "Indemnified Person" for purposes of the provisions of this Article Nine. As used in this Article Nine, "Subsidiary" shall mean (i) another corporation, joint venture, trust, partnership or unincorporated business association more than twenty percent (20%) of the voting capital stock or other voting equity interest of which was, at or after the time the circumstances giving rise to such action, suit or proceeding arose, owned, directly or indirectly, by the corporation, or (ii) a nonprofit corporation which receives its principal financial support from the corporation or its subsidiaries. 8.4 Determination. Notwithstanding any judgment, order, settlement, conviction, or plea in any action, suit or proceeding of the kind referred to in Section 8.1 of this Article Eight, an Indemnified Person shall be entitled to indemnification as provided in such Section 8.1 unless a determination that such Indemnified Person is not entitled to such indemnification (because of the applicability of clause (a) or (b) of such Section 8.1) shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who are not seeking the benefits of such indemnification; or (ii) if such quorum is not obtainable, or, even if obtainable if a quorum of such disinterested directors so directs, in a written opinion by independent legal counsel (which counsel may be the outside legal counsel regularly employed or retained by the corporation); or (iii) if a quorum cannot be obtained under (i) above and in the absence of a written opinion by independent legal counsel by majority vote or consent of a committee duly designated by the Board of Directors (in which designation interested directors may participate), consisting solely of one or more directors who are not seeking the benefit of such indemnification. Provided, however, that notwithstanding any determination pursuant to the preceding sentence, if such determination shall have been made at a time that the members of the Board of Directors, so serving when the events upon which such Indemnified Person's liability has been based occurred, no longer constitute a majority of the members of the Board of Directors, then such Indemnified Person shall nonetheless be entitled to indemnification as set forth in such Section 8.1 unless the Company shall carry the burden of proving, in an action before any court of competent jurisdiction, that such Indemnified Person is not entitled to indemnification because of the applicability of clause (a) or (b) of such Section 8.1. 8.5 Advances. Expenses (including, but not limited to, attorneys' fees and disbursements, court costs, and expert witness fees) incurred by the Indemnified Person in defending any action, suit or proceeding of the kind described in Section 8.1 or 8.2 hereof shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding only upon: (i) the Indemnified Person delivering the affirmation and the undertaking described in subparagraph (c) of Section 856 of the Code (whether or not such Indemnified Person is a director), and (ii) the Board of Directors shall not have made a determination, (any such determination to be made in the manner described in Section 8.4 of these Bylaws), that the person seeking indemnification is not entitled to indemnification because such person's conduct constitutes behavior of the type described in either clauses (a) or (b) of Section 8.1 of these Bylaws or clauses (i), (ii), (iii) or (iv) of Section 8.2(b) of these Bylaws. The Corporation may make the advances contemplated by this Section 8.5 regardless of the Indemnified Person's financial ability to make repayment. Advances and undertakings to repay pursuant to this Section 8.5 shall be on such terms and conditions as the Board of Directors shall determine from time to time, and may be unsecured and interest-free. 8.6 Non-Exclusivity; Continuing Benefits. The indemnification and advancement of expenses provided by this Article Eight shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any provision of the Articles of Incorporation, or any Bylaw, resolution, agreement, vote of shareholders or disinterested directors or otherwise, both as to actions in his official capacity and as to actions in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the corporation, as the case may be, and shall inure to the benefit of the heirs, executors and administrators of such a person. 8.7 Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, general partner, employee, or agent of another corporation, nonprofit corporation, joint venture, trust, partnership, unincorporated business association or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article Eight. 8.8 Notice. If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the corporation, the corporation shall, not later than the next annual meeting of shareholders, unless such meeting is held within three (3) months from the date of such payment, and in any event, within fifteen (15) months from the date of such payment, send by first class mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amount paid and the nature and status at the time of such payment of the litigation or threatened litigation. 8.9 Security. The Corporation may designate certain of its assets as collateral, provide self-insurance or otherwise secure its obligations under this Article Eight, or under any indemnification agreement or plan of indemnification adopted and entered into in accordance with the provisions of this Article Eight, as the Board of Directors deems appropriate. 