FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1999
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 1-10615
EMISPHERE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3306985
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
765 Old Saw Mill River Road 10591
Tarrytown, New York (Zip Code)
(Address of principal
executive offices)
(914) 347-2220
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be files by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X No
--- ---
The number of shares of the Registrant's common stock, $.01 par value,
outstanding as of March 11, 1999 was: 12,092,083
EMISPHERE TECHNOLOGIES, INC.
TABLE OF CONTENTS
January 31, 1999
Page
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statement of Stockholders' Equity 5
Condensed Statements of Cash Flows 6
Notes to Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
2
EMISPHERE TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
July 31. January 31.
1998 1999
Assets: ------------- ------------
Current assets:
Cash and cash equivalents $21,358,308 $13,715,779
Marketable securities 13,469,733 13,389,221
Receivable due from Ebbisham Ltd. 7,710,056 7,971,444
Receivable due from Novartis Pharma AG 208,333
Prepaid expenses and other current assets 729,587 765,847
------------ ------------
Total current assets 43,267,684 36,050,624
Equipment and leasehold improvements, at cost,
net of accumulated depreciation and amortization 9,619,856 11,427,094
Deferred finance costs (Note 5) 742,500 46,233
Other assets 59,970 60,164
------------ ------------
Total assets $53,690,010 $47,584,115
============ ============
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 724,848 $ 1,937,759
Accrued compensation 266,000 266,000
Accrued professional fees 203,000 119,000
Accrued interest expense 168,750 139,141
Accrued clinical trial expenses 1,500,000
Accrued expenses 364,483 161,622
Deferred revenue 208,333
Senior convertible notes, current portion 3,500,000 3,771,741
Investment deficiency in Ebbisham Ltd. 6,583,670 4,296,362
------------ ------------
Total current liabilities 11,810,751 12,399,958
Senior convertible notes 10,000,000
Deferred lease liability 598,111 1,899,727
------------ ------------
Total liabilities 22,408,862 14,299,685
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000
shares authorized, none issued and outstanding
Common stock, $.01 par value; 20,000,000 shares
authorized; 11,037,238 shares issued
(10,993,738 outstanding) at July 31,1998;
12,126,244 shares issued (12,082,744
outstanding) at January 31, 1999 110,372 121,262
Additional paid-in capital 88,481,742 98,544,458
Accumulated deficit (57,123,403) (65,248,248)
Accumulated other comprehensive income 5,250 59,771
------------ ------------
31,473,961 33,477,243
Less, common stock held in treasury, at cost;
43,500 shares (192,813) (192,813)
------------ ------------
Total stockholders' equity 31,281,148 33,284,430
------------ ------------
Total liabilities and stockholders' equity $53,690,010 $47,584,115
============ ============
See accompanying notes to financial statements. The July 31, 1998 Condensed
Balance Sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
3
EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months For the six months
ended January 31, ended January 31,
--------------------------- ---------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
Contract research revenues $3,408,563 $4,452,039 $5,124,223 $8,031,100
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 3,973,263 6,687,345 6,639,781 10,986,698
Loss in Ebbisham Ltd. 1,280,538 1,551,924 2,194,622 2,712,692
General and administrative 1,247,386 1,649,329 2,210,582 3,009,522
------------ ------------ ------------ ------------
Total operating expenses 6,501,187 9,888,598 11,044,985 16,708,912
------------ ------------ ------------ ------------
Operating (loss) (3,092,624) (5,436,559) (5,920,762) (8,677,812)
Other income and expenses:
Investment income 456,597 404,264 942,479 886,254
Interest expense (161,618) (397,868)
Rental income 49,414 64,581
------------ ------------ ------------ ------------
456,597 292,060 942,479 552,967
------------ ------------ ------------ ------------
Net (loss) $(2,636,027) $(5,144,499) $(4,978,283) $(8,124,845)
============ ============ ============ ============
Net (loss) per share-basic
and diluted $(0.25) $(0.45) $(0.47) $(0.72)
======= ======= ======= =======
See accompanying notes to the financial statements
4
EMISPHERE TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
For the six months ended January 31, 1999
Accumu-
lated
Other Common Stock
Common Stock Additional Compre- Held In Treasury Compre-
-------------------- Paid-in Accumulated hensive ------------------ hensive
Shares Amount Capital Deficit Income Shares Amount Total loss
---------- -------- ----------- ------------- ------- ------ ---------- ----------- ------------
Balance,
July 31, 1998 11,037,238 $110,372 $88,481,742 $(57,123,403) $ 5,250 43,500 $(192,813) $31,281,148
Sale of common stock
under employee stock
purchase plans and
exercise of options 89,404 894 613,244 614,138
Conversion of senior
convertible debt, net
of adjustments 999,602 9,996 9,449,472 9,459,468
Change in net
unrealized gain
on marketable
securities 54,521 54,521 54,521
Net loss for the six
months ended January
31, 1999 (8,124,845) (8,124,845) (8,124,845)
---------- -------- ----------- ------------- ------- ------ ---------- ----------- ------------
Balance,
January 31, 1999 12,126,244 $121,262 $98,544,458 $(65,248,248) $59,771 43,500 $(192,813) $33,284,430 $(8,070,324)
========== ======== =========== ============= ======= ====== ========== =========== ============
See accompanying notes to financial statements
5
EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
For the six months ended
January 31,
--------------------------
1998 1999
------------ ------------
Cash flows from operating activities:
Net loss $(4,978,283) $(8,124,845)
------------ ------------
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Loss in Ebbisham Ltd. 2,194,622 2,712,692
Depreciation 235,885 758,950
Amortization of (premium)discount on
marketable securities 41,887
Amortization of deferred finance costs 112,500
Increase in deferred lease liability 255,701 1,301,616
Realized gain on sale of marketable
securities (14,123)
Noncash compensation in connection with
issuance of equity securities 295,000
Change in assets and liabilities:
(Increase) in receivable due from Ebbisham
and Novartis (2,874,224) (469,721)
(Increase) in prepaid expenses and other
current assets (187,234) (36,260)
Increase in deferred revenue 208,333
(Increase) in other assets (194)
Increase in accounts payable and
accrued expenses 69,289 932,100
Increase in accrued interest payable 285,368
Increase in accrued clinical trial expenses 1,500,000
(Increase) in investment in
Ebbisham Ltd. (5,000,000)
------------ ------------
Total adjustments (25,084) 2,347,271
------------ ------------
Net cash (used in) operating activities (5,003,367) (5,777,574)
------------ ------------
Cash flows from investing activities:
Capital expenditures (1,262,120) (2,572,238)
Purchase of marketable securities (3,557,975) (2,352,444)
Proceeds from sales of marketable securities 4,786,263 2,445,589
------------ ------------
Net cash (used in) investing activities (33,832) (2,479,093)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of options and employee
stock purchases 321,899 614,138
------------ ------------
Net cash provided by financing
activities 321,899 614,138
------------ ------------
Net (decrease) in cash and cash
equivalents (4,715,300) (7,642,529)
Cash and cash equivalents, beginning of period 22,398,967 21,358,308
------------ ------------
Cash and cash equivalents, end of period $17,683,667 $13,715,779
============ ============
Supplemental disclosure of non-cash investing
and financing activities:
Capital expenditures in accounts payable $ 1,185,391 $ 257,440
============ ============
Conversion of debt, including accrued
interest, to equity, net of adjustments $ 9,459,468
============
See accompanying notes to financial statements
6
EMISPHERE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
1. Interim Financial Statements:
The interim Condensed Statements of Operations for the three months
and six months ended January 31, 1998 and 1999 and Condensed
Statements of Cash Flows for the six months ended January 31, 1998
and 1999, and the Condensed Balance Sheets as of July 31, 1998 and
January 31, 1999, of Emisphere Technologies, Inc. (the "Company"),
have been prepared in accordance with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include
all information and disclosures necessary for a presentation of the
Company's financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the
opinion of management, these financial statements reflect all
adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the Company's financial position, results
of operations and cash flows for such periods. The results of
operations for any interim period are not necessarily indicative of
the results for the full year. These financial statements should be
read in conjunction with the financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1998.
2. Elan-Emisphere Venture
During October 1996, Ebbisham Limited, the equally owned joint venture
formed by the Company and Elan Corporation plc ("Ebbisham"), commenced
operations. The Company accounts for its investment in Ebbisham in
accordance with the equity method of accounting. Since Ebbisham's
inception (September 1996), the Company has contributed capital to
Ebbisham of approximately $5,010,000.
Contract revenue from Ebbisham, with respect to services provided by
the Company to Ebbisham, is recognized as the related services are
rendered. Such revenue for the three and six months ended January
31, 1999 totaled approximately $5,230,000 and $2,928,000,
respectively, as compared to $1,784,000 and $2,874,000, respectively,
for the three and six months ended January 31, 1998.
