-----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, B4nhVyLwfYCZkzBq3fNxO8BD8DAZRiV5nihPZ9SdnSFIO3Cq9LUxXSR20yVUZPaI 4ICcoBr2cdbrU+sTmy7jFQ== 0000924646-98-000017.txt : 19981116 0000924646-98-000017.hdr.sgml : 19981116 ACCESSION NUMBER: 0000924646-98-000017 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODIS PROFESSIONAL SERVICES INC CENTRAL INDEX KEY: 0000924646 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 593116655 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-24484 FILM NUMBER: 98747072 BUSINESS ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043602000 MAIL ADDRESS: STREET 1: 1 INDEPENDENT DR CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: ACCUSTAFF INC DATE OF NAME CHANGE: 19940606 10-Q/A 1 FORM 10-Q/A FOR PERIOD ENDED 6/30/98 FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 0-24484 AccuStaff Incorporated (Exact name of Registrant as specified in its charter) Florida 59-3116655 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Independent Drive, Jacksonville, FL 32202 (Address of principal executive offices) (Zip code) (904) 360-2000 (Registrant's telephone number including area code) Not applicable (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 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 REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No ____ (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. August 13, 1998. Title Outstanding Common Stock, Par Value $0.01 Per Share 110,619,762 (No. of shares)
AccuStaff Incorporated and Subsidiaries Index Part I Financial Information Item 1 Financial Statements Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 Consolidated Statements of Income for the Three and Six Months ended June 30, 1998 and 1997 Consolidated Statements of Cash Flows for the Six Months ended June 30, 1998 and 1997 Notes to Consolidated Financial Statements Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Part II Other Information Item 2 Changes in Securities and Use of Proceeds Item 6 Exhibits Signatures
Part I. Financial Information Item 1. Financial Statements AccuStaff Incorporated and Subsidiaries Consolidated Balance Sheets (dollar amounts in thousands except per share amounts)
June 30, 1998 December 31, 1997 ------------------- ------------------- (unaudited) (unaudited) Assets Current assets: Cash and cash equivalents $ 29,247 $ 23,938 Accounts receivable, net 297,275 230,934 Prepaid expenses 23,082 9,352 Deferred income taxes 5,937 731 Other 17,216 - Net assets of discontinued operations 362,024 366,045 ------------------- ------------------- Total current assets 734,781 631,000 Furniture, equipment and leasehold improvements, net 35,962 27,367 Goodwill, net 902,515 693,327 Other assets 23,124 17,328 ------------------- ------------------- Total assets $ 1,696,382 $ 1,369,022 =================== =================== Liabilities and Stockholders' Equity Current liabilities Notes payable $ 19,079 $ 16,366 Accounts payable and accrued expenses 76,172 62,021 Accrued payroll and related taxes 41,911 37,647 ------------------- ------------------- Total current liabilities 137,162 116,034 Convertible debt 86,250 86,250 Notes payable, long-term portion 411,680 347,785 Other 9,465 6,111 ------------------- ------------------- Total liabilities 644,557 556,180 ------------------- ------------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, $.01 par value; 150,000,000 shares authorized 110,890,123 and 103,692,098 shares issued and outstanding on June 30, 1998 and December 31, 1997, respectively 1,109 1,037 Additional contributed capital 803,249 634,194 Retained earnings 250,402 181,068 ------------------- ------------------- 1,054,760 816,299 Less: deferred stock compensation (2,935) (3,457) ------------------- ------------------- Total stockholders' equity 1,051,825 812,842 ------------------- ------------------- Total liabilities and stockholders' equity $ 1,696,382 $ 1,369,022 =================== =================== See accompanying notes to consolidated financial statements.
