-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JGkV6XfoYchKsfG+Bd9oM/JFGCn7dK7N9XJ3rSGuCL/pOH8Xgqy1FfyYrOvO6u0L guXdaZINHOQ25Jft0rbz9A== 0000950135-99-005187.txt : 19991115 0000950135-99-005187.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950135-99-005187 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HPSC INC CENTRAL INDEX KEY: 0000718909 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE LESSORS [6172] IRS NUMBER: 042560004 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11618 FILM NUMBER: 99748634 BUSINESS ADDRESS: STREET 1: 60 STATE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6167203600 MAIL ADDRESS: STREET 1: 60 STATE ST CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 HPSC, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-11618 HPSC, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2560004 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 60 STATE STREET, BOSTON, MASSACHUSETTS 02109 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 720-3600 NONE (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 filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: COMMON STOCK, PAR VALUE $.01 PER SHARE. SHARES OUTSTANDING AT NOVEMBER 2, 1999, 4,187,530. ================================================================================ 2 HPSC, INC. INDEX
PAGE ---- PART I -- FINANCIAL INFORMATION Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998............................................................. 3 Condensed Consolidated Statements of Income for Each of the Three and Nine Months Ended September 30, 1999 and September 30, 1998............... 4 Condensed Consolidated Statements of Cash Flows for Each of the Nine Months Ended September 30, 1999 and September 30, 1998................... 5 Notes to Condensed Consolidated Financial Statements.......................... 6 Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 9 PART II -- OTHER INFORMATION Other Information............................................................. 13 Signatures.................................................................... 13
2 3 HPSC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share and share amounts)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS CASH AND CASH EQUIVALENTS ...................................................... $ 2,822 $ 4,583 RESTRICTED CASH ................................................................ 13,494 9,588 INVESTMENT IN LEASES AND NOTES: Lease contracts and notes receivable due in installments .................. 346,216 293,211 Notes receivable .......................................................... 39,705 35,863 Retained interest in leases and notes sold ................................ 15,343 14,500 Estimated residual value of equipment at end of lease term ................ 17,598 14,830 Less unearned income ...................................................... (83,925) (73,019) Less allowance for losses ................................................. (8,710) (7,350) Less security deposits .................................................... (6,792) (6,756) Deferred origination costs ................................................ 7,648 6,696 -------- --------- Net investment in leases and notes ............................................. 327,083 277,975 -------- --------- OTHER ASSETS: Other assets .............................................................. 6,057 5,682 Refundable income taxes ................................................... 417 774 -------- --------- TOTAL ASSETS ................................................................... $349,873 $ 298,602 ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY REVOLVING CREDIT BORROWINGS .................................................... $ 58,000 $ 49,000 SENIOR NOTES ................................................................... 213,709 174,541 SENIOR SUBORDINATED NOTES ...................................................... 20,000 20,000 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ....................................... 7,662 7,030 ACCRUED INTEREST ............................................................... 773 1,285 INCOME TAXES: Currently payable ......................................................... 67 84 Deferred .................................................................. 10,144 9,096 -------- --------- TOTAL LIABILITIES .............................................................. 310,355 261,036 -------- --------- STOCKHOLDERS' EQUITY: PREFERRED STOCK, $1.00 par value; authorized 5,000,000 shares; issued - None .................................................................... -- -- COMMON STOCK, $.01 par value; 15,000,000 shares authorized; issued and outstanding 4,680,030 shares in 1999 and 4,618,530 in 1998............. 47 46 Additional paid-in capital ................................................ 14,006 12,941 Retained earnings ......................................................... 30,420 28,448 Less: Treasury Stock (at cost) 492,500 shares in 1999 and 368,000 in 1998.... (3,360) (2,230) Deferred compensation ..................................................... (1,131) (1,141) Notes receivable from officers and employees .............................. (464) (498) -------- --------- TOTAL STOCKHOLDERS' EQUITY ..................................................... 39,518 37,566 -------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................... $349,873 $ 298,602 ======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 4 HPSC, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- ------------ ------------- ------------- REVENUES: Earned income on leases and notes.................. $ 10,190 $ 8,890 $ 29,028 $ 24,417 Gain on sales of leases and notes.................. 1,573 934 3,625 2,684 Provision for losses............................... (1,147) (1,106) (2,930) (2,372) ----------- ----------- ----------- ----------- Net Revenues............................................ 10,616 8,718 29,723 24,729 ---------- ---------- ---------- ---------- EXPENSES: Selling, general and administrative................ 4,743 3,881 13,372 11,082 Interest expense................................... 4,793 4,016 13,368 11,328 Interest income.................................... (155) (128) (361) (196) ----------- ----------- ----------- ----------- Net operating expenses.................................. 9,381 7,769 26,379 22,214 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES.............................. 1,235 949 3,344 2,515 ---------- ---------- ---------- ---------- PROVISION FOR INCOME TAXES: Federal, Foreign and State: Current....................................... 93 34 236 90 Deferred...................................... 412 380 1,047 1,017 Additional paid-in capital from exercise of non-qualified stock options............. -- -- 89 -- ---------- ---------- ---------- ---------- TOTAL INCOME TAXES...................................... 505 414 1,372 1,107 ---------- ---------- ---------- ---------- NET INCOME.............................................. $ 730 $ 535 $ 1,972 $ 1,408 ========== ========== ========== ========== BASIC NET INCOME PER SHARE.............................. $ 0.19 $ 0.14 $ 0.52 $ 0.38 ========== ========== ========== ========== SHARES USED TO COMPUTE BASIC NET INCOME PER SHARE........................................ 3,770,851 3,769,284 3,771,684 3,713,173 DILUTED NET INCOME PER SHARE............................ $ 0.16 $ 0.12 $ 0.45 $ 0.34 ========== ========== ========== ========== SHARES USED TO COMPUTE DILUTED NET INCOME PER SHARE.................................... 4,493,815 4,407,825 4,426,176 4,163,257
