-----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, WXKhPj46ZLunHY745PV05Iad2AIxIDzKuObshyWFPaBUwYfa4sPOz7ggEtDCiY7W CzWUpqF5kIMm54aTZG2Z9w== 0000800458-01-000002.txt : 20010223 0000800458-01-000002.hdr.sgml : 20010223 ACCESSION NUMBER: 0000800458-01-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENTRAK CORP CENTRAL INDEX KEY: 0000800458 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 930780536 STATE OF INCORPORATION: OR FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15159 FILM NUMBER: 1544829 BUSINESS ADDRESS: STREET 1: ONE AIRPORT CTR STREET 2: 7700 N E AMBASSADOR PL CITY: PORTLAND STATE: OR ZIP: 97220 BUSINESS PHONE: 5032847581 MAIL ADDRESS: STREET 1: 7227 NE 55TH AVENUE CITY: PORTLAND STATE: OR ZIP: 97218 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL VIDEO INC DATE OF NAME CHANGE: 19881004 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number: 0-15159 RENTRAK CORPORATION (Exact name of registrant as specified in its charter) OREGON 93-0780536 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification no.) 7700 NE Ambassador Place, Portland, Oregon 97220 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503)284- 7581 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 ( ) As of January 31, 2001, the Registrant had 12,228,553 shares of Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 2000 and March 31, 2000 Consolidated Statements of Operations for the three month periods ended December 31, 2000 and December 31, 1999 Consolidated Statements of Operations for the nine month periods ended December 31, 2000 and December 31, 1999 Consolidated Statements of Cash Flows for the nine month periods ended December 31, 2000 and December 31, 1999 Notes to Consolidated Financial Statements RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
(UNAUDITED) December 31, March 31, 2000 2000 -------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 3,041,693 $ 4,028,271 Accounts receivable, net of allowance for doubtful accounts of $2,050,334 and $836,945 17,537,412 21,820,168 Advances to program suppliers 3,178,975 2,982,766 Inventory 4,015,432 3,889,603 Income tax receivable 660,383 169,300 Deferred tax asset 2,103,196 1,878,113 Notes receivable - 4,061,618 Other current assets 2,056,023 1,757,081 -------------- -------------- Total current assets 32,593,114 40,586,920 -------------- -------------- PROPERTY AND EQUIPMENT, net 3,705,984 2,642,700 OTHER INVESTMENTS, net - 302,481 DEFERRED TAX ASSET 9,363,976 3,346,212 OTHER ASSETS 1,889,778 3,595,041 -------------- -------------- TOTAL ASSETS $47,552,852 $50,473,354 ============= ============= The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED) December 31, March 31, 2000 2000 ------------- ------------- CURRENT LIABILITIES: Line of credit $ 3,999,114 $ - Accounts payable 24,214,473 24,162,040 Accrued liabilities 4,275,426 2,645,567 Accrued compensation 384,232 1,476,703 Current portion of deferred revenue 1,503,806 1,500,262 Notes payable - 500,000 Net current liabilities of discontinued operations 176,991 430,923 ------------- ------------- Total current liabilities 34,554,042 30,715,495 ------------- ------------- LONG-TERM DEFERRED REVENUE 3,142,557 1,677,272 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value; Authorized: 10,000,000 shares - - Common stock, $.001 par value; Authorized: 30,000,000 shares Issued and outstanding: 12,228,553 shares at December 31, 2000 and 10,514,561 at March 31, 2000 12,229 10,515 Capital in excess of par value 52,486,224 44,445,199 Notes receivable (7,728,189) - Cumulative other comprehensive income (loss) (67,580) (264,684) Accumulated deficit (34,416,432) (25,326,951) Less - Deferred charge - warrants (429,999) (783,492) ------------- ------------- 9,856,253 18,080,587 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $47,552,852 $50,473,354 ============= ============= The accompanying notes are an integral part of these consolidated balance sheets.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Three Months Ended December 31, 2000 1999 -------------- -------------- REVENUES: PPT $22,006,428 $19,965,669 Other 10,409,379 5,819,395 32,415,807 25,785,064 -------------- -------------- OPERATING COSTS AND EXPENSES: Cost of sales 26,153,235 21,129,291 Selling, general, and administrative 5,743,343 5,601,151 Net expense from litigation settlement - 415,794 -------------- -------------- 31,896,578 27,146,236 -------------- -------------- INCOME (LOSS) FROM OPERATIONS 519,229 (1,361,172) -------------- -------------- OTHER INCOME (EXPENSE): Interest income 16,939 61,993 Interest expense (191,752) (233,422) -------------- -------------- (174,813) (171,429) INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) 344,416 (1,532,601) INCOME TAX PROVISION (BENEFIT) 114,906 (546,162) -------------- -------------- NET INCOME (LOSS) $ 229,510 $ (986,439) ============= ============= EARNINGS (LOSS) PER SHARE: -------------- -------------- Basic: $ 0.02 $ (0.09) -------------- -------------- Diluted: $ 0.02 $ (0.09) ============= ============= The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Nine Months Ended December 31, 2000 1999 -------------- -------------- REVENUES: PPT $61,877,737 $69,374,611 Other 24,050,697 14,503,091 -------------- -------------- 85,928,434 83,877,702 -------------- -------------- OPERATING COSTS AND EXPENSES: Cost of sales 71,970,164 67,023,807 Selling, general, and administrative 28,505,004 13,678,105 Net (gain) expense from litigation settlement (225,000) 1,362,612 -------------- -------------- 100,250,168 82,064,524 -------------- -------------- INCOME (LOSS) FROM OPERATIONS (14,321,734) 1,813,178 -------------- -------------- OTHER INCOME (EXPENSE): Interest income 273,145 135,937 Interest expense (541,273) (560,683) -------------- -------------- (268,128) (424,746) -------------- -------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION (BENEFIT) (14,589,862) 1,388,432 INCOME TAX PROVISION (BENEFIT) (5,500,378) 530,277 -------------- -------------- INCOME (LOSS) FROM CONTINUING OPERATIONS (9,089,484) 858,155 GAIN FROM DISPOSAL OF DISCONTINUED SUBSIDIARIES (PLUS INCOME TAX BENEFIT OF $483,502) - 2,373,502 -------------- -------------- NET INCOME (LOSS) $(9,089,484) $ 3,231,657 ============= ============= EARNINGS (LOSS) PER SHARE: Basic: Continuing operations $ (0.76) $ 0.08 Discontinued operations $ - $ 0.23 -------------- -------------- $ (0.76) $ 0.31 ============= ============= Diluted: Continuing operations $ (0.76) $ 0.08 Discontinued operations $ - $ 0.22 -------------- -------------- $ (0.76) $ 0.30 ============= ============= The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (UNAUDITED) Nine Months Ended December 31, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss) ($9,089,484) $3,231,657 Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities Gain on disposal of discontinued operations - (2,373,502) Loss on asset and investment / asset sales 597,124 17,607 Depreciation and amortization 946,238 1,039,530 Amortization of warrants 353,493 389,280 Provision for doubtful accounts and other assets 8,710,275 109,655 Deferred income taxes (6,363,658) - Change in specific accounts: Accounts receivable (1,713,010) (4,389,966) Advances to program suppliers (302,990) 8,928 Inventory (338,629) (673,301) Income tax receivable (491,083) 2,568,168 Notes receivable 4,061,618 - Other current assets (719,467) 1,376,246 Accounts payable (1,263,109) 2,914,932 Accrued liabilities & compensation 537,388 1,582,027 Deferred revenue 1,468,829 3,649,536 Net current liabilities of discontinued operations (253,932) (1,260,451) Net cash provided by (used in) operations (4,360,397) 8,190,346 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, equipment, and inventory (1,924,917) (1,140,454) Proceeds from sale of investments 1,594,812 361,894 Disposal (purchase) of other assets & intangibles (609,740) 112,573 Net cash used in investing activities (939,845) (665,987) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under line of credit 3,999,114 (2,965,000) Notes payable (500,000) - Issuance of common stock 314,550 186,242 Net cash provided by (used in) financing activiti 4,313,664 (2,778,758) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (986,578) 4,745,601 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,028,271 2,145,963 CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,041,693 $6,891,564 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $111,829 $286,017 Income taxes paid, net of refunds received 769,084 (2,428,003) NON-CASH TRANSACTIONS Retailer Financing Program investment through conversion of accounts receivable 74,234 Change in unrealized gain (loss) on investment securities, net of tax (197,105) (777,624) Notes issued, net of cancellation for common sto 7,728,189 - The accompanying notes are an integral part of these consolidated statements.
