sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended Commission file number
June 12, 2001 0-19907
------------- -------
LONE STAR STEAKHOUSE & SALOON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 48-1109495
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
224 EAST DOUGLAS, SUITE 700
WICHITA, KANSAS 67202
(Address of principal executive offices) (Zip code)
(316) 264-8899
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
/X/ YES / / NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 23, 2001
COMMON STOCK, $.01 PAR VALUE 24,023,394 SHARES
LONE STAR STEAKHOUSE & SALOON, INC.
INDEX
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AT JUNE 12, 2001 AND DECEMBER 26, 2000 2
CONDENSED CONSOLIDATED STATEMENTS OF 3
OPERATIONS FOR THE TWELVE WEEKS ENDED
JUNE 12, 2001 AND JUNE 13, 2000
CONDENSED CONSOLIDATED STATEMENTS OF 4
INCOME FOR THE TWENTY-FOUR WEEKS ENDED
JUNE 12, 2001 AND JUNE 13, 2000
CONDENSED CONSOLIDATED STATEMENTS OF 5
CASH FLOWS FOR THE TWENTY-FOUR WEEKS ENDED
JUNE 12, 2001 AND JUNE 13, 2000
NOTES TO CONDENSED CONSOLIDATED 6
FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND 9
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE 15
DISCLOSURES ABOUT MARKET RISKS
PART II. OTHER INFORMATION
-------- -----------------
ITEMS 1, 2, AND 3 HAVE BEEN OMITTED
SINCE THE ITEMS ARE EITHER INAPPLICABLE OR THE
ANSWER IS NEGATIVE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS 15
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
-1-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 12, 2001 December 26, 2000
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 49,189 $ 29,029
Inventories 12,848 12,704
Other current assets 5,269 5,415
--------- ---------
Total current assets 67,306 47,148
Property and equipment, net 392,444 406,761
Intangible and other assets, net 40,490 35,014
--------- ---------
Total assets $ 500,240 $ 488,923
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,048 $ 12,918
Other current liabilities 32,485 35,946
--------- ---------
Total current liabilities 51,533 48,864
Deferred compensation obligation 3,430 2,276
Stockholders' equity:
Preferred stock -- --
Common stock 240 243
Additional paid-in capital 200,613 188,976
Retained earnings 257,335 260,423
Accumulated other comprehensive loss (12,911) (11,859)
--------- ---------
Total stockholders' equity 445,277 437,783
--------- ---------
Total liabilities and stockholders' equity $ 500,240 $ 488,923
========= =========
See accompanying notes.
-2-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Operations
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
For the twelve weeks ended
--------------------------
June 12, 2001 June 13, 2000
------------- -------------
Net sales $ 136,069 $134,187
Costs and expenses:
Costs of sales 47,621 47,228
Restaurant operating expenses 66,327 62,662
Depreciation and amortization 6,428 6,610
--------- ----------
Restaurant costs and expenses 120,376 116,500
--------- ----------
Restaurant operating income 15,693 17,687
General and administrative expenses 9,885 9,014
Non-cash stock compensation expense 14,435 --
--------- ----------
Income (loss) from operations (8,627) 8,673
Other income, net 628 393
--------- ----------
Income (loss) before income taxes (7,999) 9,066
Provision (benefit) for income taxes (2,679) 3,208
--------- ----------
Net income (loss) $ (5,320) $ 5,858
========= ==========
Basic earnings (loss) per share $ (0.22) $ 0.22
========= ==========
Diluted earnings (loss) per share $ (0.22) $ 0.22
========= ==========
See accompanying notes.
-3-
LONE STAR STEAKHOUSE & SALOON, INC.
Condensed Consolidated Statements of Income
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
For the twenty-four weeks ended
-------------------------------
June 12, 2001 June 13, 2000
------------- -------------
Net sales $279,821 $273,442
Costs and expenses:
Costs of sales 97,324 94,885
Restaurant operating expenses 134,232 125,772
Depreciation and amortization 12,882 13,160
-------- --------
Restaurant costs and expenses 244,438 233,817
-------- --------
Restaurant operating income 35,383 39,625
General and administrative expenses 19,042 20,355
Non-cash stock compensation expense 14,435 --
-------- --------
Income from operations 1,906 19,270
Other income, net 2,327 809
-------- --------
Income before income taxes 4,233 20,079
Provision for income taxes 1,313 7,118
-------- --------
Net income $ 2,920 $ 12,961
======== ========
Basic earnings per share $ 0.12 $ 0.47
======== ========
Diluted earnings per share $ 0.12 $ 0.47
======== ========
See accompanying notes.
-4-
LONE STAR STEAKHOUSE & SALOON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For the twenty-four weeks ended
-------------------------------
June 12, 2001 June 13, 2000
------------- -------------
Cash flows from operating activities:
Net income $ 2,920 $ 12,961
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 14,725 14,503
Non-cash stock compensation expense 14,435 --
Gain on sale of assets (1,605) --
Net change in operating assets and liabilities:
Change in operating assets (5,664) (1,591)
Change in operating liabilities 2,668 (3,412)
-------- --------
Net cash provided by operating activities 27,479 22,461
Cash flows from investing activities:
Purchases of property and equipment (1,085) (14,806)
Proceeds from sale of assets 2,554 3,921
Other 18 (2,956)
-------- --------
Net cash provided by (used in) investing activities 1,487 (13,841)
Cash flows from financing activities:
Net proceeds from issuance of common stock 657 157
Common stock repurchased and retired (3,458) (38,137)
Proceeds from revolver -- 6,955
Cash dividends paid (6,008) (3,298)
-------- --------
Net cash used in financing activities (8,809) (34,323)
Effect of exchange rate on cash 3 (5)
-------- --------
Net increase (decrease) in cash and cash equivalents 20,160 (25,708)
Cash and cash equivalents at beginning of period 29,029 50,673
-------- --------
Cash and cash equivalents at end of period $ 49,189 $ 24,965
======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 487 $ 10,984
======== ========
See accompanying notes.
