Exhibit 3.1
BYLAWS
OF
QUALITY SYSTEMS, INC.
(a California corporation)
TABLE OF CONTENTS
ARTICLE I OFFICES...................................................1
Section 1. PRINCIPAL EXECUTIVE OFFICE................................1
Section 2. OTHER OFFICES.............................................1
ARTICLE II SHAREHOLDERS..............................................1
Section 1. PLACE OF MEETINGS.........................................1
Section 2. ANNUAL MEETING............................................1
Section 3. SPECIAL MEETING...........................................3
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS......................4
Section 5. QUORUM....................................................4
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF.....................5
Section 7. VOTING....................................................5
Section 8. RECORD DATE...............................................7
Section 9. CONSENT OF ABSENTEES......................................7
Section 10. ACTION WITHOUT MEETING....................................8
Section 11. PROXIES...................................................8
Section 12. INSPECTORS OF ELECTION....................................8
Section 13. CONDUCT OF MEETING........................................9
ARTICLE III DIRECTORS.................................................9
Section 1. POWERS....................................................9
Section 2. NUMBER OF DIRECTORS......................................10
Section 3. ELECTION AND TERM OF OFFICE..............................10
Section 4. VACANCIES................................................10
Section 5. PLACE OF MEETING.........................................11
Section 6. REGULAR MEETINGS.........................................11
Section 7. SPECIAL MEETINGS.........................................11
Section 8. QUORUM...................................................12
Section 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE........12
Section 10. WAIVER OF NOTICE.........................................12
Section 11. ADJOURNMENT..............................................12
Section 12. FEES AND COMPENSATION....................................12
Section 13. ACTION WITHOUT MEETING...................................12
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Section 14. RIGHTS OF INSPECTION.....................................12
Section 15. COMMITTEES...............................................13
ARTICLE IV OFFICERS.................................................13
Section 1. OFFICERS.................................................13
Section 2. ELECTION.................................................14
Section 3. SUBORDINATE OFFICERS.....................................14
Section 4. REMOVAL AND RESIGNATION..................................14
Section 5. VACANCIES................................................14
Section 6. CHAIRMAN OF THE BOARD....................................14
Section 7. PRESIDENT................................................14
Section 8. VICE PRESIDENTS..........................................15
Section 9. SECRETARY................................................15
Section 10. CHIEF FINANCIAL OFFICER..................................15
ARTICLE V OTHER PROVISIONS.........................................16
Section 1. INSPECTION OF CORPORATE RECORDS..........................16
Section 2. INSPECTION OF BYLAWS.....................................16
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS......................17
Section 4. CERTIFICATES OF STOCK....................................17
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS...........17
Section 6. STOCK PURCHASE PLANS.....................................18
Section 7. CONSTRUCTION AND DEFINITIONS.............................18
Section 8. AMENDMENTS...............................................18
ARTICLE VI INDEMNIFICATION..........................................18
Section 1. DEFINITIONS..............................................18
Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES..............19
Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION............................................19
Section 4. INDEMNIFICATION AGAINST EXPENSES.........................20
Section 5. REQUIRED DETERMINATIONS..................................20
Section 6. ADVANCE OF EXPENSES......................................20
Section 7. OTHER INDEMNIFICATION....................................20
Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED...................20
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Section 9. INSURANCE................................................21
Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT
PLANS..................................................21
Section 11. INDEMNIFICATION MANDATORY................................21
EXHIBIT A Corporate Governance Provisions..........................23
iii
BYLAWS
for the regulation, except
as otherwise provided by statute or
the Articles of Incorporation,
of
QUALITY SYSTEMS, INC.
(a California corporation)
ARTICLE I OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE.
The corporation's principal executive office is fixed and located at 17822 East
17th Street, Tustin, California 92680. The Board of Directors (herein called the
"Board") is granted full power and authority to change said principal executive
office from one location to another. Any such change shall be noted on the
Bylaws opposite this Section, or this Section may be amended to state the new
location.
Section 2. OTHER OFFICES.
Branch or subordinate offices may be established at any time by the Board at any
place or places.
ARTICLE II SHAREHOLDERS
Section 1. PLACE OF MEETINGS.
Meetings of shareholders shall be held either at the principal executive
office of the corporation or at any other place within or without the State of
California which may be designated either by the Board or by the written consent
of all persons entitled to vote thereat, given either before or after the
meeting and filed with the Secretary.
Section 2. ANNUAL MEETING.
(a) The annual meeting of shareholders shall be held each year on a
date and at a time designated by the board of directors. At each annual meeting,
directors shall be elected and any other proper business may be transacted.
