-----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, BvbXXPaQSTE+6ZKkojM8DvMAhD47QqErkQeMQy2tyBi9h9m2k0GEUpiJGuYqA9fF 5Rc+9bCbOAt+kl9mWx2Xog== 0000893220-98-001715.txt : 19981118 0000893220-98-001715.hdr.sgml : 19981118 ACCESSION NUMBER: 0000893220-98-001715 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROM TECH INC CENTRAL INDEX KEY: 0000948703 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 232694937 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27102 FILM NUMBER: 98749632 BUSINESS ADDRESS: STREET 1: 2000 CABOT BLVD STREET 2: SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 BUSINESS PHONE: 2157506606 MAIL ADDRESS: STREET 1: 2000 CABOT BLVD SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 10QSB 1 ROMTECH, INC. FORM 10-QSB 1 =============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-27102 ROMTECH, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-2694937 ------------------------------ ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 2000 Cabot Boulevard West, Suite 110 Langhorne, PA 19047-1833 ---------------------------------------- (address of Principal executive offices) ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: 215-750-6606 -------------- NOT APPLICABLE ------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer (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 ( ) APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES ( ) NO ( ) APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 9,506,200 shares of common stock, no par value per share, as of November 5, 1998. Transitional Small Business Disclosure Format (check one): YES ( ) NO ( X ) =============================================================================== 2 ROMTECH, INC. INDEX
Page ---- Part I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheet as of September 30, 1998.................. 3 Consolidated Statements of Operations for the three months ended September 30, 1998 and 1997...................................... 4 Consolidated Statements of Cash Flows for the three months ended September 30, 1998 and 1997 ..................................... 5 Notes to Consolidated Financial Statements........................... 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 8-11 Part II. Other Information Item 2. Changes in Securities and Use of Proceeds............................ 12 Item 6. Exhibits and Reports on Form 8-K..................................... 12 Signatures ..................................................................... 13 Exhibit Index ..................................................................... 14 Exhibits .....................................................................
Page 2 3 ROMTECH, INC. ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1998 ------------- ASSETS Current assets: Cash and cash equivalents $ 1,027,624 Restricted cash 16,783 Accounts receivable, net of allowance for doubtful accounts of $167,977 2,514,772 Inventory 745,596 Prepaid expenses 212,713 ----------- Total current assets 4,517,488 Furniture and equipment, net 310,991 Goodwill and other assets 606,548 ----------- Total assets $ 5,435,027 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 273,787 Accounts payable 871,098 Accrued expenses 619,870 Capital lease obligations 9,462 ----------- Total current liabilities 1,774,217 Capital lease obligations net of current portion 37,717 Notes payable-long term portion 255,664 Convertible subordinated debt 150,000 ----------- Total liabilities 2,217,598 Stockholders' equity: Common stock, no par value (40,000,000 shares authorized: 9,506,200 issued and outstanding) 8,389,826 Additional paid in capital 1,148,550 Accumulated other comprehensive income 6,412 Accumulated deficit (6,327,359) ----------- Total stockholders' equity 3,217,429 ----------- Total liabilities and stockholders' equity $ 5,435,027 ===========
See accompanying notes to the consolidated financial statements. Page 3 4 ROMTECH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, ------------- 1998 1997 ---- ---- Net sales $2,506,200 $1,535,558 Cost of sales 880,577 613,796 ---------- ---------- Gross profit 1,625,623 921,762 Operating expenses: Product development 205,667 86,571 Selling, general and administrative 979,642 656,285 ---------- ---------- Total operating expenses 1,185,309 742,856 ---------- ---------- Operating income 440,314 178,906 Interest expense, net 10,649 11,426 ---------- ---------- Income before taxes 429,665 167,480 Provision for income taxes 26,300 1,165 ---------- ---------- Net income 403,365 166,315 Accretion of beneficial conversion feature on preferred stocks -0- 105,441 ---------- ---------- Net income attributable to common stock $ 403,365 $ 60,874 ========== ========== Net income per common share - basic $ 0.04 $ 0.01 ========== ========== Net income per common share - diluted $ 0.04 $ 0.01 ========== ========== Weighted average common shares outstanding - basic 9,442,329 7,246,939 ========== ========== Dilutive effect of common stock equivalents 164,508 107,948 ---------- ---------- Weighted average common shares outstanding - diluted 9,606,837 7,354,887 ========== ==========
See accompanying notes to the consolidated financial statements. Page 4 5 ROMTECH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, ------------- 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 403,365 $ 166,315 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 85,354 40,000 Changes in items affecting operations net of effect from acquired business: Restricted cash 252 -0- Accounts receivable (350,235) (241,014) Prepaid expenses 4,975 (8,127) Inventory 212,588 (56,681) Accounts payable (286,762) 82,826 Accrued expenses 109,937 90,434 ---------- --------- Net cash provided by operating activities 179,474 73,753 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition costs, net of cash acquired (12,428) -0- Purchase of furniture and equipment (22,368) (41,633) Purchase of software rights and other assets (25,235) (87,533) Loan to related party -0- 750 ---------- --------- Net cash used in investing activities (60,031) (128,416) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable (15,888) (9,427) Repayment of lease obligations (30,581) (7,499) ---------- --------- Net cash used in financing activities (46,469) (16,926) ---------- --------- Effect of exchange rate changes on cash and cash equivalents 1,002 -0- ---------- --------- Net increase/(decrease) in cash and cash equivalents 73,976 (71,589) CASH AND CASH EQUIVALENTS: Beginning of period 953,648 445,474 ---------- --------- End of period $1,027,624 $ 373,885 ========== ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 16,427 $ 14,561 ========== ========= Cash paid for income taxes $ 20,800 $ 1,165 ========== ========= NON CASH INVESTING AND FINANCING ACTIVITIES: Financing agreements related to business insurance $ 105,800 $ - 0 - ========== ========= 150,000 shares of common stock issued in connection with acquisition $ 213,000 $ - 0 - ========== =========
See accompanying notes to the consolidated financial statements. Page 5 6 ROMTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Notes to Consolidated Financial Statements included in the Form 10-KSB for the fiscal year ended June 30, 1998 should be read in conjunction with the accompanying statements. These statements include all adjustments the Company believes are necessary for a fair presentation of the statements. The interim operating results are not necessarily indicative of the results for a full year. DESCRIPTION OF BUSINESS RomTech, Inc. (the "Company"), a Pennsylvania corporation incorporated in July 1992, develops, publishes, markets and sells a diversified line of personal computer software primarily for consumer entertainment and small office/home office applications. In October 1995, the Company completed its initial public offering coincident with its acquisition of Applied Optical Media Corporation ("AOMC"), a developer of educational and reference software titles. In April 1996, the Company acquired Virtual Reality Laboratories, Inc. ("VRLI"), a software developer of landscape generation, space exploration, scheduling and business forms manipulation programs. In August 1998, the Company acquired all of the outstanding stock of Software Partners Publishing and Distribution Limited ("Software Partners"), a U.K. distributor of personal computer software for consumer entertainment and small office/home office applications. As a result of these acquisitions, together with the Company's own internal development efforts, the Company offers software titles in the game, personal/business productivity, education, reference and lifestyle markets for use at home and in the office. The Company's product line enables it to serve customers who are seeking a broad range of high-quality, value priced software. CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Virtual Reality Laboratories, Inc. and Software Partners. All inter-company balances and transactions have been eliminated. 