-5-
LONE STAR STEAKHOUSE & SALOON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1. BASIS OF PRESENTATION
---------------------
The unaudited condensed consolidated financial statements include all
adjustments, consisting of normal, recurring accruals, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for the periods presented. The results for the twenty-four
weeks ended June 12, 2001 are not necessarily indicative of the results to be
expected for the full year ending December 25, 2001. This quarterly report on
Form 10-Q should be read in conjunction with the Company's audited consolidated
financial statements in its annual report on Form 10-K for the year ended
December 26, 2000.
2. COMPREHENSIVE INCOME (LOSS)
--------------------------
Comprehensive income (loss) is comprised of the following:
For the twelve weeks ended For the twenty-four weeks ended
-------------------------- -------------------------------
June 12, 2001 June 13, 2000 June 12, 2001 June 13, 2000
------------- ------------- ------------- -------------
Net income (loss) $(5,320) $ 5,858 $ 2,920 $12,961
Foreign currency translation
adjustments 851 (665) (1,052) (2,504)
-------- ------- ------- --------
Comprehensive income (loss) $(4,469) $ 5,193 $ 1,868 $10,457
======== ======== ======= =======
3. EARNINGS PER SHARE
------------------
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. For purposes of diluted
computations, the number of shares that would be issued from the exercise of
stock options has been reduced by the number of shares which could have been
purchased from the proceeds at the average market price of the Company's stock
or price of the Company's stock on the exercise date if options were exercised
during the period presented.
The weighted average shares outstanding for the periods presented are as
follows (in thousands):
For the twelve weeks ended For the twenty-four weeks ended
-------------------------- -------------------------------
June 12, 2001 June 13, 2000 June 12, 2001 June 13, 2000
------------- ------------- ------------- -------------
Basic average shares outstanding 24,032 26,232 24,033 27,304
Diluted average shares outstanding 24,032(a) 27,148 24,900 27,834
(a) Basic and diluted shares outstanding are the same for the twelve weeks
ended June 12, 2001, since the diluted share computations would be
anti-dilutive.
-6-
4. LONG - TERM REVOLVER
--------------------
The Company has entered into a $20 million revolving term loan agreement
with a bank, under which no borrowings were outstanding at June 12, 2001 or
December 26, 2000. The loan commitment matures in April 2005 and requires
interest only payments through April 2003, at which time the loan will convert
to a term note with monthly principal and interest payments sufficient to
amortize the loan over its remaining term. The interest rate is at the daily
prime rate as published in the Wall Street Journal. In addition, the Company
pays a facility fee of 1/4 of one percent on the unused portion of the facility.
5. TREASURY STOCK TRANSACTIONS
---------------------------
The Board of Directors has authorized the Company to purchase shares of
the Company's common stock in the open market or in privately negotiated
transactions. Pursuant to the authorization, the Company purchased 339,187
shares of its common stock during the twenty-four weeks ended June 12, 2001, at
an average price of $10.22 per share and 4,134,600 shares of its common stock
during the twenty-four weeks ended June 13, 2000, at an average price of $9.22
per share. The Company is accounting for the purchases using the constructive
retirement method of accounting wherein the aggregate par value of the stock is
charged to the common stock account and the excess of cost over par value is
charged to paid-in capital.
6. STOCK BASED COMPENSATION
------------------------
Financial Accounting Standard Board Interpretation No. 44 (FIN 44),
"ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION, AN
INTERPRETATION OF APB NO. 25" became effective July 1, 2000. FIN 44 requires,
among other things, that stock options, which have been modified after December
15, 1998 to reduce the exercise price, be accounted for as variable. Under
variable plan accounting, compensation expense is adjusted for increases or
decreases in the fair market value of the Company's common stock based upon the
changes in the common stock price from the value of $10.125 at July 1, 2000.
Variable plan accounting is applied to the modified awards until the options are
exercised, forfeited or expire unexercised. The Company repriced options in
fiscal 1999 and 2000 which are subject to the accounting provisions of FIN 44,
and at June 12, 2001, there were options outstanding for approximately 4,715,000
shares affected by this accounting requirement. Because the market price of the
Company's common stock exceeded the $10.125 threshold price for the first time
in the quarter ended June 12, 2001, the Company recorded non-cash stock
compensation expense of $14,435.
In each subsequent quarter, the Company will record an additional non-cash
charge or benefit related to the repriced options then outstanding based upon
the change in the Company's common stock price as compared to the price at the
beginning of the previous quarter.
7. STOCK OPTIONS
-------------
During the twenty-four weeks ended June 12, 2001, the Company granted to
non-executive employees and non-employee directors stock options to purchase
300,608 and 20,400 shares of common stock, respectively, at exercise prices
ranging from $8.875 to $9.00 per share, the market price at date of grant,
pursuant to its 1992 stock option plans.
-7-
8. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In June 1998, the Financial Accounting Statements Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," which the Company adopted
effective December 27, 2000. The statement requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives not considered
hedges must be adjusted to fair value through income. If a derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company's adoption of SFAS No. 133 did not have a
significant effect on its results of operations or financial position.
9. SUBSEQUENT EVENT
----------------
In July 2001, the Board of Directors declared the Company's quarterly cash
dividend of $.125 per share payable July 27, 2001 to stockholders of record on
July 13, 2001.
-8-
LONE STAR STEAKHOUSE & SALOON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements including the notes thereto
included elsewhere in this Form 10-Q.
During 1998, the Company completed the construction of twelve Lone Star
Steakhouse & Saloon ("Lone Star") restaurants. The Company opened one restaurant
in 1999, one in 2000 and four to date in fiscal 2001. The Company intends to
open the remaining six restaurants during fiscal 2001.
The Company has seven sites available for future development, five of
which are owned and two of which are under lease. There were 245 operating
domestic Lone Star restaurants as of June 12, 2001. In addition, licensees
operate three Lone Star restaurants in California, one in Guam, and one in
Canada.
The Company currently operates five Del Frisco's Double Eagle Steak House
("Del Frisco's") restaurants, including the New York City and Las Vegas, Nevada
restaurants which opened in 2000. A licensee operates a Del Frisco's in Orlando,
Florida.
The Company currently operates fifteen Sullivan's Steakhouse
("Sullivan's") restaurants, including the Sullivan's restaurant opened in
Tucson, Arizona in November 2000.
Internationally, the Company currently operates 26 Lone Star restaurants
in Australia. The Company closed nine restaurants in Australia during 2000 and
an additional five restaurants in January 2001.