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 5 HPSC, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998 (IN THOUSANDS) (UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30, 1999 1998 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income .............................................................. $ 1,972 $ 1,408 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ........................................... 3,646 3,082 Deferred income taxes ................................................... 1,048 1,017 Restricted stock and option compensation ................................ 611 1,062 Gain on sales of lease contracts and notes receivable ................... (3,625) (2,684) Provision for losses on lease contracts and notes receivable ............ 2,930 2,372 Decrease in accrued interest ............................................ (512) (593) Increase (decrease) in accounts payable and accrued liabilities............................................................. 1,220 (1,669) Decrease in accrued income taxes ........................................ (17) (66) Decrease in refundable income taxes ..................................... 357 2,431 Decrease in other assets ................................................ 61 209 --------- --------- Cash provided by operating activities ........................................ 7,691 6,569 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Origination of lease contracts and notes receivable due in installments ........................................................... (146,291) (119,294) Portfolio receipts, net of amounts included in income ................... 52,548 43,732 Proceeds from sales of lease contracts and notes receivable due in installments .................................................... 37,606 21,377 Net increase in notes receivable ........................................ (3,936) (284) Net increase in security deposits ....................................... 36 728 Net increase in other assets ............................................ (654) (425) Net (increase) decrease in loans to employees ........................... 34 (145) --------- --------- Cash (used in) investing activities .......................................... (60,657) (54,311) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of senior notes ............................................... (56,091) (36,488) Proceeds from issuance of senior notes, net of debt issue costs .................................................................. 95,259 90,048 Net proceeds (repayments) of revolving credit borrowings ................ 9,000 (5,000) Purchase of treasury stock .............................................. (1,130) (673) Increase in restricted cash ............................................. 3,906 1,589 Repayment of employee stock ownership plan promissory note .............. 105 105 Exercise of employee stock options ...................................... 156 315 --------- --------- Cash provided by financing activities ........................................ 51,205 49,896 --------- --------- Net increase (decrease) in cash and cash equivalents ......................... (1,761) 2,154 Cash and cash equivalents at beginning of period ............................. 4,583 2,137 --------- --------- Cash and cash equivalents at end of period ................................... $ 2,822 $ 4,291 ========= ========= Supplemental disclosures of cash flow information: Interest paid ........................................................... $ 13,532 $ 11,544 Income taxes paid ....................................................... 148 45
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 6 HPSC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The information presented for the interim periods is unaudited, but includes all adjustments (consisting only of normal recurring adjustments) which, in the opinion of HPSC, Inc. (the "Company"), are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of results to be expected for the full fiscal year. Certain 1998 account balances have been reclassified to conform with 1999 presentation. Such financial statements have been prepared in accordance with the instructions of Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations. As a result, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's latest annual report on Form 10-K. 2. The Company computes and presents its earnings per share data in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". The Company's basic net income per share calculation is based on the weighted average number of common shares outstanding, which does not include unallocated shares under the Company's Employee Stock Ownership Plan, Supplemental Employee Stock Ownership Plan, restricted shares issued under the Company's Incentive Stock Plans, treasury stock, or any shares issuable upon the exercise of outstanding stock options. Diluted net income per share includes the weighted average number of stock options and contingently issuable restricted shares under the Company's Incentive Stock Plans outstanding as calculated under the treasury stock method, but not unallocated shares under the Company's ESOP and SESOP. 3. In February 1999, the Company extended certain 5-year options which were scheduled to expire. As a result, the Company recognized additional compensation expense of $68,000 in the nine months ended September 30, 1999. 4. Due to increases in the Company's stock price in July and August 1999, vesting events occurred with respect to restricted shares issued under the 1995 Incentive Stock Plan. The Company consequently recognized additional compensation expense of $297,000 during the quarter ended September 30, 1999. 5. Pursuant to the terms of the HPSC Bravo Funding Corp. ("Bravo") revolving credit facility, as amended, Bravo had $51,490,000 outstanding from sales of receivables and Senior Notes outstanding of $109,070,000 at September 30, 1999. Bravo incurs interest at various rates in the commercial paper market and enters into interest rate swap agreements to assure fixed rate funding. At September 30, 1999, Bravo had 36 separate interest rate swap contracts with BankBoston with a total notional value of $158,055,000. These interest rate swaps are matched swaps, and as such, are accounted for using settlement accounting. Monthly cash settlements on the swap agreements are recognized in income as they accrue. In the case where the notional value of the interest rate swap agreements significantly exceeds the outstanding underlying debt, the excess swap agreements would be marked-to-market through income until new borrowings are incurred which would be subject to such swap agreements. All interest rate swap agreements entered into by the Company are for other than trading purposes. 6. In April 1999, the HPSC Capital Funding, Inc. ("Capital") revolving credit facility was renewed on the same terms and conditions, providing available borrowings up to $125,000,000. Pursuant to the terms of the Lease Receivable Purchase Agreement, as amended, Capital had $31,132,000 outstanding from sales of receivables and Senior Notes outstanding of $92,941,000 at September 30, 1999, and in connection with this facility had 19 separate interest rate swap agreements with BankBoston with a total notional value of $116,571,000. These interest rate swaps are matched swaps, and as such, are accounted for using settlement accounting. Monthly cash settlements on the swap agreements are recognized in income as they accrue. In the case where the notional value of the interest rate swap agreements significantly exceeds the outstanding underlying debt, the excess swap agreements would be marked-to-market through income until new borrowings are incurred which would be subject to such swap agreements. All interest rate swap agreements entered into by the Company are for other than trading purposes. 7. On September 30, 1999, the Company had restricted cash of $7,217,000 under the Bravo facility and $6,277,000 under the Capital facility. All such restricted cash is reserved for debt service. 6 7 8. In May 1999, the amended Revolving Loan Agreement with BankBoston as Managing Agent (the "Revolving Loan Agreement") was renewed on substantially the same terms and conditions through May 2000, providing availability to the Company of up to $90,000,000. 9. In March 1999, the Company entered into an additional secured, fixed rate, fixed term loan agreement with Springfield Institution for Savings. The Company borrowed $5,011,000 under that agreement, subject to certain recourse and performance covenants. 10. In April 1999, the Company entered into a secured, fixed rate, fixed term loan agreement with Cambridge Savings Bank. The Company borrowed $5,861,000 under that agreement, subject to certain recourse and performance covenants. 11. The Financial Accounting Standards Board ("FASB") has issued SFAS No. 130, "Reporting Comprehensive Income". This statement, adopted January 1, 1998, establishes standards for reporting and presenting comprehensive income and its components. Comprehensive income equals net income for each of the nine month periods ended September 30, 1999 and September 30, 1998. 12. A summary of information about the Company's operations by segment for each of the three and nine month periods ended September 30, 1999 and 1998 is as follows:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- ---------------------------------- COMMERCIAL COMMERCIAL LICENSED AND LICENSED AND (in thousands) PROFESSIONAL INDUSTRIAL PROFESSIONAL INDUSTRIAL FINANCING FINANCING TOTAL FINANCING FINANCING TOTAL ------------ ---------- ----- ------------ ---------- ----- 1999 - ---- Earned income on leases and notes .......... $ 8,992 $ 1,198 $ 10,190 $ 25,552 $ 3,476 $ 29,028 Gain on sales of leases and notes .......... 1,573 -- 1,573 3,625 -- 3,625 Provision for losses ....................... (1,106) (41) (1,147) (2,847) (83) (2,930) Selling, general and administrative expenses (4,350) (393) (4,743) (12,158) (1,214) (13,372) --------- --------- --------- --------- --------- --------- Net profit contribution .................... 5,109 764 5,873 14,172 2,179 16,351 Total assets ............................... 313,272 36,601 349,873 1998 - ---- Earned income on leases and notes .......... 7,654 1,236 8,890 20,707 3,710 24,417 Gain on sales of leases and notes .......... 934 -- 934 2,684 -- 2,684 Provision for losses ....................... (1,080) (26) (1,106) (2,271) (101) (2,372) Selling, general and administrative expenses (3,476) (405) (3,881) (9,912) (1,170) (11,082) --------- --------- --------- --------- --------- --------- Net profit contribution .................... 4,032 805 4,837 11,208 2,439 13,647 Total assets ............................... 248,783 33,615 282,398