RENTRAK CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A: Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of RENTRAK CORPORATION (the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three month and nine month periods ended December 31, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2001. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes thereto included in the Company's 2000 Annual Report to Shareholders. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include, except as disclosed, only normal and recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The Condensed Consolidated Financial Statements include the accounts of the Company, its majority owned subsidiaries, and those subsidiaries in which the Company has a controlling interest after elimination of all inter-company accounts and transactions. Investments in affiliated companies owned 20 to 50 percent are accounted for by the equity method. NOTE B: Net Income Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per common share is computed on the basis of the weighted average shares of common stock outstanding plus common equivalent shares arising from dilutive stock options and warrants. The weighted average number of shares of common stock equivalents and net income used to compute basic and diluted earnings per share for the three and nine month periods ended December 31, 2000 and 1999 were as follows:
Note B: Net Income (Loss) Per Share 3-Months Ended 9-Months Ended December 31, 2000 December 31, 2000 ----------- ----------- ----------- ----------- Basic Diluted Basic Diluted Weighted average number of shares of common stock outstanding 12,519,199 12,519,199 11,903,240 11,903,240 Dilutive effect of exercise of stock options - - - - ----------- ----------- ----------- ----------- Weighted average number of shares of common stock outstanding and common stock equivalents 12,519,199 12,519,199 11,903,240 11,903,240 ============ ============ ============ ============ Net Income: Continuing operations $ 229,510 $ 229,510 $(9,089,484) $(9,089,484) Discontinued operatio - - - - ----------- ----------- ----------- ----------- Net income $ 229,510 $ 229,510 $(9,089,484) $(9,089,484) ============ ============ ============ ============ Earnings per share: Continuing operations $0.02 $0.02 ($0.76) ($0.76) Discontinued operatio - - - - ----------- ----------- ----------- ----------- Earnings per share $0.02 $0.02 ($0.76) ($0.76) ============ ============ ============ ============
Note B: Net Income Per Share 3-Months Ended 9-Months Ended December 31, 1999 December 31, 1999 ----------- ----------- ----------- ----------- Basic Diluted Basic Diluted Weighted average number of shares of common stock outstanding 10,489,273 10,489,273 10,467,632 10,467,632 Dilutive effect of exercise of stock options - - - 142,715 ----------- ----------- ----------- ----------- Weighted average number of shares of common stock outstanding and common stock equivalents 10,489,273 10,489,273 10,467,632 10,610,347 ============ ============ ============ ============ Net Income: Continuing operations $(986,439) $(986,439) $ 858,155 $ 858,155 Discontinued operatio - - 2,373,502 2,373,502 ----------- ----------- ----------- ----------- Net income $(986,439) $(986,439) $3,231,657 $3,231,657 ============ ============ ============ ============ Earnings per share: Continuing operations ($0.09) ($0.09) $0.08 $0.08 Discontinued operatio - - $0.23 $0.22 ----------- ----------- ----------- ----------- Earnings per share ($0.09) ($0.09) $0.31 $0.30 ============ ============ ============ ============ Options and warrants to purchase approximately 3.4 million and 6.7 million shares of common stock for the quarter ended December 31, 2000 and 1999 respectively, and 3.2 million and 5.3 million for the nine month period ended December, 2000 and 1999 respectively, were outstanding but were not included in the computation of diluted EPS because their effect would be antidilutive during the periods. The options and warrants, which expire during fiscal years 2001 through 2009, remain outstanding at December 31, 2000.
NOTE C: Business Segments, Significant Suppliers and Major Customers The Company classifies its services in three segments, PPT, 3PF.COM, Inc. and Other. Under its Pay-Per-Transaction (PPT) revenue sharing program, the Company enters into contracts to lease videocassettes from program suppliers (producers of motion pictures and licensees and distributors of home video cassettes) which are then leased to retailers for a percentage of the rentals charged by the retailers. 3PF.COM, Inc. is a wholly owned subsidiary, which provides order processing, fulfillment and inventory management services. Other includes the operations of BlowOut Video, a video retail subsidiary, formovies. Com, an internet service, and amounts received pursuant to royalty agreements, primarily from Rentrak Japan. Business Segments The following are the revenues and income (loss) from operations of the company's business segments for the periods indicated (unaudited):
Nine Months Nine Months Three Months Three Months Ended Ended Ended Ended December 31, 2000 December 31, 1999 December 31, 2000 December 31, 1999 -------------- -------------- -------------- -------------- REVENUES: (1) PPT $62,431,467 $69,998,227 $22,147,747 $20,190,078 3PF.COM, Inc. (2) 16,474,335 8,089,784 7,510,716 2,829,755 OTHER 10,132,158 8,818,091 4,205,278 3,760,292 -------------- -------------- -------------- -------------- $89,037,960 $86,906,102 $33,863,741 $26,780,125 ============== ============== ============== ============== INCOME (LOSS) FROM OPERATIONS: (1) PPT ($11,136,519) $551,796 $701,663 ($1,499,546) 3PF.COM, Inc. (3,351,127) (582,784) (911,298) (484,188) OTHER 165,912 1,844,166 728,864 622,562 -------------- -------------- -------------- -------------- ($14,321,734) $1,813,178 $519,229 ($1,361,172) ============== ============== ============== ==============
(1) Total amounts differ from those reported on the consolidated financial statements, as intercompany transactions are not eliminated for segment reporting purposes. (2) 3PF.COM, Inc.'s revenues and PPT's costs related to the shipment of cassettes to PPT customers were $941,597 and $770,652 for the three month periods ended December 31, 2000 and December 31, 1999, respectively, and $2,555,796 and $2,404,782 for the nine month periods ended December 31, 2000 and December 31, 1999, respectively. For the three month period ended December 31, 2000, the Company had one program supplier whose product generated 20 percent, a second that generated 16 percent, and a third that generated 12 percent of Rentrak revenue. For the nine month period ended December 31, 2000, the Company had one program supplier whose product generated 18 percent, a second that generated 17 percent, and a third that generated an additional 15 percent of Rentrak revenue. No other program supplier provided product which generated more than 10 percent of revenue for the three or nine-month periods ended December 31, 2000. No customer accounted for more than 10 percent of the Company's revenue in the three and nine month periods ended December 31, 2000. For the three month period ended December 31, 1999, the Company had one program supplier whose product generated 23 percent, a second that generated 14 percent, and a third that generated an additional 11 percent of Rentrak revenue. For the nine month period ended December 31, 1999, the Company had one program supplier whose product generated 23 percent, a second that generated 21 percent, and a third that generated an additional 14 percent of Rentrak revenue. No other program supplier provided product which generated more than 10 percent of revenue for the three or nine month periods ended December 31, 1999. No customer accounted for more than 10 percent of the Company's revenue in the three and nine month periods ended December 31, 1999. NOTE D: Discontinued Operations On November 26, 1996, the Company made a distribution to its shareholders of 1,457,343 shares of common stock of BlowOut Entertainment, Inc. ("BlowOut"). The operations of BlowOut were reflected as discontinued operations in the March 31, 1996 consolidated financial statements. On March 22, 1999, BlowOut filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time BlowOut filed a motion to sell substantially all the assets of BlowOut. The sale to a third party video retailer was approved by the Bankruptcy Court on May 10, 1999, and closed on May 17, 1999. The Company was the principal creditor of BlowOut. In 1996, the Company had agreed to guarantee up to $7 million of indebtedness of BlowOut ("Guarantee"). Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under BlowOut's credit facility. As the proceeds from the sale of the BlowOut assets were not sufficient to cover the amounts due under this facility, the Company, pursuant to the Guarantee, agreed to a payment plan to fulfill BlowOut's obligation under its credit facility. The amount outstanding at December 31, 2000 was approximately $320,000. The funds remaining, if any, after payment of administrative and cost claims after dismissal of the case may further reduce the amount due under the credit facility. During the three month period ended June 30, 1999, the Company recorded a gain on the disposal of discontinued operations of $1.9 million related to BlowOut, as the liability related to BlowOut contingencies was less than estimated. The Company also reduced the valuation allowance, which was recorded against the deferred tax asset related to liabilities of discontinued operations. This reduction of approximately $0.5 million in the valuation allowance was recorded as an income tax benefit from discontinued operations in the accompanying consolidated income statement. Net current liabilities of discontinued operations at December 31, 2000, relate to amounts to be paid pursuant to the Guarantee, net of tax benefit. NOTE: E Agreement In June 2000, the Company entered into an agreement with one of its customers to modify an existing contract. Under terms of the agreement, the customer made a payment to the Company in the amount of $2.5 million and also increased its obligation to purchase PPT product. The entire payment is recorded as long-term deferred revenue in the Company's balance sheet at December 31, 2000. As part of this agreement, the customer agreed to enter into certain additional agreements to be agreed upon by the parties. One- half of the payment relates to the modification of certain contractual obligations, still to be negotiated by the Company and the customer. This $1.25 million has been recorded as long-term deferred revenue until the contract is complete. The additional $1.25 million was paid to the Company as a prepayment toward services to be provided by the Company's subsidiary, 3PF.COM, Inc., through June 30, 2006, pursuant to an agreement under negotiation. As services are provided by 3PF.COM, Inc., it is contemplated that the customer can apply the prepaid $1.25 million as payment for certain of these services. Accordingly, this $1.25 million has been recorded as long-term deferred revenue. The customer has taken the position that it is entitled to a refund of the $2.5 million payment upon its request if the additional agreements were not finalized by July 14, 2000. While the customer has made such a request for refund, the parties are continuing to negotiate the additional agreements. At December 31, 2000, the customer had an outstanding trade account receivable balance due the Company in the amount of approximately $2.8 million for purchases of PPT product. NOTE F: Related Party Transactions On June 16, 2000, the Company loaned a total of $8,097,636 to two of its officers to purchase 1,663,526 shares of stock upon exercise of their employee stock options. During the three month period ended December 31, 2000, the Company and one of these officers terminated his stock exercise agreement for 301,518 shares of stock and corresponding loan in the amount of $1,468,250. At various times during the three month period ended September 30, 2000, the Company additionally loaned $1,343,743 to some of its officers to purchase 283,277 shares of stock upon exercise of their employee stock options. During the three month period ended December 31, 2000, the Company and one of these officers terminated his stock exercise agreement for 50,535 shares of stock and corresponding loan in the amount of $244,940. The loans bear interest at the federal funds rate in effect on the date of the loan (6.5%) and interest is payable annually. The Company is not accruing interest on these loans. The principal amount of the loans is due on the earliest to occur of: (1) one year prior to the expiration of the term of the borrower's current employment agreement with Rentrak, (2) one year after the borrower leaves Rentrak's employment unless such departure follows a "change of control" (as defined in the loan agreements), (3) five years from the date of the loan, or (4) one year from the date of the borrower's death. The loans are secured by the stock purchased. The loans are without recourse (except as to the stock securing the loans) as to principal and are with full recourse against the borrower as to interest. In accordance with SEC regulations, the notes receivable arising from these transactions are presented as deductions from stockholders' equity. Note G: Line of Credit In May 2000 the Company obtained a replacement line of credit with a lender in an amount not to exceed the lesser of (a) $12 million or (b) the sum of 85% of the net amount of eligible accounts receivable. Interest under the new line is payable monthly at the bank's prime rate plus 1/4 percent (9.75 percent at December 31, 2000). The line is secured by substantially all of the Company's assets. The terms of the credit agreement include financial covenants requiring: (1) $15 million of tangible net worth to be maintained at all times; (2) a consolidated net profit to be achieved each fiscal year equal to or exceeding $1.00 and (3) $5 million of working capital to be maintained at all times. The agreement also restricts the amount of loans and indebtedness and limits the payment of dividends on the Company's stock, among other requirements. This agreement expires in May 2005. Based upon the financial results reported as of December 31, 2000 and for the three month and nine month periods then ended, the Company has determined it is out of compliance with the three financial covenants as of December 31, 2000. The Company has obtained waivers of compliance for the three financial covenants as of December 31, 2000 and for the three and nine month periods then ended. The Company also obtained waivers of compliance for these three financial covenants as of September 30, 2000 and for the three and six month periods then ended. The Company has initiated discussions of these covenants with its lender and is seeking covenant modifications. Based upon discussions between the Company and its lender, the Company believes it will successfully receive future waivers and/or covenant modifications and will have sufficient cash resources to repay all outstanding borrowings as due. At December 31, 2000 and February 12, 2001, the Company had $2.1 million and $3.6 million outstanding borrowings, respectively, under this agreement. Note H: Proxy Contest During the three month period ended September 30, 2000, the Company was involved in a proxy contest that resulted in the election of an entirely new board of directors. In anticipation of a potential change of control resulting from the proxy contest, the Company developed a severance program for employees. That severance program provided for each employee to receive a designated severance payment, upon receipt of his or her resignation by the Company within sixty days of the change of control (September 19, 2000). The total amount of potential severance payments designated for these employees was approximately $1.7 million. As of the expiration of this severance program, two employees tendered their resignations and received severance payments from the Company. The amounts expensed and paid to these employees are not material. At December 31, 2000 the Company had a potential payment obligation under this severance program to one additional employee. This potential expense and payment is also not material. Note I: Fixed Asset Depreciation The Company depreciates property and equipment over their estimated useful lives using the straight-line method. The Company evaluated the lives of certain of its classes of property and equipment and determined that extending those lives from 3 years, to 5 to 10 years, would more appropriately reflect the economic life of these assets. In the quarter ended December 31, 2000, the effect of applying these new useful lives increased net income by approximately $83,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Certain information included in Management's Discussion and Analysis of Financial Condition and Results of Operations constitutes forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements are identified by the use of forward-looking words such as "may", "will", "expects", "intends", "anticipates", "estimates", or "continues" or the negative thereof or variations thereon or comparable terminology. The following factors are among the factors that could cause actual results to differ materially from the forward-looking statements: the Company's ability to continue to market the Pay Per Transaction ("PPT") System successfully, the financial stability of participating retailers and their performance of their obligations under the PPT System, non- renewal or early termination of the Company's line of credit, business conditions and growth in the video industry and general economic conditions, both domestic and international; competitive factors, including increased competition, expansion of revenue sharing programs other than the PPT System by program suppliers, new technology and the continued availability of prerecorded videocassettes ("Cassettes") from program suppliers. Such factors are discussed in more detail in the Company's 2000 Annual Report to Shareholders. Results of Operations Continuing Operations For the three month period ended December 31, 2000, total revenue increased $6.6 million, or 25.7 percent, to $32.4 million from $25.8 million for the three month period ended December 31, 1999. For the nine month period ended December 31, 2000, total revenue increased $2.1 million, or 2.4 percent, to $86.0 million from $83.9 million for the nine month period ended December 31, 1999. Total revenue includes the following PPT Program fees: application fees generated when retailers are approved for participation in the PPT System; order processing fees generated when Cassettes are ordered by and distributed to retailers; transaction fees generated when retailers rent Cassettes to consumers; sell-through fees generated when retailers sell Cassettes to consumers; and buy out fees generated when retailers purchase Cassettes at the end of the lease term. In addition, total revenue includes charges to customers of the Company's wholly owned subsidiary 3PF.COM, Inc., which provides e-commerce order processing, fulfillment and inventory management services, sales of Cassettes through the Company's retail subsidiary BlowOut Video, charges for internet services provided by the Company's subsidiary formovies.Com, and royalty payments primarily from Rentrak Japan. The increase in total revenues for the three month period ended December 31, 2000, compared to the same period in the prior year, is primarily due to changes in (i) the number of titles released to the PPT System; (ii) the number of theatrical titles