2. PREFERRED STOCK During the quarter ended September 30, 1997, the Company amortized to accumulated deficit $105,441 in the accretion of the beneficial conversion feature of the Company's Class Two and Class Three Convertible Preferred Stock, which negatively impacted the net income for that period. During the quarter ended September 30, 1998, there was no Convertible Preferred Stock outstanding. Page 6 7 ROMTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. ACQUISITION On August 14, 1998, the Company acquired all of the outstanding shares of Software Partners Publishing and Distribution Limited ("Software Partners"), in exchange for 150,000 shares of the Company's Common Stock, valued at approximately $213,000, which was the fair value of the Company's Common Stock on the closing date of the acquisition. This acquisition was accounted for as a purchase and the corresponding goodwill in the approximate amount of $308,000 will be amortized over five years. For the three months ended September 30, 1998 Software Partners contributed $301,000 in net sales and $105,000 in net income. The following summarized unaudited pro-forma financial information gives effect to the Software Partners' acquisition as though it had occurred on July 1, 1998, after giving effect to certain adjustments, primarily the elimination of inter-company sales and amortization of goodwill expense. The pro-forma financial information, which is for informational purposes only, is based upon certain assumptions and estimates and does not necessarily reflect the results that would have occurred had the acquisition taken place at the beginning of the period presented, nor are they necessarily indicative of future consolidated results. ROMTECH, INC. PRO-FORMA INFORMATION THREE MONTHS ENDED SEPTEMBER 30, 1998 Net sales $2,564,000 Net income $ 295,000 Net income per diluted share $ 0.03 4. COMPREHENSIVE INCOME On July 1, 1998 the Company adopted SFAS 130, "Reporting Comprehensive Income". This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is computed as follows:
THREE MONTHS ENDED SEPTEMBER 30, --------------------------- 1998 1997 ---- ---- Net income $403,365 $60,874 Other comprehensive income: Foreign currency translation adjustment 6,412 -0- -------- ------- Comprehensive income $409,777 $60,874 ======== =======
5. COMMON STOCK On October 23, 1998, the Company's Board of Directors authorized the Company to purchase up to $1,000,000 of its shares of Common Stock in the Nasdaq SmallCap Market. As of November 9, 1998, 8,400 shares at an approximate cost of $14,000 had been acquired by the Company pursuant to the repurchase program. Page 7 8 ROMTECH, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The accompanying consolidated financial statements as of September 30, 1998 include the accounts of RomTech, Inc., ("RomTech"), and its wholly owned subsidiaries, Virtual Reality Laboratories, Inc. ("VRLI") and Software Partners Publishing and Distribution Limited ("Software Partners"). RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 Net sales for the three months ended September 30, 1998 were $2,506,000 compared to $1,536,000 for the three months ended September 30, 1997, representing an increase of $970,000 or 63.2%. This increase resulted from an increase of $1,181,000 in the sales of the Company's Galaxy of Games, Game Master Series, Galaxy of Arcade, Galaxy of Home Office Help, VistaPro, and Fun and Learning (the "Galaxy Software") brands, which were partially offset by a decrease in sales of certain discontinued products of $211,000. The largest contribution towards this $1,181,000 sales increase came from the Company's "full release" software titles in the Game Master Series and Galaxy of Arcade products, which combined for sales of $866,000 or 35% of net sales for the three months ended September 30, 1998, compared to no sales of these products for the same period last year. Software Partners, acquired in August 1998, accounted for $301,000 in net sales for the three months ended September 30, 1998. The Company primarily distributes its Galaxy Software products in North America through a large national distributor, Slash Corporation ("Slash"), a division of GT Interactive Software Corporation. The Company's product sales to Slash accounted for 72% and 75% of the Company's net sales for the three months ended September 30, 1998 and 1997, respectively. The Company believes that for the year ending June 30, 1999, sales to Slash could account for 85% or more of the Company's net sales. The Company's agreement with Slash does not specify minimum purchase requirements and can be terminated at any time by Slash. In an effort to diversify the Company's distribution channels, including distribution via the Internet, the Company has added features to its existing website to facilitate on-line orders and launched a new website offering downloadable demos of the Company's products. Cost of sales for the three months ended September 30, 1998 were $881,000 compared to $614,000 for the three months ended September 30, 1997, representing an increase of $267,000 or 43.5%. This increase resulted primarily from increases in product costs of $90,000 attributable to increased unit shipments, royalty costs of $82,000, provision for inventory obsolescence of $19,000 and $66,000 for the inter-company profit elimination due to the Company's inventory located at Software Partners' warehouse on the acquisition date, which required adjustment down to the Company's consolidated product cost. The Company's gross profit margin increased to 64.9% in the three months ended September 30, 1998 from 60.0% for the three months ended September 30, 1997. The primary causes of this increase were the increased sales derived from the high margin Game Master Series, direct distribution in the United Kingdom through the Company's wholly-owned subsidiary, Software Partners and overall cost reductions due to higher volumes and improved contract manufacturing processes. Product development expenses for the three months ended September 30, 1998 were $206,000 compared to $87,000 for the three months ended September 30, 1997, an increase of $119,000 or 136.8%. This increase was primarily due to an increase in outside developer costs resulting from increased product development efforts incurred to improve the Company's product offerings. The largest component of the Company's increased development efforts reflects the Company's transition from distributing primarily shareware-based software titles to distributing a growing percentage of higher value "full release" software titles, such as the Company's Game Master Series and Galaxy of Arcade products. Also, significant internal efforts have been made to improve the quality assurance component of the Company's development process. Page 8 9 ROMTECH, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Selling, general and administrative expenses for the three months ended September 30, 1998 were $980,000 compared to $656,000 for the three months ended September 30, 1997, representing an increase of $324,000 or 49.4%. This increase was primarily due to increases in marketing promotional costs of $100,000, provision for bad debts of $63,000, depreciation and amortization costs of $45,000, salary and related costs of $25,000, professional service costs of $25,000, and supplies costs of $21,000. Net interest expense for each of the three months ended September 30, 1998 and 1997 was $11,000. LIQUIDITY AND CAPITAL RESOURCES The financial information presented reflects the Company's financial position at September 30, 1998. As of September 30, 1998, the Company's cash and working capital balances were $1,027,624 and $2,743,271, respectively. Cash provided by operating activities for the quarters ended September 30, 1998 and 1997 were $179,474 and $73,753, respectively. As indicated in the accompanying financial statements, the Company's net income for the quarters ended September 30, 1998 and 1997 were $403,365 and $166,315 respectively, representing an increase of $237,050, or 143%. This increase in net income resulted primarily from the $703,861 increase in gross profit, which was partially reduced by the $442,453 increase in operating expenses. Cash used in investing activities for the quarters ended September 30, 1998 and 1997 were $60,031 and $128,416, respectively. On August 14, 1998, the Company acquired all of the outstanding shares of Software Partners, in exchange for 150,000 shares of the Company's Common Stock valued at approximately $213,000. Acquisition costs, net of cash received, were $12,428. Cash used in financing activities for the quarters ended September 30, 1998 and 1997 were $46,469 and $16,926, respectively. During September 1998, approximately $20,000 of capital leases were retired ahead of term. On October 23, 1998, the Company's Board of Directors authorized the Company to purchase up to $1,000,000 of its shares of Common Stock in the Nasdaq SmallCap Market. As of November 9, 1998, 8,400 shares at an approximate cost of $14,000 had been acquired by the Company pursuant to the repurchase program. At September 30, 1998, the Company satisfied all aspects of its listing agreement for the Nasdaq SmallCap Market. At September 30, 1998, the Company had $2,914,710 in net tangible assets. The Company's ability to continue to achieve positive cash flow depends upon a variety of factors, including the timeliness and success of developing and selling its products, the costs of developing, producing and marketing such products and various other factors, some of which may be beyond the Company's control. In the future, the Company's capital requirements will be affected by each of