The following reconciles net segment profit contribution as reported above to total consolidated income before income taxes:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- (in thousands) 1999 1998 1999 1998 ---- ---- ---- ---- Net segment profit contribution...... $ 5,873 $ 4,837 $ 16,351 $ 13,647 Interest expense .................... (4,793) (4,016) (13,368) (11,328) Interest income on cash balances..... 155 128 361 196 -------- -------- -------- -------- Income before income taxes .......... $ 1,235 $ 949 $ 3,344 $ 2,515
Other Segment Information - The Company derives substantially all of its revenues from domestic customers. As of September 30, 1999, no single customer within the licensed professional financing segment accounted for greater than 1% of the total owned and serviced portfolio of that segment. Within the commercial and industrial financing segment, no single customer accounted for greater than 18% of the total portfolio of that segment. The licensed professional financing segment relies on certain vendors to provide 7 8 referrals to the Company. For the nine months ended September 30, 1999, no one vendor accounted for greater than 9% of the Company's licensed professional financing originations. 13. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued. This Statement establishes new accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement will be effective for the first quarter of the Company's year ended December 31, 2001. The Company is evaluating the impact of this statement on its consolidated results of operations. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Earned income from leases and notes for the three months ended September 30, 1999 was $10,190,000 (including approximately $1,198,000 from the Company's commercial lending subsidiary, American Commercial Finance Corporation ("ACFC")) as compared to $8,890,000 (including approximately $1,236,000 from ACFC) for the three months ended September 30, 1998. Earned income for the nine months ended September 30, 1999 was $29,028,000 (including approximately $3,476,000 from ACFC) compared to $24,417,000 (including approximately $3,710,000 from ACFC) for the comparable period in 1998. The increase of 15% for the three month period and 19% for the nine month period was due principally to increases in net investment in leases and notes in 1999 over 1998. The increase in net investment in both periods resulted in part from a higher level of originations of $61,013,000 for the third quarter of 1999 compared to $48,367,000 for the same period in 1998 and $151,100,000 for the nine months ended September 30, 1999 compared to $129,370,000 for the same period in 1998. Gains on sales of leases and notes were $1,573,000 in the three months ended September 30, 1999 compared to $934,000 for the quarter ended September 30, 1998. For the nine months ended September 30, 1999, gains on sales of leases and notes were $3,625,000 compared to $2,684,000 for the nine months ended September 30, 1998. The increase for the three and nine month periods were due to a higher level of asset sales activity in 1999 compared to 1998. Interest expense (net of interest income) for the third quarter of 1999 was $4,638,000 (46% of earned income) compared to $3,888,000 (44% of earned income) in the comparable 1998 period. For the first nine months ended September 30, 1999, net interest expense was $13,007,000 (45% of earned income) compared to $11,132,000 (46% of earned income) in the nine months ended September 30, 1998. The increase in net interest expense was primarily due to a 26% increase in debt levels from September 30, 1998 to September 30, 1999. These higher debt levels resulted primarily from borrowings to finance a higher level of contract originations. Net financing margin (earned income less net interest expense) for the third quarter of 1999 was $5,552,000 (54% of earned income) compared to $5,002,000 (56% of earned income) for the third quarter of 1998. For the nine month period ended September 30, 1999, net financing margin increased to $16,021,000 (55% of earned income) from $13,285,000 (54% of earned income) in 1998. The increase in amounts in both the three month and nine month periods was due to higher earnings on a higher balance of earning assets. The decrease in percentage in the three month period and the increase in percentage in the nine month period was due to higher interest rate borrowing costs during the most recent three month period as compared to borrowing costs during the first six months of the Company's fiscal year. The provision for losses for the third quarter of 1999 was $1,147,000 (11% of earned income) compared to $1,106,000 (12% of earned income) in the third quarter of 1998. The provision for losses for the nine months ended September 30, 1999 was $2,930,000 (10% of earned income) compared to $2,372,000 (10% of earned income) in the comparable period in 1998. The increase in amounts were due to growth in the portfolio along with the Company's continuing evaluation of its portfolio quality, loss history and allowance for losses. The allowance for losses at September 30, 1999 was $8,710,000 (2.7% of net investment in leases and notes) compared to $7,350,000 (2.6% of net investment in leases and notes) at December 31, 1998. Net charge offs for the nine months ended September 30, 1999 were $1,572,000 compared to $1,501,000 for the same period ended September 30, 1998. Selling, general and administrative expenses for the three months ended September 30, 1999 were $4,743,000 (47% of earned income) compared to $3,881,000 (44% of earned income) in the comparable 1998 period. For the nine month period ended September 30, 1999, selling, general and administrative expenses were $13,372,000 (46% of earned income) compared to $11,082,000 (45% of earned income) for the same period in 1998. The increase was caused by higher advertising and marketing related costs, an increase in consulting and professional fees associated with the design and implementation of a new HPSC interactive web site, as well as increased administrative costs required to support higher levels of owned and serviced assets. The Company's income before income taxes for the quarter ended September 30, 1999 was $1,235,000 compared to $949,000 in the same period in 1998. For the nine months ended September 30, 1999, income before income taxes was $3,344,000 compared to $2,515,000 in the comparable 1998 period. For the quarter ended September 30, 1999, the provision for income taxes was $505,000 (41% of income before income taxes) compared to $414,000 (44% of income before income taxes) in the third quarter of 1998. For 9 10 the nine months ended September 30, 1999, the provision for income taxes was $1,372,000 (41% of income before income taxes) compared to $1,107,000 (44% of income before income taxes) in the comparable 1998 period. The decrease in the income tax rate from 1998 to 1999 was due to approximately $177,000 in expenses incurred by the Company in the first nine months of 1998 ($0 in 1999) related to the wind-down of the Company's Canadian operation which were not deductible in computing the income tax provision. The Company's net income for the three months ended September 30, 1999 was $730,000 ($0.16 diluted net income per share) compared to $535,000 ($0.12 diluted net income per share) for the three months ended September 30, 1998. For the nine months ended September 30, 1999, the Company's net income was $1,972,000 ($0.45 diluted net income per share) compared to $1,408,000 ($0.34 diluted net income per share) for the nine months ended September 30, 1998. The increase for the three and nine month periods resulted from higher earned income on leases and notes and higher gains on asset sales, offset by higher selling, general and administrative costs, higher net interest costs, and a higher provision for losses. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1999, the Company had $16,316,000 in cash, cash equivalents and restricted cash as compared to $14,171,000 at December 31, 1998. As described in Note 7 to the Company's condensed consolidated financial statements included in this report on Form 10-Q, $13,494,000 was restricted pursuant to financing agreements as of September 30, 1999, compared to $9,588,000 at December 31, 1998. Cash provided by operating activities was $7,691,000 for the nine months ended September 30, 1999 compared to $6,569,000 for the nine months ended September 30, 1998. The significant components of cash provided by operating activities for the nine months ended September 30, 1999 as compared to the same period in 1998 were an increase in accounts payable and accrued liabilities of $1,220,000 as compared to a decrease of $1,669,000 for the same period in 1998, as well as a decrease in refundable income taxes of $357,000 in 1999 compared to $2,431,000 for the same period in 1998. Cash used in investing activities was $60,657,000 for the nine months ended September 30, 1999 compared to $54,311,000 for the nine months ended September 30, 1998. The significant components of cash used in investing activities for the first nine months of 1999 compared to the same period in 1998 were an increase in originations of lease contracts and notes receivable due in installments to $146,291,000 from $119,294,000 and an increase in notes receivable of $3,936,000 from $284,000, offset by an increase in portfolio receipts to $52,548,000 from $43,732,000, along with an increase in proceeds from sales of lease contracts and notes receivable of $37,606,000 in 1999 compared to $21,377,000 in the comparable period ended September 30, 1998. Cash provided by financing activities for the nine months ended September 30, 1999 was $51,205,000 compared to $49,896,000 for the nine months ended September 30, 1998. The significant components of cash provided by financing activities for the first nine months of 1999 as compared to the equivalent period in 1998 were an increase in proceeds from issuance of senior notes, net of debt issuance costs, to $95,259,000 from $90,048,000, an increase in restricted cash balances of $3,906,000 compared to $1,589,000, as well as net proceeds from revolving credit borrowings of $9,000,000 in the first nine months of 1999 compared to net repayments of revolving credit borrowings of $5,000,000 in the same period in 1998, offset by higher repayments of senior notes of $56,091,000 for the nine months ended September 30, 1999 compared to $36,488,000 for the nine months ended September 30, 1998 The Company executed a Third Amended and Restated Revolving Credit Agreement with BankBoston as the Agent Bank (the "Revolver Agreement") on March 16, 1998 providing the Company with availability up to $100,000,000 through March 16, 1999. In March 1999, the agreement was extended through May 1999, providing availability up to $86,000,000. In May 1999, the Company executed the Third Amendment to the Third Amended and Restated Revolving Credit Agreement. The Third Amendment to the Revolver Agreement provides availability to the Company of $90,000,000 under substantially the same terms and conditions, through May 2000. Under the Revolver Agreement, the Company may borrow at variable rates of prime and at LIBOR plus 1.35% to 1.50% respectively, depending upon certain performance covenants. At September 30, 1999, the Company had $58,000,000 outstanding under this facility and $32,000,000 available for borrowing, subject to borrowing base limitations. The outstanding borrowings under the Revolver Agreement are not hedged and, therefore, are exposed to upward movements in interest rates. In March 1997, the Company completed a $20,000,000 offering of unsecured senior subordinated notes due 2007 bearing interest at a fixed rate of 11% (the "Subordinated Note Offering"). The Subordinated Note Offering was completed on the terms and conditions described in Amendment No. 2 to the Company's Registration Statement No. 333-20733 on Form S-1. The Company 10 11 received approximately $18,300,000 in net proceeds from the Subordinated Note Offering and used such proceeds to repay, in part, amounts outstanding under the Revolver Agreement. In April 1998, the Company, along with its wholly-owned, special purpose subsidiary, HPSC Capital Funding, Inc. ("Capital"), signed an amended Lease Receivable Purchase Agreement with EagleFunding Capital Corporation ("Eagle"). This facility (the "Capital Facility") provided the Company with available borrowings up to $150,000,000. In April 1999, this facility was renewed on substantially the same terms and conditions, providing available borrowings up to $125,000,000. Under the terms of the Capital Facility, Capital, to which the Company may sell or contribute certain of its portfolio assets from time to time, pledges or sells its interests in these assets to Eagle, a commercial paper conduit entity. Capital may borrow at variable rates in the commercial paper market and may enter into interest rate swap agreements to assure fixed rate funding. Monthly settlements of the borrowing base and any applicable principal and interest payments are made from collections of Capital's portfolio. The Company is the servicer of the Capital portfolio subject to certain covenants. At September 30, 1999, the Company had $31,132,000 outstanding from sales of receivables and $92,941,000 of borrowings outstanding from loans under the Capital Facility. In connection with this facility, the Company had 19 separate interest rate swap agreements with BankBoston with a total notional value of $116,571,000. In June 1998, the Company, along with its wholly-owned, special-purpose subsidiary HPSC Bravo Funding Corp. ("Bravo"), signed an amended revolving credit facility (the "Bravo Facility") structured and guaranteed by Capital Markets Assurance Corporation ("CapMAC", acquired by MBIA in February 1998). The Bravo Facility provides the Company with available borrowings up to $225,000,000, of which $67,500,000 may be utilized for sales of financing contracts. Under the terms of the Bravo Facility, Bravo, to which the Company sells and may continue to sell or contribute certain of its portfolio assets subject to certain covenants regarding Bravo's portfolio performance and borrowing base calculations, pledges or sells its interests in these assets to a commercial paper conduit entity. Bravo incurs interest at variable rates in the commercial paper market and enters into interest rate swap agreements to assure fixed rate funding. Monthly settlements of principal and interest payments are made from the collection of payments on Bravo's portfolio. The Company is the servicer of the Bravo portfolio, subject to the Company meeting certain covenants. The required monthly payments of principal and interest to purchasers of the commercial paper are guaranteed by CapMAC pursuant to the terms of the facility. At September 30, 1999, Bravo had $51,490,000 outstanding from sales of receivables under the sale accounting portion of the Bravo Facility and $109,070,000 of indebtedness outstanding under the loan portion of the Bravo Facility. In connection with this facility, the Company had 36 separate interest rate swap agreements with BankBoston with a total notional value of $158,055,000. In March 1999, the Company entered into an additional fixed rate, fixed term loan agreement with Springfield Institution for Savings ("SIS"). The Company borrowed $5,011,000, subject to certain recourse and performance covenants. The Company had $6,168,000 outstanding under all loan agreements with SIS at September 30, 1999. In April 1999, the Company entered into a fixed rate, fixed term loan agreement with Cambridge Savings Bank ("CSB"). The Company borrowed $5,861,000, subject to certain recourse and performance covenants. The Company had $5,530,000 outstanding under the loan obligation with CSB at September 30, 1999. Management believes that the Company's liquidity, resulting from the availability of credit under the Revolver Agreement, the Bravo Facility, the Capital Facility, the Subordinated Note Offering, and the loans from SIS and CSB, along with cash obtained from internally generated revenues, is adequate to meet current obligations and future projected levels of financings and to carry on normal operations. In order to finance adequately its anticipated growth, the Company will continue to seek to raise additional capital from bank and non-bank sources, make selective use of asset sale transactions and use its current credit facilities. The Company expects that it will be able to obtain additional capital at competitive rates, but there can be no assurance it will be able to do so. YEAR 2000 ISSUES The year 2000 issue relates to the inability of computer applications to distinguish between years with the same last two digits in different centuries such as 1900 and 2000. In 1996, the Company, along with its subsidiary, ACFC, began a review to assess the year 2000 readiness of all of its information technology (IT) systems. In 1998, the Company expanded this review to include non-IT systems, including embedded software such as the Company's telephone system, as well as the systems of third parties who are important business partners with the Company. 