-----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, LEwFFpSgUisNYeCi1RpW7EBIoMdaIXxEFzJJ55xofswVSgmaGJRpK4XPrpYixfIQ uVjUBaN1ayc8tp8lCjChPA== 0001012870-01-501613.txt : 20010815 0001012870-01-501613.hdr.sgml : 20010815 ACCESSION NUMBER: 0001012870-01-501613 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IXYS CORP /DE/ CENTRAL INDEX KEY: 0000945699 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770140882 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26124 FILM NUMBER: 1711623 BUSINESS ADDRESS: STREET 1: 3540 BASSETT ST CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4089540500 MAIL ADDRESS: STREET 1: 3540 BASSETT STREET CITY: SANTA CLARA STATE: CA ZIP: 95054 FORMER COMPANY: FORMER CONFORMED NAME: PARADIGM TECHNOLOGY INC /DE/ DATE OF NAME CHANGE: 19951031 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 2001 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 000-26124 IXYS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 77-0140882 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 3540 BASSETT STREET SANTA CLARA, CALIFORNIA 95054-2704 (Address of principal executive offices and Zip Code) (408) 982-0700 (Registrant's telephone number, including area code) 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 [_] THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING AS OF AUGUST 6, 2001, WAS 26,727,212. IXYS CORPORATION INDEX PART I - FINANCIAL INFORMATION................................................................... 1 ITEM 1. FINANCIAL STATEMENTS................................................................ 1 CONDENSED CONSOLIDATED BALANCE SHEETS............................................... 1 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS..................................... 2 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME............................ 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS..................................... 4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................................ 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................................ 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK............................. 14 PART II - OTHER INFORMATION...................................................................... 15 ITEM 1. LEGAL PROCEEDINGS................................................................... 15 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................................... 17 ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................................... 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................. 17 ITEM 5. OTHER INFORMATION................................................................... 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................... 17 SIGNATURES....................................................................................... 18
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS IXYS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
ASSETS June 30, March 31, 2001 2001 ------------ ----------- (unaudited) Current assets: Cash and cash equivalents......................................... $ 40,126 $ 44,795 Restricted cash................................................... 404 387 Accounts receivable, net of allowance for doubtful accounts of $2,226 at June 30, 2001 and $2,823 at March 31, 2001.......... 23,774 26,303 Inventories, net.................................................. 37,126 34,035 Prepaid expenses.................................................. 323 309 Deferred income taxes............................................. 2,561 2,561 ------------ ----------- Total current assets......................................... 104,314 108,390 Plant and equipment, net........................................... 14,767 13,960 Other assets....................................................... 4,971 4,749 Deferred income taxes.............................................. 315 315 ------------ ----------- Total assets.................................................. $ 124,367 $ 127,414 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of capitalized lease obligations.................. $ 1,512 $ 1,737 Current portion of notes payable to bank.......................... 706 754 Accounts payable.................................................. 6,898 10,649 Accrued expenses and other liabilities............................ 11,646 13,243 ------------ ----------- Total current liabilities........................................ 20,762 26,383 Capitalized lease obligations, net of current portion.............. 4,118 3,425 Pension liabilities................................................ 4,764 4,882 ------------ ----------- Total liabilities............................................... 29,644 34,690 ------------ ----------- Commitments and contingencies (Note 9) Stockholders' Equity Preferred stock, $0.01 par value: Authorized: 5,000,000 shares; none issued and outstanding......... - - Common stock, $0.01 par value: Authorized: 80,000,000 shares Issued and outstanding: 26,730,515 shares at June 30, 2001 and 26,662,132 shares at March 31, 2001.............................. 267 267 Additional paid-in capital......................................... $ 92,211 $ 91,873 Notes receivable from stockholders................................. (823) (823) Retained earnings.................................................. 5,475 3,889 Accumulated other comprehensive loss............................... (2,407) (2,482) ------------ ----------- Total stockholders' equity...................................... 94,723 92,724 ------------ ----------- Total liabilities and stockholders' equity..................... $ 124,367 $ 127,414 ============ ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 1 IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Three Months Ended June 30, ---------------------- 2001 2000 ---------- -------- (unaudited) Net revenues.............................................................. $ 25,605 $ 23,274 Cost of goods sold........................................................ 17,299 15,053 ---------- ---------- Gross profit.................................................... 8,306 8,221 ---------- ---------- Operating expenses: Research, development and engineering................................... 1,181 1,164 Selling, general and administrative..................................... 3,477 3,032 ---------- ---------- Total operating expenses........................................ 4,658 4,196 ---------- ---------- Operating income.......................................................... 3,648 4,025 Interest income........................................................... 341 113 Interest expense.......................................................... (195) (65) Other (expense) income.................................................... (1,238) 1,885 ---------- ---------- Income before income tax provision........................................ 2,556 5,958 Provision for income tax.................................................. (970) (2,264) ---------- ---------- Net income................................................................ $ 1,586 $ 3,694 ========== ========== Net income per share--basic............................................... $ 0.06 $ 0.15 ========== ========== Weighted average shares used in per share calculation--basic.............. 26,690 23,984 ========== ========== Net income per share--diluted............................................. $ 0.05 $ 0.14 ========== ========== Weighted average shares used in per share calculation--diluted............ 29,180 26,407 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in thousands)
Three Months Ended June 30, --------------------- 2001 2000 --------- --------- (unaudited) Net income............................................................... $ 1,586 $ 3,694 Other comprehensive income (loss): Foreign currency translation adjustments.............................. 75 (111) --------- --------- Comprehensive income............................................... $ 1,661 $ 3,583 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended June 30, ------------------------ 2001 2000 ------- ------- (unaudited) Cash flows from operating activities: Net income.................................................................... $ 1,586 $ 3,694 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............................................. 874 819 Provision for doubtful accounts............................................ (151) 847 Provision for excess and obsolete inventory................................ 786 103 Gain on disposal of assets................................................. (5) - Changes in operating assets and liabilities (1): Accounts receivable........................................................ 2,299 (276) Inventories................................................................ (4,282) (2,289) Prepaid expenses and other current assets.................................. (16) (1,028) Other assets............................................................... (373) 768 Accounts payable........................................................... (3,580) (447) Accrued expenses and other liabilities..................................... (419) 1,710 Pension liabilities........................................................ 54 29 Loss on foreign currency transactions...................................... (159) (439) ------- ------- Net cash (used in) provided by operating activities..................... (3,386) 3,491 ------- ------- Cash flows used in investing activities: Increase in restricted cash................................................... (17) - Cash acquired in acquisition of Directed Energy............................... - 135 Proceeds from disposal of assets.............................................. 5 - Purchase of plant and equipment............................................... (638) (1,546) ------- ------- Net cash used in investing activities................................... (650) (1,411) ------- ------- Cash flows from financing activities: Proceeds from capital lease obligations....................................... 75 671 Principal payments on capital lease obligations............................... (672) - Repayment of notes payable to bank............................................ (48) (91) Proceeds from exercise of options............................................. 169 162 Proceeds from issuance of shares under ESPP................................... 194 - ------- ------- Net cash (used in) provided by financing activities........................ (282) 742 ------- ------- Effect of foreign exchange rate fluctuations on cash and cash equivalents........ (351) 311 ------- ------- Net (decrease) increase in cash and cash equivalents............................. (4,669) 3,133 Cash and cash equivalents at beginning of period................................. 44,795 9,759 ------- ------- Cash and cash equivalents at end of period....................................... $40,126 $12,892 ======= =======