these factors. The Company believes cash and working capital balances will be sufficient to fund the Company's operations for the foreseeable future. However, there can be no assurances that the Company will continue achieving a positive cash flow or that additional financing will be available if and when required or, if available, will be on terms satisfactory to the Company. Page 9 10 ROMTECH, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 THE COMPANY'S STATE OF READINESS The Company has reviewed its critical information systems for Year 2000 compliance. The compliance review revealed that all but one of the Company's critical information systems are Year 2000 compliant due to the fact that most of the Company's network hardware and operating systems are "off-the-shelf" products from third parties with Year 2000 compliant versions. The one critical information system needing an upgrade to become Year 2000 compliant will be upgraded by December 31, 1998. The Company has determined that there should be no Year 2000 issues for the products it has already sold since the Company's products contain no date sensitive software. As part of the Company's Year 2000 compliance review, the Company is in the process of contacting its primary vendors, distributors and customers to determine the extent to which the Company is vulnerable to such third parties' failure to address their Year 2000 compliance issues. The Company will continue to work to obtain sufficient information and assurances from its significant vendors, distributors and customers as part of its Year 2000 compliance review. However, there can be no guarantee that third parties on which the Company's business relies will adequately address their Year 2000 compliance issues nor is there any guarantee that the failure by such third parties to adequately deal with such issues would not have a material adverse effect on the Company and its operations. THE COST TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES The Company estimates that the cost of its Year 2000 compliance review, including the upgrading of its critical information systems, will be less than $15,000 and is not expected to be material to the Company's financial position, cash flow or results of operations. THE RISKS ASSOCIATED WITH THE COMPANY'S YEAR 2000 COMPLIANCE The Company believes that the risks associated with its own Year 2000 compliance primarily relates to the failure of third parties upon whom the Company's business relies to timely address their Year 2000 issues. Failure by third parties to adequately address their Year 2000 issues in a timely manner could result in disruptions in the Company's supply of parts and materials, late, missed or unapplied payments, temporary disruptions in order processing and other general problems related to the Company's daily operations. While the Company believes its Year 2000 compliance review procedures will adequately address the Company's internal Year 2000 issues, until the Company receives responses from all of its significant vendors, distributors and customers, the overall risks associated with the Year 2000 issue remain difficult to accurately describe and quantify, and there can be no guarantee that such uncertainty will not have a material adverse effect on the Company's business, operating results and financial position. THE COMPANY'S CONTINGENCY PLAN The Company has not, to date, implemented a Year 2000 contingency plan. It is the Company's intention to devote whatever resources are necessary to assure that all of its Year 2000 compliance issues are resolved. The Company intends to develop and implement a contingency plan by the end of June 1999. Page 10 11 ROMTECH, INC. FORWARD-LOOKING STATEMENTS This report contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 and by the Securities and Exchange Commission in rules, regulations and releases. These statements include, but are not limited to, statements regarding: the projected percentage of sales of the Company's products to Slash Corporation during the 1999 fiscal year; the Company's efforts in developing "full-release" software titles; the sufficiency of the Company's cash and working capital balances to fund the Company's operations in the future; and the Company's expectations and cost estimates regarding its Year 2000 compliance efforts. All forward-looking statements are based on current expectations regarding significant risk factors, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed in this report will be achieved. The following important factors, among others, could cause the Company's actual results to differ materially from those indicated by the forward-looking statements contained in this report: the success of the Galaxy branding strategy and market acceptance of the Company's Galaxy Series titles in the United States and international markets; the allocation of adequate shelf space for the Company's products in major retail chain stores; successful sell-through results for the Company's products at retail stores; the continued success of the distribution relationship between the Company with Slash Corporation; the continued expansion of the computer in homes in North America and the world; the ability to deliver products in response to orders within a commercially acceptable time frame; downward pricing pressure; fluctuating costs of developing, producing and marketing the Company's products; access to alternative distribution channels and the success of the Company's efforts to develop its Internet sales; consumers' continued demand for value-priced software; increased competition in the value-priced software category; the ability of the Company and its key distributors, vendors and suppliers to effectively address Year 2000 compliance issues; and various other factors, many of which are beyond the Company's control. The Company does not undertake to update any forward-looking statement made in this report or that may be made from time to time by or on behalf of the Company. Page 11 12 ROMTECH, INC. PART II. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On August 14, 1998, the Company issued 150,000 shares of its Common Stock, without par value, to the shareholders of Software Partners Publishing and Distribution Limited ("Software Partners"), a United Kingdom-based distributor of computer software, in exchange for all of the outstanding shares of Software Partners. The Company relied upon the exemption from the registration requirements under the Securities Act of 1933, as amended (the "Securities Act"), contained in Rule 505 of Regulation D promulgated under the Securities Act. The approximate value of the Common Stock issued to the shareholders of Software Partners was $213,000; the Company's Common Stock was issued to five individuals; the Company was not subject to disqualification under Rule 505(b)(2)(iii); and the Company furnished to the Software Partners' shareholders a reasonable time before the issuance of the Company's Common Stock the information required under Rule 502(b) of Regulation D. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description of Exhibit ----------- ---------------------- 3.1 By-laws (as amended October 8, 1998) 27.1 Financial Data Schedule (b) Reports on Form 8-K On October 13, 1998 the Company filed a report on Form 8-K announcing the Company's unaudited results for the first quarter ended September 30, 1998. On November 2, 1998 the Company filed a report on Form 8-K announcing that its Board of Directors had authorized the Company to purchase up to $1,000,000 of its shares of Common Stock in the Nasdaq SmallCap Market. Page 12 13 ROMTECH, INC. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROMTECH, INC. (Registrant) Date: November 13, 1998 /s/ Gerald W. Klein ----------------- --------------------------------- Gerald W. Klein, President, Chief Executive Officer, Chief Financial Officer and Director Date: November 13, 1998 /s/ Thomas W. Murphy ----------------- --------------------------------- Thomas W. Murphy, Controller and Chief Accounting Officer Page 13 14 ROMTECH, INC. EXHIBIT INDEX Exhibit No. Description of Exhibit Page Number - ----------- ---------------------- ----------- 3.1 By-laws (as amended October 8, 1998) 27.1 Financial Data Schedule Page 14 EX-3.1 2 BY-LAWS 1 EXHIBIT 3.1 AMENDED AND RESTATED BYLAWS OF ROMTECH, INC. 2 TABLE OF CONTENTS Article 1 OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article 2 SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Article 3 QUORUM OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Article 4 VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Article 5 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Article 6 RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Article 7 SHAREHOLDER LIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Article 8 JUDGES OF ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Article 9 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Article 10 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Article 11 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Article 12 VACANCIES ON BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Article 13 POWERS OF BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Article 14 MEETINGS OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Article 15 ACTION BY WRITTEN CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Article 16 COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Article 17 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Article 18 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Article 19 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Article 20 TREASURER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ii 3 Article 21 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Article 22 OTHER OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Article 23 LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Article 24 SHARES; SHARE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Article 25 TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Article 26 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Article 27 FINANCIAL REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Article 28 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Article 29 MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Article 30 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