(b) At an annual meeting of shareholders, only such business shall
be conducted, and only such proposals shall be acted upon, as shall have been
brought before the annual meeting by or at the direction of a majority of the
directors or by any shareholder of the
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corporation who complies with the notice procedures set forth in this Section
2(b). For a proposal to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
corporation not less than sixty (60) days nor more than one hundred twenty (120)
days prior to the scheduled annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that if less than seventy (70) days notice or prior public disclosure of the
date of the scheduled annual meeting is given or made, notice by the
shareholder, to be timely, must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A shareholder's notice to the secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting (i) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the corporation's
books, of the shareholder proposing such business and any other shareholders
known by such shareholder to be supporting such proposal, (iii) the class and
number of shares of the corporation's stock which are beneficially owned by the
shareholder on the date of such shareholder notice and by any other shareholders
known by such shareholder to be supporting such proposal on the date of such
shareholder notice, and (iv) any financial interest of the shareholder in such
proposal. The presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the shareholder proposal was made in
accordance with the terms of this Section 2(b). If the presiding officer
determines that a shareholder proposal was not made in accordance with the terms
of this Section 2(b), he or she shall so declare at the annual meeting and any
such proposal shall not be acted upon at the annual meeting. This provision
shall not prevent the consideration and approval or disapproval at the annual
meeting of reports of officers, directors and committees of the board of
directors, but, in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated, filed and received as herein
provided.
(c) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors. Nominations of persons
for election to the board of directors of the corporation may be made at a
meeting of shareholders by or at the direction of the board of directors, by any
nominating committee or person appointed by the board of directors or by any
shareholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
2(c). Such nominations, other than those made by or at the direction of the
board of directors, shall be made pursuant to timely notice in writing to the
secretary of the corporation. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
corporation not less than sixty (60) days nor more than one hundred twenty (120)
days prior to the scheduled annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date, provided, however,
that if less than seventy (70) days notice or prior public disclosure of the
date of the scheduled annual meeting is given or made, notice by the
shareholder, to be timely, must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A shareholder's notice to the secretary
shall set forth (i) as to each person whom the
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shareholder proposes to nominate for election or re-election as a director, (A)
the name, age, business address and residence address of the person, (B) the
principal occupation or employment of the person (C) the class and number of
shares of capital stock of the corporation which are beneficially owned by the
person and (D) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
applicable rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934, as amended, and (ii) as
to the shareholder giving the notice (A) the name and address, as they appear on
the corporation's books, of the shareholder and (B) the class and number of
shares of the corporation's stock which are beneficially owned by the
shareholder on the date of such shareholder notice. The corporation may require
any proposed nominee to furnish such other information as may reasonably be
required by the corporation to determine the eligibility of such proposed
nominee to serve as director of the corporation. The presiding officer of the
annual meeting shall determine and declare at the annual meeting whether the
nomination was made in accordance with the terms of the Section 2(c). If the
presiding officer determines that a nomination was not made in accordance with
the terms of this Section 2(c), he or she shall so declare at the annual meeting
and any such defective nomination shall be disregarded.
Section 3. SPECIAL MEETING.
(a) A special meeting of the shareholders may be called at any time
by the board of directors, or by the chairman of the board, or by the president,
or by one or more shareholders holding shares in the aggregate entitled to cast
not less than ten percent (10%) of the votes at that meeting.
(b) For a special meeting of shareholders to be properly called by
any person or persons other than the board of directors, the request must be in
writing, specifying the date and time of such meeting and the information set
forth in Section 3(c) hereof, and must be delivered to, or mailed and received
by, the chairman of the board, the president or the secretary of the corporation
not less than thirty-five (35) nor more than sixty (60) days prior to the date
requested for such meeting. The officer receiving the request shall cause notice
to be promptly given to the shareholders entitled to vote, in accordance with
the provisions of Sections 4 and 5 of this Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting. If the
notice is not given within twenty (20) days after receipt of the request, the
person or persons requesting the meeting may give the notice. Nothing contained
in this paragraph of this Section 3 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action of the board
of directors may be held.
(c) Any request for a special meeting submitted pursuant to Section
3(b) hereof shall set forth as to each matter the shareholder proposes to bring
before the special meeting (i) a brief description of the proposal desired to be
brought before the special meeting and the reasons for conducting such business
at the special meeting, (ii) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business and any other
shareholders known by such shareholder to be supporting such proposal, (iii) the
class and number of shares of the corporation's stock which are beneficially
owned by the shareholder on the date of such shareholder request and by any
other shareholders known by such shareholder to be supporting such proposal on
the date of such shareholder request, and (iv) any financial
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interest of the shareholder in such proposal. In addition to whatever other
limitations are imposed by applicable law, no person may be nominated for
election to the board of directors of the corporation by any of the person or
persons making a request for a special meeting pursuant to Section 3(b) hereof
unless the request sets forth as to each person whom the requesting person or
persons propose to nominate for election as a director, (A) the name, age,
business address and residence address of the person, (B) the principal
occupation or employment of the person, (C) the class and number of shares of
capital stock of the corporation which are beneficially owned by the person and
(D) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
applicable rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934, as amended.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS.
Written notice of each annual or special meeting of shareholders shall be
given not less than ten nor more than sixty days before the date of the meeting
to each shareholder entitled to vote thereat. Such notice shall state the place,
date and hour of the meeting and (a) in the case of a special meeting, the
general nature of the business to be transacted, and no other business may be
transacted, or (b) in the case of the annual meeting, those matters which the
Board, at the time of the mailing of the notice, intends to present for action
by the shareholders, but, subject to the provisions of applicable law, any
proper matter may be presented at the meeting for such action. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of the notice to be presented by the Board for election.