released to the PPT System and the box office performance of those titles; and (iii) increased revenue from services provided by 3PF.COM, Inc. In addition, the changes in PPT revenues was also affected by changes in the total number of Cassettes leased under the PPT System, due in part to program suppliers offering more titles under copy depth programs than they have in the past and the willingness of program suppliers to engage in direct revenue sharing arrangements with the larger retailer chains. While PPT revenues increased for the three month period ended December 31, 2000, compared to the same period in the prior year, PPT revenues decreased for the nine month period ended December 31, 2000 compared to the same period in the prior year generally for the reasons noted above in items (i) and (ii) that had an opposite impact on changes in revenues. The reduction in PPT revenue for the nine months ended December 31, 2000, compared to the nine months ended December 31, 1999, was offset by an increase in revenue related to 3PF.COM, Inc.'s services for the 2000 period. Cost of sales for the three month period ended December 31, 2000 increased to $26.2 million from $21.1 million for the three month period ended December 31, 1999, an increase of $5.1 million, or 23.8 percent. The percentage increase as compared to the revenue percentage increase is primarily due to: (1) additional costs which were recorded in the quarter ended December 31, 2000 related to the guaranteed minimum payments due to program suppliers on certain movie titles and (2) increased costs of sales of 3PF.COM, Inc. as the result of increased business during the quarter, the addition of more labor intensive customers, the cost of new warehousing with no associated revenues, and lease cost adjustments and increases. Cost of sales for the nine month period ended December 31, 2000 increased to $72.0 million from $67.0 million for the nine month period ended December 31, 1999, an increase of $5.0 million, or 7.4 percent. As a result, the gross profit margin increased to 19.3 percent in the three month period ended December, 2000 from 18.1 percent in the three month period ended December 31, 1999 and the gross profit margin decreased to 16.2 percent in the nine month period ended December 31, 2000 from 20.1 percent in the nine month period ended December 31, 1999. Selling, general and administrative expenses were $5.7 million for the three month period ended December 31, 2000 compared to $5.6 million for the three month period ended December 31, 1999, an increase of $0.1 million. For the three month period ended December 31, 2000, selling, general and administrative expenses included the provision of a specific allowance in the amount of approximately $0.7 million for the anticipated non-collection of one of 3PF.COM, Inc's trade accounts due the Company as the result of a bankruptcy filing by a customer during the period. Selling, general and administrative expenses were $28.3 million for the nine month period ended December 31, 2000 compared to $15.0 million for the nine month period ended December 31, 1999, an increase of $13.3 million. The increase is primarily attributable to the following items all reported in the quarter ended September 30, 2000: (1) a $1.3 million severance payment to the Company's former chairman and chief executive officer; (2) $0.6 million in legal costs and proxy solicitation costs incurred by the Company related to the proxy contest; (3) $0.4 million in costs to reimburse the dissident shareholder group for their legal and other costs associated with the proxy contest; (4) $6.1 million of costs associated with the reserve or write-off of assets related to the Company's Retailer Financing Program; (5) $1.0 million in write-offs of investments and other assets deemed by the Company to be non- realizable; (6) $1.4 million in write-offs of accounts receivable based on the Company's assessment of the collectibility of those accounts due to changes in the financial condition and payment ability of those customers; and (7) a $0.5 million loss realized on the sale of stock received previously by the Company pursuant to the settlement of a claim with a prior customer. The effective tax rate during the three month period ended December 31, 2000 was 33.4 % compared to 35.6 % during the three month period ended December 31, 1999. The effective tax rate during the nine month period ended December 31, 2000 was 37.7 % compared to 38.2% during the nine month period ended December 31, 1999. As a result, for the three month period ended December 31, 2000, the Company recorded income from continuing operations of $0.2 million, or 0.7 percent of total revenue, compared to a loss from continuing operations of $1.0 million, or 3.8 percent of total revenue, in the three month period ended December 31, 1999. For the nine month period ended December 31, 2000, the Company recorded a loss from continuing operations of $9.1 million, or 10.6 percent of total revenue, compared to income from continuing operations of $0.9 million, or 1.0 percent of total revenue, in the nine month period ended December 31, 1999. Discontinued Operations On March 22, 1999, BlowOut Entertainment, Inc. ("BlowOut") filed for Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At that same time, BlowOut filed a motion to sell substantially all the assets of BlowOut. BlowOut is not related to the Company's wholly owned subsidiary BlowOut Video, Inc. The sale to a third party video retailer was approved on May 10, 1999 and closed on May 17, 1999. During the three month period ended June 30, 1999, the Company recorded a gain on the disposal of discontinued operations of $1.9 million related to BlowOut as the liability related to BlowOut contingencies was less than anticipated. The Company also reduced the valuation allowance, which was recorded against the deferred tax asset related to liabilities of discontinued operations. This reduction of $0.5 million in the valuation allowance was recorded as an income tax benefit from discontinued operations in the accompanying consolidated income statement. Consolidated Balance Sheet At December 31, 2000, total assets were $47.6 million, a decrease of $2.9 million from the $50.5 million at March 31, 2000. As of December 31, 2000, cash decreased $1.0 million to $3.0 million from $4.0 million at March 31, 2000, primarily due to the Company's working capital requirements. Accounts receivable decreased $4.3 million from $21.8 million at March 31, 2000 to $17.5 million at December 31, 2000, primarily due to: (1) the write off of amounts owing from two customers in the Retailer Financing Program totaling approximately $5.2 million and various other customer account write-offs during the three month period ended September 30, 2000; (2) the provision of a specific customer allowance in the amount of approximately $0.7 million for the anticipated non-collection of one of 3PF.COM, Inc.'s trade accounts due the Company as the result of a bankruptcy filing by a customer during the three month period ended December 31, 2000; and (3) the recording of a provision for an allowance totaling approximately $0.3 million for the three month period ended December 31, 2000 for the anticipated non-collection of other customer accounts, based on the Company's assessment of the collectibility of those accounts due to changes in the financial condition and payment ability of those customers. These reductions in the Company's accounts receivable were offset by an increase in revenues and a continual improvement in collections during the three month period ended December 31, 2000. Notes receivable decreased to $0 at December 31, 2000 due to a payment of $4.16 million, including interest, received by the Company in July 2000 from a customer pursuant to the settlement of a claim. Property and equipment increased $1.1 million from $2.6 million at March 31, 2000 to $3.7 million at December 31, 2000, primarily due to acquisitions of equipment by the Company's subsidiary 3PF.COM, Inc. The long-term portion of the deferred tax asset increased $6.1 million from $3.3 million at March 31, 2000 to $9.4 million at December 31, 2000, primarily due to the tax loss carryforward created from the loss from continuing operations for the three month period ended September 30, 2000. The Company believes it will benefit from this deferred tax asset in future periods. Other assets decreased $1.7 million from $3.6 million at March 31, 2000 to $1.9 million at December 31, 2000 primarily due to the sale of some of the Company's investments. At December 31, 2000, total liabilities were $37.7 million, an increase of $5.3 million from $32.4 million at March 31, 2000. The line of credit increased to $4.0 million at December 31, 2000 primarily due to increased working capital needs. Accrued compensation decreased $1.1 million from $1.5 million at March 31, 2000 to $0.4 million at December 31, 2000 primarily due to the payment of annual employee bonuses during the three month period ended June 30, 2000, that were accrued as of March 31, 2000. Notes payable decreased to $0 at December 31, 2000 due to the payoff of a promissory note to a former director of the Company during the three month period ended September 30, 2000. Total deferred revenue increased $1.4 million from $3.2 million at March 31, 2000 to $4.6 million at December 31, 2000 primarily due to a $2.5 million dollar payment received from a customer in June 2000 (See Note E of the accompanying financial statements), offset by a decrease in deferred revenue from the recognition of earnings in accordance with agreements with related party organizations and customers. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2000, the Company had cash of $3.0 million compared to $4.0 million at March 31, 2000. At December 31, 2000, the Company's current ratio (current assets/current liabilities) decreased to 0.94 from 1.32 at March 31, 2000. As discussed in Note G of the accompanying financial statements, in May 2000 the Company obtained a replacement line of credit with a lender in an amount not to exceed the lesser of (a) $12 million or (b) the sum of 85% of the net amount of eligible accounts receivable. The terms of the credit agreement include financial covenants requiring: (1) $15 million of tangible net worth to be maintained at all times; (2) a consolidated net profit to be achieved each fiscal year equal to or exceeding $1.00 and (3) $5 million of working capital to be maintained at all times. The agreement also restricts the amount of loans and indebtedness and limits the payment of dividends on the Company's stock, among other requirements. This agreement expires in May 2005. Based upon the financial results reported as of December 31, 2000 and for the three month and nine month periods then ended, the Company has determined it is out of compliance with the three financial covenants as of December 31, 2000. The Company obtained waivers of compliance for the three financial covenants as of December 31, 2000 and for the three and nine month periods then ended. The Company also obtained waivers of compliance for these three financial covenants as of September 30, 2000 and for the three and six month periods ended. The Company has initiated discussions of these covenants with its lender and is seeking covenant modifications. Based upon discussions between the Company and its lender, the Company believes it will successfully receive future waivers and/or covenant modifications and will have sufficient cash resources to repay all outstanding borrowings as due. At December 31, 2000 and February 12, 2001, the Company had $4.0 million and $2.1 million outstanding borrowings, respectively, under this agreement. In 1992, the Company established a Video Retailer Loan Program whereby, on a selective basis, it provided financing to Participating Retailers that the Company believed had potential for substantial growth in the industry. In connection with these financings, the Company typically made a loan to and/or an equity investment in the Participating Retailer. In some cases, the Company obtained a warrant to purchase stock in the Participating Retailer. As part of such financing, the Participating Retailer typically agreed to cause all of its current and future retail locations to participate in the PPT System for a designated period of time (usually 5 - 20 years). Under these agreements, Participating Retailers were typically required to obtain some or all of their requirements of Cassettes from those offered under the PPT System or obtain a minimum amount of Cassettes based on a percentage of the Participating Retailer's revenues. Notwithstanding the long term nature of such agreements, both the Company and the Participating Retailer, in some cases, retained the right to terminate such agreement upon 30-90 days prior written notice. These financings are highly speculative in nature and involve a high degree of risk, and no assurance of a satisfactory return on investment can be given. The Rentrak Video Retailer Loan Program was adopted in 1992 at a time when the video industry was experiencing rapid growth. The underlying rationale for this program was the belief that the Company could expand its business and at the same time participate in the rapid growth experienced by the video retailers in which it invested. During the three month period ended September 30, 2000 the Company announced the discontinuance of new financings under this program. Write-offs of assets associated with this program during the three month period ended September 30, 2000 were $6.1 million, including $4.4 million due to the Company from Video Update, Inc. See Part II, Item 1, Legal Proceedings. The Company continues to seek to enforce agreements entered into in connection with this program in accordance with their terms to the extent practicable. The Company was the principal creditor of BlowOut Entertainment, Inc. ("BlowOut"), which filed a petition under Chapter 11 of the Federal Bankruptcy Code in March 1999. In 1996, the Company had agreed to guarantee up to $7 million of indebtedness of BlowOut ("Guarantee"). BlowOut had a credit facility (the "Credit Facility") in an aggregate principal amount of $2 million for a five-year term. Amounts outstanding under the Credit Facility bear interest at a fixed rate per annum equal to 14.525 percent. Pursuant to the terms of the Guarantee, the Company agreed to guarantee any amounts outstanding under the Credit Facility until the lender is satisfied, in its sole discretion, that BlowOut's financial condition is sufficient to justify the release of the Guarantee. As the proceeds from the sale of the BlowOut assets in May 1999 in the bankruptcy proceeding were not sufficient to cover the amounts due under this facility, the Company, pursuant to the Guarantee, has agreed to a payment plan to fulfill BlowOut's obligation under the Credit Facility. The funds remaining, if any, after payment of administrative and cost claims after dismissal of the case may further reduce the amount due under the Credit Facility. As of December 31, 2000, the balance owing under this obligation was approximately $320,000. Based on the Company's current budgets and projected cash needs, the Company believes that its available sources of liquidity will be sufficient to fund the Company's operations for the fiscal year ending March 31, 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. None. PART II - OTHER INFORMATION Item 1. Legal Proceedings In June 1998, Video Update, Inc. ("Video Update") filed a complaint (the "Video Update Complaint") against the Company entitled Video Update, Inc. v. Rentrak Corp., Civil Action No. 98-286, in the United States District Court for the District of Delaware. The Video Update Complaint alleges various violations of the antitrust laws, including that the Company has monopolized or attempted to monopolize a market for videocassettes leased to retail video stores in violation of Section 2 of the Sherman Act. Video Update further alleges that the Company's negotiation and execution of an exclusive, long-term revenue sharing agreement with Video Update violates Section 1 of the Sherman Act and Section 3 of the Clayton Act. Video Update is seeking unspecified monetary relief, including treble damages and attorneys' fees, and equitable relief, including an injunction prohibiting the Company from enforcing its agreement with Video Update or any exclusivity provision against videocassette suppliers and video retailers. In August 1998, the Court granted the Company's motion to dismiss the Video Update Complaint pursuant to Federal Rules of Civil Procedure Rule 12(b)(3) on the basis of improper venue. In August 1998, Video Update filed a new complaint against the Company in the United States District Court for the District of Oregon (the "Re-Filed Complaint"), Case No. 98- 1013HA. The Re-Filed Complaint is substantially the same as the previous complaint. The Company believes the Re-Filed Complaint lacks merit and intends to vigorously defend against the allegations in the Complaint. The Company has answered the Re-Filed Complaint denying its material allegations and asserting several affirmative defenses. The Company also has counterclaimed against Video Update alleging, among other things, breach of contract, breach of the covenant of good faith and fair dealing, promissory fraud, breach of fiduciary duty, breach of trust, constructive fraud, negligent misrepresentation and intentional interference with business advantage, and is seeking damages and equitable relief. In October 1998, the Company filed a motion for summary judgment seeking to dismiss the lawsuit filed against it by Video Update. In January 1999, the Company filed a separate motion for partial summary judgment on its breach of contract counterclaim seeking to recover more than $4.4 million in fees and interest which the Company claims Video Update owes to it. The court denied Rentrak's motions without reaching the merits and without prejudice to re- filing the motions after discovery had been conducted. On October 21, 1999, the Company amended its counterclaims to add additional claims, including a claim for trade secret misappropriation and a claim for recovery of personal property. The amended countercomplaint also added Video Update's chairman, Daniel Potter, as a defendant to the fraud and negligent misrepresentation claims. Mr. Potter filed a motion to dismiss the Company's claims against him which motion was granted by the Court on April 13, 2000. Video Update also moved to dismiss six of the Company's claims. On April 13, 2000, the Court granted Video Update's motion in part and dismissed the following claims: promissory fraud, breach of fiduciary duty, breach of trust, constructive fraud, and negligent misrepresentation. On July 31, 2000, the Company filed multiple motions for summary judgment including a motion seeking to dismiss Video Update's antitrust claim and a motion seeking a finding that Video Update breached its contract with Rentrak. On September 18, 2000, Video Update filed a voluntary petition under Chapter 11 of the federal Bankruptcy Code. In light of the bankruptcy, the District Court dismissed the Re-Filed Complaint and counterclaims on its own motion in January 2001. The Company has filed a motion for relief from stay with respect to its claims against Video Update. A hearing on the motion is scheduled for March 2001. On November 15, 2000, 3PF.COM, Inc., a subsidiary of the Company, filed a proceeding with the American Arbitration Association against Reel.com, Inc., a subsidiary of Hollywood Entertainment Corporation ("Hollywood"), for breach of a servicing, warehousing, and distribution agreement, and against Hollywood in connection with its guarantee of the obligations of Reel.com, Inc., under the agreement. 