Selected financial data of Ebbisham as of January 31, 1999 and for the
three and six months ended January 31, 1999 and 1998 is as follows:
Balance Sheet Data January 31, 1999
----------------
Cash $ 4,170,000
Accounts payable 8,263,000
Subordinated debt 14,500,000
Stockholders' deficit (18,593,000)
Statement of Operations Data
Three Months Ended Six Months Ended
-------------------------- --------------------------
January 31, January 31, January 31, January 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
Total Revenue $ 8,400 $ 73,000 $ 16,400 $103,000
Total Expenses 2,569,400 3,177,000 4,405,400 5,528,000
------------ ------------ ------------ ------------
Net Loss $(2,561,000) $(3,104,000) $(4,389,000) $(5,425,000)
============ ============ ============ ============
7
3. Net Loss Per Share
The Company's basic net loss per share amounts have been computed by
dividing net loss by the weighted average number of Common Shares
outstanding. For the three months and six months ended January 31,
1999 and 1998, the Company reported net losses and, therefore, no
common stock equivalents were included in the computation of diluted
net loss per share since such inclusion would have been antidilutive.
The calculations of basic and diluted loss per share are as follows:
Net Loss Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------- ---------
Three months ended January
31, 1998-basic and diluted $(2,636,027) 10,708,546 $(0.25)
Three months ended January
31, 1999-basic and diluted $(5,144,499) 11,477,816 $(0.45)
Six months ended January 31,
1998-basic and diluted $(4,978,283) 10,702,008 $(0.47)
Six months ended January 31,
1999-basic and diluted $(8,124,845) 11,241,309 $(0.72)
Options which have been excluded from the diluted per share amount
because their effect would have been antidilutive, include the
following:
Three months ended January 31, Six months ended January 31,
----------------------------------------- -----------------------------------------
1998 1999 1998 1999
------------------- ------------------- ------------------- -------------------
Wtd. Wtd. Wtd. Wtd.
Avg. Avg. Avg. Avg.
Exercise Exercise Exercise Exercise
Number Price Number Price Number Price Number Price
--------- -------- --------- -------- --------- -------- --------- --------
Options with exercise
prices below the average
fair market value of the
Company's common stock for
the respective period 4,158,067 $10.49 3,767,511 $ 9.48 4,313,839 $10.78 2,392,206 $ 8.18
========= ====== ========= ====== ========= ====== ========= ======
Options with exercise
prices above the average
fair market value of the
Company's common stock for
the respective period 253,422 $19.63 430,550 $16.65 97,650 $21.44 1,805,855 $13.33
======= ====== ======= ====== ====== ====== ========= ======
8
4. Adoption of Statement of Financial Accounting Standards No. 130
The Company has adopted Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS No. 130").
Comprehensive loss represents the change in net assets of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive loss of the
Company includes net loss adjusted for the change in net unrealized
gain or loss on marketable securities. The net effect of income taxes
on comprehensive loss is immaterial. The disclosures required by SFAS
No. 130 for the six months ended January 31, 1999 have been included
in the Statement of Stockholders' equity. For the six months ended
January 31, 1999 and 1998, the components of comprehensive loss were:
1998 1999
------------ ------------
Net loss $(4,978,283) $(8,124,845)
Change in net unrealized gain
on marketable securities (15,191) 54,521
------------ ------------
Total comprehensive loss $(4,993,474) $(8,070,324)
============ ============
5. Notes Payable
As of July 31, 1998, the Company had outstanding $13,500,000 of its 5%
Senior Convertible Notes, due May 1, 2001 (the "Notes"). During the
quarter ended January 31, 1999, holders of the Notes converted principal
and accrued interest in the amounts of $9,728,258 and $314,975,
respectively, into 999,602 shares of the Company's Common Stock. Of the
$810,000 incurred in connection with the issuance of the Notes and
classified as deferred financing costs, $112,500 was amortized to
interest expense during the six months ended January 31, 1999 and
$583,767 was recorded as a reduction to additional paid-in capital upon
conversion of the Notes.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the caption "Management's Discussion and Analysis
of Financial Conditions and Results of Operations" and elsewhere in this
report on Form 10-Q constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: uncertainties related to future test results and viability of
the Company's product candidates, which are in the early stages of
development; the need to obtain regulatory approval for the Company's
product candidates; the Company's dependence on partnerships with
pharmaceutical companies to develop, manufacture and commercialize products
using the Company's drug delivery technologies; the Company's dependence on
the success of its joint venture with Elan Corporation plc ("Elan") for the
development and commercialization of an oral heparin and a low molecular
weight heparin product, its strategic alliance with Eli Lilly & Company
("Lilly") for the development and commercialization of certain of Lilly's
therapeutic proteins; and its research collaboration with Novartis Pharma
AG to investigate the Company's technology for oral delivery of two
selected Novartis compounds; the risk of technological obsolescence and
risks associated with the Company's highly competitive industry ; the
Company's dependence on others to manufacture the Company's chemical
compounds; the risk of product liability and policy limits of product
liability insurance; potential liability for human clinical trials; the
Company's dependence on key personnel; the quality, judgement and strategic
decisions of management and other personnel; uncertain availability of
third-party reimbursement for commercial medical products; and general
business and economic conditions; and other factors referenced in the
Company's report on Form 10-K for the fiscal year ended July 31, 1998.
General
Emisphere is a drug delivery company focused on the discovery and
application of proprietary synthetic chemical compounds that enable the
oral delivery of therapeutic macromolecules and other compounds that are
not currently deliverable by oral means. Since its inception in 1986, the
Company has devoted substantially all of its efforts and resources to
research and development conducted on its own behalf and through
collaborations with corporate partners and academic research institutions.
The Company has had no product sales to date. The major sources of the
Company's working capital have been proceeds from its initial public
offering in 1989, a second public offering in 1993, a third public offering
in 1997, private equity financing, issuance to an affiliate of Elan
Corporation plc of stock and warrants in 1995 and subsequent exercise of
the warrants in April 1998, reimbursement of expenses and other payments
from corporate partners, the registered sale of one million shares of
common stock to two institutional investors in 1996, the issuance on May 1,
1998 of three year, $13,500,000 aggregate principal, 5% senior convertible
notes, and income earned on the investment of available funds. The
Company's operations are not significantly affected by inflation or
seasonality.
Results of Operations
The Company has since its inception generated significant losses from
operations. The Company does not expect to achieve profitability in the
foreseeable future. Profitability will ultimately depend on the Company's
ability to develop its lead products, in conjunction with Ebbisham, Lilly
and Novartis, or to develop other products in conjunction with other
partners. There can be no assurance that the development will be completed
or if completed, any regulatory agency will approve the final product.
Even if final products are developed and approved, there is no assurance
that sales will be sufficient to achieve profitability. If development of
such products is not achieved or approval not granted, the Company's
prospects will be materially affected.
The ability of the Company to reduce its operating losses in the near term
will be dependent upon, among other things, its ability to attract new
pharmaceutical and other companies who are willing to provide funding to
the Company for a portion of the Company's research and development with
respect to specific projects. While the Company is constantly engaged in
discussions with pharmaceutical and other companies, there can be no
assurance that the Company will enter into any additional agreements or
that the agreements will provide research and development revenues to the
Company.
10
Three Months Ended January 31, 1999 vs. Three Months Ended January 31,
1998:
For the three months ended January 31, 1999, the Company recognized
$4,452,000 of contract revenue compared to $3,409,000 of contract research
revenues for the three months ended January 31, 1998. The majority of
contract research revenue for the three months ended January 31, 1999
consisted of revenues from Ebbisham Ltd. of $2,926,000 and research funding
payments from Lilly and Novartis. For the three months ended January 31,
1998, contract research revenue consisted of revenues from Ebbisham Ltd. of
$1,748,000 and payments from Lilly and Novartis.
Total operating expenses for the fiscal quarter ended January 31, 1999,
increased by approximately $3,387,000 or 52%, as compared to the fiscal
quarter ended January 31, 1998. The details of this increase are as
follows:
Research and development costs increased by approximately $2,714,000, or
68%, in the fiscal quarter ended January 31, 1999, as compared to the
fiscal quarter ended January 31, 1998. This increase is mainly attributable
to increased personnel in connection with the collaborations with Lilly,
Novartis and the ongoing clinical trials work for heparin. The Company also
experienced an increase in funding of outside consultants and universities
engaged to conduct studies to help advance the Company's scientific
research efforts, perform services related to the manufacturing of the
Company's carriers, and consult on the Company's ongoing clinical studies
with heparin. The Company also experienced an increase in rent and
operating expense in connection with a new lease for laboratory space.
The Company believes that this level of research and development spending
will continue for the foreseeable future and may increase if operations are
expanded.
The loss in Ebbisham Ltd., increased by approximately $271,000, or 21%, in
the fiscal quarter ended January 31, 1999, as compared to the fiscal
quarter ended January 31, 1998. This increase is attributable to the timing
of costs associated with ongoing clinical development of heparin. The costs
associated with Ebbisham may increase substantially depending upon the
agreed timing and scope of future research and development efforts.
General and administrative expenses increased by approximately $402,000, or
32%, in the fiscal quarter ended January 31, 1999, as compared to the
fiscal quarter ended January 31, 1998. This increase is primarily the
result of an increase in personnel and related expenses associated with an
increase in administrative staff positions, to support increased research
and development activities and rent and operating expense in connection
with a new lease for office space.