-9-
LONE STAR STEAKHOUSE & SALOON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the
percentages which certain items included in the condensed consolidated statement
of income bear to net sales, and (ii) other selected operating data:
TWELVE WEEKS ENDED (1) TWENTY-FOUR WEEKS ENDED
---------------------- -----------------------
JUNE 12, 2001 JUNE 13, 2000 JUNE 12, 2001 JUNE 13, 2000
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSAND)
STATEMENT OF OPERATIONS:
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Costs of sales.......................... 35.0 35.2 34.8 34.7
Restaurant operating expenses........... 48.7 46.7 48.0 46.0
Depreciation and amortization........... 4.7 4.9 4.6 4.8
----- ------ ----- -----
Restaurant costs and expenses...... 88.4 86.8 87.4 85.5
----- ------ ----- -----
Restaurant operating income................... 11.6 13.2 12.6 14.5
General and administrative expenses........... 7.3 6.7 6.8 7.5
Non-cash stock compensation expense........... 10.6 - 5.1 -
----- ------ ----- -----
Income (loss) from operations................. (6.3) 6.5 0.7 7.0
Other income, net............................. 0.4 0.3 0.8 0.3
----- ------ ----- -----
Income (loss) before for income taxes ........ (5.9) 6.8 1.5 7.3
Provision (benefit) for income taxes.......... (2.0) 2.4 .5 2.6
----- ------ ----- -----
Net income (loss)............................. (3.9)% 4.4% 1.0% 4.7%
===== ====== ===== =====
RESTAURANT OPERATING DATA:
Average sales per restaurant on an
annualized basis (2) $ 2,029 $ 1,942 $ 2,089 $1,973
Number of restaurants at end of the period 293 299 293 299
(1) The Company operates on a fifty-two or fifty-three week fiscal year ending
the last Tuesday in December. The fiscal quarters for the Company consist
of accounting periods of twelve, twelve, twelve and sixteen or seventeen
weeks, respectively.
(2) Average sales per restaurant on an annualized basis are computed by
dividing a restaurant's total sales for full accounting periods open
during the reporting period, and annualizing the result.
-10-
LONE STAR STEAKHOUSE & SALOON, INC.
TWELVE WEEKS ENDED JUNE 12, 2001 COMPARED TO TWELVE WEEKS ENDED JUNE 13, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales increased $1,882 (1.4%) to $136,069 for the twelve weeks ended
June 12, 2001 compared to $134,187 for the twelve weeks ended June 13, 2000. The
increase was principally attributable to the additional sales of $4,112 from
five new domestic Lone Star restaurants, one new Sullivan's restaurant and one
new Del Frisco's restaurant opened since June 2000. In addition, increased sales
are attributed to the fact that the Company has expanded the number of
Sullivan's restaurants opened on Sundays during fiscal 2001. The increases were
partially offset by the impact of the 14 Australian Lone Star's closed
subsequent to August 2000. Same store sales increased 0.1% compared with the
comparable prior year period.
Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 35.0% from 35.2% due primarily to a small increase in menu prices and a
change in the menu mix in the upscale restaurants.
Restaurant operating expenses for the twelve weeks ended June 12, 2001
increased $3,665 from $62,662 in 2000, to $66,327 and increased as a percentage
of net sales from 46.7% to 48.7%. The increase in restaurant operating expenses
is attributable to increases in labor, advertising, utility rates, primarily
natural gas, and certain insurance costs. The increases in labor were
attributable primarily to costs associated with adding and training new managers
and retaining existing personnel. In addition, labor costs and pre-opening
expenses increased due to new store openings.
Depreciation and amortization decreased $182 in the twelve weeks ended
June 12, 2001 compared to the same period in 2000. The decrease is attributable
primarily to the restaurants closed since August 2000.
General and administrative expenses increased $871 compared to the same
period in 2000. The increases in general and administrative expenses were
attributable primarily to increases in professional fees, travel expenses, and
recruiting costs.
Non-cash stock compensation expense for the twelve weeks ended June 12,
2001 was $14,435. Financial Accounting Standard Board Interpretation No. 44 (FIN
44), "ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION, AN
INTERPRETATION OF APB NO. 25" became effective July 1, 2000. FIN 44 requires,
among other things, that stock options, which have been modified after December
15, 1998 to reduce the exercise price, be accounted for as variable. Under
variable plan accounting, compensation expense is adjusted for increases or
decreases in the fair market value of the Company's common stock based upon the
changes in the common stock price from the value of $10.125 at July 1, 2000.
Variable plan accounting is applied to the modified awards until the options are
exercised, forfeited or expire unexercised. The Company repriced options in
fiscal 1999 and 2000 which are subject to the accounting provisions of FIN 44,
and at June 12, 2001, there were options outstanding for approximately 4,715,000
shares affected by this accounting requirement. Because the market price of the
Company's common stock exceeded the $10.125 threshold price for the first time
in the quarter ended June 12, 2001, the Company recorded non-cash stock
compensation expense of $14,435.
-11-
In each subsequent quarter, the Company will record an additional non-cash
charge or benefit related to the repriced options then outstanding based upon
the change in the Company's common stock price as compared to the price at the
beginning of the previous quarter.
Other income, net, for the twelve weeks ended June 12, 2001 was $628,
compared to $393 in 2000. The increase is attributable to a gain on sale of
assets of $224.
The effective income tax rates for the twelve weeks ended June 12, 2001
and the twelve weeks ended June 13, 2000 were 33.5% and 35.4%, respectively. The
change in the effective tax rate is primarily attributable to the impact of FICA
Tip and other tax credits.
-12-
LONE STAR STEAKHOUSE & SALOON, INC.
TWENTY-FOUR WEEKS ENDED JUNE 12, 2001 COMPARED TO TWENTY-FOUR WEEKS ENDED JUNE
13, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales increased $6,379 (2.3%) to $279,821 for the twenty-four weeks
ended June 12, 2001 compared to $273,442 for the twenty-four weeks ended June
13, 2000. The increase was principally attributable to the additional sales of
$7,595 from five new domestic Lone Star restaurants, one new Sullivan's
restaurant and one new Del Frisco's restaurant opened since June 2000. In
addition, increased sales are attributed to the fact that the Company has
expanded the number of Sullivan's restaurants opened on Sundays during fiscal
2001. The increases were partially offset by the impact of the 14 Australian
Lone Star's closed subsequent to August 2000. Same store sales increased 1.2%
compared with the comparable prior year period.