Notice of a shareholders' meeting shall be given either personally or by
mail or by other means of written communication, addressed to the shareholder at
the address of such shareholder appearing on the books of the corporation or
given by the shareholder to the corporation for the purpose of notice, or, if no
such address appears or is given, at the place where the principal executive
office of the corporation is located or by publication at least once in a
newspaper of general circulation in the county in which the principal executive
office is located. Notice by mail shall be deemed to have been given at the time
a written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient.
Section 5. QUORUM.
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at any meeting of shareholders. If a quorum is
present, the affirmative vote of a majority of the shares represented and voting
at the meeting (which shares voting affirmatively also constitute at least a
majority of the required quorum) shall be the act of the shareholders, unless
the vote of a greater number or voting by classes is required by law or by the
Articles, except as provided in the following sentence. The shareholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
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Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF.
Any shareholders' meeting, whether or not a quorum is present, may be
adjourned from time to time by the vote of a majority of the shares represented
either in person or by proxy, but in the absence of a quorum (except as provided
in Section 5 of this Article) no other business may be transacted at such
meeting.
It shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 7. VOTING.
The shareholders entitled to notice of any meeting or to vote at any such
meeting shall be only persons in whose name shares stand on the stock records of
the corporation on the record date determined in accordance with Section 8 of
this Article.
Subject to the following sentence and to the provisions of Section 708 of
the California General Corporation Law, every shareholder entitled to vote at
any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination.
Elections need not be by ballot; provided, however, that all elections for
directors must be by ballot upon demand made by a shareholder at the meeting and
before the voting begins.
In any election of directors, the candidates receiving the highest number
of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Voting shall in all cases be subject to the provisions of Chapter 7 of the
California General Corporation Law, and to the following provisions:
(a) Subject to clause (g), shares held by an administrator, executor,
guardian, conservator or custodian may be voted by such holder
either in person or by proxy, without a transfer of such shares into
the holder's name; and shares standing in the name of a trustee may
be voted by the trustee, either in person or
5
by proxy, but no trustee shall be entitled to vote shares held by
such trustee without a transfer of such shares into the trustee's
name.
(b) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may
be voted by such a receiver without the transfer thereof into the
receiver's name if authority to do so is contained in the order of
the court by which such receiver was appointed.
(c) Subject to the provisions of Section 705 of the California General
Corporation Law and except where otherwise agreed in writing between
the parties, a shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by
the minor, in person or by proxy, whether or not the corporation has
notice, actual or constructive, of the nonage, unless a guardian of
the minor's property has been appointed and written notice of such
appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder as the
bylaws of such other corporation may prescribe or, in the absence of
such provision, as the Board of Directors of such other corporation
may determine or, in the absence of such determination, by the
chairman of the board, president or any vice president of such other
corporation, or by any other person authorized to do so by the
chairman of the board, president or any vice president of such other
corporation. Shares which are purported to be voted or any proxy
purported to be executed in the name of a corporation (whether or
not any title of the person signing is indicated) shall be presumed
to be voted or the proxy executed in accordance with the provisions
of this clause, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and shares
of the issuing corporation held in a fiduciary capacity by any
subsidiary, shall not be entitled to vote on any matter, except to
the extent that the settler or beneficial owner possesses and
exercises a right to vote or to give the corporation binding
instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants
by the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise, or if two or more persons
(including proxyholders) have the same fiduciary relationship
respecting the same
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shares, unless the secretary of the corporation is given written
notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall
have the following effect:
i. If only one votes, such act binds all;
ii. If more than one vote, the act of the majority so voting
binds all;
iii. If more than one vote, but the vote is evenly split on
any particular matter, each faction may vote the
securities in question proportionately.
If the instrument so filed or the registration of the shares shows that
any such tenancy is held in unequal interests, a majority or even split for the
purpose of this section shall be a majority or even split in interest.
Section 8. RECORD DATE.
The Board may fix, in advance, a record date for the determination of the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution, or any allotment or rights, or to
exercise rights in respect of any other lawful action. The record date so fixed
shall be not more than 60 days nor less than 10 days prior to the date of the
meeting nor more than 60 days prior to any other action. When a record date is
so fixed, only shareholders of record on that date are entitled to notice of and
to vote at the meeting or to receive the dividend, distribution, or allotment of
rights, or to exercise of the rights, as the case may be, notwithstanding any
transfer of shares on the books of the corporation after the record date. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
Board fixes a new record date for the adjourned meeting. The Board shall fix a
new record date if the meeting is adjourned for more than 45 days.
If no record date is fixed by the Board, the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining shareholders for any purpose other than set forth in this
Section 8 or Section 10 of this Article shall be at the close of business on the
day on which the Board adopts the resolution relating thereto, or the sixtieth
day prior to the date of such other action, whichever is later.
Section 9. CONSENT OF ABSENTEES.
The transactions of any meeting of shareholders, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice, or
a consent to the holding of the meeting or an approval of the minutes thereof.