11 12 The Company is heavily reliant on integrated IT systems for providing much of its day-to-day operations, including application processing, underwriting, billing and collections, as well as much of the financial and operational reporting to management. The Company has performed a complete review of all relevant computer systems. Based on its internal review, the Company believes that substantially all of its internal IT systems are year 2000 compliant. The Company has also obtained written assurances from all providers of its IT software and systems as to the year 2000 compliance of each of these systems. The Company believes that the loss of any ancillary systems as to which the Company is not assured of year 2000 compliance would not cause major business disruption. The Company is monitoring the year 2000 progress of its major service providers of non-IT systems, including embedded systems and software, as well as of its third party business partners such as banking institutions and customers. In 1998, the Company's subsidiary, ACFC, began a review of the systems of its major customers. Based on this review, ACFC does not anticipate any major issues. In the event of a failure of a customer's system, ACFC believes it has adequate contingency plans and systems in place to ensure a continuity of its business operations. The Company does not separately track the internal costs associated with the year 2000 project. All such costs, which primarily consist of payroll and IT related consulting costs, have been expensed as incurred. Expenses incurred to date associated with implementing the year 2000 review process have not been material. The Company does not anticipate that any remaining costs will have a material impact on the future financial position or results of operations of the Company. FORWARD-LOOKING STATEMENTS This Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act. When used in this Form 10-Q, the words "believes," "anticipates," "expects," "plans," "intends," "estimates," "continue," "may," or "will" (or the negative of such words) and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties, including but not limited to the following: the Company's dependence on funding sources; restrictive covenants in funding documents; payment restrictions and default risks in asset securitization transactions to which the Company, or its subsidiaries, are a party; customer credit risks; competition for customers and for capital funding at favorable rates relative to the capital costs of the Company's competitors; changes in healthcare payment policies; interest rate risk; the risk that the Company may not be able to realize the residual value on financed equipment at the end of its lease term; risks associated with the sale of certain receivable pools by the Company; dependence on sales representatives and the current management team; the risk that the Company's or its customers' computer systems will not be fully year 2000 compliant; and fluctuations in quarterly operating results. The Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 1998, contain additional information concerning such risk factors. Actual results in the future could differ materially from those described in any forward-looking statements as a result of the risk factors set forth above, and the risk factors described in the Annual Report. HPSC cautions the reader, however, that such list of risk factors may not be exhaustive. HPSC undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. 12 13 HPSC, INC. PART II. OTHER INFORMATION ITEMS 1 THROUGH 5 ARE OMITTED BECAUSE THEY ARE INAPPLICABLE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 3.1 Amended and Restated By-laws 10 Amended and Restated Rights Agreement Incorporated by reference to Exhibit 4.1 to HPSC's current report on Form 8-K filed November 5, 1999. 27 Financial Data Schedule b) Reports on Form 8-K: There were no reports on Form 8-K filed during the three months ended September 30, 1999. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, HPSC, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HPSC, INC. ------------ (REGISTRANT) By: /s/ JOHN W. EVERETS ----------------------------- JOHN W. EVERETS CHIEF EXECUTIVE OFFICER CHAIRMAN OF THE BOARD By: /s/ RENE LEFEBVRE ----------------------------- RENE LEFEBVRE VICE PRESIDENT CHIEF FINANCIAL OFFICER Dated: November 12, 1999 13 EX-3.1 2 AMENDED AND RESTATED BY LAWS 1 EXHIBIT 3.1 Effective September 16, 1999 AMENDED AND RESTATED BY-LAWS OF HPSC, INC. ARTICLE I Stockholders SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders of the corporation, for the election of the Directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held on the third Tuesday of March in each year (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day) at the hour stated in the notice of the meeting. If the annual meeting of the stockholders is not held on such date, the Directors shall cause the meeting to be held as soon thereafter as convenient. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be called by the President or by order of the Board of Directors, and shall be called by the Secretary (or in the case of the death, absence, incapacity or refusal of the Secretary, by any other officer) upon written application by one or more stockholders who together hold at least 50 percent in interest of the capital stock entitled to vote at the meeting. SECTION 3. PLACE AND HOUR OF MEETINGS. All meetings of stockholders shall be held at the principal office of the corporation at 10:00 a.m. local time unless a different place or hour is fixed by the person or persons calling the meeting and stated in the notice of the meeting. SECTION 4. NOTICES OF MEETINGS AND ADJOURNED MEETINGS. A written notice of each annual or special meeting of the stockholders stating the place, date, and hour thereof, shall be given by the Secretary (or the person or persons calling the meeting), not less than 10 nor more than 60 days before the date of the meeting, to each stockholder entitled to vote thereat, by leaving such notice with him or at his residence or usual place of business, or by depositing it postage prepaid in the United States mail, directed to each stockholder at his address as it appears on the records of the corporation. The notice of a special meeting of the stockholders shall state the purpose or purposes for which the meeting is called. An affidavit of the Secretary, Assistant Secretary, or transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. No notice need be given to any person with whom communication is unlawful or to any person who has waived such notice (a) in writing (which writing need not specify the business to be transacted at, or the purpose of, the meeting) signed by such person before or after the time of the meeting or (b) by attending the meeting except for the express purpose of objecting, at the beginning of the meeting, to the 2 transaction of any business because the meeting is not lawfully called or convened. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken except that, if the adjournment is for more than thirty 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 in the manner provided in this Section 4. SECTION 5. QUORUM. At any meeting of the stockholders, a quorum for the transaction of business shall consist of one or more individuals appearing in person or represented by proxy and owning or representing a majority of the shares of the corporation then outstanding and entitled to vote, provided that less than such quorum shall have power to adjourn the meeting from time to time. SECTION 6. VOTING. Unless otherwise provided in the Certificate of Incorporation and subject to the provisions of Section 10 of this Article I, each stockholder shall have one vote for each share of stock entitled to vote held by him of record according to the records of the corporation. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote the pledged shares, in which case only the pledgee or his proxy shall be entitled to vote. If shares stand of record in the names of two or more persons or if two or more persons have the same fiduciary relationship respecting the shares then, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided to the contrary: (a) if only one votes, his act binds all; (b) if more than one vote, the act of the majority so voting binds all; and (c) if more than one vote and the vote is evenly split, the effect shall be as provided by law. SECTION 7. PROXIES. 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 any group of not more than three 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. SECTION 8. ACTION AT MEETING. When a quorum is present at any meeting, action of the stockholders on any matter properly brought before such meeting shall require, and may be effected by, the affirmative vote of the holders of a majority in interest of the stock present or represented and entitled to vote and voting on such matter, except where a different vote is required by law, the Certificate of Incorporation or these By-Laws. If the Certificate of Incorporation so provides, no ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. SECTION 9. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of 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 -2- 3 stockholder. Such list 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 ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also 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. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 10. 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 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 a record date which shall not precede the date such record date is fixed and shall not be more than 60 nor less than ten days before the date of such meeting, nor more than 60 days prior to any such other action. If no record 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. 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. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 11. ACTION BY WRITTEN CONSENT. All actions taken by stockholders shall be taken at an annual or special meeting of stockholders in accordance with the provisions of this Article I. No action by stockholders may be taken by written consent or otherwise without a meeting. SECTION 12. CONDUCT OF MEETINGS. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the -3- 4 corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. SECTION 13. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS. (A) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the corporation's notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or (c) by any stockholder of the corporation who was a stockholder of record of the corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 13. (2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 13, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation and any such proposed business other than the nominations of persons for election to the Board of Directors must constitute a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the ninetieth day nor earlier than the close of business on the one hundred twentieth day prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than seventy days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (and such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-Laws of the corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made; and (c) as to the stockholder giving notice and the beneficial -4- 5 owner, if any, (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of capital stock of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holder of at least the percentage of the corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the corporation. (3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation at an annual meeting is increased and there is no public announcement by the corporation naming the nominees for the additional directorships at least one hundred days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the corporation. (B) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation's notice of meeting (1) by or at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the corporation who is a stockholder of record at the time the notice provided for in this Section 13 is delivered to the Secretary of the corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 13. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the corporation's notice of meeting, if the stockholder's notice required by paragraph (A)(2) of this Section 13 shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the one hundred twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. -5- 6 (C) GENERAL. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible to be elected at an annual or special meeting of stockholders of the corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed as the case may be, in accordance with the procedures set forth in this Section 13 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's nominee or proposal in compliance with such stockholder's representation as required by clause (A)(2)(c)(iv) of this Section 13) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. (2) For purposes of this Section 13 "public announcement" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 13 a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE II Directors SECTION 1. POWERS. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. SECTION 2. NUMBER OF DIRECTORS. The Board of Directors shall consist of a number within the limits set forth in Article 10 of the corporation's Certificate of Incorporation. The number of Directors shall be fixed by the vote of a majority of the entire Board of Directors in each case within the limits set forth in Article 10 of the corporation's Certificate of Incorporation. Any increase or decrease in the authorized number of Directors shall be governed by the provisions of Section 5 below. SECTION 3. ELECTION, CLASSES AND TENURE. The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III, which shall be as nearly equal in -6- 7 number as possible; provided, however, that the number of Directors in any one class shall not exceed the number of Directors in any other class by more than one. Each Director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which the Director was elected; provided, however, that each initial Director in Class I shall hold office until the annual meeting of stockholders in 1996; and each initial Director in Class II shall hold office until the annual meeting of stockholders in 1997; and each initial Director in Class III shall hold office until the annual meeting of stockholders in 1998. Notwithstanding the foregoing provisions of this Section 3, each Director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. Notwithstanding the provisions of Sections 2, 3, 5 and 6 of this Article II, whenever the holders of any one or more classes or series of stock issued by the corporation having a preference over the common stock as to dividends or upon liquidation shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies, terms of removal and other features of such directorships shall be governed by the terms of Article 4 of the corporation's Certificate of Incorporation and the resolution or resolutions establishing such class or series adopted pursuant thereto and such Directors so elected shall not be divided into classes pursuant to this Article II unless expressly provided by such terms. SECTION 4. QUALIFICATION. No Director must be a stockholder. SECTION 5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. In the event of any increase or decrease in the authorized number of Directors, the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of Directors so as to maintain such classes as nearly equal in number as possible. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. Newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled exclusively by the affirmative vote of a majority of the remaining Directors then in office (and not by stockholders), even if such remaining Directors constitute less than a quorum of the Board of Directors, or by a sole remaining Director. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor is duly elected and qualified or until his death, resignation or removal. SECTION 6. REMOVAL. Any Director may be removed from office only for cause, and only upon the affirmative vote of the holders of at least seventy-five (75%) of the voting power of the corporation's stock. SECTION 7. RESIGNATION. Any Director of the corporation may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board, if any, to the President, or to the Secretary, and any member of a committee may resign therefrom at any time by giving notice as aforesaid or to the Chairman or Secretary of such committee. Any such -7- 8 resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 8. ANNUAL MEETING. Immediately after each annual meeting of stockholders and at the place thereof, if a quorum of the Directors is present, there shall be a meeting of the Directors without notice. SECTION 9. REGULAR MEETINGS. Regular meetings of the Directors may be held at such times and places as shall from time to time be fixed by resolution of the Board, and no notice need be given of regular meetings held at times and places so fixed, PROVIDED, HOWEVER, that any resolution relating to the holding of regular meetings shall remain in force only until the next annual meeting of stockholders and that, if at any meeting of Directors at which a resolution is adopted fixing the times or place or places for any regular meetings any Director is absent, no meeting shall be held pursuant to such resolution without notice to or waiver by such absent Director pursuant to Section 11 of this Article II. SECTION 10. SPECIAL MEETINGS. Special meetings of the Directors may be called by the Chairman of the Board (if any), the President, or by any two Directors, and shall be held at the place and on the date and hour designated in the call thereof. SECTION 11. NOTICES. Notices of any special meeting of the Directors shall be given by the Secretary or an Assistant Secretary to each Director, by mailing to him, postage prepaid, and addressed to him at his address as registered on the books of the corporation, or if not so registered at his last known home or business address, a written notice of such meeting at least four days before the meeting or by delivering such notice to him at least 48 hours before the meeting or by sending to him at least 48 hours before the meeting, by prepaid telegram addressed to him at such address, notice of such meeting. In the absence of all such officers, such notice may be given by the officer or one of the Directors calling the meeting. Notice need not be given to any Director who has waived notice (a) in writing executed by him before or after the meeting and filed with the records of the meeting, or (b) by attending the meeting except 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. A notice or waiver of notice of a meeting of the Directors need not specify the business to be transacted at or the purpose of the meeting. SECTION 12. QUORUM. At any meeting of the Directors a majority of the total number of Directors shall constitute a quorum for the transaction of business; provided always that any number of Directors (whether one or more and whether or not constituting a quorum) present at any meeting or at any adjourned meeting may adjourn such meeting, provided that all absent Directors receive or waive notice pursuant to Section 11 of Article II of any such adjournment that exceeds four business days. SECTION 13. ACTION AT MEETING. At any meeting of the Directors at which a quorum is present, the action of the Directors on any matter brought before the meeting shall be -8- 9 decided by vote of a majority of those present and voting, unless a different vote is required by law, the Certificate of Incorporation, or these By-Laws. SECTION 14. ACTION BY WRITTEN CONSENT. 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 or 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 or committee. SECTION 15. TELEPHONE MEETINGS. Members of the Board of Directors, or any committee thereof, may participate in a meeting of such Board or 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 participation in a meeting pursuant to this Section 15 shall constitute presence in person at such meeting. SECTION 16. PLACE OF MEETINGS. The Board of Directors may hold its meetings, and have an office or offices, within or without the State of Delaware. SECTION 17. COMPENSATION. The Board of Directors shall have the authority to fix the compensation of Directors. SECTION 18. COMMITTEES. (a) The Board of Directors may designate one or more committees, each committee to consist of one or more of the Directors of the corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. 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. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting or recommending to the stockholders, any action or matter expressly required by law to be submitted to stockholders for approval; or (ii) adopting, amending or repealing any By-Law of the corporation. (b) At any meeting of any committee, a majority of the whole committee shall constitute a quorum and, except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the affirmative vote of at least a majority of the members present at a meeting at which there is a quorum shall be the act of the committee. (c) Each committee, except as otherwise provided by resolution of the Board of Directors, shall fix the time and place of its meetings within or without the State of Delaware, -9- 10 shall adopt its own rules and procedures, and shall keep a record of its acts and proceedings and report the same from time to time to the Board of Directors. ARTICLE III Officers SECTION 1. OFFICERS AND THEIR ELECTION. The officers of the corporation shall be a President, a Secretary, a Treasurer and such Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers as the Board of Directors may from time to time determine and elect or appoint. The Board of Directors may appoint one of its members to the office of Chairman of the Board and another of its members to the office of Vice-Chairman of the Board and from time to time define the powers and duties of these offices notwithstanding any other provisions of these By-Laws. The President, the Secretary and the Treasurer shall be elected by the Board of directors at its annual meeting or at the first meeting of the Board after the date fixed by these By-Laws therefor and may, but need not, be members of the Board of Directors. Two or more offices may be held by the same person. SECTION 2. TERM OF OFFICE. The President, the Treasurer and the Secretary shall, unless sooner removed under the provisions of these By-Laws, hold office until the next annual election of officers and thereafter until their respective successors are elected and qualified or until their earlier resignation or removal. All other officers shall hold office for such term as shall be determined from time to time by the Board of Directors. SECTION 3. VACANCIES. Any vacancy at any time existing in any office may be filled by the Directors. SECTION 4. PRESIDENT. The President shall be the chief executive officer of the corporation except as the Board of Directors may otherwise provide. It shall be his duty and he shall have the power to see that all orders and resolutions of the Board of Directors are carried into effect. He shall from time to time report to the Board of Directors all matters within his knowledge which the interests of the corporation may require to be brought to its notice. The President, when present, shall preside at all meetings of the stockholders and of the Board of Directors, unless otherwise provided by the Board of Directors. The President shall perform such duties and have such powers additional to the foregoing as the Board of Directors shall designate. SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall have the powers and duties expressly designated in these By-Laws and shall perform such duties and have such powers additional thereto as the Board of Directors shall designate. SECTION 6. VICE PRESIDENTS. In the absence or disability of the President, his powers and duties shall be performed by the Vice President, if only one, or, if more than one, by the one designated for the purpose by the Board of Directors. Each Vice President shall perform -10- 11 such duties and have such powers additional to the foregoing as the Board of Directors shall designate. SECTION 7. TREASURER. The Treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositories as shall be designated by the Board of Directors or in the absence of such designation in such depositories as he shall from time to time deem proper. He shall disburse the funds of the corporation as shall be ordered by the Board of Directors, taking proper vouchers for such disbursements. He shall promptly render to the President and to the Board of Directors such statements of his transactions and accounts as the President and Board of Directors respectively may from time to time require. The Treasurer shall Perform such duties and have such powers additional to the foregoing as the Board of Directors may designate. SECTION 8. ASSISTANT TREASURERS. In the absence or disability of the Treasurer, his powers and duties shall be performed by the