Costs of sales, primarily food and beverages, increased as a percentage of
sales to 34.8% from 34.7% due primarily to a higher mix of sales from Del
Frisco's and Sullivan's which tend to have slightly higher food and beverage
costs. The cost of sales increase was offset partially by a small increase in
menu prices initiated primarily in the second quarter.
Restaurant operating expenses for the twenty-four weeks ended June 12,
2001 increased $8,460 from $125,772 in 2000, to $134,232 and increased as a
percentage of net sales from 46.0% to 48.0%. The increase in restaurant
operating expenses is attributable to increases in labor, advertising,
maintenance of buildings and equipment, certain insurance costs and increased
utility rates, primarily natural gas. The increases in labor were attributable
to increased hourly labor costs created by a continuing tight labor market as
well as costs associated with adding and training new managers and retaining
existing personnel. In addition, labor costs increased as a result of new store
openings. The increases in restaurant operating expenses were partially offset
by a decrease in pre-opening expenses.
Depreciation and amortization decreased $278 in the twenty-four weeks
ended June 12, 2001 compared to the same period in 2000. The decrease is
attributable primarily to the restaurants closed since August 2000.
General and administrative expenses decreased $1,313 compared to the same
period in 2000. The decreases in general and administrative expenses were
attributable primarily to decreases in software consulting and development
costs, and field supervision costs including salaries and travel related to
those restaurants closed since August 2000. The decreases were partially offset
by an increase in recruiting costs.
Non-cash stock compensation expense for the twenty-four weeks ended June
12, 2001 was $14,435. See Note 6 to the Notes To Condensed Consolidated
Financial Statements included elsewhere herein for additional information.
Other income, net, for the twenty-four weeks ended June 12, 2001 was
$2,327, compared to $809 in 2000. The increase is attributable to a gain on sale
of assets of $1,605.
The effective income tax rates for the twenty-four weeks ended June 12,
2001 and the twenty-four weeks ended June 13, 2000 were 31.0% and 35.4%,
respectively. The decrease in the effective tax rate is primarily attributable
to the impact of FICA Tip and other tax credits.
-13-
IMPACT OF INFLATION
The primary inflationary factors affecting the Company's operations
include food and labor costs. A number of the Company's restaurant personnel are
paid at the federal and state established minimum wage levels and, accordingly,
changes in such wage levels affect the Company's labor costs. However, since the
majority of personnel are tipped employees, minimum wage changes generally have
little effect on overall labor costs. Recently the Company has experienced
significant increases in utility costs, particularly natural gas. Historically,
as food, labor, and most recently, utility costs have increased, the Company has
been able to offset these increases through menu price increases and economies
of scale; however, there may be delays in the implementation of such menu price
increases or in effecting timely economies of scale, as well as competitive
pressures which may limit the Company's ability to recover any cost increases in
its entirety. To date, inflation has not had a material impact on operating
margins.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
each of the twenty-four weeks ended June 12, 2001 and June 13, 2000 (in
thousands):
Twenty-four weeks ended
June 12, 2001 June 13, 2000
------------- ------------- ----------------
Net cash provided by operating activities..............................$ 27,479 $ 22,461
Net cash provided by (used in) investment activities................... 1,487 (13,841)
Net cash used in financing activities.................................. (8,809) (34,323)
Effect of exchange rate on cash........................................ 3 (5)
--------- ------------
Net increase (decrease) in cash........................................$ 20,160 $ (25,708)
========= =============
During the twenty-four week period ended June 12, 2001, the Company's
investment in property and equipment was $1,085 compared to $14,806 for the same
period in 2000. In the twenty-four week period ended June 12, 2001, the Company
received $2,554 in proceeds from the sale of assets compared to $3,921 for the
same period in 2000.
The Company does not have significant receivables or inventory.
At June 12, 2001, the Company had $49,189 in cash and cash equivalents.
The Company has entered into a $20,000 revolving term loan agreement with a
bank. At June 12, 2001, the Company had no outstanding borrowings.
The Company's Board of Directors has authorized the purchase of shares of
the Company's common stock from time to time in the open market or in privately
negotiated transactions. During the twenty-four weeks ended June 12, 2001, the
Company purchased 339,187 shares at a cost of $3,458 and in the twenty-four week
period ended June 13, 2000 purchased 4,134,600 shares at a cost of $38,137.
In the second quarter of fiscal 2000, the Company began paying quarterly
dividends on its common stock. During the twenty-four weeks ended June 12, 2001,
the Company paid out dividends of $6,008 or $.25 per share and $3,298 or $.125
per share for the twenty-four weeks ended June 13, 2000.
The Company utilizes derivative financial instruments in the form of
commodity futures contracts to manage market risks and reduce its exposure
resulting from fluctuations in the prices of meat. The Company uses live beef
-14-
cattle futures contracts to accomplish its objective. Realized and unrealized
changes in the fair values of the derivative instruments are recognized in
income in the period in which the change occurs. Realized and unrealized gains
and losses for the period were not significant. As of June 12, 2001, the
Company's had no positions in futures contracts.
As described in Note 6 to the Notes to Condensed Consolidated Financial
Statements in this Form 10-Q, the Company has options outstanding to purchase
approximately 4,715,000 shares subject to variable plan accounting. The Company
may incur significant volatility in reporting earnings in future periods as
fluctuations in market prices of its common stock may greatly impact reported
non-cash compensation expenses on a periodic basis.
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to open new restaurants, general market
conditions, competition and pricing and other risks set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 26, 2000. Although
the Company believes the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
contained in the report will prove to be accurate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
THE COMPANY'S EXPOSURE TO MARKET RISKS WAS NOT SIGNIFICANT DURING
THE TWENTY-FOUR WEEKS ENDED JUNE 12, 2001.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
ON JULY 6, 2001, THE COMPANY HELD ITS ANNUAL MEETING OF STOCKHOLDERS
(THE "MEETING"). AT THE MEETING, THE FIRST ITEM TO BE VOTED UPON WAS
THE ELECTION OF ONE DIRECTOR. THE STOCKHOLDERS ELECTED GUY W. ADAMS
TO THE BOARD OF DIRECTORS TO SERVE UNTIL THE 2004 ANNUAL MEETING OF
STOCKHOLDERS AND UNTIL HIS SUCCESSOR HAS BEEN DULY ELECTED AND
QUALIFIED. MR. ADAMS RECEIVED 10,603,029 VOTES "FOR" AND 276,779
"WITHHELD" AND JAMIE B. COULTER RECEIVED 8,325,969 VOTES "FOR" AND
227,790 VOTES "WITHHELD".