All such waivers,
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consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of and presence at such meeting, except when the
person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the California General Corporation Law to
be included in the notice but not so included, if such objection is expressly
made at the meeting. Neither the business to be transacted at nor the purpose of
any regular or special meeting of shareholders need be specified in any written
waiver of notice, consent to the holding of the meeting or approval of the
minutes thereof, except as provided in Section 601(f) of the California General
Corporation Law.
Section 10. ACTION WITHOUT MEETING.
Subject to Section 603 of the California General Corporation Law, any
action which, under any provision of the California General Corporation Law, may
be taken at any annual or special meeting of shareholders, may be taken without
a meeting and without prior notice if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares 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. Unless a record date for voting purposes be fixed as provided
in Section 8 of this Article, the record date for determining shareholders
entitled to give consent pursuant to this Section 10, when no prior action by
the Board has been taken, shall be the day on which the first written consent is
given.
Section 11. PROXIES.
Every person entitled to vote shares has the right to do so either in
person or by one or more persons authorized by a written proxy executed by such
shareholder and filed with the Secretary. Any proxy duly executed is not revoked
and continues in full force and effect until revoked by the person executing it
prior to the vote pursuant thereto. Such revocation may be effected either (i)
by a writing delivered to the Secretary of the Corporation stating that the
proxy is revoked, (ii) by a subsequent proxy executed by the person executing
the prior proxy and presented to the meeting, or (iii) by attendance at the
meeting and voting in person by the person executing the proxy; provided,
however, that no proxy shall be valid after the expiration of eleven months from
the date of its execution unless otherwise provided in the proxy.
Section 12. INSPECTORS OF ELECTION.
In advance of any meeting of shareholders, the Board may appoint
inspectors of election to act at such meeting and any adjournment thereof. If
inspectors of election be not so appointed, or if any persons so appointed fail
to appear or refuse to act, the chairman of any such meeting may, and on the
request of any shareholder or shareholder's proxy shall, make such appointment
at the meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or proxies,
the majority of shares present shall determine whether one or three inspectors
are to be appointed.
The duties of such inspectors shall be as prescribed by Section 707(b) of
the California General Corporation Law and shall include: determining the number
of shares outstanding and the voting power of each; determining the shares
represented at the meeting; determining the
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existence of a quorum; determining the authenticity, validity, and effect of
proxies; receiving votes, ballots or consents; hearing and determining all
challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining when the polls
shall close; determining the result; and doing such acts as may be proper to
conduct the election or vote with fairness to all shareholders. If there are
three inspectors of election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all.
Section 13. CONDUCT OF MEETING.
The President shall preside as chairman at all meetings of the
shareholders. The chairman shall conduct each such meeting in a businesslike and
fair manner, but shall not be obligated to follow any technical, formal or
parliamentary rules or principles of procedure. The chairman's rulings on
procedural matters shall be conclusive and binding on all shareholders, unless
at the time of a ruling a request for a vote is made to the shareholders holding
shares entitled to vote and which are represented in person or by proxy at the
meeting, in which case the decision of a majority of such shares shall be
conclusive and binding on all shareholders. Without limiting the generality of
the foregoing, the chairman shall have all of the powers usually vested in the
chairman of a meeting of shareholders.
ARTICLE III DIRECTORS
Section 1. POWERS.
Subject to limitations of the Articles, of these Bylaws and of the
California General Corporation Law relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board. The Board may delegate the management of the
day-to-day operation of the business of the corporation to a management company
or other person provided that the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised under the ultimate
direction of the Board. Without prejudice to such general powers, but subject to
the same limitations, it is hereby expressly declared that the Board shall have
the following powers in addition to the other powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents and employees of
the corporation, prescribe the powers and duties for them as may not
be inconsistent with law, the Articles or these Bylaws, fix their
compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor not
inconsistent with law, the Articles or these Bylaws, as the may deem
best.
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(c) To adopt, make and use a corporate seal, and to prescribe the forms
of certificates of stock, and to alter the form of such seal and of
such certificates from time to time as they may deem best.
(d) To authorize the issuance of shares of stock of the corporation from
time to time, upon such terms and for such consideration as may be
lawful.
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges, hypothecations or other evidences of debt
and securities therefor.
Section 2. NUMBER OF DIRECTORS.
The authorized number of directors shall be not less than five (5) nor
more than nine (9) until changed by amendment of the Articles or by a Bylaw duly
adopted by approval by approval of the outstanding shares. The exact number of
directors shall be fixed, within the limits specified, by amendment of the next
sentence duly adopted either by the Board or the shareholders. The exact number
of directors shall be seven (7) until changed as provided in this Section 2.
Section 3. ELECTION AND TERM OF OFFICE.
The directors shall be elected at each annual meeting of the shareholders,
but if any such meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meetings of shareholders held for
that purpose. Each director shall hold office until the next annual meeting and
until a successor had been elected and qualified.
Section 4. VACANCIES.