As a result of these factors, the Company's operating loss for the quarter
ended January 31, 1999 increased by $2,344,000, or 76%, as compared to the
quarter ended January 31, 1999. The Company does not expect to generate an
operating profit, and may possibly generate larger losses in the
foreseeable future.
The Company's other income in the quarter ended January 31, 1999 decreased
by approximately $165,000, or 36%, as compared to the fiscal quarter ended
January 31, 1998. The decrease is primarily the result of interest expense
which the Company accrued on $13,500,000, 5% Senior Convertible Notes due
May 1, 2001 and amortization of deferred financing costs incurred in
obtaining the notes.
Based on the above, the Company sustained a net loss for the second fiscal
quarter of 1999 of $5,145,000, a 95% increase of the 1998 second fiscal
quarters loss of $2,636,000.
Six Months Ended January 31, 1999 vs. Six Months Ended January 31, 1998:
For the six months ended January 31, 1999, the Company recognized
$8,031,000 of research and development revenue compared to $5,124,000 for
the six months ended January 31, 1998. Research and development revenue
for the six months ending January 31, 1999 consisted of the recognition of
revenues from Ebbisham, Ltd. of approximately $5,230,000and research
funding payments from Lilly, Novartis and a pharmaceutical company for
which the Company performed a feasibility study. For the six months ended
January 31, 1998, contract revenue consisted of revenues from Ebbisham,
Ltd. of $2,874,000 and payments from Lilly and Novartis under their
respective research collaboration agreements.
Total operating expenses for the six month period ended January 31, 1999,
increased by approximately $5,664,000, or 51%, as compared to the six month
period ended January 31, 1998 The details of this increase are as follows:
11
Research and development costs increased by approximately $4,347,000, or
66%, for the six months ended January 31, 1999 as compared to the six
months ended January 31, 1998. This increase is mainly attributable to
increased personnel and laboratory supply costs in connection with the
collaborations with Lilly, Novartis and the ongoing clinical trials work
for heparin. The Company also experienced an increase in funding of
outside consultants and universities engaged to conduct studies to help
advance the Company's scientific research efforts, perform services related
to the manufacturing of the Company's carriers, and consult on the
Company's ongoing clinical studies with heparin. The Company also
experienced an increase in rent and operating expense in connection with a
new lease for laboratory space. The Company believes that this level of
research and development spending will continue for the foreseeable future
and may increase if operations are expanded.
The loss in Ebbisham Ltd., increased by approximately $518,000 or 24%, in
the six months ended January 31, 1999, as compared to the six months ended
January 31, 1998. This increase is attributable to the timing of costs
associated with ongoing clinical development of heparin. The costs
associated with Ebbisham may increase substantially depending upon the
agreed timing and scope of future research and development efforts.
General and administrative expense increased by approximately $799,000, or
36%, for the six months ended January 31, 1999, as compared to the six
months ended January 31, 1998. This increase is primarily the result of an
increase in personnel and related expenses associated with an increase in
administrative staff and support positions, of costs associated with the
ongoing computer consulting to improve the Company's information technology
systems and rent and operating expense in connection with a new lease of
office space. This was partially offset by a decrease in legal and
professional fees paid in connection with the application and issuance of
patents on the Company's technology.
As a result of these factors, the Company's operating loss for the six
months ended January 31, 1999 increased by $2,757,000, or 47%, as compared
to the quarter ended January 31, 1999. The Company does not expect to
generate an operating profit, and may possibly generate larger losses in
the foreseeable future.
The Company's other income and expense for the six months ended January 31,
1999 decreased by approximately $390,000 or 41%, compared to the six months
ended January 31, 1998. The decrease is primarily the result of interest
expense which the Company accrued on $13,500,000, 5% Senior Convertible
Notes due May 1, 2001 and amortization of deferred financing costs incurred
in obtaining the notes.
Based on the above, the Company sustained a net loss for the six months
ending January 31, 1999 of $8,125,000, a 63% increase over the net loss of
$4,978,000 sustained in the six months ending January 31, 1998.
Liquidity and Capital Resources
As of January 31, 1999, the Company had working capital of approximately
$23,651,000 as compared with approximately $31,457,000 at July, 31, 1998.
Cash and cash equivalents and marketable securities were $27,105,000 as of
January 31, 1999, as compared to approximately $34,828,000 at July 31,
1998. The decrease in the Company's cash and cash equivalents and
marketable securities was primarily due to cash used to fund operations in
the first half of fiscal 1999, partially offset by the exercise of options
and payments connected with the Company's agreements with Lilly and
Novartis.
The Company expects to continue to incur substantial research and
development expenses associated with the development of the Company's oral
drug delivery system. As a result of the ongoing research and development
efforts of the Company, management believes that the Company will continue
to incur operating losses and that, potentially, such losses could
increase. The Company expects to need substantial resources to continue
its research and development efforts. In addition, the Company is
obligated to fund one-half of Ebbisham's future cash needs upon the
Venture's request. The Company anticipates that its share of the funding
requirements will be $10,000,000 over the next twelve months. In August
1998, the Company's loaned Ebbisham Ltd. $5,000,000 to cover past costs
incurred by Ebbisham Ltd. The Company expects the research funding
received from Novartis to approximate the costs to be incurred by the
Company in connection with the development of each of the Company's
projects. The Company's research funding agreement with Lilly expired in
February 1999. Lilly's development agreement with Emisphere will continue
and Emisphere will receive predetermined payments as outlined in the Lilly
agreement, as milestones are achieved. Under present operating
assumptions, the Company expects that cash, cash equivalents and marketable
securities will be adequate to meet its liquidity and capital requirements
through fiscal 2000. Thereafter, the Company would need to seek additional
funds, primarily in the public and private equity markets and, to the
extent necessary and available, through debt financing. The Company has no
firm agreements with respect to any additional financing and there can be
12
no assurance that the Company would be able to obtain adequate funds on
acceptable terms. If adequate funds were not available, the Company would
be required to delay, scale back, or eliminate one or more of its research
and development programs, or obtain funds, if available, through
arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product
candidates, or products that the Company would not otherwise relinquish.
The Company does not maintain any credit lines with financial institutions.
Year 2000 Compliance
The "Year 2000" problem relates to many currently installed computers,
software, and other equipment that rely on embedded technology
(collectively, "Business Systems"). These Business Systems are not capable
of distinguishing 21st century dates for 20th century dates. As a result,
in less than one year, Business Systems used by many companies, in a very
wide variety of applications, will experience operating difficulties unless
they are modified, upgraded, or replaced to adequately process information
involving, related to or dependent upon the century change. If a Business
System used by the Company or a third party dealing with the Company fails
because of the inability of the Business System to properly read a 21st
century date, the results could have a material adverse effect on the
Company.
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 Business Systems failures and has
established a team to address Year 2000 risk. The team is reviewing the
Company's internal infrastructure and believes that it has identified
substantially all of the major Business Systems used in connection with its
internal operations. The Company has commenced the process of identifying
and correcting the major Business Systems that may need to be modified,
upgraded, or replaced, and expects to complete this process, along with
remedial actions before the end of fiscal 1999. Costs incurred to date to
correct Year 2000 problems have been immaterial. The Company estimates the
total cost to complete any required modifications, upgrades, or
replacements of affected Business Systems will not have a material impact
on the Company's business or results of operations. This estimate is
being monitored and will be revised, if necessary, as additional
information becomes available.
The Company also recognizes the risk that suppliers of products, services,
and collaborators with whom the Company transacts business on a worldwide
basis may not comply with Year 2000 requirements. The Company has
initiated formal communications with significant suppliers and
collaborators to determine the extent to which the Company is vulnerable if
these third parties fail to remediate their own Year 2000 issues. The
review is ongoing and the Company is unable to determine, at this time, the
probability that any material supplier or collaborator will not be able to
correct any Year 2000 problem in a timely manner. In the event any such
third parties cannot provide the Company with products, services, or
continue the collaborations with the Company, the Company's results of
operations could be materially adversely affected.
Based on the above, the Company has yet to develop a comprehensive
contingency plan with respect to the Year 2000 problem. The Company will
continue to monitor its own Business Systems and, to the extent possible,
evaluate the Business Systems of its third party suppliers and
collaborators to ensure progress on this critical matter. However, if the
Company identifies significant risk related to the Year 2000 compliance or
progress deviates from anticipated time lines, the Company will develop
contingency plans as deemed necessary at that time.
THE DISCUSSION OF THE COMPANY'S EFFORTS, ESTIMATES, AND CONCLUSIONS HEREIN
CONTAIN FORWARD-LOOKING STATEMENTS AND ARE BASED ON MANAGEMENT'S BEST
ESTIMATES OF FUTURE EVENTS. THE COMPANY'S ABILITY TO ACHIEVE YEAR 2000
COMPLIANCE AND THE LEVEL OF INCREMENTAL COSTS ASSOCIATED THEREWITH, COULD
BE ADVERSELY IMPACTED BY, AMONG OTHER THINGS, THE AVAILABILITY AND COST OF
MODIFICATIONS, OUR ABILITY TO DISCOVER AND CORRECT THE POTENTIAL YEAR 2000
PROBLEM, AND UNANTICIPATED PROBLEMS IDENTIFIED IN THE ONGOING COMPLIANCE
REVIEW.