THE STOCKHOLDERS RATIFIED THE APPOINTMENT OF ERNST & YOUNG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 25,
2001. AS TO THE RATIFICATION OF AUDITORS, THERE WERE 19,358,371
VOTES "FOR", 52,485 VOTES "AGAINST" AND 22,714 VOTES "ABSTAINED".
THE STOCKHOLDERS VOTED AGAINST A PROPOSAL OF WILLIAM STEINER URGING
THE BOARD OF DIRECTORS TO ARRANGE FOR THE PROMPT SALE OF THE COMPANY
TO THE HIGHEST BIDDER. AS TO THE PROPOSAL, THERE WERE 3,432,511
VOTES "FOR", 15,051,627 VOTES "AGAINST" AND 710,168 VOTES
"ABSTAINED".
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ITEM 5. OTHER INFORMATION
THE COMPANY AMENDED ITS BY-LAWS ON 07-05-01 TO MAKE CERTAIN
MINISTERIAL REVISIONS.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) REPORTS ON FORM 8-K NONE
(B) AMENDED AND RESTATED BY-LAWS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LONE STAR STEAKHOUSE & SALOON, INC.
(Registrant)
Date: July 27, 2001 /s/ Randall H. Pierce
----------------------------- --------------------------------------
Randall H. Pierce
Chief Financial Officer
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AMENDED AND RESTATED
BY-LAWS
OF
LONE STAR STEAKHOUSE & SALOON, INC.
ARTICLE ONE
STOCKHOLDERS
SECTION 1.1 Annual Meetings. An annual meeting of stockholders to
elect directors and transact such other business as may properly be presented to
the meeting shall be held on such date and at such place as the Board of
Directors may from time to time fix, and if that day shall be a legal holiday in
the jurisdiction in which the meeting is to be held, then on the next day not a
legal holiday or as soon thereafter as may be practical as determined by the
Board of Directors.
SECTION 1.2 Special Meetings. A special meeting of stockholders may
be called at any time by the Chairman of the Board, by the Board of Directors
pursuant to a resolution adopted by a majority of the Whole Board (as defined
below) or by the Secretary at the direction of a majority of the voting power of
all the then outstanding shares of the voting stock, voting together as a single
class upon receipt of a written request to do so specifying the matter or
matters, appropriate for action at such a meeting. Any such meeting shall be
held at such time and at such place, within or without the State of Delaware, as
shall be determined by the body or person calling such meeting and as shall be
stated in the notice of such meeting. The Whole Board shall mean the total
number of directors which the Corporation would have if there were no vacancies.
SECTION 1.3 Notice of Meeting. For each meeting of stockholders
written notice shall be given stating the place, date and hour and, in the case
of a special meeting, the purpose or purposes for which the meeting is called
and, if the list of stockholders required by Section 1.9 is not to be at such
place at least 10 days prior to the meeting, the place where such list will be.
Except as otherwise provided by Delaware law, written notice of any meeting
shall be given not less than 10 or more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, notice
shall be deemed to be given when deposited in United States mail, postage
prepaid, directed to stockholder at his address at it appears on the records of
the Corporation.
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SECTION 1.4 Quorum. Except as otherwise required by Delaware law or
the Certificate of Incorporation, the holders of record of a majority of the
shares of stock entitled to be voted present in person or represented by proxy
at a meeting shall constitute a quorum for the transaction of business at the
meeting, but in the absence of a quorum the holders of record present or
represented by proxy at such meeting may vote to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is obtained. At any such adjourned session of the meeting at which there shall
be present or represented the holders of record of the requisite number of
shares, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 1.5 Chairman and Secretary at Meeting. At each meeting of
stockholders the President or the Chief Executive Officer, or in their absence
the person designated in writing by the President or Chief Executive Officer, or
if no person is designated, then a person designated by the Board of Directors,
shall preside as chairman of the meeting; if no person is so designated, then
the meeting shall choose a chairman by plurality vote. The Secretary, or in his
absence a person designated by the chairman of the meeting, shall act as
secretary of the meeting.
SECTION 1.6 Voting; Proxies. Except as otherwise provided by
Delaware law or the Certificate of Incorporation, and subject to the provisions
of Section 1.10:
(a) Each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock
held by him.
(b) Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a
longer period.
(c) Directors shall be elected by a plurality vote.
(d) Each matter, other than election of directors, properly
presented to any meeting shall be decided by a majority of the votes
cast on the matter.
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(e) Election of directors and the vote on any other matter
presented to a meeting shall be by written ballot only if so ordered
by the chairman of the meeting or if so requested by any stockholder
present or represented by proxy at the meeting entitled to vote in
such election or on such matter, as the case may be.
SECTION 1.7 Adjourned Meetings. A meeting of stockholders may be
adjourned to another time or place as provided in Section 1.4 or 1.6(d). Unless
the Board of Directors fixes a new record date, stockholders of record for an
adjourned meeting shall be as originally determined for the meeting from which
the adjournment was taken. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote. At the adjourned meeting any business may be transacted that
might have been transacted at the meeting as originally called.
SECTION 1.8 Consent of Stockholders in Lieu of Meeting. Any action
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Notice of taking of such action
shall be given promptly to each stockholders that would have been entitled to
vote thereon at a meeting of stockholders and that did not consent thereto in
writing.
SECTION 1.9 List of Stockholders Entitled to Vote. At least 10 days
before every meeting of stockholders a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder, shall be prepared and shall be open to the examination of any
stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, at a place within
the city where the meeting is to be held. Such list shall be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
SECTION 1.10 Fixing of Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
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action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 or less than 10 days
before the date of such meeting, nor more than 60 days prior to any other
action. If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding day
on which the meeting is held; the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and the record date for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE TWO
DIRECTORS
SECTION 2.1 Number. The number of directors that shall constitute
the whole Board of Directors shall initially be four, which number may be
changed from time to time as determined by action of the Board of Directors
taken by the affirmative vote of a majority of the Whole Board of Directors.