Any director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
Vacancies in the Board, except those existing as a result of a removal of
a director, may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director, and each director so elected
shall hold office until the next annual meeting and until such director's
successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case of
the death, resignation or removal of any director, or if the authorized number
of directors be increased, or if the shareholders fail, at any annual or special
meeting of shareholders at which any director or directors are elected, to elect
the full authorized number of directors to be voted for at that meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
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The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election by written
consent other than to fill a vacancy created by removal requires the consent of
a majority of the outstanding shares entitled to vote. Any such election by
written consent to fill a vacancy created by removal requires unanimous consent.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of the director's term of
office.
Section 5. PLACE OF MEETING.
Regular or special meetings of the Board shall be held at any place within
or without the State of California which had been designated from time to time
by the Board. In the absence of such designation, regular meetings shall be held
at the principal executive office of the corporation.
Section 6. REGULAR MEETINGS.
Immediately following each annual meeting of shareholders the Board shall
hold a regular meeting for the purpose of organization, election of officers and
the transaction of other business.
Other regular meetings of the Board shall be held without call on such
dates and at such times as may be fixed by the Board. Call and notice of all
regular meetings of the Board are hereby dispensed with.
Section 7. SPECIAL MEETINGS.
Special meetings of the Board for any purpose or purposes may be called at
any time by the Chairman of the Board, the President, any Vice President, the
Secretary or by any two directors.
Special meetings of the Board shall be held upon four days written notice
or forty-eight hours notice given personally or by telephone, telegraph, telex
or other similar means of communication. Any such notice shall be addressed or
delivered to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by the
director for purposes of notice or, if such address is not shown on such records
or is not readily ascertainable, at the place in which the meetings of the
directors are regularly held.
Notice my mail shall be deemed to have been given at the time a written
notice is deposited in the United States mails, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated, in person or by telephone or wireless, to the recipient or to a
person at the office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient.
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Section 8. QUORUM.
A majority of the authorized number of directors constitutes a quorum of
the Board for the transaction of business, except to adjourn as provided in
Section 11 of this Article. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board, unless a greater number be required by law
or by the Articles, except as provided in the next sentence. A meeting at which
a quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another.
Section 10. WAIVER OF NOTICE.
Notice of a meeting need not be given to any director who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 11. ADJOURNMENT.
A majority of the directors present, whether or not a quorum is present,
may adjourn any directors' meeting to another time and place. Notice of the time
and place of holding an adjourned meeting need not be given to absent directors
if the time and place be fixed at the meeting adjourned, except as provided in
the next sentence. If the meeting is adjourned for more than 24 hours, notice of
any adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of the
adjournment.
Section 12. FEES AND COMPENSATION.
Directors and members of committee may receive such compensation, if any,
for their services, and such reimbursement for expenses, as may be fixed or
determined by the Board.
Section 13. ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the Board may be taken
without a meeting if all members of the Board shall individually or collectively
consent in writing to such action. Such consent or consents shall have the same
effect as a unanimous vote of the Board and shall be filed with the minutes of
the proceedings of the Board.
Section 14. RIGHTS OF INSPECTION.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation and also of its subsidiary
corporations, domestic or foreign. Such inspection by a director may be made in
person or by agent or attorney and includes the right to copy and obtain
extracts.
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Section 15. COMMITTEES.
The Board may appoint one or more committees, each consisting of two or
more directors, and delegate to such committees any of the authority of the
Board except with respect to:
(a) The approval of any action for which the General Corporation Law
also requires shareholders' approval or approval of the outstanding
shares;
(b) The filling of vacancies in the Board or on any committee;
(c) The fixing of compensation of the directors for serving on the Board
or on any committee;
(d) The amendment or repeal of bylaws or the adoption of new bylaws;
(e) The amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the corporation except at a
rate or in a periodic amount or within a price range determined by
the Board; or
(g) The appointment of other committee of the Board or the members
thereof.
Any such committee must be designated, and the members or alternate
members thereof appointed, by resolution adopted by a majority of the authorized
number of directors and any such committee may be designated an Executive
Committee or by such other name as the Board shall specify. Alternate members of
a committee may replace any absent member at any meeting of the committee. The
Board shall have the power to prescribe the manner in which proceedings of any
such committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meetings and actions
of the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV OFFICERS
Section 1. OFFICERS.
The officers of the corporation shall be a President, a Secretary and a
Chief Financial Officer. The corporation may also have, at the discretion of the
Board, a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as may be elected or appointed in accordance with the provisions of Section 3 of
the Article.
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Section 2. ELECTION.
The officers of the corporation, except such officers as may be elected or
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen annually by, and shall serve at the pleasure of, the
Board, and shall hold their respective offices until their resignation, removal,
or other disqualification from service, or until their respective successors
shall be elected.
Section 3. SUBORDINATE OFFICERS.
The Board may elect, and may empower the President to appoint, such other
officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in these Bylaws or as the Board may from time to time determine.
Section 4. REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by the Board at
any time or, except in the case of an officer chosen by the Board, by any
officer upon whom such power of removal may be conferred by the Board. Any such
removal shall be without prejudice to the rights, if any, of the officer under
any contract of employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular election or appointment to such office.