3PF.COM, Inc., is seeking damages in the amount of $4,776,237 plus an amount to be determined as consequential damages, together with prejudgment interest and attorney fees. Hollywood and Reel.com, Inc. have filed a counterclaim for attorney fees. Reference is made to Part II, Item 1, Legal Proceedings in the Company's Report on Form 10-Q for the three month period ended September 30, 2000 for the descriptions of legal proceedings that have terminated. The Company is also subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of any ultimate liability with respect to these actions is not expected to materially affect the financial position or results of operations of the Company as a whole. Item 2. Changes in Securities and Use of Proceeds - The Company issued a warrant dated December 1, 2000, to purchase 125,000 shares of the Company's common stock at a price of $5.00 per share to Donald J. Kundinger in consideration of services provided under a consulting agreement entered into between the Company and Mr. Kundinger, d.b.a. Jackson Hole Advisors, in September 1999. The warrant expires upon the earlier of September 1, 2001, or a sale or merger of the Company. The Company relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of the warrant. Item 3. Defaults upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 3.1 - 1995 Restated Bylaws of Rentrak Corporation (as amended through November 17, 2000) (b) Reports on Form 8-K The Company filed the following reports on Form 8- K during the three month period ended December 31, 2000: A Form 8-K filed October 5, 2000, reporting under Item 1 the results of an election contest which resulted in the replacement of the incumbent directors with a new Board of five directors; and A Form 8-K filed December 1, 2000, reporting under Item 9 various corporate developments and forward- looking information about the Company. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated this 14th day of February, 2001 RENTRAK CORPORATION /s/ Mark L. Thoenes By: Mark L. Thoenes Chief Financial Officer Signing on behalf of the registrant EX-3.1 2 0002.txt 1995 RESTATED BYLAWS OF RENTRAK CORPORATION (as amended through November 17, 2000) ARTICLE 1 OFFICES Section 1.1 Principal Office. The principal office of the corporation in the State of Oregon shall be located at 7700 N.E. Ambassador Place, Portland, Oregon 97220, or such other place as the Board of Directors may designate. The corporation may have such other offices, within or without the State of Oregon, as the Board of Directors may designate or as the business of the corporation may require. Section 1.2 Registered Office. The registered office of the corporation required by the Oregon Business Corporation Act to be maintained in the State of Oregon may, but need not, be identical with the corporation's principal office in the State of Oregon and the address of the registered office may be changed from time to time by the Board of Directors. ARTICLE 2 SHAREHOLDERS Section 2.1 Annual Meetings. The annual meeting of the shareholders shall be held in the month of August each year or such other month as the Board of Directors may specify on the date and at the time specified by the Board of Directors for the purpose of electing directors and for transacting other business which may properly come before the meeting. If the election of directors shall not be held on the date designated for the annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient. Section 2.2 Special Meetings. Unless otherwise prescribed by statute, special meetings of the shareholders may be called for any purpose or purposes by the Chief Executive Officer or the Board of Directors and shall be called by the Chief Executive Officer at the request of the holders of not less than 10 percent of all outstanding shares of the corporation entitled to vote at the meeting. Only business within the purpose or purposes discussed in the notice required by Section 2.4 of these Restated Bylaws may be conducted at a special meeting of the shareholders. Section 2.3 Place of Meeting. The Board of Directors may designate any place, within or without the State of Oregon, as the place for the annual meeting or any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, within or without the State of Oregon, as the place for holding such meetings. If no designation is made, the meeting shall be held at the principal office of the corporation in the State of Oregon. Section 2.3.1. Subject of Meetings. To be properly brought before an annual meeting of shareholders, business must be either (i) specified in the notice of the meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise brought before the meeting by a shareholder who is a shareholder of record at the time of giving of the notice provided for in this Article II, Section 2.3.1, who shall be entitled to vote at such meeting and who complies fully with all of the notice procedures and other requirements set forth in this Article II, Section 2.3.1. In addition to any other applicable requirements, for business to be properly brought before an annual meeting of shareholders by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than sixty (60) calendar days nor more than ninety (90) calendar days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than thirty (30) calendar days from such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the tenth (10th) calendar day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. A shareholder's notice to the corporation's Secretary of business proposed to be conducted at any annual or special meeting of shareholders shall set forth as to each matter the shareholder proposes to bring before such meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the shareholder proposing such business and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class, series and number of shares of the capital stock of the corporation which are owned beneficially and of record by such shareholder and by the beneficial owner, if any, on whose behalf the proposal is made, and (iv) any material interest of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting of shareholders except in accordance with the procedures set forth in this Article II, Section 2.3.1. The officer of the corporation presiding at a meeting of shareholders (the "Presiding Officer") shall determine whether the proposed business is properly brought before the meeting in accordance with the provisions of this Article II, Section 2.3.1. If the Presiding Officer should determine that the proposed business is not properly brought before the meeting, the Presiding Officer shall state such determination to the meeting, whereupon any such business not properly brought before the meeting shall not be transacted or otherwise brought before the meeting. Notwithstanding the foregoing provisions of this Article II, Section 2.3.1, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth herein. Section 2.4 Notice of Meeting. Unless otherwise prescribed by statute, written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each shareholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chief Executive Officer, the Secretary, or the officer or persons calling the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock registrar of the corporation with postage prepaid. Section 2.5 Closing of Transfer Books or Fixing of Record Date. For the purposes of determining which shareholders are entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or which shareholders are entitled to receive payment of any dividend, or in order to determine shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed seventy (70) days. If the stock transfer books are closed for the purpose of determining shareholders entitled to notice of, or to vote, at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding this meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than seventy (70) days and, in the case of a meeting of shareholders, not fewer than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of, or to vote, at a meeting of shareholders or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, the determination shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Section 2.6 Voting Record. The officer or agent having charge of the stock transfer books for shares of the corporation shall prepare an alphabetical list of the names of all shareholders entitled to vote at each shareholders' meeting. This list shall be arranged by voting group, and within each voting group by class or series of shares, and shall show the address of and the number of shares held by each shareholder. This list shall be available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting at the corporation's principal office or at a place identified in the notice, which shall be located in the city where the meeting will be held. The corporation shall make this list available at the meeting and any shareholder or the shareholder's agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. Section 2.7 Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 2.8 Proxies. At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by the shareholder's duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. Section 2.9 Voting of Shares. Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. Section 2.10 Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by the officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by such person, in person or by proxy, without a transfer of the shares into such person's name. Shares standing in the name of a trustee or custodian may be voted by such person, in person or by proxy, but no trustee or custodian shall be entitled to vote shares held by him or her without a transfer of the shares into his or her name. Shares standing in the name of a receiver may be voted by the receiver, and shares held by or under the control of a receiver may be voted by the receiver without transferring the shares into the receiver's name if authority to so vote is contained in an order of the court by which the receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote the shares until they have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Nothing in this Section 2.10 shall prevent a pledgee from obtaining a proxy entitling the pledgee to vote the pledged shares and from voting the pledged shares in accordance with a valid proxy. Neither shares of its own stock held by this corporation, nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation are held by this corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting. The foregoing, however, shall not limit the power of the corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. Section 2.11 Action Without Meeting. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action shall be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation for inclusion in the minutes or filing with the corporate records. ARTICLE 3 BOARD OF DIRECTORS Section 3.1 General Powers. The business and affairs of the corporation shall be managed by its Board of Directors. Section 3.2 Number, Tenure and Qualifications. The Board of Directors shall consist of six persons. Each director shall hold office until the next annual meeting of the shareholders and until his or her successor is elected and qualified or until death, resignation or removal. Section 3.2.1. Nominations of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation at any meeting of shareholders may be made by or at the direction of the Board of Directors, by any committee of persons appointed by the Board of Directors or at the meeting by any shareholder of the corporation who is a shareholder of record at the time of giving notice provided for in this Article III, Section 3.2.1, who shall be entitled to vote for the election of directors at the meeting and who complies fully with all of the notice procedures and other requirements set forth in this Article III, Section 3.2.1 and the procedures and requirements set forth in the Oregon Business Act. Nominations by any shareholder shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation (a) in the case of annual meeting, not less than sixty (60) calendar days nor more than ninety (90) calendar days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than thirty (30) calendar days from such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the tenth (10th) calendar day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made, and (b) in the case of a special meeting at which directors are to be elected, not later than the earlier of (i) the close of business on the tenth (10th) calendar day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made or (ii) the close of business on the fifth (5th) calendar day before the date of the meeting. Such shareholder's notice to the Secretary or a written demand from shareholders pursuant to Section 60.204 of the Oregon Revised Statutes shall set forth (i) as to each person whom such shareholders propose to nominate for election or reelection as a director, (a) the name, age, business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of capital stock of the corporation which are beneficially owned by the person, and (d) all other information relating to the person that is or would be required to be disclosed in a solicitation for proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to the shareholders giving such notice or demand (a) the name and record address of the shareholders, (b) the class and number of shares of capital stock of the corporation which are beneficially owned by each such shareholder and also which are owned of record by each such shareholder and (c) any material interest or relationship each such shareholder has in or with the proposed nominee; and (iii) as to each beneficial owner, if any, on whose behalf the nomination is made, (a) the name and address of such person, (b) the class and number of shares of capital stock of the corporation which are beneficially owned by such person and (c) any material interest or relationship such person has in or with the proposed nominee. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein. The Presiding Officer shall determine whether the nomination is made in accordance with the foregoing procedures. If the Presiding Officer should determine that the nomination was not made in accordance with the foregoing procedures, the Presiding Officer shall state such determination to the meeting, whereupon any such defective nomination shall be disregarded and not otherwise brought before the meeting. Notwithstanding the foregoing provisions of this Article III, Section 3.2.1, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth herein. Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide by resolution the time and place, within or without the State of Oregon, for the holding of additional regular meetings without other notice than such resolution. Section 3.4 Special Meetings. Special meetings of the Board of Directors may be called by, or at the request of, the Chairman of the Board, Chief Executive Officer or a majority of the directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, within or without the State of Oregon, as the place for holding any special meeting of the Board of Directors called by him, her or them. Section 3.5 Notice of Meeting. Notice of the date, time and place of any special meeting shall be given at least two (2) days prior to the meeting by written notice delivered personally or mailed to each director at his or her business address, or by facsimile or telegram. If mailed, the notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If delivered by facsimile, the notice shall be deemed to be delivered when the facsimile is transmitted by the corporation to the facsimile number maintained by the director at his or her business. If notice is delivered by telegram, the notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 3.6 Quorum. A majority of the number of directors fixed by Section 3.2 of this Article 3 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, the majority of the directors present may adjourn the meeting from time to time without further notice. Section 3.7 Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 3.8 Action Without Meeting. Any action required or permitted to be taken at a Board of Directors' meeting may be taken without a meeting if the action is taken by all members of the Board of Directors. The action shall be evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes or filed with the corporate records reflecting the action taken. Section 3.9 Vacancies. Any vacancy occurring in the Board of Directors, including a vacancy resulting from an increase in the number of directors, may be filled by the shareholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, or in the event of a vacancy resulting from an increase in the number of directors, until the next election of directors by the shareholders. Section 3.10 Compensation. By resolution of the Board of Directors, each director may be paid his or her expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors, or both. Section 3.11 Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless the director's dissent shall be entered in the minutes of the meeting the director shall file his or her written dissent to the action with the person acting as the secretary of the meeting before the adjournment of the meeting, or the director shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent to a particular action shall not be available to a director who voted in favor of the action. Section 3.12 Action of Directors by Communications Equipment. Any action required or which may be taken at a meeting of directors, or of a committee thereof, may be taken by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 3.13 Limitation of Director Liability. No director of the corporation shall be personally liable to the corporation or its shareholders for monetary damages for conduct as a director, provided that this Section 3.13 shall not eliminate the liability of a director for any act or omission for which such elimination of liability is not permitted under the Oregon Business Corporation Act. No amendment to the Oregon Business Corporation Act that further limits the acts or omissions for which elimination of liability is permitted shall affect the liability of a director for any act or omission which occurs prior to the effective date of such amendment. Section 3.14 Committees. Pursuant to the authority granted under the Oregon Business Corporation Act, and subject to the restrictions stated therein, the Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on such committees. ARTICLE 4 OFFICERS Section 4.1 Number. The officers of the corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (the number to be determined by the Board of Directors), a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person. Section 4.2 Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign or shall have been removed in the manner provided in Section 4.3 of this Article 4. Section 4.3 Removal. Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 4.4 Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors for the unexpired portion of the term. Section 4.5 Chairman of the Board of Directors. The Chairman of the Board of Directors shall be a director and shall preside at all meetings of the Board of Directors and of the shareholders. The Chairman of the Board shall perform such duties as the Board of Directors may from time to time designate Section 4.6 Chief Executive Officer. The Chief Executive officer shall be the principal officer of the corporation and, subject to the control of the Board of Directors, shall supervise and control all of the business and affairs of the corporation. The Chief Executive Officer may sign, with the Secretary, Assistant Secretary or any other proper officer of the corporation so authorized by the Board of Directors, certificates for shares of the corporation, and any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution of any of the same shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The Chief Executive Officer shall exercise the executive powers normally associated with such office and shall perform such other duties as the Board of Directors may from time to time designate. Section 4.7 President. The President shall perform such duties as the Chief Executive Officer or the Board of Directors may from time to time designate. In the event the Board of Directors shall not elect a Chief Executive Officer, or in his or her absence or in the event of his or her death, inability or refusal to act, the President shall be deemed to be the principal officer of the corporation and, subject to the designation of duties by the Board of Directors, shall have the authority and responsibilities of the Chief Executive Officer. Section 4.8 Vice President(s). In the absence of the President or in the event of his or her death, inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice President(s) shall perform such duties as the Chief Executive officer, the President, and the Board of Directors may from time to time designate. Section 4.9 Secretary. The Secretary shall: (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) keep a register of the shareholders of the corporation, in a form that permits preparation of a list of the names and addresses of all shareholders in alphabetical order by class of shares showing the number and class of shares held by each; (e) sign with the Chief Executive Officer certificates for shares of the corporation, the issuance of which shall be authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation (which duty, if authorized by the Board of Directors, may be delegated to a third party acting as stock transfer agent); and (g) in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer, the President, and by the Board of Directors. Section 4.10 Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article 6 of these Bylaws; and (c) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer, the President, and the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. Section 4.11 Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries, when authorized by the Board of Directors, may sign with the Chief Executive Officer or the President certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers, if required by the Board of Directors, shall give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, and by the Chief Executive Officer, President and the Board of Directors. Section 4.12 Salaries. The salaries and all other compensation of the officers shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving salary or other compensation by reason of the fact that the officer is also a director of the corporation. ARTICLE 5 CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 5.1 Certificates for Shares. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the Chief Executive Officer or President and by the Secretary or an Assistant Secretary and shall be consecutively numbered or otherwise identified. The name and address of each person to whom shares are issued, the number of shares and the date of issue shall be entered on the stock registrar of the corporation. All certificates surrendered to the corporation for transfer shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled. No new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled. In the case of a lost, destroyed or mutilated certificate, a new certificate may be issued upon such terms and indemnity to the corporation as the Board of Directors may prescribe. Section 5.2 Transfer of Shares. Transfer of shares of the corporation shall be made only on the stock registrar of the corporation by the holder of record or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney so authorized by power of attorney duly executed and filed with the Secretary of the corporation, and on surrender for cancellation of any certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner of such shares for all purposes. ARTICLE 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 6.1 Contracts. The Board of Directors may authorize any officer, officers, agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation and such authority may be general or confined to specific instances. Section 6.2 Loans. No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall he issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 6.3 Checks, Drafts, Other Orders. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer, officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. Section 6.4 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors or Chief Executive Officer may select. ARTICLE 7 DIVIDENDS The Board of Directors may, from time to time, declare and the corporation may pay dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the corporation's Articles of Incorporation. ARTICLE 8 CORPORATE SEAL The Board of Directors may provide a corporate seal which shall be circular in form and have inscribed on it the name of the corporation and the state of incorporation and the words "Corporate Seal." ARTICLE 9 WAIVER OF NOTICE Whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of these bylaws, the Articles of Incorporation, or the Oregon Business Corporation Act, a waiver of the notice in writing, signed by the person or persons entitled to the notice, whether before or after the time stated in the notice, shall be deemed equivalent to the giving of the notice. ARTICLE 10 INDEMNIFICATION Section 10.1 Indemnities and Indemnified Acts. Each person who was or is made a party or is threatened to be made a party to or was otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (an "indemnitee"), whether the basis of the proceeding is alleged action in an official capacity or as director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Oregon Business Corporation Act, as it exists on the date hereof or may subsequently be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than the Act permitted the corporation to provide prior to the amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by the indemnitee in connection therewith and the indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided in Section 10.2 hereof with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any indemnitee in connection with a proceeding (or part thereof) initiated by the indemnitee only if the proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Article 10 shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (an "advancement of expenses"); provided, however, that if the Oregon law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by, such indemnitee, including without limitation service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking by or on behalf of the indemnitee to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (hereinafter an "undertaking"). Section 10.2 Right of Indemnitee to Bring Suit. If a claim under Section 10.1 is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Oregon law. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Oregon Business Corporation Act, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Section or otherwise shall be on the corporation. Section 10.3 Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the corporation's articles of incorporation or bylaws, agreement, vote of shareholders or disinterested directors or otherwise. Section 10.4 Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Oregon law. Section 10.5 Indemnification of Agents of the Corporation. The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and the advancement of expenses, to any agent of the corporation to the fullest extent of the provisions of this Article 10 with respect to the indemnification and advancement of expenses of directors, officers and employees of the corporation. ARTICLE 11 AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by the shareholders at any regular or special meeting. ARTICLE 12 BOOKS AND RECORDS Section 12.1 Corporate Records. The corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the corporation. The corporation or its agent shall maintain a record of its shareholders in a form that permits preparation of a list of the names and addresses of all shareholders in alphabetical order by class of shares showing the number and class of shares held by each. Section 12.2 Copies of Resolutions. Any person dealing with the corporation may rely upon a copy of any of the records of the proceedings, resolutions, or votes of the Board of Directors or stockholders, when certified by the Chief Executive Officer, President, or Secretary. ARTICLE 13 FISCAL YEAR The fiscal year of the corporation shall begin on the first day of April and end of the last day of March in each year. /s/ Paul Rosenbaum Paul Rosenbaum, Chairman of the Board and CEO ATTEST: /s/ F. Kim Cox ________________________ F. Kim Cox, Secretary EX-27 3 0003.txt
5 This schedule contains summary financial information extracted from the Company's balance sheet and related statements of income for the period ended June 30, 2000 and is qualified in its entirety by reference to such financial statements. 9-MOS MAR-31-2001 DEC-31-2000 3,041,693 0 19,587,746 2,050,334 4,015,432 32,593,114 11,477,911 (7,771,927) 47,552,852 34,554,042 0 0 0 12,229 9,844,024 47,552,852 85,928,434 85,928,434 71,970,164 100,250,168 268,128 0 541,273 (14,589,862) (5,550,378) (9,089,484) 0 0 0 (9,089,484) (0.76) (0.76)
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