SECTION 2.2 Election and Term of Director. The directors of this
Corporation shall be divided into three classes, with respect to the time that
they severally hold office, as nearly equal in number as possible, with the
initial term of office of the first class of directors to expire at the 2001
annual meeting of stockholders of the Corporation and until their respective
successors are elected and qualified, the initial term of office of the second
class of directors to expire at the 2002 annual meeting of stockholders of the
Corporation and until their respective successors are elected and qualified and
the initial term of office of the third class of directors to expire at the 2003
annual meeting of stockholders of the Corporation and until their respective
successors are elected and qualified. Directors elected to succeed those
directors whose terms have thereupon expired shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders of the
Corporation after their election and until their respective successors are
elected and qualified.
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SECTION 2.3 Newly Created Directorships and Vacancies.
(a) If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain or attain, if possible,
the equality of the number of directors in each class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
If such equality is not possible, the increase or decrease shall be apportioned
among the classes in such a way that the difference in the number of directors
in any two classes shall not exceed one.
(b) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled only by a majority
of the directors then in office, although less than a quorum, and a director so
chosen shall hold office, subject to Sections 2.4 and 2.5, for the unexpired
portion of the term of the class in which such director was chosen to serve and
until his successor is elected and qualified.
SECTION 2.4 Resignation. Any director of the Corporation may resign
at any time by giving written notice of such resignation to the Board of
Directors, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if no time be
specified, upon receipt thereof by the Board of Directors or one of the
above-named officers; and, unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective. When one or more
directors shall resign from the Board of Directors effective at a future date, a
majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in these By-Laws in the filling
of other vacancies.
SECTION 2.5 Remova1. Unless these By-Laws or the Certificate of
Incorporation otherwise provides, where the Board of Directors is classified as
provided in Section 141(d) of the Delaware General Corporation Law, any director
or the entire Board of Directors may be removed by stockholders only for cause,
and the affirmative vote of the holders of outstanding stock representing at
least eighty percent (80%) in the amount of the entire capital stock of the
Corporation then entitled to vote generally in the election of Directors, or the
affirmative vote of at least a majority of the Whole Board, shall be required to
effect such removal.
-5-
SECTION 2.6 Regular and Annual Meetings, Notice. Regular meetings of
the Board of Directors Shall be held at such time and at such place, within or
without the State of Delaware, as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting, and a notice, if
given, need not specify the purposes thereof. A meeting of the Board of
Directors may be held without notice immediately after an annual meeting of
stockholders at the same place as that at which such meeting was held.
SECTION 2.7 Special Meetings, Notice. A special meeting of the Board
of Directors may be called at any time by the Board of Directors, its Chairman,
the Executive Committee, the President or any person acting in the place of the
President and shall be called by any one of them or by the Secretary upon
receipt of a written request to do so specifying the matter or matters,
appropriate for action at such a meeting, proposed to be presented at the
meeting and signed by at least two directors. Any such meeting shall be held at
such time and at such place, within or without the State of Delaware, as shall
be determined by the body or person calling such meeting. Notice of such meeting
stating the time and place thereof shall be given (a) by deposit of the notice
in the United States mail, first class, postage prepaid, at least two days
before the day fixed for the meeting addressed to each director at his address
as it appears on the Corporation's records or at such other address as the
director may have furnished the Corporation for that purpose, or (b) by delivery
of the notice similarly addressed for dispatch by telegraph, cable or radio or
by delivery of notice by telephone or in person, in each case at least 24 hours
before the time fixed for the meeting.
SECTION 2.8 Chairman of the Board; Presiding Officer and Secretary
at Meetings. The Board of Directors may elect one of its members to serve at its
pleasure as Chairman of the Board. Each meeting of the Board of Directors shall
be presided over by the Chairman of the Board or in his absence by the Chief
Executive Officer or the President, if a director, or if neither is present by
such member of the Board of Directors as shall be chosen at the meeting. The
Secretary, or in his absence an Assistant Secretary, shall act as secretary of
the meeting, or if no such officer is present, a secretary of the meeting shall
be designated by the person presiding over the meeting.
SECTION 2.9 Quorum. A majority of the Whole Board of Directors shall
constitute a quorum for the transaction of business, but in the absence of a
quorum a majority of those present (or if only one be present, then that one)
may adjourn the meeting, without notice other than announcement at the meeting,
until such time as a quorum is present.
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Except as otherwise required by the Certificate of Incorporation or the By-Laws,
the vote of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 2.10 Meeting by Telephone. Members of the Board of Directors
or any committee thereof may participate in meetings of the Board of Directors
or of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 2.11 Action Without Meeting. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
of such committee.
SECTION 2.12 Executive and Other Committees. The Board of Directors
may, by resolution passed by a majority of the Whole Board of Directors,
designate an Executive Committee and one or more other committees, each such
committee to consist of one or more directors as the Board of Directors may from
time to time determine. Any such committee, to the extent provided in such
resolution or resolutions, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, including the power to authorize the seal of the
Corporation to be affixed to all papers that may require it but no such
committee shall have such power of authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws; and unless the resolution shall expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Each such committee
other than the Executive Committee shall have such name as may be determined
from time to time by the Board of Directors.
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SECTION 2.13 Advance Notice of Stockholder Nominees for Director and
Other Stockholder Proposals.
(a) The matters to be considered and brought before any annual or
special meeting of stockholders of the Corporation shall be limited to
only such matters, including the nomination and election of directors, as
shall be brought properly before such meeting in compliance with the
procedures set forth in this Section 2.13.