AccuStaff Incorporated and Subsidiaries Consolidated Statements of Income (dollar amounts in thousands except per share amounts)
Three Months Ended Six Months Ended ------------------------------- ------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) June 30, June 30, June 30, June 30, 1998 1997 1998 1997 ------------- ------------- -------------- ------------- Revenue $ 425,383 $ 273,675 $ 799,875 $ 515,909 Cost of Revenue 307,573 197,787 577,622 374,607 ------------- ------------- -------------- ------------- Gross Profit 117,810 75,888 222,253 141,302 ------------- ------------- -------------- ------------- Operating expenses: General and administrative 64,807 44,300 120,398 80,300 Depreciation and amortization 9,309 5,197 16,872 8,963 ------------- ------------- -------------- ------------- Total operating expenses 74,116 49,497 137,270 89,263 ------------- ------------- -------------- ------------- Income from operations 43,694 26,391 84,983 52,039 ------------- ------------- -------------- ------------- Other income (expense): Interest expense (7,352) (3,590) (14,049) (5,614) Interest income and other 2,746 347 3,509 806 ------------- ------------- -------------- ------------- Total other expense, net (4,606) (3,243) (10,540) (4,808) ------------- ------------- -------------- ------------- Income from continuing operations before provision for income taxes 39,088 23,148 74,443 47,231 Provision for income taxes 14,964 9,024 28,222 18,356 ------------- ------------- -------------- ------------- Income from continuing operations 24,124 14,124 46,221 28,875 Income from discontinued operations, net of income taxes 12,634 9,762 23,113 16,473 ------------- ------------- -------------- ------------- Net income $ 36,758 $ 23,886 $ 69,334 $ 45,348 ============= ============= ============== ============= Basic income per common share: From continuing operations $ 0.22 $ 0.14 $ 0.43 $ 0.29 ============= ============= ============== ============= From discontinued operations $ 0.11 $ 0.10 $ 0.21 $ 0.16 ============= ============= ============== ============= Basic net income per common share $ 0.33 $ 0.24 $ 0.64 $ 0.45 ============= ============= ============== ============= Diluted income per common share: From continuing operations $ 0.21 $ 0.13 $ 0.40 $ 0.27 ============= ============= ============== ============= From discontinued operations $ 0.10 $ 0.09 $ 0.19 $ 0.15 ============= ============= ============== ============= Diluted net income per common share $ 0.31 $ 0.22 $ 0.59 $ 0.42 ============= ============= ============== ============= Average common shares outstanding, basic 110,576 101,520 107,922 101,035 ============= ============= ============== ============= Average common shares outstanding, diluted 121,885 112,289 119,444 111,883 ============= ============= ============== ============= See accompanying notes to consolidated financial statements.
AccuStaff Incorporated and Subsidiaries Consolidated Statements of Cash Flows (dollar amounts in thousands except for per share amounts)
Six months ended ------------------------------- (unaudited) (unaudited) June 30, June 30, 1998 1997 --------------- --------------- Cash flows from operating activities: Income from continuing operations $ 46,221 $ 28,875 Adjustments to net income to net cash provided by (used in) operating activities: Depreciation and amortization 16,872 8,963 Deferred income taxes (406) (1,426) Changes in certain assets and liabilities Accounts receivable (61,530) (11,634) Prepaid expenses and other assets (17,497) 1,240 Accounts payable and accrued expenses 7,389 (1,969) Accrued payroll and related taxes 86 81 Other, net (656) 5,419 Net cash provided by (used in) operating --------------- --------------- activities (9,521) 29,549 --------------- --------------- Cash flows from investing activities: Advances associated with sale of assets, net of repayments (10,216) - Purchase of furniture, equipment and leasehold improvements, net of disposals (10,348) (4,094) Purchase of businesses, including additional earn-outs on acquisitions, net of cash acquired (87,345) (241,449) --------------- --------------- Net cash used in investing activities (107,909) (245,543) --------------- --------------- Cash flows from financing activities: Proceeds from stock options exercised 39,484 12,012 Borrowings on indebtedness 176,509 277,792 Repayments on indebtedness (117,074) (39,194) Other (357) (21) --------------- --------------- Net cash provided by financing activities 98,562 250,589 --------------- --------------- Net increase (decrease) in cash and cash equivalents from continuing operations (18,868) 34,595 Cash provided by (used in) discontinued operations 24,177 (108,033) Cash and cash equivalents, beginning of period 23,938 96,416 --------------- --------------- Cash and cash equivalents, end of period $ 29,247 $ 22,978 =============== =============== See accompanying notes to consolidated financial statements.