13
Part II. OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on January 25, 1999.
The matters voted upon at the meeting were (i) the election of eight
directors of the Company, (ii) to approve and adopt an amendment to the
Company's Restated Certificate of Incorporation providing for an increase
in the number of shares of the Common Stock of the Company is authorized to
issue from 20,000,000 to 40,000,000 (iii) to approve and adopt amendments
to the Company's Restated Certificate of Incorporation providing for (a)
the classification of the Board of Directors into three classes to serve
staggered three-year terms, (b) the fixing of the number of directors
constituting the entire Board of Directors at a maximum of twelve and a
minimum of three, (c) the removal of directors only for cause and (d)
related matters (iv) to approve and adopt amendments to the Company's
Restated Certificate of Incorporation providing for the taking of any
action by the stockholders of the Corporation only at a meeting of
stockholders and not by written consent without a meeting and related
matters (v) to approve and adopt an amendment to the Company's 1991 Stock
Option Plan providing among other things for an increase in the maximum
number of shares of the Company's Common Stock available for issuance
thereunder by 300,000 (vi) to approve and adopt an amendment to the
Company's 1995 Non-Qualified Stock Option Plan providing among other things
for an increase in the maximum number of shares of the Company's Common
Stock available for issuance thereunder by 250,000 (vii) to ratify the Board
of Directors' selection of PricewaterhouseCoopers LLP to serve as the
Company's independent accountants for the fiscal year ending July 31, 1999.
The number of votes cast for and against or withheld with respect to each
matter voted upon at the meeting and the number of abstentions and broker
non-votes are as follows:
Votes
Withheld Broker
Votes For or Against Abstentions Non-votes
---------- ---------- ----------- ---------
Election of Directors:
Michael M. Goldberg, M.D. 9,958,256 629,826
Jere E. Goyan, Ph.D. 9,941,252 646,830
Peter Barton Hutt. 9,942,352 645,730
Sam J. Milstein, Ph.D. 9,906,828 681,254
Howard M. Pack 9,941,342 646,740
Mark I. Greene, M.D., Ph.D. 9,913,029 675,053
Joseph R. Robinson, Ph.D. 9,959,049 629,033
Amendment of the Company's
Restated Certificate of
Incorporation to increase
number of authorized shares 10,154,650 403,551 29,881
Amendment of the Company's
Restated Certificate of
Incorporation to provide a
staggered board and related
matters 5,609,568 1,064,632 366,432 3,547,450
Amendment of the Company's
Restated Certificate of
Incorporation to provide for
stockholder action only by
meeting and related matters 5,670,495 992,623 377,514 3,547,450
Amendment of the Company's
1991 Stock Option Plan as
amended 8,989,152 1,512,591 86,339
Amendment of the Company's
1995 Non-Qualified Stock
Option Plan 8,973,931 1,518,658 95,493
Ratification of the selection
of PricewaterhouseCoopers
LLP 10,443,770 130,162 14,150
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Registrant's Restated Certificate of Incorporation dated June 13,
1997, as amended by the Certificate of Amendment dated January
25, 1999
3(ii) Registrant's By-Laws, as amended December 7, 1998
27 Financial Data Schedule
(b) Reports
No reports on Form 8-K were filed by the Registrant during the quarter
ended January 31, 1999.
SIGNATURES
Pursuant to the requirement 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.
Emisphere Technologies, Inc.
Dated: March 16, 1999 by /s/Joseph D. Poveromo
----------------------------
Joseph D. Poveromo, C.P.A.
Controller (Principal Financial
and Accounting Officer)
15
Exhibit 3(i)
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
EMISPHERE TECHNOLOGIES, INC.
Under Section 242 of the General Corporation Law
The undersigned Secretary of Emisphere Technologies, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY that, in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware, the Board of Directors of said Corporation has duly
adopted a resolution setting forth the following amendment to the Corporation's
Restated Certificate of Incorporation, declaring its advisability and directing
that such amendment be considered at the next annual meeting of the
Corporation's stockholder and that a majority of the shares of the
Corporation's outstanding stock entitled to vote thereon has duly voted in
favor of such amendment:
RESOLVED that Article FOURTH and Article TENTH of the Corporation's
Certificate of Incorporation be amended to read in full as follows:
* * * *
FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is forty-one million (41,000,000),
consisting of 40,000,000 shares of common stock, $.01 par value per share
("Common Stock"), and 1,000,000 shares of preferred stock, $.01 par value
per share ("Preferred Stock").
* * * *
TENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further
provided:
(a) Number, Election and Terms of Office of Board of
Directors. The business of the Corporation shall be managed by a Board of
Directors consisting of not less than three nor more than twelve members,
the exact number of directors within such minimum and maximum limitations
to be fixed from time to time by resolution adopted by a majority of the
entire Board of Directors then in office, whether or not present at a
meeting. Directors need not be stockholders of the Corporation. The
directors shall be divided into three classes with the term of office of
the first class to expire at the first annual meeting of stockholders of
the Corporation next following the end of the Corporation's fiscal year
ending July 31, 1999, the term of office of the second class to expire at
the first annual meeting of stockholders of the Corporation next following
the end of the Corporation's fiscal year ending July 31, 2000 and the term
of office of the third class to expire at the annual meeting of
stockholders of the Corporation next following the end of the Corporation's
fiscal year ending July 31, 2001. At each annual meeting of stockholders
following such initial election as specified above, directors elected to
succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders
after their election.
(b) Adoption, Amendment and Repeal of By-Laws. The power to
adopt, amend or repeal by-laws of the Corporation shall be vested in the
Board of Directors; provided, however, that the stockholders of the
Corporation may adopt, amend or repeal by-laws of the Corporation upon the
affirmative vote of a majority of the stock outstanding and entitled to
vote thereon.
(c) Newly Created Directorships and Vacancies. Subject to
the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal
from office or other cause shall be filled by a majority vote of the
remaining directors then in office, although less than a quorum, or by a
sole remaining director and any director so chosen shall hold office for a
term expiring at the annual meeting of stockholders at which the term of
the class to which he or she has been elected expires or, in each case,
until his or her successor is duly elected and qualified. Except as may
otherwise be specified in the designations of rights of any series of
Preferred Stock then outstanding, no decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(d) Removal of Directors. The removal of a director may be
effected only for cause and only upon the affirmative vote of a majority of
the stock outstanding and entitled to vote for the election of directors.
(e) Action by Stockholders. Notwithstanding the provisions
of Section 228 of the General Corporation Law of the State of Delaware (or
any successor statute), any action required or permitted by such General
Corporation Law to be taken at any annual or special meeting of
stockholders of the Corporation shall be taken only at such an annual or
special meeting of stockholders and may not be taken by written consent
without a meeting. At any annual meeting or special meeting of
stockholders of the Corporation, only such business as has been brought
before such meeting in the manner provided by the by-laws of the
Corporation shall be conducted.
(f) Special Meetings of Stockholders. Special meetings of
stockholders of the Corporation may be called only by the Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer of the Corporation and shall be held at such place or places within
or without the State of Delaware as may be designated by the Board of
Directors or the person calling such meeting and stated in the notice
thereof.
2
(g) Amendments to this Article TENTH. Notwithstanding
anything in this Restated Certificate of Incorporation to the contrary, the
amendment of this Article TENTH shall require either (i) the affirmative
vote of a two-thirds majority of the stock outstanding and entitled to vote
or (ii) the unanimous approval of the Board of Directors of the Corporation
and a majority of the stock outstanding and entitled to vote.
IN WITNESS WHEREOF, this Certificate of Amendment to the Restated
Certificate of Incorporation is executed on behalf of the Corporation by its
Secretary this 25th day of January, 1999.
/s/ Joseph D. Poveromo
-----------------------
Joseph D. Poveromo
Secretary
3
RESTATED CERTIFICATE OF INCORPORATION
OF
EMISPHERE TECHNOLOGIES, INC.
Under Section 245 of the General Corporation Law
The undersigned President and Secretary of Emisphere Technologies, Inc.