Section 6. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if there shall be such an officer, shall, if
present, preside at all meetings of the Board and exercise and perform such
other powers and duties as may be from time to time assigned by the Board.
Section 7. PRESIDENT.
Subject to such powers, if any, as may be given by the Board to the
Chairman of the Board, if there be such an officer, the President is the general
manager and chief executive officer of the corporation and has, subject to the
control of the Board, general supervision, direction and control of the business
and officers of the corporation. The President shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, or if there
be none, at all meetings of the Board. The President has the general powers and
duties of management usually vested in the office of president and general
manager of a corporation and such other powers and duties as may be prescribed
by the Board.
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Section 8. VICE PRESIDENTS.
In the absence or disability of the President, the Vice Presidents in
order of their rank as fixed by the Board or, if not ranked, the Vice President
designated by the Board, shall perform all the duties of the President and, when
so acting, shall have all the powers of, and be subject to all the restrictions
upon, the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board.
Section 9. SECRETARY.
The Secretary shall keep or cause to be kept, at the principal executive
office and such other place as the Board may order, a book of minutes of all
meetings of shareholders, the Board and its committees, with the time and place
of holding, whether regular or special, and if special, how authorized, the
notice thereof given, the names of those present at Board and committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof. The Secretary shall keep, or cause to be kept, a
copy of the Bylaws of the corporation at the principal executive office or
business office in accordance with Section 213 of the California General
Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, if one
be appointed, a share register, or a duplicate share register, showing the names
of the shareholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board and any committees thereof required by these
Bylaws or by law to be given, shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board.
Section 10. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer of the corporation shall keep and maintain, or
cause to be kept and maintained, adequate and correct accounts of the properties
and business transactions of the corporation, and shall send or cause to be sent
to the shareholders of the corporation such financial statements and reports as
are by law or these Bylaws required to be sent to them. The books of account
shall at all times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the Board. The Chief Financial Officer shall disburse the funds
of the corporation as may be ordered by the Board, shall render to the President
and the directors, whenever they request it, an account of all transactions as
Chief Financial Officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as my be prescribed
by the Board.
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ARTICLE V OTHER PROVISIONS
Section 1. INSPECTION OF CORPORATE RECORDS.
(a) A shareholder or shareholders holding at least five percent in the
aggregate of the outstanding voting shares of the corporation or who
hold at least one percent of such voting shares and have filed a
Schedule 14B with the United States Securities and Exchange
Commission relating to the election of directors of the corporation
shall have an absolute right to do either or both of the following:
i. Inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours
upon five business days prior written demand upon the
corporation; or
ii. Obtain from the transfer agent, if any, for the
corporation, upon five business days prior written
demand and upon the tender of its usual charges for such
a list (the amount of which charges shall be stated to
the shareholder by the transfer agent upon request), a
list of the shareholders' names and addresses who are
entitled to vote for the election of directors and their
shareholdings, as of the most recent record date for
which it has been compiled or as of a date specified by
the shareholder subsequent to the date of demand.
(b) The record of shareholders shall also be open to inspection and
copying by any shareholder or holder of a voting trust certificate
at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's
interest as a shareholder or holder of a voting trust certificate.
(c) The accounting books and records and minutes of proceedings of the
shareholders and the Board and committees of the Board shall be open
to inspection upon written demand on the corporation of any
shareholder or holder of voting trust certificate at any reasonable
time during usual business hours, for a purpose reasonably related
to such holder's interests as a shareholder or as a holder of such
voting trust certificate.
(d) Any inspection and copying under this Article may be made in person
or by agent or attorney.
Section 2. INSPECTION OF BYLAWS.
The corporation shall keep in its principal executive office in the State
of California, or if its principal executive office is not in such State at its
principal business office in such State, the original or a copy of these Bylaws
as amended to date, which shall be open to inspection by shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is located outside the State of California and the corporation has
no principal business office in such state, it shall upon the written request of
any shareholder furnish to such shareholder a copy of these Bylaws as amended to
date.
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Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS.
Subject to provisions of applicable law, any note, mortgage, evidence of
indebtedness, contract, share certificate, conveyance or other instrument in
writing and any assignment or endorsements thereof executed or entered into
between the corporation and any other person, when signed by the Chairman of the
Board, the President or any Vice President and the Secretary, any Assistant
Secretary, the Chief Financial Officer or any Assistant Chief Financial Officer
of the corporation shall be valid and binding on the corporation in the absence
of actual knowledge on the part of the other person that the signing officers
had no authority to execute the same. Any such instruments may be signed by any
other person or persons and in such manner as from time to time shall be
determined by the Board, and, unless so authorized by the Board, no officer,
agent or employee shall have any power or authority to bind the corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or amount.
Section 4. CERTIFICATES OF STOCK.