AccuStaff Incorporated and Subsidiaries Notes to Consolidated Financial Statements (unaudited) (dollar amounts in thousands except for per share amounts) 1. Basis of Presentation: The accompanying consolidated financial statements are unaudited and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The financial statements should be read in conjunction with the consolidated financial and related notes included in the Company's Form 8-K, as filed with the Securities and Exchange Commission on November 12, 1998. The accompanying consolidated financial statements reflect all adjustments (including normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for an interim period are not necessarily indicative of the results of operations for a full fiscal year. The Company completed the acquisition of Office Specialists, Inc. ("OSI") on December 1, 1997 which was accounted for as a pooling of interests and accordingly all periods presented have been restated as if the acquisition had taken place at the beginning of each such period. On October 31, 1998, the Company's Board of Directors authorized the repurchase of up to $200 million of the Company's common stock. The Company first considered the repurchase on August 31, 1998, shortly after announcing the sale of its commercial business, Strategix Solutions, Inc. ('Strategix') to Randstad U.S., L.P. ('Randstad'), for $850.0 million as a result of an unsolicited offer. Prior to the Randstad offer, the Company had announced plans to sell 20% of Strategix in an intitial public offering with a subsequent spin-off of the Company's interest to its shareholders, subject to certain market conditions. As a result of the above described events, the Company believes it is now appropriate to change the accounting treatment for its acquistion of Actium, Inc. on March 27, 1998 from pooling of interests to purchase. As a result, the company has recorded goodwill in an amount of approximately $130.0 million. This amount represents the agreed-upon purchase price with the Actium shareholders, plus acquisition related costs, net of the fair value of assets received. The effect of this restatement on the previously issued interim financial statements is as follows:
June 30, 1998 December 31, 1997 -------------------------- ----------------------- Total Assets, as previously reported $ 1,691,505 $ 1,495,011 Total Assets, as restated 1,696,382 1,369,022 Shareholders' equity, as previously reported 921,351 825,287 Shareholders' equity, as restated 1,051,825 812,842
Three Months Ended Six Months Ended ---------------------------------------------- ------------------------------------------------- June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 -------------------- ------------------------- ------------------------ ------------------------ Net Income, as previously reported $ 37,576 $ 25,689 $ 59,130 $ 48,776 Net Income, as restated $ 36,758 $ 23,886 $ 69,334 $ 45,348 Basic net income per common share, as previously reported $ 0.34 $ 0.24 $ 0.54 $ 0.46 Basic net income per common share, as restated $ 0.33 $ 0.24 $ 0.64 $ 0.45 Dilutive net income per common share, as previously reported $ 0.32 $ 0.23 $ 0.50 $ 0.43 Dilutive net income per common share, as restated $ 0.31 $ 0.22 $ 0.59 $ 0.42
2. Summary Data of Subsidiary: The following table details the summarized financial information (in thousands) of the Company's wholly owned subsidiary, Career Horizons, Inc. and Career Horizons' subsidiaries as of and for the three and six months ended.
June 30, 1998 December 31, 1997 -------------------- ------------------------- Current assets $ 150,689 $ 186,674 Non-current assets 276,942 251,261 Current liabilities 68,545 67,459 Non-current liabilities 89,051 114,520 Three Months Ended Six Months Ended ---------------------------------------------- ------------------------------------------------- June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 -------------------- ------------------------- ------------------------ ------------------------ Revenue $ 206,726 $ 230,357 $ 431,860 $ 432,352 Gross profit 53,845 58,559 111,679 109,909 Income from operations 17,329 13,990 34,956 26,259
3. Contingencies: The Company is from time to time subject to routine lawsuits and claims incidental to the business. The Company believes that, based on the advice of in-house and external legal counsel, the results of any lawsuits, claims and other proceedings will not have a materially adverse effect on the Company's consolidated financial position, results of operations or cash flows. 4. Newly Issued Accounting Standards: During 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. This statement is effective for the Company's 1998 fiscal year. Management does not believe that the Company has material other comprehensive income which would require separate disclosure. Additionally, during 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 requires, among other things, that certain general and financial information be disclosed for reportable operating segments of a company. SFAS No. 131 is effective for the Company's 1998 fiscal year. The Company is currently evaluating the effects of SFAS No. 131 on its disclosure format. During 1998, the American Institute of Certified Public Accountants' Executive Committee issued Statement of Position Number 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. Management believes that the Company is substantially in compliance with this pronouncement and that the implementation of this pronouncement will not have a material effect on the Company's consolidated financial position, results of operations or cash flows. 