iii 4 AMENDED AND RESTATED BYLAWS OF ROMTECH, INC. ARTICLE 1 - OFFICES Section 1.1. Registered Office. The Corporation shall have and continuously maintain in the Commonwealth of Pennsylvania a registered office at an address to be designated from time to time by the Board of Directors which may, but need not, be the same as its place of business. Section 1.2. Other Offices. The Corporation may also have offices at such other places as the Board of Directors may from time to time designate or the business of the Corporation may require. ARTICLE 2 - SHAREHOLDER MEETINGS Section 2.1. Place of Shareholders' Meetings. All meetings of the shareholders shall be held at such time and place, within or without the Commonwealth of Pennsylvania, as may be determined from time to time by the Board of Directors and need not be held at the registered office of the Corporation. Section 2.2 Annual Meeting. An annual meeting of the shareholders for the election of directors and the transaction of such other business as may properly be brought before the meeting shall be held in each calendar year at such time and place as may be determined by the Board of Directors. At the annual meeting of shareholders, only the business specified in the notice of meeting can be conducted at such meeting. To be properly brought before an annual meeting, business must: (a) have been specified in the written notice of the annual meeting (or any supplement thereto) given by the Corporation; (b) be brought before the annual meeting at the direction of the Board of Directors or the presiding officer of the meeting; or (c) have been specified in a written notice (a "Shareholder Notice") given to the Corporation, in accordance with all of the following requirements, by or on behalf of any shareholder of the Corporation: each Shareholder Notice must be delivered personally to, or be mailed to and received by, the Corporation, addressed to the attention of the Secretary at the principal executive offices of the Corporation on the date that is at least sixty (60) days before the date on which the Corporation first mailed its proxy materials for the prior year's annual meeting of shareholders (or, if during the prior year, the Corporation did not hold an annual meeting of shareholders, or if the date of the annual meeting of shareholders has changed more than thirty (30) days from the prior year, then the Shareholder Notice must be received a reasonable time before the Corporation mails its proxy materials for the current year). Each Shareholder Notice shall set forth a general description of each item of business proposed to be brought before the annual meeting of 1 5 shareholders, the name and address of the shareholder proposing to bring such item of business before the meeting, the number of shares of the Corporation which are beneficially owned by the shareholder, and any material interest of the shareholder in such business. The presiding officer of an annual meeting may refuse to consider any business that shall be brought before the annual meeting of shareholders of the Corporation other than as provided in this Section 2.2. Section 2.3. Special Meetings. Special Meetings of the shareholders may be called at any time only by (i) the Chairman of the Board, if any, if such officer is serving as the chief executive officer of the Corporation, and otherwise the President or (ii) the Board of Directors. The request of any person who has called a special meeting of shareholders shall be addressed to the Secretary of the Corporation, shall be signed by the person or persons making the request and shall state the general nature of the business to be transacted at the meeting. Upon receipt of any such request it shall be the duty of the Secretary to fix the time and provide written notice of the special meeting of shareholders, which, if called pursuant to a statutory right, shall be held not more than sixty (60) days after receipt of the request. If the Secretary shall neglect or refuse to fix the time or provide written notice of the special meeting, the person or persons making the request may fix the time and provide written notice of the special meeting. Except as otherwise required by law or in these By-laws, or except as permitted by the presiding officer of the meeting in the exercise of such officer's sole discretion, the business which shall be conducted at a special meeting of shareholders shall (a) have been specified in the written notice of the meeting (or any supplement thereto) given by the Corporation, or (b) be brought before the meeting at the direction of the Board of Directors or the presiding officer of the meeting. Section 2.4. Timing of Notice of Shareholders' Meetings. Written notice of each meeting other than an adjourned meeting of shareholders, stating the place and time, and, (i) in the case of a special meeting of shareholders, the general nature of the business to be transacted, and, (ii) in the case of a meeting of shareholders called for the purpose, or one of the purposes, of considering the amendment or repeal of the Bylaws, written notice of such proposed action, shall be provided to each shareholder of record entitled to vote at the meeting at such address as appears on the books of the Corporation. Such notice shall be given, in accordance with the provisions of Article 29 of these Bylaws, at least (i) ten days prior to the day named for a meeting to consider a fundamental change under Chapter 19 of the Pennsylvania Business Corporation Law of 1988 (the "BCL") or (ii) five days prior to the day named for the meeting in any other case. Section 2.5. Notice to Shareholder Not Required. (a) Whenever the Corporation has been unable to communicate with a shareholder for more than twenty-four (24) consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address, the giving of notice to such shareholder pursuant to Section 2.4 of these Bylaws shall not be required. Any action or meeting that is taken or held without notice or communication to that shareholder shall have the same validity as if the notice or communication had been duly given. Following said twenty-four (24) month period, if a shareholder provides the Corporation with a current address the giving of notice to such shareholder 2 6 pursuant to Section 2.4 of these Bylaws shall again be required. (b) The Corporation shall not be required to give notice to any shareholder pursuant to Section 2.4 hereof if and for so long as communication with such shareholder is unlawful. Section 2.6. Meeting Using Telecommunications Equipment. The Board of Directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more shareholders may participate in such meeting or meetings of shareholders by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear one another. Participation in the meeting by such means shall constitute presence in person at the meeting. Any notice otherwise required to be given in connection with any meeting at which participation by conference telephone or other communications equipment is permitted shall so specify. ARTICLE 3 - QUORUM OF SHAREHOLDERS Section 3.1. Quorum Generally Required. Except as provided in Sections 3.3 and 3.5, a meeting of shareholders duly called shall not be organized for the transaction of business unless a quorum is present. Section 3.2. Quorum Defined. The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for purposes of consideration and action on such matter. Section 3.3. Quorum Following Shareholder Withdrawals. The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Section 3.4. Adjournments. (a) If a meeting of shareholders cannot be organized because a quorum is not present, those present in person or by proxy, may, except as otherwise provided by statute or unless the Board fixes a new record date for the adjourned meeting, adjourn the meeting to such time and place as they may determine, without notice other than an announcement at the meeting, until the requisite number of shareholders for a quorum shall be present in person or by proxy. (b) Any meeting, including one at which directors are to be elected, may be adjourned for such period as the shareholders present and entitled to vote shall direct. Section 3.5. Quorum Less Than a Majority. Notwithstanding the provisions of Sections 3.1, 3.2, 3.3 