- --------------- (1) Excludes effects of foreign exchange rate fluctuation. The accompanying notes are an integral part of these condensed consolidated financial statements. 4 IXYS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Condensed Consolidated Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The condensed consolidated financial statements include the accounts of IXYS Corporation ("IXYS" or the "Company") and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. It is recommended that the interim financial statements be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2001 contained in the Company's Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year. 2. Foreign Currency Translation The local currency is considered to be the functional currency of the operations of IXYS' foreign subsidiaries, IXYS Semiconductor GmbH ("IXYS GmbH"), IXYS Berlin GmbH ("IXYS Berlin") and IXYS CH GmbH ("IXYS CH"). Accordingly, assets and liabilities are translated at the exchange rate in effect at period- end and revenues and expenses are translated at average rates during the period. Adjustments resulting from the translation of the accounts of IXYS' foreign subsidiaries into U.S. dollars are included in cumulative translation adjustment, a separate component of stockholders' equity. Foreign currency transaction gains and losses are included as a component of non-operating income and expense. 3. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement will require IXYS to recognize all derivatives on the balance sheet at fair value and requires that derivative instruments used to hedge be identified specifically as to assets, liabilities, firm commitments or anticipated transactions and measured as to effectiveness and ineffectiveness when hedging changes in fair value or cash flows. Derivative instruments that do not qualify as either a fair value or cash flow hedge are valued at fair value with the resultant gain or loss recognized in current earnings. Changes in the effective portion of fair value hedges are recognized in correct earnings along with changes in the fair value of the hedged item. Changes in the effective portion of the fair value of cash flow hedges will be recognized in other comprehensive income until realization of the cash flows of the hedged item through current earnings. Any ineffective portion of hedges are recognized in current earnings. In June 1999, FASB issued SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," to defer for one year the effective date of implementation of SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000, with earlier application encouraged. The adoption of SFAS No. 133 did not have a material effect on IXYS' financial position or results of operations. In July 2001, FASB adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 141, all business combinations are to be accounted for using the purchase method of accounting; use of the pooling-of-interest method is prohibited. The provisions of the statement will apply to all business combinations initiated after June 30, 2001. 5 SFAS No. 142 will apply to all acquired intangible assets whether acquired singly, as part of a group, or in a business combination. The statement will supersede Accounting Principles Board ("APB") Opinion No. 17, "Intangible Assets," and will carry forward provisions in APB Opinion No. 17 related to internally developed intangible assets. Adoption of SFAS No. 142 will result in ceasing amortization of goodwill. All of the provisions of the statement should be applied in fiscal years beginning after December 15, 2001, to all goodwill and other intangible assets recognized in the entity's statement of financial position on that date, regardless of when those assets were initially recognized. IXYS is currently assessing, but has not yet determined, the impact of SFAS No. 142 on its financial position and results of operations. 4. Comprehensive Income IXYS adopted SFAS No. 130, "Accounting for Comprehensive Income," during the fiscal year ended 1998. This statement establishes standards for reporting and display of comprehensive income and its components (including revenues, expenses, gains and losses) in a full set of general-purpose financial statements. IXYS' change in the cumulative translation adjustment represent the only component of comprehensive income which is excluded from net income for 2001 and prior years. IXYS' comprehensive income has been presented in the condensed consolidated financial statements. 5. Inventories Inventories consist of the following (in thousands):
June 30, March 31, 2001 2001 ----------- ----------- (unaudited) Raw materials............................ $ 4,500 $ 3,888 Work in process.......................... 21,684 21,114 Finished goods........................... 10,942 9,033 ------- ------- Total............................... $37,126 $34,035 ======= =======
6. Common Stock A two-for-one split of IXYS' common stock was effected on August 10, 2000 and was applicable to stockholders of record on July 20, 2000. References to share and per share data in the accompanying condensed consolidated financial statements give effect to the stock split. 7. Computation of Net Income Per Share Basic earnings per share ("EPS") is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of other securities into common stock. Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):
Three Months Ended June 30, -------------------------- 2001 2000 -------- -------- (unaudited) BASIC: Weighted, average shares outstanding for the period................... 26,690 23,984 -------- -------- Shares used in computing per share amounts............................ 26,690 23,984 -------- -------- Net income available for common stockholders.......................... $ 1,586 $ 3,694 ======== ======== Net income available for common stockholders per share................ $ 0.06 $ 0.15 ======== ======== DILUTED: Weighted, average shares outstanding for the period................... 26,690 23,984 Net effective dilutive stock options and warrants based on treasury stock method using average market price.............................. 2,490 2,423 -------- -------- Shares used in computing per share amounts............................ 29,180 26,407 -------- -------- Net income available for common stockholders.......................... $ 1,586 $ 3,694 ======== ======== Net income per share available for common stockholders................ $ 0.05 $ 0.14 ======== ======== Total common stock equivalents excluded from the computation of earnings per share as their effect was anti-dilutive....................................... 179 - ======== ========
6 8. Segmental Information Based on the criteria set forth in Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information," IXYS operates in a single industry segment comprising power semiconductors used primarily in controlling energy in motor drives, power conversion (including uninterruptible power supplies (UPS) and switch mode power supplies (SMPS)) and medical electronics. IXYS' net revenues by major geographic area (based on destination) were as follows:
Three Months Ended June 30, --------------------- 2001 2000 -------- -------- (unaudited) United States............................................................ $ 8,516 $ 8,430 Europe and the Middle East............................................... 12,613 10,825 Japan.................................................................... 334 164 Asia Pacific............................................................. 4,142 3,855 -------- -------- Total........................................................... $ 25,605 $ 23,274 ======== ========
IXYS' foreign operations consist mostly of foreign subsidiaries in Germany. The following table summarizes the net revenue, net income and total assets of IXYS' U.S. and foreign operations (in thousands):
Three Months Ended June 30, ---------------------- 2001 2000 -------- -------- (unaudited) Net Revenue: Foreign............................................................... $ 13,390 $ 11,188 U.S................................................................... 12,215 12,086 -------- -------- Total........................................................... $ 25,605 $ 23,274 ======== ======== Net Income: Foreign............................................................... $ 323 $ 293 U.S................................................................... 1,263 3,401 -------- -------- Total........................................................... $ 1,586 $ 3,694 ======== ========
June 30, March 31, 2001 2001 ----------- ---------- (unaudited) Total Assets: Germany............................................................... $ 24,565 $ 25,193 Switzerland........................................................... 5,527 7,229 U.S................................................................... 94,275 94,992 -------- -------- Total........................................................... $124,367 $127,414 ======== ========