(the "Corporation"), a corporation that was originally incorporated under the
name Clinical Technologies Associates, Inc., that had its original certificate
of incorporation filed with the Secretary of State of the State of Delaware on
July 21, 1986 and that is currently existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY that, in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and does not further amend the Corporation's certificate of
incorporation as heretofore amended or supplemented and that there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation:
FIRST: The name of the corporation (hereinafter sometimes called the
"Corporation") is Emisphere Technologies, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is United States
Corporation Company.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the Corporation, which shall be in addition to the authority of
the Corporation to conduct any lawful business, to promote any lawful purpose,
and to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware, is as
follows:
To acquire by purchase, subscription, contract or otherwise, and to
invest in, hold for investment or otherwise, to pledge and otherwise realize
upon and to sell, contract to sell and dispose of all forms of securities, real
and personal property, including, but not limited to, shares, stocks, bonds,
debentures, notes, warrant, rights, options, certificates of deposit,
mortgages, evidences of indebtedness, certificates of indebtedness and
certificates of interest issued or created, or to be issued or created in any
and all parts of the world by corporations, associations, partnerships,
trustees, syndicates, individuals, governments, states, municipalities and
other political and governmental divisions and subdivisions, or by any
combinations, organizations or entities whatsoever, irrespective of their form
or the name by which they may be described, and all trust, participation, and
other certificates of, and receipts evidencing interest in, any such
securities, to exercise any and all rights, powers and privileges of individual
ownership or interest in respect of any and all such securities, real and
personal property, and options or other evidences of interest, including the
right to vote thereon and to consent and otherwise act with respect thereto; to
operate and manage the business of any entity whose securities it holds, to do.
any and all acts and things for the preservation, protection, improvement and
enhancement in value of any and all such securities, or evidences of interest
therein.
To purchase, receive, taken by grant, gift, devise, bequest or otherwise,
lease or otherwise acquire, own, hold, improve, employ, use and otherwise deal
in and with real or personal property, or any interest therein; wherever
situated, and to sell, convey, lease, exchange, transfer or otherwise dispose
of, or mortgage or pledge, all or any of its property and assets, or any
interest therein, wherever situated.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase, or
otherwise handle, manage, operate, deal in and dispose of, real estate, real
property, lands, multiple-dwelling structures, houses, buildings and other
works and any interest or right therein; to take, lease, purchase or otherwise
acquire, and to own, use, hold, sell, convey, exchange, hire, lease, pledge,
mortgage, and otherwise handle, and deal in and dispose of, as principal,
agent, broker, and in any lawful capacity, such personal property, chattels,
chattels real, rights, easements, privileges, choses in action, notes, bonds,
mortgages and securities as may lawfully be acquired, held, or disposed of; and
to acquire, purchase, sell, assign, transfer, dispose of, and generally deal in
and with, as principal, agent, broker, and in any lawful capacity, mortgages
and other interests in real, personal, and mixed properties; to carry on a
general construction, contracting, building and realty management business as
principal, agent, representative, contractor, subcontractor, and in any other
lawful capacity.
To carry on a general mercantile, industrial, investing, and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter
into, negotiate, execute, acquire, and assign contracts in respect of acquire,
receive, grant and assign licensing arrangements, as principal, and as sales,
business, special, or general agent, representative broker, factor, merchant,
distributor, jobber, advisor, and in any other lawful capacity, goods, wares,
merchandise, commodities, and unimproved, furnished, processed, and other real,
personal, and mixed property of any and all kinds, together with the
components, resultants, and by-products thereof.
To apply for, register, obtain, purchase, lease, take licenses in respect
of, or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn
to account, grant licenses, franchises and immunities in respect of,
manufacture under and to introduce, sell, assign, mortgage, pledge or otherwise
dispose of, and, in any manner deal with and contract with reference to:
(i) inventions, devices, formulae, processes, and any improvements and
modifications thereof;
2
(ii) letters patent, patent rights, patented processes, copyrights,
designs and similar rights, trade-marks, trade names, trade symbols and
other indications of origin and ownership granted by or recognized under
the laws of the United States of America, the District of Columbia, any
state or subdivision thereof, and any commonwealth, territory,
possession, dependency, colony, agency or instrumentality of the United
States of America and of any foreign country, and all rights connected
therewith or appertaining thereunto;
(iii) franchises, licenses, grants and concessions.
To guarantee, purchase, take, receive, subscribe for, and otherwise
acquire, own, hold, use, and otherwise, employ, sell, lease, exchange,
transfer, and otherwise dispose of, mortgage, lend, pledge, and otherwise deal
in and with, securities (which term, for the purpose of this Article THIRD,
includes, without limitation of the generality thereof, any shares of stock,
bonds, debentures, notes, mortgages, other obligations, and any certificates,
receipts or other instruments representing rights to receive, purchase or
subscribe for the same, or representing any other rights or interests therein
or in any property or assets) of any persons, domestic and foreign firms,
associations, and corporations, and by any government or agency or
instrumentality thereof; to make payment therefor in any lawful manner; and,
while owner of any such securities, to exercise any and all rights, powers and
privileges in respect thereof, including the right to vote.
To make, enter into, perform and carry out contracts of every kind and
description with any person, firm, association, corporation or government or
agency or instrumentality thereof.
To acquire by purchase, exchange or otherwise, all, or any part of, or
any interest in, the properties, assets, business and good will of any one or
more persons, firms, associations or corporations heretofore or hereafter
engaged in any business for which a corporation may now or hereafter be
organized under the laws of the State of Delaware; to pay for the same in cash,
property or its own or other securities; to hold, operate, reorganize,
liquidate, sell or in any manner dispose of the whole or any part thereof; and
in connection therewith, to assume or guarantee performance liabilities,
obligations or contracts of such persons, firms, associations or corporations,
and to conduct the whole or in part of any business thus acquired.
To lend money in furtherance of its corporate purposes and to invest and
reinvest its funds from time to time to such extent, to such persons, firms,
associations, corporations, governments or agencies or instrumentalities
thereof, and on such terms and on such security, if any, as the Board of
Directors of the Corporation may determine.
To make contracts of guaranty and suretyship of all kinds and endorse or
guarantee the payment of principal, interest or dividends upon, and to
guarantee the performance of sinking fund or other obligations of, any
securities, and to guarantee in any way permitted by law the performance of any
of the contracts or other undertakings in which the Corporation may otherwise
be or become interested, of any persons, firm, association, corporation,
government or agency or instrumentality thereof, or of any other combination,
organization or entity whatsoever.
To borrow money without limit as to amount and at such rates of interest
as it may determine; from time to time to issue and sell its own securities,
including its shares of stock, notes, bonds, debentures, and other obligations,
in such amounts, on such terms and conditions, for such purposes and for such
prices, now or hereafter permitted by the laws of the State of Delaware and by
this Certificate of Incorporation, as the Board of Directors of the Corporation
may determine; and to secure any of its obligations by mortgage, pledge or
other encumbrance of all or any of its property, franchises and income.
3
To be a promoter or manager of other corporations of any type or kind;
and to participate with others in any corporation, partnership, limited
partnership, joint venture, or other association of any kind, or in any
transaction, undertaking or arrangement which the Corporation would have power
to conduct by itself, whether or not such participation involves sharing or
delegation of control with or to others.
To draw, make, accept, endorse, discount, execute, and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments and evidences of indebtedness whether
secured by mortgage or otherwise, as well as to secure the same by mortgage or
otherwise, so far as may be permitted by the laws of the State of Delaware.
To purchase, receive, take, reacquire or otherwise acquire, own and hold,
sell, lend, exchange, reissue, transfer or otherwise dispose of, pledge, use,
cancel, and otherwise deal in and with its own shares and other securities from
time to time to such an extent and in such manner and upon such terms as the
Board of Directors of the Corporation shall determine; provided that the
Corporation shall not use its funds or property for the purchase of its own
shares of capital stock when its capital is impaired or when such use would
cause any impairment of its capital, except to the extent permitted by law.
To organize, as an incorporator, or cause to be organized under the laws
of the State of Delaware, or of any other state of the United States of
America, or of the District of Columbia, or of any commonwealth, territory,
dependency, colony, possession, agency or instrumentality of the United States
of America, or of any foreign country, a corporation or corporations for the
purpose of conducting and promoting any business or purpose for which
corporations may be organized, and to dissolve, wind up, liquidate, merge or
consolidate any such corporation or corporations or to cause the same to be
dissolved, wound up, liquidated, merged or consolidated.
To conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within and
without the State of Delaware, in any and all States of the United States of
America, in the District of Columbia, and in any or all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United States of America and of foreign governments.
To promote and exercise all or any part of the foregoing purposes and
powers in any and all parts of the world, and to conduct its business in all or
any of its branches as principal, agent, broker, factor, contractor, and in any
other lawful capacity, either alone or through or in conjunction with any
corporations, associations, partnerships, firms, trustees, syndicates,
individuals, organizations, and other entities in any part of the world, and,
in conducting its business and promoting any of its purposes, to maintain
offices, branches and agencies in any part of the world, to make and perform
any contracts and to do any acts and things, and to carry on any business, and
to exercise any powers and privileges suitable, convenient, or proper for the
conduct, promotion, and attainment of any of the business and purposes herein
specified or which at any time may be incidental thereto or may appear
conducive to, or expedient for, the accomplishment of any of such business and
purposes and which might be engaged in or carried on by a corporation
incorporated or organized under the General Corporation Law of the State of
Delaware, and to have and exercise all of the powers conferred by the laws of
the State of Delaware upon corporations incorporated or organized under the
General Corporation Law of the State of Delaware.