5. REDEMPTION OF CONVERTIBLE DEBENTURES AND NEW CREDIT FACILITY On October 1, 1998 the Company called the 7% Convertible Senior Notes described in note 11 to be converted as of November 1, 1998. As of November 1, 1998, the notes were either purchased by the Company or converted into shares of the Company's common stock and are no longer outstanding. On October 22, 1998, the Company closed on its new $500 million revolving credit facility with NationsBank, N.A. as principal agent. The facility expires on October 21, 2003. Outstanding amounts under the credit facility will bear interest at certain floating rates as specified by the credit facility. The credit facility contains certain affirmative and negative covenants relating to the Company's operations, including a prohibition on making any business acquisitions which would result in pro forma noncompliance with the related covenants if the acquired company would meet or exceed 10% of total assets or income on a consolidated basis. In addition, approval is required by the majority lenders at such time that the cash consideration of an individual acquisition exceeds 20% of consolidated shareholder's equity. 6. AUTHORIZATION FOR REPURCHASE OF TREASURY SHARES On October 31, 1998, the Company's Board of Directors authorized the repurchase of up to $200.0 million of the Company's common stock. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations On June 8, 1998, Modis Professional Services ("Modis"), formerly known as AccuStaff Incorporated, filed an initial public offering for the Company's subsidiary Strategix Solutions, Inc. ('Strategix') for the sale and subsequent spin off of the Company's Commercial, Teleservices, and Health Care divisions. On August 27, 1998, before the initial public offering was consummated, the Company announced its intention to sell Strategix to Randstad Holding nv for $850 million in cash. The effective date of the sale was September 27, 1998. As a result of this transaction, the Company's Consolidated Financial Statements and Management's Discussion and Analysis have been reclassified to report Strategix as discontinued operations for all periods presented. The following detailed analysis of operations should be read in conjunction with the 1997 Financial Statements included in the Company's Form 8-K filed on November 12, 1998. Three Months ended June 30, 1998 Compared to Three Months ended June 30, 1997. From continuing operations Revenue. Revenue increased $151.7 million, or 55.4%, to $425.4 million in the three months ended June 30, 1998 from $273.7 million in the year earlier period. The increase was attributable by division to: Information Technology, $105.2 million or an increase of 55.9%; and Professional Services, $46.5 million, or an increase of 54.5%. The increases in the Information Technology and Professional Services divisions were due to both internal growth and the revenue contribution of acquired companies. Gross Profit. Gross profit increased $41.9 million or 55.2% to $117.8 million in the three months ended June 30, 1998 from $75.9 million in the year earlier period. Gross margin remained relatively constant at 27.7% in the three months ended June 30, 1998 as compared to 27.8% in the year earlier period. The increase in gross profit was attributable by division to: Information Technology $27.5 million, or 54.1% and Professional Services $14.4 million, or 57.6%. The Information Technology division realized an overall decrease in gross margin to 26.6% in the three months ended June 30, 1998 from 26.9% in the year earlier period. The decrease was primarily attributable to the higher volume of contribution to gross profit from the division's international operations, which produces lower gross margins than the division's domestic operations, the majority of which were acquired in November 1997 and are therefore not included in the June 30, 1997 results. The remainder of the division's decrease is attributable to the Company's continuing effort to recruit and retain intellectual capital which requires, in some instances, higher pay rates for consultants which cannot necessarily be passed through to the customers. Additionally, the Company is employing more salaried consultants, who receive increased benefits which in certain instances may not be passed through to the customer. The gross margin in the Professional Services division increased to 30.1% in the three months ended June 30, 1998 from 29.5% in the year earlier period. Operating Expenses. Operating expenses increased $24.6 million, or 49.7%, to $74.1 million in the three months ended June 30, 1998 from $49.5 million in the year earlier period. Operating expenses as a percentage of revenue decreased to 17.4% in the three months ended June 30, 1998 from 18.1% in the year earlier period due to the Company's ability to spread its expenses over a larger revenue base. Included in operating expenses during the three months ended June 30, 1998 and 1997 are the costs associated with projects underway to ensure accurate date recognition and data processing with respect to the Year 2000 as it relates to the Company's business, operations, customers and vendors. The related costs, which are expensed as incurred, are included in general and administrative expense. The Company expects to substantially complete the Year 2000 conversion projects by the end of 1999. These costs have been immaterial to date and are not expected to have a material impact on the Company's results of operations, financial condition or liquidity in the future. Income from Operations. As a result of the foregoing, income from operations increased $17.3 million, or 65.5% to $43.7 million in the three months ended June 30, 1998 from $26.4 million in the year earlier period. Income from operations as a percentage of revenue increased to 10.3% in the three months ended June 30, 1998 from 9.6% in the year earlier period. Interest Expense. Interest expense increased $3.8 million, or 105.6%, to $7.4 million in the three months ended June 30, 1998 from $3.6 million in the year earlier period. The increase in interest expense resulted from a combination of the utilization of the Company's credit facility, and the amount of cash on hand at December 31, 1996. Income Taxes. The Company's effective tax rate was 38.3% in the three months ended June 30, 1998 compared to 39.0% in the year earlier period. The