and 3.4 of these Bylaws: (a) Those shareholders entitled to vote who attend a meeting called for election of directors 3 7 that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in these Bylaws, shall nevertheless constitute a quorum for the purpose of electing directors. (b) Those shareholders entitled to vote who attend a meeting that has been previously adjourned for one or more periods aggregating at least fifteen (15) days because of an absence of a quorum, although less than a quorum as fixed in these Bylaws, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. ARTICLE 4 - VOTING RIGHTS Section 4.1. One Vote Per Share. Except as may be otherwise provided by the Corporation's Articles of Incorporation, at every meeting of shareholders, every shareholder entitled to vote thereat shall be entitled to one vote for every share having voting power standing in his name on the books of the Corporation on the record date fixed for the meeting. Section 4.2. Majority Vote. Except as otherwise provided by statute, the Articles of Incorporation or these Bylaws, at any duly organized meeting of shareholders the vote of the holders of a majority of the votes cast shall decide any question brought before such meeting. Unless the Pennsylvania Business Corporation law of 1988 (the "BCL") permits otherwise, this Section 4.2 may be modified only by a Bylaw amendment adopted by the shareholders. Section 4.3. Ballot Not Required. Unless demand is made before the voting begins by a shareholder entitled to vote at any election for directors, the election of such directors need not be by ballot. ARTICLE 5 - PROXIES Section 5.1. General. Every shareholder entitled to vote at a meeting of shareholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him by proxy. Every proxy shall be executed in writing by the shareholder or his duly authorized attorney-in-fact and filed with the Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the Secretary of the Corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death of incapacity of the maker, unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation. 4 8 ARTICLE 6 - RECORD DATE Section 6.1. Record Date Fixed By Board. The Board of Directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall not be more than ninety (90) days prior to the date of the meeting of shareholders. Only shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting, notwithstanding any transfer of shares on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may similarly fix a record date for the determination of shareholders of record for any other purpose, such as the payment of a distribution or a conversion or exchange of shares. Section 6.2. Certificate of Ownership. The Board of Directors may by resolution adopt a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in such shareholder's name are held for the account of a specified person or persons. Such resolution may set forth: (a) the classification of shareholder who may certify; (b) the purpose or purposes for which the certification may be made; (c) the form of certification and information to be contained therein; (d) if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and (e) such other provisions with respect to the procedure as are deemed necessary or desirable. Upon receipt by the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. ARTICLE 7 - SHAREHOLDER LIST Section 7.1. Shareholder List - General. The officer or agent having charge of the share transfer books of the Corporation shall make a complete alphabetical list of the shareholders entitled to vote at any meeting, with their addresses and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting for inspection by any shareholder during the entire meeting except that if the Corporation has 5,000 or more shareholders, in lieu of the making of the list the Corporation may make the information available at the meeting by other means. Section 7.2. Effect of Non-compliance with Section 7.1. Failure to comply with the provisions of Section 7.1 of these Bylaws shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. Section 7.3. Transfer Books - Prima Facie Evidence. The original transfer books for shares of the Corporation, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or transfer books for shares or to vote at any meeting. 5 9 ARTICLE 8 - JUDGES OF ELECTION Section 8.1. Appointment. Prior to any meeting of shareholders, the Board of Directors may appoint judges of election, who may but need not be shareholders and who will have such duties as provided in the BCL, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one or three. No person who is a candidate for an office to be filled at the meeting shall act as a judge of election. Section 8.2. Vacancy. In case any person appointed as a judge of election fails to appear or fails or refuses to act, the vacancy so created may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. Section 8.3. Amendment of Article 8. Unless the BCL permits otherwise, this Article 8 may be amended only by a Bylaw amendment. ARTICLE 9 - CONSENT OF SHAREHOLDERS IN LIEU OF MEETING Section 9.1. Consent of Shareholders in Lieu of Meeting. Actions of the shareholders may be taken by written consent in either of the following manners: (a) Unanimous Consent. Any action required or permitted to be taken at a meeting of the shareholders, or of a class of shareholders, may be taken without a meeting if, prior to or subsequent to the action, a consent or consents thereto signed by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the Secretary of the Corporation. Consents may be executed in any number of counterparts. (b) Partial Consent. Any action required or permitted to be taken at a meeting of shareholders, or of a class of shareholders, may be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. The consent(s) shall be filed with the Secretary of the Corporation. The action shall not become effective until at least ten (10) days after written notice of the action has been given to each shareholder entitled to vote thereon who has not consented in writing thereto. Such consent may be executed in any number of counterparts. ARTICLE 10 - BOARD OF DIRECTORS Section 10.1. Number. The number of directors shall not be less than four (4) nor more than twelve (12), as shall from time to time (i) be determined by the Board of Directors or (ii) be set forth in a notice of a meeting of shareholders called for the election of the Board of Directors. The 6 10 Chairman of the Board of Directors shall preside at all meetings of shareholders and directors. Section 10.2. Qualification. Each director shall be a natural person of full age and need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the Corporation. Section 10.3. Shareholder Election; Vote Required. Except as otherwise provided in Article 12 of these Bylaws, directors shall be elected by the shareholders. The candidates receiving the highest number of votes from the shareholders or each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the shareholders, or class or group of classes, if any, shall be elected. Each director shall be elected for a term of one year and until his successor has been elected and qualified or until his earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. Section 10.4. Nominations. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder of record entitled to vote in the election of directors generally at the record date of the Meeting. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder's intention to make such nomination or nominations has been delivered personally to, or been mailed to and received by the Corporation at the principal executive offices of the Corporation addressed to the attention of the Secretary, at least sixty (60) days before the date on which the Corporation first mailed its proxy materials for the prior year's annual meeting of shareholders (or, if during the prior year the Corporation did not hold an annual meeting of shareholders or if the date of the meeting has been changed more than thirty (30) days from the prior year, the notice must have been received a reasonable time before the Corporation mails its proxy materials for the current year). Each such notice shall set forth: (a) the name and address of the shareholder intending to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder intends to appear in person or by proxy at the annual meeting of shareholders to nominate the person or person or persons specified in the notice; (c) the address and principal occupation for the past five (5) years of each nominee and such other information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, had proxies been solicited with respect to such nominee by management of the Corporation; and (d) the written consent of each nominee to serve as a director of the Corporation if so elected. The presiding officer of the Meeting may declare invalid any nomination not made in compliance with the foregoing procedure. ARTICLE 11 - REMOVAL OF DIRECTORS Section 11.1. Removal By Shareholders. The entire board of directors, or any class of the board, or any individual director may be removed from office only for cause by vote of the shareholders entitled to vote thereon. In case the board or a class of the board or any one or more directors are so removed, new directors may be elected at the same meeting. The repeal of a 7 11 provision of the articles or these bylaws prohibiting, or the addition of a provision to the articles or bylaws permitting, the removal by the shareholders of the board, a class of the board or a director without assigning any cause shall not apply to any incumbent director during the balance of the term for which the director was selected. This Section 11.1 was adopted by the shareholders of the Corporation on June 30, 1995. Section 11.2. Removal By Board. The Board of Directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year. ARTICLE 12 - VACANCIES ON BOARD OF DIRECTORS Section 12.1. Board Authorized To Fill Existing Vacancies. Vacancies on the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled by a majority vote of the remaining members of the Board of Directors, though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve for the balance of the unexpired term. Section 12.2. Board Authorized To Fill Future Vacancies. When one or more directors resign from the Board of Directors effective at a future date, the directors then in office, including those who have so resigned, shall have the power by a majority vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. ARTICLE 13 - POWERS OF BOARD Section 13.1. Board Authority - General. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are directed or required to be exercised and done by statute, the Articles of Incorporation or these Bylaws. Section 13.2. Board Committees. The Board of Directors may, by resolution adopted by a majority of the directors in office, establish one or more committees consisting of one or more directors as may be deemed appropriate or desirable by the Board of Directors to serve at the pleasure of the Board. Any committee, to the extent provided in the resolution of the Board of Directors pursuant to which it was created, shall have and may exercise all of the powers and authority of the Board of Directors, except that no committee shall have any power or authority as to the following: (a) The submission to shareholders of any action requiring approval of shareholders; (b) The creation or filling of vacancies in the Board of Directors; (c) The adoption, amendment or repeal of these Bylaws; (d) The amendment or repeal of any resolution of the Board of Directors that by its terms is amendable or repealable only by the Board of Directors; and 8 12 (e) Action on matters committed by the Bylaws or resolution of the Board of Directors to another committee of the Board of Directors. ARTICLE 14 - MEETINGS OF THE BOARD OF DIRECTORS Section 14.1. Place of Meeting; Use of Telecommunications Equipment. Meetings of the Board of Directors shall be held at such times and places within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time appoint or as may be designated in the notice of the meeting. One or more directors may participate in any meeting of the Board of Directors, or of any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another, provided that the use of such conference telephone or similar communications equipment shall be at the discretion of the Board of Directors. Participation in a meeting by such means shall constitute presence in person at the meeting. Section 14.2. Regular Meetings. A regular meeting of the Board of Directors shall be held annually, immediately following the annual meeting of the shareholders, at the place where such meeting of the shareholders is held or at such other place and time as a majority of the directors in office after the annual meeting of shareholders may designate. At such meeting, the Board of Directors shall elect officers of the Corporation. In addition to such regular meeting, the Board of Directors shall have the power to fix by resolution the place and time of other regular meetings of the Board. Section 14.3. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, if any, by the President, or by a majority of the directors in office on one day's notice to each director, either by telephone, or, if in writing, in accordance with the provisions of Article 29 of these Bylaws. Section 14.4. Quorum. At all meetings of the Board of Directors a majority of the directors in office shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws. ARTICLE 15 - ACTION BY WRITTEN CONSENT Section 15.1. Written Consent - General. Any action required or permitted to be taken at a meeting of the Board of Directors, or at any committee of the Board of Directors, may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto signed by all of the directors (or members of the committee with respect to committee action) is filed with the Secretary of the Corporation. 9 13 ARTICLE 16 - COMPENSATION OF DIRECTORS Section 16.1. Compensation - General. Directors, as such, may receive a stated salary for their services or a fixed sum and expenses for attendance at regular and special meetings, or any combination of the foregoing as may be determined from time to time by resolution of the Board of Directors, and nothing contained herein shall be construed to preclude any director from receiving compensation for services rendered to the Corporation in any other capacity. ARTICLE 17 - OFFICERS Section 17.1. Officers - General. The officers of the Corporation shall be a Chief Executive Officer, a President, a Chairman of the Board, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers and assistant officers as the Board of Directors may from time to time deem advisable. Except for the Chief Executive Officer, President, Secretary and Treasurer, the Board may refrain from filling any of the said offices at any time and from time to time. The same individual may hold any two or more offices. The following officers shall be elected by the Board of Directors at the time, in the manner and for such terms as the Board of Directors from time to time shall determine: Chief Executive Officer, President, Chairman of the Board, Secretary, and Treasurer. The Chief Executive Officer may, subject to change by the Board of Directors, appoint such other officers and assistant officers as he may deem advisable provided such officers or assistant officers have a title no higher than Vice President, who shall hold office for such periods as the Chief Executive Officer shall determine. Any officer may be removed at any time, with or without cause, and regardless of the term for which such officer was elected. ARTICLE 18 -PRESIDENT Section 18.1. Chief Executive Officer - General. The Chief Executive Officer shall have general supervision of all of the departments and business of the Corporation; he shall prescribe the duties of the other officers and employees and see to the proper performance thereof. The Chief Executive Officer shall be responsible for having all orders and resolutions of the Board of Directors carried into effect. The Chief Executive Officer shall execute on behalf of the Corporation and may affix or cause to be affixed a seal to all authorized documents and instruments requiring such execution, except to the extent that signing and execution thereof shall have been delegated to some other officer or agent of the Corporation by the Board of Directors or by the Chief Executive Officer. The Chief Executive Officer shall be a member of the Board of Directors. In the event of the disability of the Chairman of the Board or his refusal to act, the Chief Executive Officer shall preside at meetings of the Board and the shareholders. In general, the Chief Executive Officer shall perform all the duties and exercise all the powers and authorities incident to his office or as prescribed by the Board of Directors. Unless otherwise provided by the Board of Directors, the salaries and compensation of all officers and assistant officers, except the Chief Executive Officer, President and Chairman of the Board, shall be fixed by or in the manner designated by the Chief Executive Officer. Section 18.2 President - General. The President shall perform such duties as are prescribed 10 14 by the Board of Directors or the Chief Executive Officer. The President shall execute on behalf of the Corporation and may affix or cause to be affixed a seal to all authorized documents and instruments requiring such execution, except to the extent that signing and execution thereof shall have been delegated to some other officer or agent of the Corporation by the Board of Directors or by the Chief Executive Officer. In the event of the disability of the Chief Executive Officer or his refusal to act, the President shall perform the duties and have the powers and authorities of the Chief Executive Officer. In the event of the disability of the Chairman of the Board and the Chief Executive Officer or their refusal to act, the President shall preside at meetings of the Board and the shareholders. ARTICLE 19 - SECRETARY Section 19.1. Secretary - General. The Secretary shall act under the supervision of the Chief Executive Officer or such other officer as the Chief Executive Officer may designate. Unless a designation to the contrary is made at a meeting, the Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all of the proceedings of such meetings in a book to be kept for that purpose. The Secretary shall keep a seal of the Corporation, and, when authorized by the Board of Directors or the Chief Executive Officer, cause to be