4
The foregoing provisions of this Article THIRD shall be construed both as
purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers of the Corporation, and
the purposes and powers herein specified shall, except when otherwise provided
in this Article THIRD, be in no wise limited or restricted by reference to, or
interference from the terms of any provision of this Article of this
Certificate of Incorporation; provided, that the Corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within
the State of Delaware which, under the laws thereof, the Corporation may not
lawfully conduct, promote, or exercise.
FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is Twenty-One Million (21,000,000), consisting of
20,000,000 shares of common stock, $.01 par value per share, and 1,000,000
shares of preferred stock, $.01 par value per share.
FIFTH: The Board of Directors is hereby authorized to issue the
Preferred Stock in series, and to fix and determine the voting powers,
designate preferences, rights, qualifications and other terms of the Preferred
Stock pursuant to Section 151 of the Delaware General Corporation Law.
SIXTH: By resolution adopted by the Board of Directors of the
Corporation (hereinafter called the "Board of Directors" or the "Board") at a
meeting of the Board duly held on February 23, 1996, the Board of Directors has
created a series of Preferred Stock with the designation and number of shares
and the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Cumulative Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Junior Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"). The number of shares initially
constituting the Series A Preferred Stock shall be 200,000; provided,
however, that if more than a total of 200,000 shares of Series A Preferred
Stock shall be issuable upon the exercise of Rights (the "Right") issued
pursuant to the Rights Agreement dated as of February 23, 1996, between
the Corporation and Continental Stock Transfer & Trust Company, as Rights
Agent (the "Rights Agreement"), the Board of Directors of the Corporation,
pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware, shall direct by resolution or resolutions that a certificate be
properly executed, acknowledged, filed and recorded, in accordance with
the provisions of Section 103 thereof, providing for the total number of
shares of Series A Preferred Stock authorized to be issued to be increased
(to the extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights. Such number of shares may be
decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series A Preferred Stock to
a number less than the number of shares then outstanding plus the number
of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Preferred Stock.
5
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock, in preference to the holders of
Common Stock, par value $.01 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in
cash on the first day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof, and shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.
6
(D) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared,
paid or distributed, or set aside for payment or distribution, on the
Common Stock unless, in each case, the dividend required by this
Section 2 to be declared on the Series A Preferred Stock shall have
been declared.
(E) The holders of the shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock into
a greater or lesser number of shares of Common Stock), then in each
such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock,
or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
(C) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends
(whether or not consecutive) payable on any share or shares of Series A
Preferred Stock are in default, the number of directors constituting
the Board of Directors of the Corporation shall be increased by two.
In addition to voting together with the holders of Common Stock for the
election of other directors of the Corporation, the holders of record
of the Series A Preferred Stock, voting separately as a class to the
exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of
stockholders), unless all dividends in arrears have been paid or
declared and set apart for payment prior thereto, to vote for the
election of two directors of the Corporation, the holders of any Series
A Preferred Stock being entitled to cast that number of votes per share
of Series A Preferred Stock as specified in clause (A) of this Section
3. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall
have been so elected pursuant to the next preceding sentence may be
removed at any time, either with or without cause, only by the
affirmative vote of the holders of the shares of Series A Preferred
Stock at the time entitled to cast a majority of the votes entitled to
be cast for the election of any such director at a special meeting of
such holders called for that purpose, and any vacancy thereby created
may be filled by the vote of such holders. If and when such default
shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to
revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been
elected directors pursuant to said special voting rights shall
forthwith terminate, and the number of directors constituting the Board
of Directors shall be reduced by two. The voting rights granted by
this Section 3(C) shall be in addition to any other voting rights
granted to the holders of the Series A Preferred Stock in this Section
3.
7
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares
of stock ranking on a parity with the Series A Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
8
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a
series of Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to receive
an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series A Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash and/or any
property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event. In
the event both this Section 7 and Section 2 appear to apply to a
transaction, this Section 7 shall control.
9
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable; provided, however, that the Corporation may
purchase or otherwise acquire outstanding shares of Series A Preferred
Stock in the open market or by offer to any holder or holders of shares of
Series A Preferred Stock.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Corporation's Preferred Stock,
unless the Board of Directors shall specifically determine otherwise in
fixing the powers, preferences and relative, participating, optional and
other special rights of the shares of such series and the qualifications,
limitations and restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock shall
be issuable upon exercise of the Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is one one-
hundredths (1/100ths) of a share or any integral multiple of such fraction
which shall entitle the holder, in proportion to such holder's fractional
shares, to receive dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of holders of
Series A Preferred Stock. In lieu of fractional shares, the Corporation,
prior to the first issuance of a share or a fraction of a share of Series
A Preferred Stock, may elect (l) to make a cash payment as provided in the
Rights Agreement for fractions of a share other than one one-hundredths
(1/100ths) of a share or any integral multiple thereof or (2) to issue
depository receipts evidencing such authorized fraction of a share of
Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; provided that
such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are
entitled as holders of the Series A Preferred Stock.
Section 11. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock, voting together as a single class.
SEVENTH: No holder of any of the shares of the stock of the Corporation,
whether now or hereafter authorized and issued, shall be entitled as of right
to purchase or subscribe for (i) any unissued stock of any class, or (ii) any
additional shares of any class to be issued by reason of any increase in the
authorized capital stock of the Corporation of any class, or (iii) bonds,
certificates of indebtedness, debentures or other securities convertible into
stock of the Corporation, or carrying any right to purchase stock of any class,
but any such unissued stock or such additional authorized issue of any stock or
of other securities convertible into stock, or carrying any right to purchase
stock, may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporation or associations and upon such
terms as may be deemed advisable by the Board of Directors in the exercise of
its discretion.
10
EIGHTH: The Corporation is to have perpetual existence.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or
the stockholders or class of stockholders of the Corporation, as the case may
be to be summoned in such manner as the said court directs. If a majority in
number representing three-fourth in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
TENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
(a) The management of the business and the conduct of the affairs of the
Corporation, including the election of the Chairman of the Board of Directors,
if any, the President, the Treasurer, the Secretary, and other principal
officers of the Corporation, shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors shall
be fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have the
same meaning, to wit, the total number of directors which the Corporation would
have if there were no vacancies. No election of directors need be by written
ballot.
(b) The power to make, alter, or repeal the By-Laws, and to adopt any new
By-Law, except a By-Law classifying directors for election for staggered terms,
shall be vested in the Board of Directors.
(c) Whenever the Corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the Certificate of Incorporation shall entitle the holder thereof
to notice of, and the right to vote at, any meeting of stockholders, except as
the provisions of paragraph (c) (2) of Section 242 of the General Corporation
Law shall otherwise require.
(d) In lieu of taking any permissive or requisite action by vote at a
meeting of stockholders, any such vote and any such meeting may be dispensed
with if stockholders holding at least the minimum percentage of the votes
required to be cast to authorize any such action under the provisions of the
General Corporation Law shall consent in writing, setting forth the action so
taken, to any such corporate action being taken; provided, that prompt notice
be given to all stockholders entitled to vote on any such action who have not
consented in writing.
11
ELEVENTH: No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers or have a financial
interest, shall be void solely for this reason, or solely because the director
or officer is present at, or participates in, the meeting of the Board of
Directors or a committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such purpose, if:
(i) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the
contract or transaction by a vote sufficient for such purpose without
counting the vote of the interested director or directors; or
(ii) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(iii) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
TWELFTH: (a) The Corporation shall have power to indemnify 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 (other than an action by or in the right of the
Corporation) 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
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall have power to indemnify any person who was or
is party or is threatened to be made a party to any threatened pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor 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
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Corporation unless, and only to the extent that, the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
12
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (a) and (b). Such determination shall be
made (1) by the Board of Directors by a majority vote of a quorum consisting of
director who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the specific case upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any By-Law, 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 such office, and shall 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 a
person.
(g) The Corporation shall have 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 corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against and
incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
(h) The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph 7 of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as same
may be amended and supplemented.
13
THIRTEENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
FOURTEENTH: From time to time any of the provisions of this Certificate
of Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article FOURTEENTH.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation is
executed on behalf of the Corporation by its President and Secretary this 24th
day of June, 1997.
/s/ Sam J. Milstein
----------------------
Sam J. Milstein, Ph.D.
President, Chief Scientific
Officer and Secretary
14
Exhibit 3(ii)
EMISPHERE TECHNOLOGIES, INC.
BY-LAWS
ARTICLE ONE
STOCKHOLDERS
SECTION 1.1. Annual Meetings. An annual meeting of stockholders
to elect directors and transact such other business as may properly be
presented to the meeting shall be held each year on such date, at such time
and at such place, within or without the State of Delaware, as the Board of
Directors may from time to time determine.
SECTION 1.2. Special Meetings. A special meeting of
stockholders may be called at any time by the Board of Directors, the
Chairman of the Board or the Chief Executive Officer. Any such meeting
shall be held at such time and at such place, within or without the State
of Delaware, as shall be determined by the body or person calling such
meeting and as shall be stated in the notice of such meeting. At any
special meeting of stockholders, no business may be transacted other than
(i) such business stated in the notice thereof given pursuant to Section
1.3 hereof or (ii) such business as is related to the purpose or purposes
of such meeting and which is properly brought before the meeting by or at
the direction of the Board.