Every holder of shares of the corporation shall be entitled to have a
certificate signed in the name of the corporation by the Chairman of the Board,
the President or a Vice President and by the Chief Financial Officer or an
Assistant Chief Financial Officer or the Secretary or an Assistant Secretary,
certifying the number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be 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 such person were an
officer, transfer agent or registrar at the date of issue.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board may provide; provided, however,
that on any certificate issued to represent any partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
Except as provided in this Section, no new certificate for shares shall be
issued in lieu of an old one unless the latter is surrendered and cancelled at
the same time. The Board may, however, if any certificate for shares is alleged
to have been lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The President or any other officer or officers authorized by the Board or
the President are each authorized to vote, represent and exercise on behalf of
the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officer.
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Section 6. STOCK PURCHASE PLANS.
The corporation may adopt and carry out a stock purchase plan or agreement
or stock option plan or agreement providing for the issue and sale for such
consideration as may be fixed of its unissued shares, or of issued shares
acquired or to be acquired, to one or more of the employees or directors of the
corporation or of a subsidiary or to a trustee on their behalf and for the
payment for such shares in installments or at one time, and may provide for
aiding any such persons in paying for such shares by compensation for services
rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment, an option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 7. CONSTRUCTION AND DEFINITIONS.
Unless the context otherwise requires, the general provisions, rules of
construction and definitions contained in the General Provisions of the
California Corporations Code and in the California General Corporation Law shall
govern the construction of these Bylaws.
Section 8. AMENDMENTS.
These Bylaws may be amended or repealed either by approval of the
outstanding shares (as defined in Section 152 of the California General
Corporation Law) or by the approval of the Board; provided, however, that after
the issuance of shares, a bylaw specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable number of directors or vice versa may be adopted only by approval of
the outstanding shares, and a bylaw reducing the fixed number or the minimum
number of directors to a number less than five shall be subject to the
provisions of Section 212 (a) of the California General Corporation Law.
ARTICLE VI IDEMNIFICATION
Section 1. DEFINITIONS.
For the purposes of this Article, "agent" means any person who is or was a
director, officer, employee or other agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
18
investigative; and "expenses" includes without limitation attorneys fees and any
expenses of establishing a right to indemnification under Sections 4 or 5 (c) of
this Article.
Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES.
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 proceeding (other than an action by
or in the right of the corporation to procure a judgment in its favor) by reason
of the fact that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with such proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was unlawful. The
termination of any 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 an manner which the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The corporation shall have the 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 by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
No indemnification shall be made under this Section 3:
(a) In respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation in the
performance of such person's duty to the corporation, unless and
only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstance of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall
determine;
(b) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.
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Section 4. INDEMNIFICATION AGAINST EXPENSES.
To the extent that an agent of the corporation has been successful on the
merits in defense of any proceeding referred to in Sections 2 or 3 of this
Article or in defense of any claim, issue or matter therein, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent in
connection therewith.
Section 5. REQUIRED DETERMINATIONS.
Except as provided in Section 4 of this Article, any indemnification under
this Article shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in Sections 2 or 3 of this Article, by:
(a) A majority vote of a quorum consisting of directors who are not
parties to such proceeding;
(b) Approval of the shareholders, with the shares owned by the person to
be indemnified not being entitled to vote thereon; or
(c) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not such application by the agent, attorney or other
person is opposed by the corporation.
Section 6. ADVANCE OF EXPENSES.
Expenses incurred in defending any proceeding may be advanced by the
corporation prior to the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is entitled to be indemnified as authorized
in this Article.
Section 7. OTHER INDEMNIFICATION.
No provision made by the corporation to indemnify its or its subsidiary's
directors or officers for the defense of any proceeding, whether contained in
the Articles, Bylaws, a resolution of shareholders or directors, an agreement or
otherwise, shall be valid unless consistent with this Article. Nothing contained
in this Article shall affect any right to indemnification to which persons other
than such directors and officers may be entitled by contract or otherwise.
Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED.
No indemnification or advance shall be made under this Article, except as
provided in Sections 4 or 5 (c), in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the Articles,
these Bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
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(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 9. INSURANCE.
The corporation shall have power to purchase and maintain insurance on
behalf of any agent of the corporation against any liability asserted against or
incurred by the agent in such capacity or arising out of the agent's status as
such whether or not the corporation would have the power to indemnify the agent
against such liability under the provisions of this Article.
Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT PLANS.
This Article does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article. The corporation shall have
power to indemnify such trustee, investment manager or other fiduciary to the
extent permitted by subdivision (f) of Section 207 of the California General
Corporation Law.
Section 11. INDEMNIFICATION MANDATORY.
The corporation shall indemnify each director, officer, employee or agent
of the corporation to the fullest extent that the corporation has power to
indemnify such persons under applicable provisions of California law and the
Articles of Incorporation of the corporation with respect to any matter which
might be subject to indemnification under this Article VI. Any repeal or
modification of the provisions of this Article VI shall not adversely affect any
rights or protections of any director, officer, employee or agent of the
corporation existing at the time of such repeal or modification.
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EXHIBIT A
Quality Systems, Inc.
Corporate Governance Provisions
(as made part of Bylaws)
1. At least a majority of the members of the board of directors (the "Board")
shall be independent directors as defined below.