9. Commitments and Contingencies Legal Proceedings On August 12, 1996, IXYS, along with Robert McClelland, Richard A. Veldhouse and Chiang Lam (the "Paradigm Defendants") was named (along with others subsequently dismissed from the case) as a defendant in a purported class action (entitled Bulwa et al. v. Paradigm Technology, Inc. et al., Santa Clara County Superior Court Case No. CV759991) brought on behalf of stockholders who purchased IXYS' common stock between November 7 20, 1995 and March 22, 1996 (the "Class Period"), prior to the Paradigm merger. The complaint asserted violations of California Corporations Code sections 25400 and 25500 ("Sections 25400 and 25500") along with other causes of action that have been dismissed. On February 9, 1998 the Santa Clara County Court certified a class consisting only of California purchasers of IXYS' stock during the Class Period. Following the California Supreme Court decision in Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal. 4th 1036 (1999), plaintiffs moved to modify the prior class certification ruling to include also non-California purchasers. The Santa Clara County Court granted this motion on April 28, 1999. On September 20, 2000, IXYS' counsel and counsel for the plaintiffs reached a tentative agreement to settle the class action lawsuit in exchange for the payment of $900,000, which amount is fully covered by insurance. Accordingly, this contemplated settlement agreement would have no impact on IXYS' operating results. IXYS' insurance carrier has deposited the payment into escrow, pending final approval. The settlement was preliminarily approved by the Santa Clara County Court on February 20, 2001. At that time, the Santa Clara County Court also directed Notice of Pendency and Settlement of Class Action and Settlement Hearing Date for Final Approval of Settlement. There were no objections to the settlement and only one individual opted out of the settlement. The Santa Clara County Court approved the settlement at a hearing on the Motion for Final Approval of Settlement on July 2, 2001. The individual defendants were dismissed with prejudice. There can be no assurance that IXYS will be successful in the defense of a newly filed lawsuit should the individual that opted out file suit. On June 22, 2000, International Rectifier Corporation filed an action for patent infringement against IXYS in the United States District Court for the Central District of California, alleging that certain of IXYS' products sold in the United States, including but not limited to four specified power MOSFET parts, infringe five identified U.S. patents owned by International Rectifier (U.S. Patents No. 4,959,699; No. 5,008,725; No. 5,130,767; No. 4,642,666; and No. 4,705,759). International Rectifier has since notified IXYS that it no longer contends that IXYS infringes two of those patents (U.S. Patents No. 4,705,759 and No. 4,642,666), and has refined its allegations of infringement to embrace all of IXYS' power MOSFETs and IGBTs having "elongated octagonal" cells or "non-symmetrical cluster" cells. These designations cover many of IXYS' power MOSFET and IGBT products sold in the United States. International Rectifier's complaint against IXYS contends that IXYS' alleged infringement of International Rectifier's patents has been and continues to be willful and deliberate, seeks to enjoin IXYS from further infringement and requests an award of unspecified, actual monetary damages, but no less than a reasonable royalty (presently contended to be 6.5% of IXYS' net sales) of products that are claimed to infringe International Rectifier's patents. International Rectifier also seeks to have the claimed damages trebled. IXYS has answered the complaint, denied any infringement and asserted that International Rectifier's patents are invalid and unenforceable for, among other reasons, failure of International Rectifier to properly disclose known prior art during its prosecution of the patents in suit, and that International Rectifier's claims are barred by reason of the doctrines of estoppel and laches. IXYS also contends that a reasonable royalty for these patents would be much less than 6.5%. In prior years, International Rectifier has approached IXYS on several occasions and requested that IXYS enter into royalty-bearing license agreements with International Rectifier, under its patents. IXYS has declined to do so, based upon IXYS' belief that its products do not infringe the International Rectifier patents. The case had been scheduled for trial on June 12, 2001. In May 2001, however, in view of newly issued patent claims added to the case by International Rectifier, the U.S. District Court vacated the trial date, set a new discovery cut-off date of July 16, scheduled a further pre-trial conference for August 6, 2001, and deferred setting a new trial date. In July 2001, in view of other soon-to-be-issued claims that International Rectifier proposes to add to the case, the U.S. District Court vacated the prior dates, set a new discovery cut-off date of September 24, 2001, and set a new pre-trial conference date of October 15, 2001. In May 2001, the U.S. District Court also granted motions for summary judgment dismissing IXYS' second and eighth affirmative defenses, relating to its contentions that certain of the patent claims are invalid over a prior invention by Dr. Jean Hoerni, and that claims for alleged infringement by certain products have been released in a settlement between International Rectifier and Samsung Electronics Co., Ltd. ("Samsung"). Samsung fabricates IXYS-designed wafers for IXYS in Korea. In July 2001, the U.S. District Court also granted motions for summary judgment, dismissing IXYS' affirmative defense that the claims of U.S. Patent No. 4,959,699 are invalid for non-compliance with the so-called "written description" requirement of Section 112 of the Patent Statute, finding that IXYS' power MOSFET devices having cells shaped like elongated octagons or non-symmetrical clusters infringe claim 1 of U.S. Patent No. 4,959,699 and denying IXYS' countermotions on the same or similar issues. IXYS 8 expects to appeal these rulings. It remains IXYS' intent to vigorously contest the claims of International Rectifier. While IXYS believes its defenses to these various claims are meritorious, there can be no assurance of a favorable outcome. In the event of an adverse outcome, damages or injunctions awarded by the U.S. District Court could be materially adverse to IXYS' financial condition and results of operations. International Rectifier also contends that IXYS' importation of IXYS- designed MOSFET products into the United States having the "elongated octagonal" cells or "non-symmetrical cluster" cells manufactured for IXYS by Samsung is in violation of a consent decree and injunction entered against Samsung in another lawsuit that did not involve IXYS. In February 2001, International Rectifier served Samsung and IXYS with a Post-Judgment Ex Parte Application for OSC Re Contempt seeking, among other things, an enforcement of the injunction for IXYS' importation into the United States of parts designed by IXYS and manufactured for IXYS by Samsung that infringe claim 1 of International Rectifier's U.S. Patent No. 4,959,699 and an appropriate fine. Samsung contends that IXYS is contractually obligated under the terms of IXYS' wafer supply agreement with Samsung to defend it against the contempt claims made by International Rectifier and indemnify and hold Samsung harmless in connection with such claims. IXYS is considering Samsung's request in light of the terms of the wafer supply agreement. While IXYS believes that neither it nor Samsung are or could be in violation of the injunction for various reasons IXYS believes to be meritorious, including an express reservation as to IXYS' designed parts in the consent decree, there can be no assurance of a favorable outcome. Argument in this matter was held May 18, 2001, at which time the U.S. District Court stated interim rulings that IXYS is bound by the Samsung injunction, and that IXYS and Samsung attempted to subvert the injunction by having IXYS take delivery outside the United States of products designed by IXYS and made by Samsung, but deferred decision as to whether IXYS and Samsung violated the injunction until after a decision on the infringement issue in International Rectifier v. IXYS. IXYS expects to appeal these rulings. In the event of an adverse ruling against IXYS on the ultimate issue of contempt, or if IXYS is obligated to defend and indemnify Samsung, any damages or injunction awarded by the U.S. District Court could be materially adverse to IXYS' financial condition and results of operations. In November 2000, IXYS filed a lawsuit for patent infringement against International Rectifier GmbH in the County Court of Mannheim, Germany. The lawsuit charged International Rectifier with infringing at least two of IXYS' German patents. These patents cover key design features of IXYS' proprietary integrated power module technology, which the lawsuit alleged International Rectifier had been infringing in products sold in Germany. The lawsuit sought damages and an injunction prohibiting the continued infringement by International Rectifier. International Rectifier originally had until January 4, 2001 to file a response. This response date was delayed to February 8, 2001, upon the request of International Rectifier. On March 23, 2001, a public hearing took place in Mannheim, Germany and International Rectifier did not deny making use of the above patents. On April 27, 2001, the County Court of Mannheim rendered a judgment in IXYS' favor that enjoined International Rectifier from marketing, utilizing, importing or possessing two of IXYS' German patents, and imposed a fine of up to DM 500,000 to the state or imprisonment of International Rectifier's managing director for each violation of the injunction. In addition, International Rectifier was ordered to disclose to IXYS information about its previous sales activity, offers of sales, advertisements, production costs and profits concerning the infringed patents. International Rectifier was also ordered to pay attorney fees and past and future damages and unjustified enrichment resulting from International Rectifier's infringing practices, as calculated by the information to be provided to IXYS by International Rectifier. International Rectifier has appealed the judgment to the Court of Appeals in Karlsruhe and currently has until August 9, 2001, to deliver a statement of appeal. Notwithstanding this appeal, IXYS is currently enforcing this judgment; in order to do so IXYS was required to pay DM 1,040,000 as a form of bond to be held by the County Court of Mannheim. The funds held by the County Court of Mannheim will be returned to IXYS if final adjudication is in its favor, or