SECTION 1.3. Notice of Meeting. For each meeting of
stockholders written notice shall be given stating the place, date and hour
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called and, if the list of stockholders required by Section
1.9 is not to be at such place at least 10 days prior to the meeting, the
place where such list will be. Except as otherwise provided by Delaware
law, the written notice of any meeting shall be given not less than 10 or
more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed
to the stockholder at his address as it appears on the records of the
Corporation.
SECTION 1.4. Quorum. Except as otherwise required by Delaware
law or the Certificate of Incorporation, the holders of record of a
majority of the shares of stock entitled to be voted present in person or
represented by proxy at a meeting shall constitute a quorum for the
transaction of business at the meeting, but in the absence of a quorum the
holders of record present or represented by proxy at such meeting may vote
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is obtained. At any such
adjourned session of the meeting at which there shall be present or
represented the holders of record of the requisite number of shares, any
business may be transacted that might have been transacted at the meeting
as originally called.
SECTION 1.5. Conduct of the Meeting. (a) At each meeting of
stockholders the Chairman of the Board, or in his absence the President, or
in his absence the person designated in writing by the Chairman of the
Board, or if no person is so designated, then a person designated by the
Board of Directors, shall preside as chairman of the meeting; if no person
is so designated, then the meeting shall choose a chairman by plurality
vote. The Secretary, or in his absence a person designated by the chairman
of the meeting, shall act as secretary of the meeting.
(b) No person shall be eligible for election to the Board of
Directors at an annual or special meeting of stockholders of the
Corporation unless such person has been nominated (i) by or at the
direction of the Board, (ii) by a nominating committee or person appointed
by the Board or (iii) by a stockholder of record of the Corporation who is
entitled to vote for the election of directors and who has given the
Corporation timely written notice (the "Notice of Nomination") in
accordance with the provisions hereof. The Notice of Nomination shall set
forth (i) the name and record address of the stockholder proposing to make
the nominations, (ii) the class and number of shares of capital stock held
of record, held beneficially and represented by proxy held by such person
as of the record date for the meeting and as of the date of the Notice of
Nomination, (iii) all information regarding each nominee proposed by such
stockholder that would be required to be set forth in a definitive proxy
statement filed with the Securities and Exchange Commission pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended, or any
successor statute thereto (the "Exchange Act"), and the written consent of
each such nominee to serve if elected and (iv) all other information that
would be required to be filed with the Securities and Exchange Commission
if the person proposing such nominations were a participant in a
solicitation subject to Section 14 of the Exchange Act.
(c) No business shall be conducted at any annual meeting of
Stockholders unless such business is properly brought before the meeting
and no business shall be properly brought before a meeting unless such
business is (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board, (ii) otherwise properly
brought before the meeting by or at the direction of the Board or (iii)
specified in a timely written notice (the "Notice of Business") given by or
on behalf of a stockholder of record of the Corporation in accordance with
the provisions hereof. The Notice of Business shall set forth (i) the name
and record address of the stockholder proposing such business, (ii) the
class and number of shares of capital stock held of record, held
beneficially and represented by proxy held by such stockholder as of the
record date for the meeting and as of the date of such Notice of Business,
(iii) a brief description of the business such stockholder desires to bring
before the annual meeting and the reasons for conducting such business at
the annual meeting, (iv) any material interest such stockholder has in such
business and (v) all other information that would be required to be filed
with the Securities and Exchange Commission if the person proposing such
Stockholder business were a participant in a solicitation subject to
Section 14 of the Exchange Act.
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(d) The Notice of Nomination and the Notice of Business shall, in
order to meet the requirement of timeliness, be delivered to the
Corporation in person or, if mailed, received at the principal executive
offices of the Corporation addressed to the attention of the Secretary not
less than 30 days nor more than 60 days prior to the annual meeting or
special meeting of stockholders; provided, however, that, in the event that
notice of the meeting is first given or made to the stockholders of the
Corporation less than 40 days prior to the date of the meeting, the Notice
of Nomination or the Notice of Business, as the case may be, shall, in
order to meet the requirement of timeliness, be received no later than the
close of business on the tenth day following the earlier of (i) the date on
which such notice of the meeting is mailed or (ii) the date public
disclosure of the date of the meeting is first made. For purposes of the
foregoing, public disclosure shall be deemed to include any press release
reported by the Dow Jones News Services, Associated Press or comparable
national news service and any document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Sections 13, 14 or
15(d) of the Exchange Act.
(e) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that any proposals by a stockholder
for a nomination to the Board or for business to be conducted at the
meeting were not made in accordance with the foregoing procedures and, if
he should so determine, any such defective nomination shall be discarded
and any such defective proposal for business to be conducted shall be
stricken from the agenda for the meeting.
SECTION 1.6. Voting; Proxies. Except as otherwise provided by
Delaware law or the Certificate of Incorporation, and subject to the
provisions of Section 1.10:
(a) Each stockholder shall at every meeting of the stockholders be
entitled to one vote for each share of capital stock held by him.
(b) Each stockholder entitled to vote at a meeting of stockholders 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,
but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
(c) Directors shall be elected by a plurality vote.
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(d) Each matter, other than election of directors, properly presented
to any meeting shall be decided by a majority of the votes cast on the
matter.
(e) Election of directors and the vote on any other matter presented
to a meeting shall be by written ballot only if so ordered by the chairman
of the meeting or if so requested by any stockholder present or represented
by proxy at the meeting entitled to vote in such election or on such
matter, as the case may be.
SECTION 1.7. Adjourned Meetings. A meeting of stockholders may
be adjourned to another time or place by vote as provided in Section 1.4 or
1.6(d). Unless the Board of Directors fixes a new record date,
stockholders of record for an adjourned meeting shall be as originally
determined for the meeting from which the adjournment was taken. If the
adjournment is for more than 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 adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called.
SECTION 1.8. Consent of Stockholders in Lieu of Meeting. Any
action that may be taken at any annual or special meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if
a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted.
Notice of the taking of such action shall be given promptly to each
stockholder that would have been entitled to vote thereon at a meeting of
stockholders and that did not consent thereto in writing.
SECTION 1.9. List of Stockholders Entitled to Vote. At least 10
days before every meeting of stockholders a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical
order and showing the address of each stockholder and the number of shares
registered in the name of each stockholder, shall be prepared and shall be
open to the examination of any stockholder for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, at a place within the city where the meeting is to be
held. Such list shall be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any
stockholder who is present.
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SECTION 1.10. Fixing of Record Date. 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, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any 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
shall not be more than 60 or less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. If no record date
is fixed, 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; the record date for determining
stockholders entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is
expressed; and the record date for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the
resolution relating thereto.
ARTICLE TWO
DIRECTORS
SECTION 2.1. Number; Term of Office; Qualifications; Vacancies.
The number of directors that shall constitute the whole Board of Directors
shall be seven, which number may be changed from time to time as determined
by action of the Board of Directors taken by the affirmative vote of a
majority of the whole Board of Directors. Directors shall be elected at the
annual meeting of stockholders to hold office, subject to Sections 2.2 and
2.3, until the next annual meeting of stockholders and until their
respective successors are elected and qualified. Vacancies and newly
created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director, and the
directors so chosen shall hold office, subject to Sections 2.2 and 2.3,
until the next annual meeting of stockholders and until their respective
successors are elected and qualified.
SECTION 2.2. Resignation. Any director of the Corporation may
resign at any time by giving written notice of such resignation to the
Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take effect at
the time specified therein or, if no time be specified, upon receipt
thereof by the Board of Directors or one of the above-named officers; and
unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective. 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 as provided in these By-Laws in the
filling of other vacancies.
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SECTION 2.3. Removal. Any one or more directors may be removed,
with or without cause, by the vote or written consent of the holders of a
majority of the shares entitled to vote at an election of directors.
SECTION 2.4. Regular and Annual Meetings; Notice. Regular
meetings of the Board of Directors shall be held at such time and at such
place, within or without the State of Delaware, as the Board of Directors
may from time to time prescribe. No notice need be given of any regular
meeting, and a notice, if given, need not specify the purposes thereof. A
meeting of the Board of Directors may be held without notice immediately
after an annual meeting of stockholders at the same place as that at which
such meeting was held.
SECTION 2.5. Special Meetings; Notice. A special meeting of the
Board of Directors may be called at any time by the Board of Directors, its
Chairman, the Executive Committee, the President or any person acting in
the place of the President and shall be called by any one of them or by the
Secretary upon receipt of a written request to do so specifying the matter
or matters, appropriate for action at such a meeting, proposed to be
presented at the meeting and signed by at least two directors. Any such
meeting shall be held at such time and at such place, within or without the
State of Delaware, as shall be determined by the body or person calling
such meeting. Notice of such meeting stating the time and place thereof
shall be given (a) by deposit of the notice in the United States mail,
first class, postage prepaid, at least two days before the day fixed for
the meeting addressed to each director at his address as it appears on the
Corporation's records or at such other address as the director may have
furnished the Corporation for that purpose, or (b) by delivery of the
notice similarly addressed for dispatch by telegraph, cable or radio or by
delivery of the notice by telephone or in person, in each case at least 24
hours before the time fixed for the meeting.