8.10 Amendment. Any amendment to this Article Eight that limits or otherwise adversely affects the right of indemnification, advancement of expenses, or other rights of any Indemnified Person hereunder shall, as to such Indemnified Person, apply only to claims, actions, or proceedings based on actions, events, or omissions (collectively, "Post Amendment Events") occurring after such amendment and after delivery of notice of such amendment to the Indemnified Person so affected. Any Indemnified Person shall, as to any claim, action, suit or proceeding based on actions, events, or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification, advancement of expenses, and other rights under this Article Eight to the same extent as had such provisions continued as part of the Bylaws of the Corporation without such amendment. This Section 8.10 cannot be altered, amended, or repealed in a manner effective as to any Indemnified Person (except as to Post Amendment Events) without the prior written consent of such Indemnified Person. The Board of Directors may not alter, amend or repeal any provision of this Article Eight in a manner that extends or enlarges the right of any person to indemnification or advancement of expenses hereunder, except with the approval of the holders of a majority of all the shares of capital stock of the corporation entitled to vote thereon at a meeting called for such purpose. 8.11 Agreements. The provisions of this Article Eight shall be deemed to constitute an agreement between the Corporation and each Person entitled to indemnification hereunder. In addition to the rights provided in this Article Eight, the Corporation shall have the power, upon authorization by the Board of Directors, to enter into an agreement or agreements providing to any person who is or was a director, officer, employee or agent of the Corporation indemnification rights substantially similar to those provided in this Article Eight. 8.12 Successors. For purposes of this Article Eight, the terms "Corporation" or "this Corporation" shall include any corporation, joint venture, trust, partnership, or unincorporated business association which is the successor to all or substantially all of the business or assets of this Corporation, as a result of merger, consolidation, sale, liquidation, or otherwise, and any such successor shall be liable to the persons indemnified under this Article Eight on the same terms and conditions and to the same extent as this Corporation. 8.13 Additional Indemnification. In addition to the specific indemnification rights set forth herein, the Corporation shall indemnify each of its directors and officers to the full extent permitted by action of the Board of Directors without shareholder approval under the Code or other laws of the State of Georgia as in effect from time to time. ARTICLE IX Miscellaneous 9.1 Inspection of Books and Records. The Board of Directors shall have the power to determine which accounts, books, and records of the Corporation shall be available for shareholders to inspect or copy, except for those books and records required by the Code to be made available upon compliance by a shareholder with applicable requirements, and shall have the power to fix reasonable rules and regulations (including confidentiality restrictions and procedures) not in conflict with applicable law for the inspection and copying of accounts, books, and records that by law or by determination of the Board of Directors are made available. Unless required by the Code or otherwise provided by the Board of Directors, a shareholder of the Corporation holding less than two percent (2%) of the total shares of the Corporation then outstanding shall have no right to inspect the books and records of the Corporation. 9.2 Fiscal Year. The Board of Directors is authorized to fix the fiscal year of the Corporation and to change the fiscal year from time to time as it deems appropriate. 9.3 Corporate Seal. The corporate seal will be in such form as the Board of Directors may from time to time determine. The Board of Directors may authorize the use of one or more facsimile forms of the corporate seal. The corporate seal need not be used unless its use is required by law, by these Bylaws, or by the Articles of Incorporation. 9.4 Annual Statements. Not later than four months after the close of each fiscal year, and in any case prior to the next annual meeting of shareholders, the Corporation shall prepare (a) a balance sheet showing in reasonable detail the financial condition of the Corporation as of the close of its fiscal year, and (b) a profit and loss statement showing the results of its operations during its fiscal year. Upon receipt of written request, the Corporation promptly shall mail to any shareholder of record a copy of the most recent such balance sheet and profit and loss statement, in such form and with such information as the Code may require. 9.5 Notice. a. Whenever these Bylaws require notice to be given to any shareholder or to any director, the notice may be given by mail, in person, by courier delivery, by telephone, or by telecopier, telegraph, or similar electronic means. Whenever notice is given to a shareholder or director by mail, the notice shall be sent by depositing the notice in a post office or letter box in a postage-prepaid, sealed envelope addressed to the shareholder or director at his or her address as it appears on the books of the Corporation. Any such written notice given by mail shall be effective: (i) if given to shareholders, at the time the same is deposited in the United States mail; and (ii) in all other cases, at the earliest of (x) when received or when delivered, properly addressed, to the addressee's last known principal place of business or residence, (y) five days after its deposit in the mail, as evidenced by the postmark, if mailed with first-class postage prepaid and correctly addressed, or (z) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee. Whenever notice is given to a shareholder or director by any means other than mail, the notice shall be deemed given when received. b. In calculating time periods for notice, when a period of time measured in days, weeks, months, years, or other, measurement of time is prescribed for the exercise of any privilege or the discharge of any duty, the first day shall not be counted but the last day shall be counted. ARTICLE X Amendments Except as otherwise provided under the Code or in Article 8 hereof, the Board of Directors shall have the power to alter, amend, or repeal these Bylaws or adopt new Bylaws. Any Bylaws adopted by the Board of Directors may be altered, amended, or repealed, and new Bylaws adopted, by the shareholders. The shareholders may prescribe in adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted shall not be altered, amended, or repealed by the Board of Directors. -----END PRIVACY-ENHANCED MESSAGE-----