(b) For any matter to be properly brought before any annual meeting
of stockholders, the matter must be (i) specified in the notice of annual
meeting given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the
Board of Directors or (iii) brought before the annual meeting in the
manner specified in this Section 2.13(b) (x) by a stockholder that holds
of record stock of the Corporation entitled to vote at the annual meeting
on such matter (including any election of a director) or (y) by a person
(a "Nominee Holder") that holds such stock through a nominee or "street
name" holder of record of such stock and can demonstrate to the
Corporation such indirect ownership of, and such Nominee Holder's
entitlement to vote, such stock on such matter. In addition to any other
requirements under applicable law, the certificate of incorporation and
these By-Laws, persons nominated by stockholders for election as directors
of the Corporation and any other proposals by stockholders shall be
properly brought before an annual meeting of stockholders only if notice
of any such matter to be presented by a stockholder at such meeting (a
"Stockholder Notice") shall be delivered to the Secretary of the
Corporation at the principal executive office of the Corporation not less
than 90 nor more than 120 days prior to the first anniversary date of the
annual meeting for the preceding year; provided, however, that if and only
if the annual meeting is not scheduled to be held within a period that
commences 30 days before and ends 30 days after such anniversary date (an
annual meeting date outside such period being referred to herein as an
"Other Meeting Date"), such Stockholder Notice shall be given in the
manner provided herein by the later of (i) the close of business on the
date 90 days prior to such Other Meeting Date or (ii) the close of
business on the tenth day following the date on which such Other Meeting
Date is first publicly announced or disclosed. Any stockholder desiring to
nominate any person or persons (as the case may be) for election as a
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director or directors of the Corporation at an annual meeting of
stockholders shall deliver, as part of such Stockholder Notice, a
statement in writing setting forth the name of the person or persons to be
nominated, the number and class of all shares of each class of stock of
the Corporation owned of record and beneficially by each such person, as
reported to such stockholder by such person, the information regarding
each such person required by paragraphs (a), (e) and (f) of Item 401 of
Regulation S-K adopted by the Securities and Exchange Commission, each
such person's signed consent to serve as a director of the Corporation if
elected, such stockholder's name and address, the number and class of all
shares of each class of stock of the Corporation owned of record and
beneficially by such stockholder and, in the case of a Nominee Holder,
evidence establishing such Nominee Holder's indirect ownership of stock
and entitlement to vote such stock for the election of directors at the
annual meeting. Any stockholder who gives a Stockholder Notice of any
matter (other than a nomination for director) proposed to be brought
before an annual meeting of stockholders shall deliver, as part of such
Stockholder Notice, the text of the proposal to be presented and a brief
written statement of the reasons why such stockholder favors the proposal
and setting forth such stockholder's name and address, the number and
class of all shares of each class of stock of the Corporation owned of
record and beneficially by such stockholder, any material interest of such
stockholder in the matter proposed (other than as a stockholder), if
applicable, and, in the case of a Nominee Holder, evidence establishing
such Nominee Holder's indirect ownership of stock and entitlement to vote
such stock on the matter proposed at the annual meeting. As used in these
By-Laws, shares "beneficially owned" shall mean all shares which such
person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934 (the "Exchange Act"). If a
stockholder is entitled to vote only for a specific class or category of
directors at a meeting (annual or special), such stockholder's right to
nominate one or more individuals for election as a director at the meeting
shall be limited to such class or category of directors.
Notwithstanding any provision of this Section 2.13 to the contrary,
in the event that the number of directors to be elected to the Board of
Directors of the Corporation at the next annual meeting of stockholders is
increased by virtue of an increase in the size of the Board of Directors
-9-
and either all of the nominees for director at the next annual meeting of
stockholders or the size of the increased Board of Directors is not
publicly announced or disclosed by the Corporation at least 100 days prior
to the first anniversary of the preceding year's annual meeting, a
Stockholder Notice shall also be considered timely hereunder, but only
with respect to nominees to stand for election at the next annual meeting
as the result of any new positions created by such increase, if it shall
be delivered to the Secretary of the Corporation at the principal
executive office of the Corporation not later than the close of business
on the tenth day following the first day on which all such nominees or the
size of the increased Board of Directors shall have been publicly
announced or disclosed.
(c) Except as provided in the immediately following sentence, no
matter shall be properly brought before a special meeting of stockholders
unless such matter shall have been brought before the meeting pursuant to
the Corporation's notice of such meeting. 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 stockholder entitled to vote
for the election of such director(s) at such meeting may nominate a person
or persons (as the case may be) for election to such position(s) as are
specified in the Corporation's notice of such meeting, but only if the
Stockholder Notice required by Section 2.13(b) hereof shall be delivered
to the Secretary of the Corporation at the principal executive office of
the Corporation not later than the close of business on the tenth day
following the first day on which the date of the special meeting and
either the names of all nominees proposed by the Board of Directors to be
elected at such meeting or the number of directors to be elected shall
have been publicly announced or disclosed.
(d) For purposes of this Section 2.13, a matter shall be deemed to
have been "publicly announced or disclosed" if such matter is disclosed in
a press release reported by the Dow Jones News Service, the Associated
Press or a comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission.
(e) In no event shall the adjournment of an annual meeting or a
special meeting, or any announcement thereof, commence a new period for
the giving of notice as provided in this Section 2.13. This Section 2.13
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shall not apply to (i) any stockholder proposal made pursuant to Rule
14a-8 under the Exchange Act or (ii) any nomination of a director in an
election in which only the holders of one or more series of Preferred
Stock of the Corporation issued pursuant to Article FOURTH of the
certificate of incorporation are entitled to vote (unless otherwise
provided in the terms of such stock).
(f) The chairman of any meeting of stockholders, in addition to
making any other determinations that may be appropriate to the conduct of
the meeting, shall have the power and duty to determine whether notice of
nominees and other matters proposed to be brought before a meeting has
been duly given in the manner provided in this Section 2.13 and, if not so
given, shall direct and declare at the meeting that such nominees and
other matters shall not be considered.
SECTION 2.14 Independent Directors. A majority of the Board of
Directors shall be comprised of Independent Directors. For the purpose of
Section 2.14, the term "Independent Director" shall mean a director who: (i) has
not been employed by the Corporation in an executive capacity within the last
five years; (ii) is not, and is not affiliated with a company that is, an
advisor or consultant to the Corporation, or a significant customer or supplier
of the company; (iii) has no personal services contract(s) with the Corporation
or the Corporation's senior management; (iv) is not affiliated with a
not-for-profit entity that receives significant contributions from the
Corporation; (v) within the last five years, has not had any business
relationship with the Corporation that the Corporation has been required to
disclose under the Securities and Exchange Commission disclosure regulations;
(vi) is not employed by a public company at which an executive officer of the
Corporation serves as a director; (vii) has not had a relationship described in
(i) through (vi) above with any affiliate of the Corporation; and (viii) is not
a member of the immediate family of any person described in (i) through (vii)
above.