SECTION 2.6. Chairman of the Board; Presiding Officer and
Secretary at Meetings. The Board of Directors may elect one of its members
to serve at its pleasure as Chairman of the Board. Each meeting of the
Board of Directors shall be presided over by the Chairman of the Board or
in his absence by the President, if a director, or if neither is present by
such member of the Board of Directors as shal1 be chosen at the meeting.
The Secretary, or in his absence an Assistant Secretary, shall act as
secretary of the meeting, or if no such officer is present, a secretary of
the meeting shall be designated by the person presiding over the meeting.
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SECTION 2.7. Quorum. A majority of the whole Board of Directors
shall constitute a quorum for the transaction of business, but in the
absence of a quorum a majority of those present (or if only one be present,
then that one) may adjourn the meeting, without notice other than
announcement at the meeting, until such time as a quorum is present.
Except as otherwise required by the Certificate of Incorporation or the By-
Laws, the vote of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
SECTION 2.8. Meeting by Telephone. Members of the Board of
Directors or of any committee thereof may participate in meetings of the
Board of Directors or of such committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 2.9. Action Without Meeting. Unless otherwise
restricted by the Certificate of Incorporation, 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 of such committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes
of proceedings of the Board of Directors or of such committee.
SECTION 2.10. Executive and Other Committees. The Board of
Directors may, by resolution passed by a majority of the whole Board of
Directors, designate an Executive Committee and one or more other
committees, each such committee to consist of one or more directors as the
Board of Directors may from time to time determine. Any such committee, to
the extent provided in such resolution or resolutions, 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, including the
power to authorize the seal of the Corporation to be affixed to all papers
that may require it but no such committee shall have such power of
authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or
amending the By-Laws; and unless the resolution shall expressly so provide,
no such committee shall have the power or authority to declare a dividend
or to authorize the issuance of stock. In the absence or disqualification
of a 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. Each such committee other than the Executive
Committee shall have such name as may be determined from time to time by
the Board of Directors.
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SECTION 2.11. Compensation. No director shall receive any
stated salary for his services as a director or as a member of a committee
but shall receive such sum, if any, as may from time to time be fixed by
the action of a majority of the directors.
ARTICLE THREE
OFFICERS
SECTION 3.1. Election; Qualification. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary and a Treasurer, each of whom shall be selected by
the Board of Directors. The Board of Directors may elect a Controller, one
or more Assistant Secretaries, one or more Assistant Treasurers, one or
more Assistant Controllers and such other officers as it may from time to
time determine. Two or more offices may be held by the same person. Other
than the Chairman of the Board and the President, no officer need be a
director.
SECTION 3.2. Term of Office. Each officer shall hold office
from the time of his election and qualification to the time at which his
successor is elected and qualified, unless he shall die or resign or shall
be removed pursuant to Section 3.4 at any time sooner.
SECTION 3.3. Resignation. Any officer of the Corporation may
resign at any time by giving written notice of such resignation to the
Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Any such resignation shall take effect at
the time specified therein or, if no time be specified, upon receipt
thereof by the Board of Directors or one of the above-named officers; and,
unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.4. Removal. Any officer may be removed at any time,
with or without cause, by the vote of two directors if there are three
directors or less, or the vote of a majority of the whole Board of
Directors if there are more than three directors.
SECTION 3.5. Vacancies. Any vacancy however caused in any
office of the Corporation may be filled by the Board of Directors.
SECTION 3.6. Compensation. The compensation of each officer
shall be such as the Board of Directors may from time to time determine.
SECTION 3.7 Chairman of the Board. The Chairman of the Board
shall be the chief executive officer of the Corporation and shall preside
at all meetings of the stockholders, the Board of Directors and the
Executive Committee, if any. He shall have general direction of the
affairs of the Corporation and shall perform such other duties as may be
assigned to him from time to time by the Board of Directors.
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SECTION 3.8. President. The President shall in the absence of
the Chairman of the Board preside at all meetings of the stockholders, the
Board of Directors and the Executive Committee, if any, and shall perform
all duties incident to the office of a president of a corporation, subject
however to the right of the Board of Directors to confer specified powers
on officers and subject generally to the direction of the Board of
Directors, the Chairman of the Board and the Executive Committee, if any.
SECTION 3.9. Vice President. Each Vice President shall have
such powers and duties as generally pertain to the office of Vice President
and as the Board of Directors, the Chairman of the Board or the President
may from time to time prescribe. During the absence of the President or
his inability to act, the Vice President, or if there shall be more than
one Vice President, then that one designated by the Board of Directors,
shall exercise the powers and shall perform the duties of the President,
subject to the direction of the Board of Directors and the Executive
Committee, if any.
SECTION 3.10. Secretary. The Secretary shall keep the minutes
of all meetings of stockholders and of the Board of Directors. He shall be
custodian of the corporate seal and shall affix it or cause it to be
affixed to such instruments as require such seal and attest the same and
shall exercise the powers and shall perform the duties incident to the
office of Secretary, subject to the direction of the Board of Directors and
the Executive Committee, if any.
SECTION 3.11. Other Officers. Each other officer of the
Corporation shall exercise the powers and shall perform the duties incident
to his office, subject to the direction of the Board of Directors and the
Executive Committee, if any.
ARTICLE FOUR
CAPITAL STOCK
SECTION 4.1. Stock Certificates. The interest of each holder of
stock of the Corporation shall be evidenced by a certificate or
certificates in such form as the Board of Directors may from time to time
prescribe. Each certificate shall be signed by or in the name of the
Corporation by the Chairman of the Board, the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures appearing on such
certificate or certificates may be a facsimile. If 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 by
the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
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SECTION 4.2. Transfer of Stock. Shares of stock shall be
transferable on the books of the Corporation pursuant to applicable law and
such rules and regulations as the Board of Directors shall from time to
time prescribe.
SECTION 4.3. Holders of Record. Prior to due presentment for
registration of transfer, the Corporation may treat the holder of record of
a share of its stock as the complete owner thereof exclusively entitled to
vote, to receive notifications and otherwise entitled to all the rights and
powers of a complete owner thereof, notwithstanding notice to the contrary.
SECTION 4.4. Lost, Stolen, Destroyed or Mutilated Certificates.
The Corporation shall issue a new certificate of stock to replace a
certificate theretofore issued by it alleged to have been lost, destroyed
or wrongfully taken, if the owner or his legal representative (i) requests
replacement, before the Corporation has notice that the stock certificate
has been acquired by a bona fide purchaser; (ii) files with the Corporation
a bond sufficient to indemnify the Corporation against any claim that may
be made against it on account of the alleged loss or destruction of any
such stock certificate or the issuance of any such new stock certificate;
and (iii) satisfies such other terms and conditions as the Board of
Directors may from time to time prescribe.
ARTICLE FIVE
MISCELLANEOUS
SECTION 5.1. Indemnity. (a) The Corporation shall indemnify,
subject to the requirements of subsection (d) of this Section, 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 (other than an action by or in
the right of the Corporation), 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 corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Corporation shall indemnify, subject to the
requirements of subsection (d) of this Section, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor 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 corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation and except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation
unless, and only to the extent that, the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of the Corporation, or a person serving in any other enterprise at
the request of the Corporation, has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsection (a) and (b) of this Section, or in defense of any claim, issue
or matter therein, the Corporation shall indemnify him against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
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(d) Any indemnification under subsections (a) and (b) of
this Section (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of this Section. Such determination shall
be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by a director, officer, employee or
agent in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the specific
case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Section.
(f) The indemnification and advancement of expenses provided
by or granted pursuant to the other subsections of this Section shall not
limit the Corporation from providing any other indemnification or
advancement of expenses permitted by law nor shall it be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any by-law, 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 such office.
(g) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under the provisions of this Section.
(h) The indemnification and advancement of expenses provided
by, or granted pursuant to this Section 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 a person.
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(i) For the purposes of this Section, references to "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, 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 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
(j) This Section 5.1 shall be construed to give the
Corporation the broadest power permissible by the Delaware General
Corporation Law, as it now stands and as it may hereafter be amended.
SECTION 5.2. Waiver of Notice. Whenever notice is required by
the Certificate of Incorporation, the By-Laws or any provision of the
General Corporation Law of the State of Delaware, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time
required for such notice, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the 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 is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders or of the Board of Directors or
committee thereof need be specified in any written waiver of notice.
SECTION 5.3. Fiscal Year. The fiscal year of the Corporation
shall start on August 1 of each year or such other date as the Board of
Directors shall from time to time prescribe.
SECTION 5.4. Corporate Seal. The corporate seal shall be in
such form as the Board of Directors may from time to time prescribe, and
the same may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
ARTICLE SIX
AMENDMENT OF BY-LAWS
SECTION 6.1. Amendment. The By-Laws may be altered, amended or
repealed by the stockholders or by the Board of Directors by a majority
vote.
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