Assistant Treasurer, if only one, or if more than one, by the one designated for the purpose by the Board of Directors. Each Assistant Treasurer shall perform such duties and have such powers additional to the foregoing as the Board of Directors shall designate. SECTION 9. SECRETARY. The Secretary shall issue notices of all meetings of stockholders, of the Board of Directors and of committees thereof where notices of such meetings are required by law or these By-Laws. He shall record the proceedings of the meetings of the stockholders and of the Board of Directors and shall be responsible for the custody thereof in a book to be kept for that purpose. He shall also record the Proceedings of the committees of the Board of Directors unless such committees appoint their own respective secretaries. Unless the Board of Directors shall appoint a transfer agent and/or registrar, the Secretary shall be charged with the duty of keeping, or causing to be kept, accurate records of all stock outstanding, stock certificates issued and stock transfers. He shall sign such instruments as require his signature. The Secretary shall have custody of the corporate seal and shall affix and attest such seal on all documents whose execution under seal is duly authorized. In his absence at any meeting, an Assistant Secretary or the Secretary pro tempore shall Perform his duties thereat. He shall perform such duties and have such powers additional to the foregoing as the Board of Directors shall designate. SECTION 10. ASSISTANT SECRETARIES. In the absence or disability of the Secretary, his powers and duties shall be performed by the Assistant Secretary, if only one, or, if more than one, by the one designated for the purpose by the Board of Directors. Each Assistant Secretary shall perform such duties and have such powers additional to the foregoing as the Board of Directors shall designate. SECTION 11. SALARIES. The salaries and other compensation of officers, agents and employees shall be fixed from time to time by or under authority from the Board of Directors. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that he is also a Director of the corporation. -11- 12 SECTION 12. REMOVAL. The Board of Directors may remove any officer, either with or without cause, at any time. SECTION 13. BOND. The corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. SECTION 14. RESIGNATIONS. Any officer, agent or employee of the corporation may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board, if any, to the President or to the Secretary of the corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. ARTICLE IV Capital Stock SECTION 1. STOCK CERTIFICATES. Each stockholder shall be entitled to have a certificate signed by, or in the name of the corporation by the Chairman or Vice-Chairman of the Board or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before the certificate is issued, such certificate may nevertheless be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. CLASSES OF STOCK. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the face or back of each certificate issued by the corporation to represent such class or series shall either (a) set forth in full or summarize the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions thereof, or (b) contain a statement that the corporation will furnish a statement of the same without charge to each stockholder who so requests. SECTION 3. 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. The Board of Directors may at any time or from time to time appoint a transfer agent or agents or a registrar or registrars for the transfer or registration of shares of stock. SECTION 4. 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 -12- 13 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 5. LOST, STOLEN, OR DESTROYED STOCK CERTIFICATES. The Board of Directors may direct a new stock certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against the corporation on account of the alleged loss, theft, or destruction, of such certificates or the issuance of such new certificate. -13- 14 ARTICLE V Miscellaneous Provisions SECTION 1. INTERESTED DIRECTORS AND OFFICERS. (a) 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 or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or 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 the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (3) 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 shareholders. (b) 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. SECTION 2. STOCK IN OTHER CORPORATIONS. Subject to any limitations that may be imposed by the Board of Directors, the President or any person or persons authorized by the Board of Directors may, in the name and on behalf of the corporation, (a) call meetings of the holders of stock or other securities of any corporation or other organization, stock or other securities of which are held by this corporation, (b) act, or appoint any other person or persons (with or without powers of substitution) to act in the name and on behalf of the corporation, or (c) express consent or dissent, as a holder of such securities, to corporate or other action by such other corporation or organization. SECTION 3. CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS. Checks, notes, drafts and other instruments for the payment of money drawn or endorsed in the name of the corporation may be signed by any officer or officers or person or persons authorized by the Board of Directors to sign the same. No officer or person shall sign any such instrument as aforesaid unless authorized by the Board of Directors to do so. -14- 15 SECTION 4. CORPORATE SEAL. The seal of the corporation shall be circular in form, bearing the name of the corporation, the word "Delaware", and the year of incorporation, and the same may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. SECTION 5. FISCAL YEAR. The fiscal year of the corporation shall be the year ending with the 31st day of December. SECTION 6. BOOKS AND RECORDS. The books, accounts and records of the corporation, except as may be otherwise required by the laws of the State of Delaware, may be kept outside of the State of Delaware, at such place or places as the Board of Directors may from time to time appoint. Except as may otherwise be provided by law, the Board of Directors shall determine whether and to what extent the books, accounts, records and documents of the corporation, or any of them, shall be open to the inspection of the stockholders. SECTION 7. SEPARABILITY. If any term or provision of the By-Laws, or the application thereof to any person or circumstances or period of time, shall to any extent be invalid or unenforceable, the remainder of the By-Laws shall be valid and enforced to the fullest extent permitted by law. SECTION 8. AMENDMENTS. The By-Laws may be amended or repealed by the stockholders or, if such power is conferred by the Certificate of Incorporation, by the Board of Directors, except that any By-law added or amended by the stockholders may be altered or repealed only by the stockholders if such By-law expressly so provides. ARTICLE VI INDEMNIFICATION Section 6.1. RIGHT TO INDEMNIFICATION. The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "Covered Person") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the corporation or, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized by the Board of Directors of the corporation. -15- 16 Section 6.2. PREPAYMENT OF EXPENSES. The corporation shall pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition, PROVIDED, HOWEVER that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article VI or otherwise. Section 6.3. CLAIMS. If a claim for indemnification or advancement of expenses under this Article VI is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law. Section 6.4. NONEXCLUSIVITY OF RIGHTS. The rights conferred on any Covered Person by this Article VI shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. Section 6.5. OTHER SOURCES. The corporation's obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. Section 6.6. AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such repeal or modification. Section 6.7. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES. This Article VI shall not limit the right of the corporation, to the extent and in the manner permitted by law, to indemnify and to advance, expenses to persons other than Covered Persons when and as authorized by appropriate corporate action. EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 SEP-30-1999 16,316 0 401,264 8,710 0 0 3,732 1,901 349,873 0 291,709 0 0 47 39,471 349,873 0 32,653 0 13,372 0 2,930 13,368 3,344 1,372 1,972 0 0 0 1,972 .52 .45
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