An "independent director" means a person other than an officer or employee
of the Company or its subsidiaries or any other individual having a
relationship, which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
(a) a director who is, or at any time during the past three years was,
employed by the Company or by any parent or subsidiary of the
Company;
(b) a director who accepted or who has a family member (as defined
below) who accepted any payments from the Company or any parent or
subsidiary of the Company in excess of $60,000 during the current or
any of the past three fiscal years, other than the following:
(i) compensation for Board or Board committee service;
(ii) payments arising solely from investments in the Company's
securities;
(iii) compensation paid to a family member who is a
non-executive employee of the Company or a parent or
subsidiary of the Company;
(iv) benefits under a tax-qualified retirement plan, or
non-discretionary compensation; or
(v) loans permitted under Section 13(k) of the Exchange Act of
1934;
(c) a director who is a family member of an individual who is or at any
time during the past three years was, employed by the Company or by
any parent or subsidiary of the Company as an executive officer;
(d) a director who is, or has a family member who is, a partner in, or a
controlling shareholder or an executive officer of, any organization
to which the Company made, or from which the Company received,
payments for property or services in the current or any of the past
three fiscal years that exceed 5% of the recipient's consolidated
gross revenues for that year, or $200,000, whichever is more, other
than the following:
(i) payments arising solely from investments in the Company's
securities; or
(ii) payments under non-discretionary charitable contribution
matching programs;
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(e) a director of the Company who is, or has a family member who is,
employed as an executive officer of another entity where at any time
during the past three years any of the officers of the Company serve
on the compensation committee of such other entity; or
(f) a director who is, or has a family member who is, a current partner
of the Company's outside auditor, or was a partner or employee of
the Company's outside auditor who worked on the Company's audit at
any time during any of the past three years.
A "family member" for these purposes means a person's spouse, parents,
children and siblings, whether by blood, marriage or adoption, or anyone
residing in such person's home.
2. There shall be an Audit committee of the Board, composed entirely of
independent directors, which shall oversee the Company's financial reporting
process and internal controls, review compliance with laws and accounting
standards, recommend the appointment of public accountants, and provide a direct
channel of communication to the Board for public accountants, internal auditors
and finance officers.
3. There shall be a Nominating Committee of the Board, composed entirely of
independent directors, which shall be responsible for the evaluation and
nomination of Board members.
4. There shall be a Compensation Committee of the Board, composed entirely of
independent directors, which shall be responsible for (i) ensuring that senior
management will be accountable to the Board through the effective application of
compensation policies, and (ii) monitoring the effectiveness of both senior
management and the Board (including committees thereof). The Compensation
Committee shall establish compensation policies applicable to the Company's
executive officers. A fair summary of such policies and the relationship of
corporate performance to executive compensation, including the factors and
criteria upon which the Chief Executive Officer's compensation was based, shall
be disclosed to shareholders in the Company's proxy statement for the annual
meeting.
5. There shall be a Transaction Committee of the Board, composed entirely of
independent directors, which shall be responsible for reviewing all
related-party transactions involving the Company, and considering and making
recommendations to the full Board with respect to all proposals involving (i) a
change in control, or (ii) the purchase or sale of assets constituting more than
10% of the Company's total assets. Additionally, the Transaction Committee shall
be responsible for reviewing all transactions or proposed transactions that
trigger the Company's Shareholder Rights Plan, if any.
6. If at any time the Chairman of the Board shall be an executive officer of the
Company, or for any other reason shall not be an independent director, a
non-executive Lead Director shall be selected by the independent directors. The
Lead Director shall be one of the independent directors, shall be a member of
the Audit Committee and of the Executive Committee, if there is such a
committee, and shall be responsible for coordinating the activities of the
independent directors. He shall assist the Board in assuring compliance with
these corporate governance procedures and policies, and shall coordinate,
develop the agenda for, and moderate executive sessions of the Board's
independent directors. Such executive sessions shall be held
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immediately following each regular meeting of the Board, and may be held at
other times as designated by the Lead Director. The Lead Director shall approve,
in consultation with the other Independent Directors, the retention of
consultants who report directly to the Board. If at any time the Chairman of the
Board is one of the independent directors, then he or she shall perform the
duties of the Lead Director.
7. The foregoing provisions are adopted as part of the Bylaws of the Company and
cannot be amended or repealed without either (a) approval by the shareholders of
the Company, or (b) approval by a two-thirds majority of all the authorized
number of directors of the Company including two-thirds of the independent
directors, and cannot be amended or repealed prior to the 1999 Annual Meeting of
the Company. Any inconsistent provisions of the Bylaws are hereby modified to be
consistent with these provisions. The foregoing provisions, insofar as they
establish eligibility to serve as a director or as a committee member, shall not
have the effect of removing any director or committee member from office but
shall be given effect at the next election of directors and the next selection
of committee members, as the case may be, in calendar year 1999 and thereafter.
The foregoing provisions shall not be construed to limit or restrict the
effective exercise of statutory cumulative voting rights by any shareholder, but
the Nominating Committee shall not nominate candidates for election to the Board
except as may be consistent with such provisions, and no corporate funds may be
expended for the solicitation of proxies which are inconsistent with the
foregoing provisions.
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