ARTICLE 3.THREE
OFFICERS
SECTION 3.1 Election; Disqualification. The officers of the
Corporation shall be a Chairman of the Board, Chief Executive Officer,
President, one or more Vice Presidents, a Secretary and a Treasurer, each of
whom shall be selected by the Board of Directors. The Board of Directors may
elect a Controller, one or more Assistant Secretaries, one or more Assistant
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Treasurers, one or more Assistant Controllers and such other officers as it may
from time to time determine. Two or more offices may be held by the same person.
SECTION 3.2 Term of Office. Each officer shall hold office from the
time of his election and disqualification to the time at which his successor is
elected and qualified, unless he shall die or resign or shall be removed
pursuant to Section 3.4 at any time sooner.
SECTION 3.3 Resignation. Any officer of the Corporation may resign
at any time by giving written notice of such resignation to the Board of
Directors, the Chief Executive Officer, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein or, if no time be specified, upon receipt thereof by the Board of
Directors or one of the above-named officers; and, unless specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.4 Removal. Any officer may be removed at any time, with or
without cause, by the vote of a majority of the Whole Board.
SECTION 3.5 Vacancies. Any vacancy however caused in any office of
the Corporation may be filled by the Board of Directors.
SECTION 3.6 Compensation. The compensation of each officer shall be
such as the Board of Directors may from time to time determine.
SECTION 3.7 Chairman of the Board. The Chairman of the Board shall
be the Chairman of all meetings of the Board of Directors.
SECTION 3.8 Chief Executive Officer. The Chief Executive Officer
shall be the Chief Executive Officer of the Corporation and, in the absence of a
President, shall have general charge of the business and affairs of the
Corporation, subject, however, to the right of the Board of Directors to confer
specified powers on officers and subject generally to the direction of the Board
of Directors and the Executive Committee, if any.
SECTION 3.9 President. The President shall have general charge of
the business and affairs of the Corporation, subject however to the right of the
Board of Directors to confer specified powers on officers and subject generally
to the direction of the Board of Directors and the Executive Committee, if any.
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SECTION 3.10 Vice President. Each Vice President shall have such
powers and duties as generally pertain to the office of Vice President and as
the Board of Directors or the President may from time to time prescribe. During
the absence of the President or his inability to act, the Vice President, or if
there shall be more than one Vice President, then that one designated by the
Board of Directors, shall exercise the powers and shall perform the duties of
the President, subject to the direction of the Board of Directors and the
Executive Committee, if any.
SECTION 3.11 Secretary. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors. He shall be custodian of
the corporate seal and shall affix it or cause it to be affixed to such
instruments as require such seal and attest the same and shall exercise the
powers and shall perform the duties incident to the office of Secretary, subject
to the direction of the Board of Directors and the Executive Committee, if any.
SECTION 3.12 Other Officers. Each other officer of the Corporation
shall exercise the powers and shall perform the duties incident to his office,
subject to the discretion of the Board of Directors and the Executive Committee,
if any.
ARTICLE FOUR
CAPITAL STOCK
SECTION 4.1 Stock Certificates. The interest of each holder of stock
of the Corporation shall be evidenced by a certificate or certificates in such
form as the Board of Directors may from time to time prescribe. Each certificate
shall be signed by or in the name of the Corporation by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all the signatures appearing on such certificate or
certificates may be a facsimile. If any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 4.2 Transfer of Stock. Shares of stock shall be transferable
on the books of the Corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
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SECTION 4.3 Holders of Record. Prior to due presentment for
registration of transfer the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications and otherwise entitled to all rights and powers of a
complete owner thereof, notwithstanding notice to the contrary.
SECTION 4.4 Lost, Stolen, Destroyed or Mutilated Certificates. The
Corporation shall issue a new certificate of stock to replace a certificate
theretofore issued by it alleged to have been lost, destroyed or wrongfully
taken, if the owner or his legal representative (i) requests replacement, before
the Corporation has notice that the stock certificate has been acquired by a
bona fide purchaser; (ii) files with the Corporation a bond sufficient to
indemnify the Corporation against any loss or destruction of any such stock
certificate or the issuance of any such new stock certificate; and (iii)
satisfies such other terms and conditions as the Board of Directors may from
time to time prescribe.
ARTICLE FIVE
MISCELLANEOUS
SECTION 5.1 Indemnity.
(a) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit, or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation, as a
director, officer or employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent, or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) and in the manner provided in the Certificate of
Incorporation of the Corporation and as otherwise permitted by the Delaware
General Corporation Law.
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SECTION 5.2 Waiver on Notice. Whenever notice is required by the
Certificate of Incorporation, the By-Laws or any provision of the Delaware
General Corporation Law, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time required for such notice, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver or notice.
SECTION 5.3 Fiscal Year. The fiscal year of the Corporation shall
start on such date as the Board of Directors shall from time to time prescribe.
SECTION 5.4 Corporate Seal. The corporate seal shall be in such form
as the Board of Director may from time to time prescribe, and the same may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
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ARTICLE SIX
AMENDMENT OF BY-LAWS
SECTION 6.1 Amendment. Except with respect to Sections 2.2 and
2.3(a) of these By-Laws, the By-Laws may be altered, amended or repealed by the
stockholders or by the Board of Directors by a majority vote. With respect to
Sections 2.2 and 2.3(a), the affirmative vote of the holders of outstanding
stock representing at least eighty percent (80%) in the amount of the entire
capital stock of the Corporation then entitled to vote generally in the election
of directors shall be required to amend or repeal, or to adopt any provision
inconsistent with Sections 2.2 and 2.3(a), unless approved by at least
seventy-five percent (75%) of the Whole Board of the Corporation. In the event
that at least seventy-five percent (75%) of the Whole Board approves any such
provision, then the affirmative vote of the holders of outstanding stock
representing at least a majority in the amount of the entire capital stock of
the Corporation then entitled to vote generally in the election of directors
shall be required to amend or repeal, or to adopt any provision inconsistent
with Sections 2.2 and 2.3(a).