will offset any costs that may need to be paid if final adjudication is not in its favor. International Rectifier has begun to disclose information to IXYS pursuant to the judgment. On February 8, 2001, IXYS filed a lawsuit against International Rectifier Italia S.p.A. in the Civil Court of Monza, Italy, for patent infringement of at least two of IXYS' European patents, which correspond to the German patents involved in the above-described legal proceeding in Germany. The lawsuit seeks the seizure of semiconductor modules produced by International Rectifier that infringe on IXYS' patents and an injunction against further production of such modules by International Rectifier in Italy. At a hearing on March 8, 2001, the judge rejected International Rectifier's arguments that the Monza tribunal was not competent to hear the case and nominated an expert to comment on the technical details of the alleged patent infringement. Following the scheduled submission of technical writs by the parties in May 2001, the expert submitted written comments in June 2001. On June 27, 2001, the Civil Court of Monza rendered a preliminary injunction in IXYS' favor with respect to certain claims of infringement by International Rectifier S.p.A. Under the terms of this preliminary injunction, IXYS is permitted to seize, and International Rectifier S.p.A. is prohibited from distributing, certain of the allegedly infringing semiconductor modules. The injunction is an interlocutory measure that remains in effect until there has been a 9 judgment on the merits. IXYS has started to focus on the merits of the law suit. It could be as long as several years before a judgment on the merits is rendered. Discussions of additional details relating to the above-described legal proceedings may be found in IXYS' prior SEC filings and reports. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion contains forward-looking statements, which are subject to certain risks and uncertainties, including without limitation those described in our Annual Report on Form 10-K that has been filed with the Securities and Exchange Commission (the "SEC"). Actual results may differ materially from the results discussed in the forward-looking statements. All forward-looking statements included in this document are made as of the date hereof, based on the information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Important factors affecting our ability to achieve future revenue growth include whether and the extent to which demand for our products increases and reflects real end-user demand; whether customer cancellations and delays of outstanding orders increase; and whether we are able to manufacture in a correct mix to respond to orders on hand and new orders received in the future; whether we are able to achieve our new product development and introduction goals, including, without limitation, goals for recruiting, retaining, training, and motivating engineers, particularly design engineers, and goals for conceiving and introducing timely new products that are well received in the marketplace; and whether we are able to successfully commercialize our new technologies, which we have been investing in by designing and introducing new products based on these new technologies. Other important factors that could cause actual results to differ materially from those predicted include overall economic conditions, such as the economic issues affecting Asian countries; fluctuations in currency exchange ratios as we sell products in currencies other than the U.S. dollar; demand for electronic products and semiconductors generally; demand for the end-user products for which our semiconductors are suited; the level of utilization of our production capacity; timely availability of, and changes in the cost of, raw materials, equipment, supplies and services; unanticipated manufacturing problems; problems in obtaining products from outside foundries that manufacture for us; increases in production and engineering costs associated with initial manufacture of new products; technological and product development risks; competitors' actions; and other risk factors described in our filings with the SEC on Form 10-K. The impact of these and other factors on our revenues and operating results in any future period cannot be forecast with certainty. Our expense levels are based, in part, on its expectations as to future revenues. Because our sales are generally made pursuant to purchase orders that are subject to cancellation, modification, quantity reduction or rescheduling on short notice and without significant penalties, our backlog as of any particular date may not be indicative of sales for any future period, and such changes could cause our net sales to fall below expected levels. If revenue levels are below expectations, operating results are likely to be materially adversely effected. Net income, if any, and gross margins may be disproportionately affected by a reduction in net sales because a proportionately smaller amount of our expenses varies with its revenues. OVERVIEW We are a leading company in the design, development, manufacture and marketing of high power, high performance power semiconductors. Our power semiconductors improve system efficiency and reliability by converting electricity at relatively high voltage and current levels into the finely regulated power required by electronic products. We focus on the market for power semiconductors that are capable of processing greater than 500 watts of power. We were founded in 1983. In 1989, we acquired from ABB our semiconductor operation in Lampertheim, Germany, now called IXYS Semiconductor GmbH. This acquisition provided us with a strong foothold in Europe. In 1995, we reincorporated in Delaware. Also in 1995, ABB converted approximately $10.5 million in debt owed to it by us into our capital stock. In January 1998, we purchased the Lampertheim facility, which had previously been leased from ABB. In September 1998, IXYS Corporation merged with Paradigm Technology, a Delaware corporation that designed and marketed SRAM products, in a transaction accounted for as a reverse merger. In the merger, Paradigm issued its common stock in exchange for all outstanding shares of our capital stock. At the conclusion of the merger, IXYS stockholders held approximately 96% of the combined company, and the historical accounting records of IXYS became those of the combined company. Accordingly, Paradigm formally changed its name to "IXYS Corporation." In May 2000, we acquired Directed Energy, which gave us added scientific expertise and additional products related to laser diode drives, high voltage pulse generators and modulators. In connection with this acquisition, we 11 issued 250,370 shares of our common stock to the former shareholders of Directed Energy in a transaction that was accounted for under the purchase method. The semiconductor industry is cyclical and has from time to time experienced depressed business conditions. The semiconductor industry has historically experienced a decrease in average selling prices of products over time. From 1996 through 1998, the semiconductor industry experienced worldwide overcapacity, which caused prices to erode and was accompanied by a slowdown in the demand for semiconductors. Additionally, a number of factors can result in quarter to quarter fluctuations in operating results, including: the reduction, rescheduling or cancellation of orders by customers; fluctuations in the timing and amount of customer requests for product shipments; fluctuations in the manufacturing yields and significant yield losses; and availability of production capacity. In the three month period ended June 30, 2001, North American sales represented approximately 33.3%, and international sales represented approximately 66.7%, of our net revenues. Of our international sales, approximately 73.8% were derived from sales in Europe and the Middle East and approximately 26.2% were derived from sales in Asia. No single end customer accounted for more than 10.0% of our net revenues in the three month period ended June 30, 2001. We do not hedge our foreign currency transactions. Accordingly, although many of our sales and expenses occur in the same currency, translation of foreign currencies into U.S. dollars may negatively impact us. We relied on external foundries for approximately 45.0% of our wafer fabrication requirements in the three month period ended June 30, 2001, and our utilization of external foundries is expected to grow. We have arrangements with four external wafer foundries, two of which produce substantially all of the wafers provided to us by external foundries. Our principal external foundry is Samsung Electronics' facility located in Kiheung, South Korea. Our relationship with Samsung extends over 17 years. We provide our foundries forecasts for wafer fabrication six months in advance and make firm purchase commitments one to two months in advance of delivery. Other than these firm commitments, we do not have any obligations to order any minimum quantities. Results of Operations--Three Month Periods Ended June 30, 2001 and June 30, 2000 Net Revenues. Net revenues in the three month period ended June 30, 2001 were $25.6 million, a 10.0% increase from net revenues of $23.3 million in the three month period ended June 30, 2000. International net revenues were $17.1 million in the three month period ended June 30, 2001, or 66.7% of net revenues, as compared to $14.8 million, or 63.8% of net revenues, in the three month period ended June 30, 2000. The increase in net revenues is primarily related to an approximately 20.7% increase in units shipped in the three month period ended June 30, 2001, as compared to the three month period ended June 30, 2000, offset by an approximately 8.9% decrease in average selling prices across our product line. We believe that the increase in unit sales volume was largely attributable to increased demand for power conversion systems for communications infrastructure applications. Gross Profit. Gross profit was $8.3 million, or 32.4% of net revenues, in the three month period ended June 30, 2001, as compared to $8.2 million, or 35.3% of net revenues, in the three month period ended June 30, 2000. The decrease in margins was primarily due to an 8.9% decrease