affixed to any documents and instruments requiring it. The Secretary shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, or such other supervising officer as the Chief Executive Officer may designate. ARTICLE 20 - TREASURER Section 20.1. Treasurer - General. The Treasurer shall act under the supervision of the Chief Executive Officer or such other officer as the Chief Executive Officer may designate. The Treasurer shall have custody of the Corporation's funds and such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, or such other supervising officer as the Chief Executive Officer may designate. ARTICLE 21 - CHAIRMAN OF THE BOARD Section 21.1. Chairman of the Board - General. The Chairman of the Board shall be a member of the Board of Directors and shall preside at the meetings of the Board and the shareholders and perform such other duties as may be prescribed by the Board of Directors. ARTICLE 22 - OTHER OFFICERS Section 22.1. Vice Presidents - General. The Vice Presidents shall perform such duties, do such acts and be subject to such supervisions as may be prescribed by the Board of Directors or the Chief Executive Officer. In the event of the disability of the Chief Executive Officer and the President or their refusal to act, the Vice Presidents, in the order of their rank, and within the same rank in the order of their seniority, shall perform the duties and have the powers and authorities of the Chief 11 15 Executive Officer and President, except to the extent inconsistent with applicable law. Section 22.2 Assistant Officers - General. Unless otherwise provided by the Board of Directors, each assistant officer shall perform such duties as shall be prescribed by the Board of Directors, the Chief Executive Officer, or the officer to whom he is an assistant. In the event of the absence or disability of an officer or his refusal to act, his assistant officers shall, in the order of their rank, and within the same rank in the order of their seniority, have the powers and authorities of such officer. ARTICLE 23 - LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION OF OFFICERS, DIRECTORS, AND OTHER PERSONS Section 23.1. Limitation of Liability. No director of the Corporation shall be personally liable, as such, for monetary damages for any action taken unless: (a) the director has breached or failed to perform the duties of his or her office, and (b) the breach or failure to perform constitutes self-dealing, wilful misconduct or recklessness; provided, however, that the provisions of this Section 23.1 shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or to the liability of a director for the payment of taxes pursuant to local, Pennsylvania or federal law. Section 23.2. Indemnification. The Corporation shall indemnify and hold harmless to the fullest extent permitted by Pennsylvania law any director or officer, and may indemnify any other employee or agent, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation (collectively, for purposes of this Article 23, "Proceeding"), by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise, against expenses, liability and loss including, without limitation, attorneys' fees and disbursements, punitive and other damages, judgments, fines, penalties, amounts paid or to be paid in settlement and costs and expenses of any nature incurred by him in connection with such Proceeding and any appeal therefrom; provided that such indemnification shall not be made where the act or failure to act giving rise to the claim for indemnification is determined by a court in a final binding adjudication to have constituted willful misconduct or recklessness. Section 23.3. Indemnification and Advancement of Expenses Non-Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 23 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of shareholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. It is the policy of the Corporation that indemnification of, and advancement of expenses to, directors and officers of the Corporation shall be made to the fullest extent permitted by law. To this end, the provisions of this Article 23 shall be deemed to have been 12 16 amended for the benefit or directors and officers of the Corporation effective immediately upon any modification of the BCL or any modification, or adoption of any other law that expands or enlarges the power or obligation of corporations organized under the BCL to indemnify, or advance expenses to, directors and officers of corporations. Section 23.4. Advancement of Expenses - Repayment Undertaking. The Corporation shall pay expenses incurred by an officer or director, and may pay expenses incurred by any other employee or agent, in defending a Proceeding, in advance of the final disposition of such action or proceeding provided that if required by the BCL or other applicable law, the payment of such expenses shall be made only upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Section 23.5. Continuation of Indemnification Following Termination. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 23 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Section 23.6. Security For Indemnification Obligation. The Corporation shall have the authority to create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner, its indemnification obligations, whether arising under these Bylaws or otherwise. This authority shall include, without limitation, the authority to: (i) deposit funds in trust or in escrow; (ii) establish any form of self-insurance; (iii) secure its indemnity obligation by grant of a security interest, mortgage or other lien on the assets of the Corporation; or (iv) establish a letter of credit, guaranty or surety arrangement for the benefit of such persons in connection with the anticipated indemnification or advancement of expenses contemplated by this Article 23. The provisions of this Article 23 shall not be deemed to preclude the indemnification of, or advancement of expenses to, any person who is not specified in Section 23.1 of this Article 23 but whom the Corporation has the power or obligation to indemnify, or to advance expenses for, under the provisions of the BCL, other applicable law or otherwise. The authority granted by this Section 23.5 shall be exercised by the Board of Directors of the Corporation. Section 23.7. Indemnification Agreements. The Corporation shall have the authority to enter into a separate indemnification agreement with any officer, director, employee or agent of the Corporation or any subsidiary providing for such indemnification of such person as the Board of Directors shall determine up to the fullest extent permitted by law. Section 23.8. Settlement; No Presumption. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of guilty or nolo contendere, or its equivalent, shall not, of itself, create a presumption that the person's conduct constituted willful misconduct or recklessness. Section 23.9. Repeal of Indemnification Provisions. The indemnification provisions of this 13 17 Article 23 shall constitute a contract between the Corporation and each of its directors, officers, employees and agents who are or may be entitled to indemnification hereunder and who serve in any such capacity at any time while such provisions are in effect. Any repeal or modification of the indemnification provisions of this Article 23 shall not limit any such person's rights to indemnification (including the advancement of expenses) then existing or arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification with respect to Proceedings commenced after such repeal or modification based in whole or in part upon any such event, act or omission. Section 23.10. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise against any expense, liability or loss asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article 23 or under any provision of the BCL or other applicable law. Section 23.11. Amendment of Article 23; Amendments Not Effective Retroactively. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article 23 which is adverse to any director of officer shall apply to such director or officer only on a prospective basis, and shall not reduce any limitation on the personal liability of a director of the Corporation, or limit the rights of any person entitled under Article 23 to indemnification or to the advancement of expenses with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this Article so as either to reduce the limitation of directors' liability or limit indemnification or the advancement of expenses in any manner unless adopted by the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast in the election of directors; provided that no such amendment shall have retroactive effect inconsistent with the preceding sentence. The provisions of this Article 23 were adopted by the shareholders of the Corporation on June 30, 1995. Section 23.12. Changes to Pennsylvania Law. References in this Article 23 to Pennsylvania law or to any provision thereof shall be to such law as it existed on the date this Article 23 was adopted or as such law thereafter may be changed; provided that (a) in the case of any change which expands the liability of directors or limits the indemnification rights or the rights to advancement of expenses which the Corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses which the Corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in this Article shall continue as theretofore to the extent permitted by law; and (b) if such change permits the Corporation without the requirement of any further action by shareholders or directors to limit further the liability of directors (or limit the liability of officers) or to provide broader indemnification rights or rights to the 14 18 advancement of broader indemnification rights or rights to the advancement of expenses than the Corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law. ARTICLE 24 - SHARES; SHARE CERTIFICATES Section 24.1. Share Certificates. Except as otherwise provided in Section 24.2, the shares of the Corporation shall be represented by certificates. Unless otherwise provided by the Board of Directors, every share certificate shall be signed by two officers and sealed with the corporate seal, which may be a facsimile, engraved or printed, but where such certificate is signed by a transfer agent or a registrar, the signature of any corporate officer upon such certificate may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise, before the certificate is issued, it may be issued with the same effect as if the officer had not ceased to be such at the date of its issue. The provisions of this Section 24.1 shall be subject to any inconsistent or contrary agreement at the time between the Corporation and any transfer agent or registrar. To the extent the Corporation is authorized to issue shares of more than one class or series, every certificate shall set forth upon the face or back of the certificate (or shall state on the fact or back of the certificate that the Corporation will furnish to any shareholder upon request and without charge) a full or summary statement of the designation, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the Board of Directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the Corporation. Section 24.2. Uncertificated Shares. Notwithstanding anything herein to the contrary, any or all classes and series of shares, or any part thereof, may be represented by uncertificated shares to the extent determined by the Board of Directors, except that shares represented by a certificate that is issued and outstanding shall continue to be represented thereby until the certificate is surrendered to the Corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof, a written notice containing the information required to be set forth or stated on certificates. The rights and obligations of the holders of shares represented by certificates and the rights and obligations of the holders of uncertificated shares of the same class and series shall be identical. Notwithstanding anything herein to the contrary, the provisions of Section 24.1 shall be inapplicable to uncertified shares and in lieu thereof the Board of Directors shall adopt alternative procedures for registration of transfers. ARTICLE 25 -TRANSFER OF SHARES Section 25.1. Transfer of Shares - General. Upon surrender to the Corporation of a share certificate duly endorsed by the person named in the certificate or with duly executed stock powers attached and otherwise in proper form for transfer, or by attorney duly appointed in writing and 15 19 accompanied where necessary by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate canceled and the transfer recorded on the share register of the Corporation. Except as otherwise provided pursuant to Section 6.2 hereof, a transferee of shares of the Corporation shall not be a record holder of such shares entitled to the rights and benefits associated therewith unless and until the share transfer has been recorded on the share transfer books of the Corporation. No transfer shall be made if it would be inconsistent with the provisions of Article 8 of the Pennsylvania Uniform Commercial Code. ARTICLE 26 - LOST CERTIFICATES Section 26.1. Lost Certificates - General. Unless waived in whole or in part by the Board of Directors, any person requesting the issuance of a new certificate in lieu of an alleged lost, destroyed, mislaid or wrongfully taken certificate shall (a) give to the Corporation his or her bond of indemnity with an acceptable surety, and (b) satisfy such other requirements as may be imposed by the Corporation. Thereupon, a new share certificate shall be issued to the registered owner or his or her assigns in lieu of the alleged lost, destroyed, mislaid or wrongfully taken certificate, provided that the request therefor and issuance thereof have been made before the corporation has notice that such shares have been acquired by a bona fide purchaser. ARTICLE 27 - FINANCIAL REPORTS TO SHAREHOLDERS Section 27.1. Annual Financial Statements. Unless waived in a written agreement by the shareholders, separate from the Articles of Incorporation or these By-laws, the Corporation shall furnish to its shareholders annual financial statements, including at least a balance sheet as of the end of each fiscal year and a statement of income and expenses for the fiscal year. The financial statements shall be prepared on the basis of generally accepted accounting principles, if the Corporation prepares financial statements for the fiscal year on that basis for any purpose, and may be consolidated statements of the Corporation and one or more of its subsidiaries. The financial statements shall be mailed by the Corporation to each of its shareholders entitled thereto within one hundred and twenty (120) days after the close of each fiscal year and, after the mailing and upon written request, shall be mailed by the Corporation to any shareholder or beneficial owner entitled thereto to whom a copy of the most recent annual financial statements has not previously been mailed. Statements that are audited or reviewed by a public accountant shall be accompanied by the report of the accountant; in other cases, each copy shall be accompanied by a statement of the person in charge of the financial records of the Corporation stating his reasonable belief as to whether or not the financial statements were prepared in accordance with generally accepted accounting principles and, if not, describing the basis of presentation and describing any material respects in which the financial statements were not prepared on a basis consistent with those prepared for the previous year. ARTICLE 28 - FISCAL YEAR Section 28.1. Fiscal Year. The fiscal year of the Corporation shall be as determined by the Board of Directors. 16 20 ARTICLE 29 - MANNER OF GIVING WRITTEN NOTICE; WAIVERS OF NOTICE Section 29.1. Manner of Giving Written Notice. Whenever written notice is required to be given to any person under the provisions of these Bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answer back received) or courier service, charges prepaid, or by telecopier, to his address (or to his telex, TWX, telecopier or telephone number) appearing on the books of the Corporation or, in the case of written notice to directors, supplied by each director to the Corporation for the purpose of the notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched. Section 29.2. Waivers of Notice. Any written notice required to be given to any person under the provisions of statute, the Corporation's Articles of Incorporation or these Bylaws may be waived in a writing signed by the person entitled to such notice whether before or after the time stated therein. Except as otherwise required by statute, and except in the case of a special meeting, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted. Attendance of any person, whether in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. ARTICLE 30 - AMENDMENTS Section 30.1. Amendment by Shareholders. Except as provided in Section 23.11 hereof, these Bylaws may be amended or repealed, and new Bylaws adopted, by the affirmative vote of a majority of the votes cast by the shareholders at any regular or special meeting duly convened after written notice to the shareholders that the purpose, or one of the purposes, of the meeting is to consider the amendment or repeal of these Bylaws and the adoption of new Bylaws. There shall be included in, or enclosed with, the notice, a copy of the proposed amendment or a summary of the changes to be effected thereby. Section 30.2. Amendment By Board. Except as provided in Section 23.11 hereof, and except as provided in Section 1504(b) of the BCL, these Bylaws may be amended or repealed, and new Bylaws adopted, by the affirmative vote of a majority of the members of the Board of Directors (but not a committee thereof) at any regular or special meeting duly convened, regardless of whether the shareholders have previously adopted the Bylaw being amended or repealed, subject to the power of the shareholders to change such action of the Board of Directors, provided that the Board of Directors shall not have the power to amend these Bylaws on any subject that is expressly committed to the shareholders by the express terms hereof, by Section 1504 of the BCL or otherwise. 17 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-30-1999 SEP-30-1998 1,027,624 0 2,514,772 167,977 745,596 4,517,488 310,991 0 5,435,027 1,774,217 0 0 0 8,389,826 1,148,550 5,435,027 2,506,200 2,506,200 880,577 880,577 1,185,309 0 10,649 429,665 26,300 403,365 0 0 0 403,365 .04 .04
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