in average selling prices from the three month period ended June 30, 2000, as well as relatively constant cost per unit. Research, Development and Engineering. During the three month period ended June 30, 2001, research, development and engineering ("R&D") expense was $1.2 million, or 4.6% of net revenues, as compared to $1.2 million, or 5.0% of net revenues, in the three month period ended June 30, 2000. The absolute dollar amount of R&D expenses remained relatively fixed between the three month period ended June 30, 2001 and the three month period ended June 30, 2000. Selling, General and Administrative. During the three month period ended June 30, 2001, selling, general and administrative ("SG&A") expense was $3.5 million, or 13.6% of net revenues, as compared to $3.0 million, or 13.0% of net revenues, in the three month period ended June 30, 2000. The absolute dollar amount increase in expenses was caused primarily by higher consulting expenses incurred in the three month period ended June 30, 2001, as compared to the three month period ended June 30, 2000. Interest Income (Expense), Net. During the three month period ended June 30, 2001, interest income (expense), net was $146,000, as compared to interest income (expense), net of $48,000 in the three month period ended June 30, 2000. The increase is mainly due to interest received from the investment of the net proceeds from our secondary public offering which was completed in October 2000. Other Income (Expense), Net. Other income (expense), net, including gain on foreign currency transactions, in the three month period ended June 30, 2001 was $1.2 million of other expense, as compared to $1.9 million of other income in the three month 12 period ended June 30, 2000. The decrease in other income (expense), net is primarily due to legal fees of $1.1 million incurred in the three month period ending June 30, 2001, contrasted with a $1.8 million gain from a one time licensing fee in the three month period ending June 30, 2000. Provision For Income Taxes. The provision for income taxes in the period ended June 30, 2001, reflects an effective tax rate of 38.0%, which has not changed from the same period in the prior fiscal year. Liquidity and Capital Resources As of June 30, 2001, cash and cash equivalents were $40.1 million, a decrease of $4.7 million from cash and cash equivalents of $44.8 million at March 31, 2001. The decrease in cash and cash equivalents was primarily due to cash used in operations. Cash flows from operating activities. Net cash used in operating activities in the three month period ended June 30, 2001 was $3.4 million, which represents a decrease of $6.9 million from net cash provided by operating activities of $3.5 million in the three month period ended June 30, 2000. The increase in net cash used in operating activities was primarily attributable to both larger levels of inventory on hand and increased accounts receivables as a result of increased sales. Cash flows from investing activities. Net cash used in investing activities in the three month period ended June 30, 2001 was $0.7 million, a decrease of $0.7 million from $1.4 million in the three month period ended June 30, 2000. This decrease in net cash used in investing activities is primarily due to a lower level of capital expenditure. Cash flows from financing activities. During the three month period ended June 30, 2001, net cash used in financing activities was $0.3 million, a decrease of $1.0 million from net cash provided by financing activities of $0.7 million during the three month period ended June 30, 2000. The decrease in net cash used in financing activities is primarily due to principal repayment of capital lease obligations. There are three lines of credit facilities available to us. We have one line of credit with a U.S. bank that consists of a $5.0 million commitment amount, which is available through September 2001. The line bears interest at the bank's prime rate (6.75% at June 30, 2001). The line is collateralized by certain assets and contains certain general and financial covenants. At June 30, 2001, we had drawn $700,000 against such line of credit. We have another line of credit with a U.S. bank that consists of a $100,000 commitment, which is available through September 2001. The line bears interest at a fixed rate of 9.5%. The line is collateralized by a $100,000 certificate of deposit that we have with the bank. At June 30, 2001, we had a drawn $5,600 against such line of credit. In Germany, at June 30, 2001, we had a $5.0 million line of credit with a German bank with no outstanding balance. This line supports a letter of credit facility. A German bank issued to us a commitment letter for a DM 7.5 million equipment lease facility. Our existing equipment leases, DM 4.7 million at June 30, 2001, were charged against the facility. The equipment leases provide financing at varying pricing for periods up to 48 months. In addition to the rights to the equipment, the bank holds a security interest in other assets and up to DM 1.0 million deposited with the bank. In the same commitment letter discussed above, the bank also committed to issue a credit line to us up to DM 9.9 million for a wafer fabrication facility in Germany, including leasehold improvements, clean room construction and fabrication, computer and office equipment. At June 30, 2001, we had drawn DM 643,000 under this commitment. The security interest of the bank under the equipment lease facility also collateralizes this line. Our accounts receivable at June 30, 2001 were $ 23.8 million, a decrease of 9.6% as compared to $26.3 million at March 31, 2001. Our inventories at June 30, 2001 were $37.1 million, an increase of 9.1% as compared to $34.0 million at March 31, 2001. Net plant and equipment at June 30, 2001 were $14.8 million, an increase of 5.8% as compared to $14.0 million at March 31, 2001. From time to time, we consider acquisitions and strategic investments. To the extent that our available funds are insufficient to meet our capital requirements, we will be required to raise additional funds. There can be no assurance that additional financing will be available on acceptable terms. The lack of such financing, if needed, would have a material adverse effect on our business, financial condition and results of operations. 13 New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement will require us to recognize all derivatives on the balance sheet at fair value and requires that derivative instruments used to hedge be identified specifically as to assets, liabilities, firm commitments or anticipated transactions and measured as to effectiveness and ineffectiveness when hedging changes in fair value or cash flows. Derivative instruments that do not qualify as either a fair value or cash flow hedge are valued at fair value with the resultant gain or loss recognized in current earnings. Changes in the effective portion of fair value hedges are recognized in correct earnings along with changes in the fair value of the hedged item. Changes in the effective portion of the fair value of cash flow hedges will be recognized in other comprehensive income until realization of the cash flows of the hedged item through current earnings. Any ineffective portion of hedges are recognized in current earnings. In June 1999, FASB issued SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," to defer for one year the effective date of implementation of SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000, with earlier application encouraged. The adoption of SFAS did not have a material effect on our financial position or results of operations. In July 2001, FASB adopted SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 141, all business combinations are to be accounted for using the purchase method of accounting; use of the pooling-of-interest method is prohibited. The provisions of the statement will apply to all business combinations initiated after June 30, 2001. SFAS No. 142 will apply to all acquired intangible assets whether acquired singly, as part of a group, or in a business combination. The statement will supersede Accounting Principles Board ("APB") Opinion No. 17, "Intangible Assets," and will carry forward provisions in APB Opinion No. 17 related to internally developed intangible assets. Adoption of SFAS No. 142 will result in ceasing amortization of goodwill. All of the provisions of the statement should be applied in fiscal years beginning after December 15, 2001, to all goodwill and other intangible assets recognized in the entity's statement of financial position on that date, regardless of when those assets were initially recognized. We are currently assessing, but have not yet determined, the impact of SFAS No. 142 on our financial position and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK There has been no change to the quantitative and qualitative disclosures of market risk made in our Report on Form 10-K for the fiscal year ended March 31, 2001. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 12, 1996, we, along with Robert McClelland, Richard A. Veldhouse and Chiang Lam (the "Paradigm Defendants") were named (along with others subsequently dismissed from the case) as a defendant in a purported class action (entitled Bulwa et al. v. Paradigm Technology, Inc. et al., Santa Clara County Superior Court Case No. CV759991) brought on behalf of stockholders who purchased our common stock between November 20, 1995 and March 22, 1996 (the "Class Period"), prior to the Paradigm merger. The complaint asserted violations of California Corporations Code sections 25400 and 25500 ("Sections 25400 and 25500") along with other causes of action that have been dismissed. On February 9, 1998 the Santa Clara County Court certified a class consisting only of California purchasers of our stock during the Class Period. Following the California Supreme Court decision in Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal. 4th 1036 (1999), plaintiffs moved to modify the prior class certification ruling to include also non-California purchasers. The Santa Clara County Court granted this motion on April 28, 1999. On September 20, 2000, our counsel and counsel for the plaintiffs reached a tentative agreement to settle the class action lawsuit in exchange for the payment of $900,000, which amount is fully covered by insurance. Accordingly, this contemplated settlement agreement would have no impact on our operating results. Our insurance carrier has deposited the payment into escrow, pending final approval. The settlement was preliminarily approved by the Santa Clara County Court on February 20, 2001. At that time, the Santa Clara County Court also directed Notice of Pendency and Settlement of Class Action and Settlement Hearing Date for Final Approval of Settlement. There were no objections to the settlement and only one individual opted out of the settlement. The Santa Clara County Court approved the settlement at a hearing on the Motion for Final Approval of Settlement on July 2, 2001. The individual defendants were dismissed with prejudice. There can be no assurance that we will be successful in the defense of a newly filed lawsuit should the individual that opted out file suit. On June 22, 2000, International Rectifier Corporation filed an action for patent infringement against us in the United States District Court for the Central District of California, alleging that certain of our products sold in the United States, including but not limited to four specified power MOSFET parts, infringe five identified U.S. patents owned by International Rectifier (U.S. Patents No. 4,959,699; No. 5,008,725; No. 5,130,767; No. 4,642,666; and No. 4,705,759). International Rectifier has since notified us that it no longer contends that we infringe two of those patents (U.S. Patents No. 4,705,759 and No. 4,642,666), and has refined its allegations of infringement to embrace all of our power MOSFETs and IGBTs having "elongated octagonal" cells or "non- symmetrical cluster" cells. These designations cover many of our power MOSFET and IGBT products sold in the United States. International Rectifier's complaint against us contends that our alleged infringement of International Rectifier's patents has been and continues to be willful and deliberate, seeks to enjoin us from further infringement and requests an award of unspecified, actual monetary damages, but no less than a reasonable royalty (presently contended to be 6.5%) of our net sales of products that are claimed to infringe International Rectifier's patents. International Rectifier also seeks to have the claimed damages trebled. We have answered the complaint, denied any infringement and asserted that International Rectifier's patents are invalid and unenforceable for, among other reasons, failure of International Rectifier to properly disclose known prior art during its prosecution of the patents in suit, and that International Rectifier's claims are barred by reason of the doctrines of estoppel and laches. We also contend that a reasonable royalty for these patents would be much less than 6.5%. In prior years, International Rectifier has approached us on several occasions and requested that we enter into royalty-bearing license agreements with International Rectifier, under its patents. We have declined to do so, based upon our belief that our products do not infringe the International Rectifier patents. The case had been scheduled for trial on June 12, 2001. In May 2001, however, in view of newly issued patent claims added to the case by International Rectifier, the U.S. District Court vacated the trial date, set a new discovery cut-off date of July 16, scheduled a further pre-trial conference for August 6, 2001, and deferred setting a new trial date. In July 2001, in view of other soon-to-be-issued claims that International Rectifier proposes to add to the case, the U.S. District Court vacated the prior dates, set a new discovery cut-off date of September 24, 2001, and set a new pre-trial conference date of October 15, 2001. In May 2001, the U.S. District Court also granted motions for summary judgment dismissing our second and eighth affirmative defenses, relating to our contentions that certain of the patent claims are invalid over a prior invention by Dr. Jean Hoerni, and that claims for alleged infringement by certain products have been released in a settlement between International Rectifier and Samsung Electronics Co., Ltd. ("Samsung"). Samsung fabricates 15 IXYS-designed wafers for us in Korea. In July 2001, the U.S. District Court also granted motions for summary judgment, dismissing our affirmative defense that the claims of U.S. Patent No. 4,959,699 are invalid for non-compliance with the so-called "written description" requirement of Section 112 of the Patent Statute, finding that IXYS' power MOSFET devices having cells shaped like elongated octagons or non-symmetrical clusters infringe claim 1 of U.S. Patent No. 4,959,699 and denying our countermotions on the same or similar issues. We expect to appeal these rulings. It remains our intent to vigorously contest the claims of International Rectifier. While we believe our defenses to these various claims are meritorious, there can be no assurance of a favorable outcome. In the event of an adverse outcome, damages or injunctions awarded by the U.S. District Court could be materially adverse to our financial condition and results of operations. International Rectifier also contends that our importation of IXYS-designed MOSFET products into the United States having the "elongated octagonal" cells or "non-symmetrical cluster" cells manufactured for us by Samsung is in violation of a consent decree and injunction entered against Samsung in another lawsuit that did not involve us. In February 2001, International Rectifier served Samsung and us with a Post-Judgment Ex Parte Application for OSC Re Contempt seeking, among other things, an enforcement of the injunction for our importation into the United States of parts designed by us and manufactured for us by Samsung that infringe claim 1 of International Rectifier's U.S. Patent No. 4,959,699 and an appropriate fine. Samsung contends that we are contractually obligated under the terms of our wafer supply agreement with Samsung to defend it against the contempt claims made by International Rectifier and indemnify and hold Samsung harmless in connection with such claims. We are considering Samsung's request in light of the terms of the wafer supply agreement. While we believe that neither we nor Samsung are or could be in violation of the injunction for various reasons we believe to be meritorious, including an express reservation as to our designed parts in the consent decree, there can be no assurance of a favorable outcome. Argument in this matter was held May 18, 2001, at which time the U.S. District Court stated interim rulings that we are bound by the Samsung injunction, and that we and Samsung attempted to subvert the injunction by having us take delivery outside the United States of products designed by us and made by Samsung, but deferred decision as to whether we and Samsung violated the injunction until after a decision on the infringement issue in International Rectifier v. IXYS. We expect to appeal these rulings. In the event of an adverse ruling against us on the ultimate issue of contempt, or if we are obligated to defend and indemnify Samsung, any damages or injunction awarded by the U.S. District Court could be materially adverse to our financial condition and results of operations. In November 2000, we filed a lawsuit for patent infringement against International Rectifier GmbH in the County Court of Mannheim, Germany. The lawsuit charged International Rectifier with infringing at least two of our German patents. These patents cover key design features of our proprietary integrated power module technology, which the lawsuit alleged International Rectifier had been infringing in products sold in Germany. The lawsuit sought damages and an injunction prohibiting the continued infringement by International Rectifier. International Rectifier originally had until January 4, 2001 to file a response. This response date was delayed to February 8, 2001, upon the request of International Rectifier. On March 23, 2001, a public hearing took place in Mannheim, Germany and International Rectifier did not deny making use of the above patents. On April 27, 2001, the County Court of Mannheim rendered a judgment in our favor that enjoined International Rectifier from marketing, utilizing, importing or possessing two of our German patents, and imposed a fine of up to DM 500,000 to the state or imprisonment of International Rectifier's managing director for each violation of the injunction. In addition, International Rectifier was ordered to disclose to us information about its previous sales activity, offers of sales, advertisements, production costs and profits concerning the infringed patents. International Rectifier was also ordered to pay attorney fees and past and future damages and unjustified enrichment resulting from International Rectifier's infringing practices, as calculated by the information to be provided to us by International Rectifier. International Rectifier has appealed the judgment to the Court of Appeals in Karlsruhe and currently has until August 9, 2001 to deliver a statement of appeal. Notwithstanding this appeal, we are currently enforcing this judgment; in order to do so we were required to pay DM 1,040,000 as a form of bond to be held by the County Court of Mannheim. The funds held by the County Court of Mannheim will be returned to us if final adjudication is in our favor, or will offset any costs that may need to be paid if final adjudication is not in our favor. International Rectifier has begun to disclose information to us pursuant to the judgment. On February 8, 2001, we filed a lawsuit against International Rectifier Italia S.p.A. in the Civil Court of Monza, Italy, for patent infringement of at least two of our European patents, which correspond to the German patents involved in the above-described legal proceeding in Germany. The lawsuit seeks the seizure of semiconductor modules produced by International Rectifier that infringe on our patents and an injunction against further production of such modules by International Rectifier in Italy. At a hearing on March 8, 2001, the judge rejected International Rectifier's arguments that the Monza tribunal was not competent to hear the case and nominated an expert to comment on the technical details of the alleged patent infringement. Following the scheduled 16 submission of technical writs by the parties in May 2001, the expert submitted written comments in June 2001. On June 27, 2001, the Civil Court of Monza rendered a preliminary injunction in our favor with respect to certain claims of infringement by International Rectifier S.p.A. Under the terms of this preliminary injunction, we are permitted to seize, and International Rectifier S.p.A. is prohibited from distributing, certain of the allegedly infringing semiconductor modules. The injunction is an interlocutory measure that remains in effect until there has been a judgment on the merits. We have started to focus on the merits of the law suit. It could be as long as several years before a judgment on the merits is rendered. Discussions of additional details relating to the above-described legal proceedings may be found in our prior SEC filings and reports. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 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) See Index to Exhibits. (b) The Company filed a Current Report on Form 8-K on May 14, 2001 to announce financial results for the three month period and fiscal year ended March 31, 2001. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IXYS CORPORATION By: /s/ Arnold P. Agbayani -------------------------- Arnold P. Agbayani, Senior Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer) Date: August 14, 2001 18 Exhibit Index Exhibit No. Description - ----------- ----------- 3.1 Amended and Restated Certificate of Incorporation of the Registrant. (1) 3.2 Amended and Restated Bylaws of the Registrant. __________ (1) Filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2001 and incorporated herein by reference. 19 EX-3.2 3 dex32.txt AMENDED AND RESTATED BY-LAWS OF IXYS CORP EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF IXYS CORPORATION (A DELAWARE CORPORATION) Table Of Contents
Page ARTICLE I OFFICES.............................................................................. 1 Section 1. Registered Office............................................................ 1 Section 2. Other Offices................................................................ 1 ARTICLE II CORPORATE SEAL................................................................... 1 Section 3. Corporate Seal............................................................... 1 ARTICLE III STOCKHOLDERS' MEETINGS........................................................... 1 Section 4. Place Of Meetings............................................................ 1 Section 5. Annual Meetings.............................................................. 2 Section 6. Special Meetings............................................................. 4 Section 7. Notice Of Meetings........................................................... 4 Section 8. Quorum....................................................................... 5 Section 9. Adjournment And Notice Of Adjourned Meetings................................. 5 Section 10. Voting Rights................................................................ 6 Section 11. Joint Owners Of Stock........................................................ 6 Section 12. List Of Stockholders......................................................... 6 Section 13. Action Without Meeting....................................................... 7 Section 14. Organization................................................................. 7 ARTICLE IV DIRECTORS........................................................................ 7 Section 15. Number And Term Of Office.................................................... 7 Section 16. Powers....................................................................... 7 Section 17. Board of Directors........................................................... 7 Section 18. Vacancies.................................................................... 8 Section 19. Resignation.................................................................. 8 Section 20. Removal...................................................................... 8 Section 21. Meetings..................................................................... 8 Section 22. Quorum And Voting............................................................ 9 Section 23. Action Without Meeting....................................................... 10 Section 24. Fees And Compensation........................................................ 10 Section 25. Committees................................................................... 10 Section 26. Organization................................................................. 11
i. Table Of Contents (continued)
Page ARTICLE V OFFICERS......................................................................... 11 Section 27. Officers Designated.......................................................... 11 Section 28. Tenure And Duties Of Officers................................................ 12 Section 29. Delegation Of Authority...................................................... 13 Section 30. Resignations................................................................. 13 Section 31. Removal...................................................................... 13 ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION............................................................... 13 Section 32. Execution Of Corporate Instruments........................................... 13 Section 33. Voting Of Securities Owned By The Corporation................................ 14 ARTICLE VII SHARES OF STOCK.................................................................. 14 Section 34. Form And Execution Of Certificates........................................... 14 Section 35. Lost Certificates............................................................ 15 Section 36. Transfers.................................................................... 15 Section 37. Fixing Record Dates.......................................................... 15 Section 38. Registered Stockholders...................................................... 16 ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.............................................. 16 Section 39. Execution Of Other Securities................................................ 16 ARTICLE IX DIVIDENDS........................................................................ 16 Section 40. Declaration Of Dividends..................................................... 16 Section 41. Dividend Reserve............................................................. 16 ARTICLE X FISCAL YEAR...................................................................... 17 Section 42. Fiscal Year.................................................................. 17 ARTICLE XI INDEMNIFICATION.................................................................. 17 Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees And Other Agents................................................... 17 ARTICLE XII NOTICES.......................................................................... 20 Section 44. Notices...................................................................... 20 ARTICLE XIII AMENDMENTS....................................................................... 21 Section 45. Amendments................................................................... 21
ii. Table Of Contents (continued)
Page ARTICLE XIV LOANS TO OFFICERS................................................................ 21 Section 46. Loans To Officers............................................................ 21
iii. AMENDED AND RESTATED BYLAWS OF IXYS CORPORATION (A DELAWARE CORPORATION) ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent. (Del. Code Ann., tit. 8, (S) 131) Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. (Del. Code Ann., tit. 8, (S) 122(8)) ARTICLE II CORPORATE SEAL Section 3. Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, "Corporate Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8, (S) 122(3)) ARTICLE III STOCKHOLDERS' MEETINGS Section 4. Place Of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law ("DGCL"). (Del. Code Ann., tit. 8, (S) 211(a)) 1. Section 5. Annual Meetings. (a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5. (Del. Code Ann., tit. 8, (S) 211(b)). (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this Section 5(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation's voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90/th/) day nor earlier than the close of business on the one hundred twentieth (120/th/) day 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 advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120/th/) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90/th/) day prior to such annual meeting or the tenth (10/th/) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 2. Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). (c) Notwithstanding anything in the second sentence of Section 5(b) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 5 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10/th/) day following the day on which such public announcement is first made by the corporation. (d) Only such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded. (e) Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders' meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act. 3. (f) For purposes of this Section 5, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act. Section 6. Special Meetings. (a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption). (b) If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. (c) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation's notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in these Bylaws who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 6(c). In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice required by Section 5(b) of these Bylaws shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the one hundred twentieth (120/th/) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90/th/) day prior to such meeting or the tenth (10/th/) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above. Section 7. Notice Of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less 4. than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (Del. Code Ann., tit. 8, (S)(S) 222, 229, 232) Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute or by applicable stock exchange or Nasdaq rules, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series. (Del. Code Ann., tit. 8, (S) 216) Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote 5. communication, if applicable, or represented by proxy at the meeting. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8, (S) 222(c)) Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period. (Del. Code Ann., tit. 8, (S)(S) 211(e), 212(b)) Section 11. Joint Owners Of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even- split in interest. (Del. Code Ann., tit. 8, (S) 217(b)) Section 12. List Of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law. (Del. Code Ann., tit. 8, (S) 219) 6. Section 13. Action Without Meeting. No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent or by electronic transmission. Section 14. Organization. (a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE IV DIRECTORS Section 15. Number And Term Of Office. The authorized number of directors of the corporation shall be fixed in accordance with the Certificate of Incorporation. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b), 211(b), (c)) Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation. (Del. Code Ann., tit. 8, (S) 141(a)) Section 17. Board of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, directors shall be 7. elected at each annual meeting of stockholders for a term of one year. Each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 18. Vacancies. (a) Unless otherwise provided in the Certificate of Incorporation and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director's successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Section 18 in the case of the death, removal or resignation of any director. (Del. Code Ann., tit. 8, (S) 223(a), (b)) Section 19. Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. (Del. Code Ann., tit. 8, (S)(S) 141(b), 223(d)) Section 20. Removal. The Board of Directors or any individual director may be removed from office at any time (a) with cause by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the corporation, entitled to vote generally at an election of directors or (b) without cause by the affirmative vote of the holders of at least Sixty-Six And Two-Thirds Percent (66 2/3%) of the voting power of all the then-outstanding shares of the capital stock of the corporation entitled to vote generally at an election of directors. Section 21. Meetings. (a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, 8. facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board of Directors. (Del. Code Ann., tit. 8, (S) 141(g)) (b) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the President or any two of the directors. (Del. Code Ann., tit. 8, (S) 141(g)) (c) Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (Del. Code Ann., tit. 8, (S) 141(i)) (d) Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. (Del. Code Ann., tit. 8, (S) 229) (e) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting. (Del. Code Ann., tit. 8, (S) 229) Section 22. Quorum And Voting. (a) Unless the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. (Del. Code Ann., tit. 8, (S) 141(b)) (b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the 9. directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8, (S) 141(b)) Section 23. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. (Del. Code Ann., tit. 8, (S) 141(f)) Section 24. Fees And Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor. (Del. Code Ann., tit. 8, (S) 141(h)) Section 25. Committees. (a) Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation. (Del. Code Ann., tit. 8, (S) 141(c)) (b) Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, (S) 141(c)) (c) Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Bylaw, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, 10. removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (Del. Code Ann., tit. 8, (S)141(c)) (d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any Director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8, (S)(S) 141(c), 229) Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President (if a director), or if the President is absent, the most senior Vice President (if a director), or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. ARTICLE V OFFICERS Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically 11. prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b)) Section 28. Tenure And Duties Of Officers. (a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. (Del. Code Ann., tit. 8, (S) 141(b), (e)) (b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28. (Del. Code Ann., tit. 8, (S) 142(a)) (c) Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. (Del. Code Ann., Tit. 8, (S) 142(a)) (d) Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a)) (e) Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have 12. such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a)) (f) Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a)) Section 29. Delegation Of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof. Section 30. Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer. (Del. Code Ann., tit. 8, (S) 142(b)) Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors. ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION Section 32. Execution Of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, 13. and such execution or signature shall be binding upon the corporation. (Del. Code Ann., tit. 8, (S)(S) 103(a), 142(a), 158) All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. (Del. Code Ann., tit. 8, (S)(S) 103(a), 142(a), 158). Section 33. Voting Of Securities Owned By The Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President. (Del. Code Ann., tit. 8, (S) 123) ARTICLE VII SHARES OF STOCK Section 34. Form And Execution Of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. (Del. Code Ann., tit. 8, (S) 158) 14. Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner's legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed. (Del. Code Ann., tit. 8, (S) 167) Section 36. Transfers. (a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares. (Del. Code Ann., tit. 8, (S) 201, tit. 6, (S) 8- 401(1)) (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL. (Del. Code Ann., tit. 8, (S) 160 (a)) Section 37. Fixing Record Dates. (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (Del. Code Ann., tit. 8, (S) 213) 15. Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (Del. Code Ann., tit. 8, (S)(S) 213(a), 219) ARTICLE VIII OTHER SECURITIES OF THE CORPORATION Section 39. Execution Of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation. ARTICLE IX DIVIDENDS Section 40. Declaration Of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8, (S)(S) 170, 173) Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board 16. of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. (Del. Code Ann., tit. 8, (S) 171) ARTICLE X FISCAL YEAR Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. ARTICLE XI INDEMNIFICATION Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees And Other Agents. (a) Directors. The corporation shall indemnify its directors to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors; and, provided, further, that the corporation shall not be required to indemnify any director in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d). (b) Officers, Employees and Other Agents. The corporation shall have power to indemnify its employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person to such officers or other persons as the Board of Directors shall determine. (c) Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director in his or her capacity as a director (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 17. only upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such 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 (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise. Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Section 43, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation. (d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director. Any right to indemnification or advances granted by this Section 43 to a director shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. (e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or 18. agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law. (f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 43. (h) Amendments. Any repeal or modification of this Section 43 shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation. (i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Section 43 that shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and officer to the full extent under any other applicable law. (j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply: (1) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative. (2) The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding. (3) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section 43 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 19. (4) References to a "director," "executive officer," "officer," "employee," or "agent" of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise. (5) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Section 43. ARTICLE XII NOTICES Section 44. Notices. (a) Notice To Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by US mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means. (Del. Code Ann., tit. 8, (S)(S) 222, 232) (b) Notice To Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), or by overnight delivery service, facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director. (c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained. (Del. Code Ann., tit. 8, (S) 222) (d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may 20. be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. (e) Notice To Person With Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. ARTICLE XIII AMENDMENTS Section 45. Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation. ARTICLE XIV LOANS TO OFFICERS Section 46. Loans To Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. (Del. Code Ann., tit. 8, (S)143) 21. -----END PRIVACY-ENHANCED MESSAGE-----