decrease in the effective tax rate was due to tax savings realized from corporate restructurings. Income from continuing operations. As a result of the foregoing,income from continuing operations increased $10.0 million, or 70.9%, to $24.1 million in the three months ended June 30, 1998 from $14.1 million in the year earlier period. Income from continuing operations as a percentage of revenue increased to 5.7% in the three months ended June 30, 1998 from 5.2% in the year earlier period. From discontinued operations Income from Discontinued Operations. Income from the discontinued commercial operations, after tax, increased $2.8 million, or 28.6% to $12.6 million for the three months ended June 30, 1998 versus $9.8 million for the year earler period. Reported revenues from discontinued operations were $312.5 million for the three months ended June 30, 1998 versus $315.7 million for the year earlier period. Operating income for the discontinued operations were $ 21.5 million for the three months ended March 31, 1998 versus $16.7 million during the year earler period. Results of discontinued operations include allocations of consolidated interest expense totaling $1.3 million and $1.0 million for the three months ended June 30, 1998 and 1997, respectively. The allocations were based on the historic funding needs of the discontinued operations, including: the purchases of property, plant and equipment, acquisitions, current income tax liabilities and fluctuating working capital needs. Six Months ended June 30, 1998 Compared to Six Months ended June 30, 1997. From continuing operations Revenue. Revenue increased $284.0 million, or 55.0%, to $799.9 million in the six months ended June 30, 1998 from $515.9 million in the year earlier period. The increase was attributable by division to: Information Technology, $189.5 million or an increase of 53.1%; and Professional Services, $94.5 million, or an increase of 59.5%. The increase in the Information Technology division was due to growth through acquisition, and more significantly, internal growth. The growth in the Professional Services division was due to both internal growth and the revenue contribution of acquired companies. Gross Profit. Gross profit increased $81.0 million or 57.3% to $222.3 million in the six months ended June 30, 1998 from $141.3 million in the year earlier period. Gross margin increased to 27.7% in the six months ended June 30, 1998 from 27.4% in the year earlier period. The increase was attributable by division to: Information Technology $49.1 million, or 51.5% and Professional $31.9 million, or 69.3%. The Information Technology division realized an overall decrease in gross margin to 26.4% in the six months ended June 30, 1998 from 26.7% in the year earlier period. The decrease was partially attributable to the higher volume of contribution to gross profit from the division's international operations, which produces lower gross margins than the division's domestic operations, the majority of which were acquired in November of 1997 and are therefore not included in the June 30, 1997 results. The remainder of the divisions decrease is attributable to the Company's continuing effort to recruit and retain intellectual capital which requires, in some instances, higher pay rates for consultants which cannot necessarily be passed through to the customer. Additionally, the Company is employing more salaried consultants, who receive increased benefits which in certain instances may not be passed through to the customer. The gross margin in the Professional division increased to 30.8% in the six months ended June 30, 1998 from 29.0% in the year earlier period. Operating Expenses. Operating expenses increased $48.0 million, or 53.8%, to $137.3 million in the six months ended June 30, 1998 from $89.3 million in the year earlier period. Operating expenses as a percentage of revenue decreased to 17.2% in the six months ended June 30, 1998 from 17.3% in the year earlier period due to the Company's ability to spread its expenses over a larger revenue base. Included in Operating expenses during the six months ended June 30, 1998 and 1997 are the costs associated with projects underway to ensure accurate date recognition and data processing with respect to the Year 2000 as it relates to the Company's business, operations, customers and vendors. The related costs, which are expensed as incurred, are included in general and administrative expense. The Company expects to substantially complete the Year 2000 conversion projects by the end of 1999. These costs have been immaterial to date and are not expected to have a material impact on the Company's results of operations, financial condition or liquidity in the future. Income from Operations. As a result of the foregoing, income from operations increased $33.0 million, or 63.5% to $85.0 million in the six months ended June 30, 1998 from $52.0 million in the year earlier period. Income from operations as a percentage of revenue increased to 10.6% in the six months ended June 30, 1998 from 9.7% in the year earlier period. Interest Expense. Interest expense increased $8.4 million, or 150.0%, to $14.0 million in the six months ended June 30, 1998 from $5.6 million in the year earlier period. The increase in interest expense resulted from a combination of the utilization of the Company's credit facility, and the amount of cash on hand at December 31, 1996. Income taxes. The Company's effective tax rate was 37.9% in the six months ended June 30, 1998 compared to 38.9% in the year earlier period. The decrease in the effective tax rate was due to tax savings realized from corporate restructurings. Income from continuing operations. As a result of the foregoing, income from continuing operations increased $17.3 million, or 59.9%, to $46.2 million in the six months ended June 30, 1998 from $28.9 million in the year earlier period. Income from continuing operations as a percentage of revenue increased to 5.8% in the six months ended June 30, 1998 from 5.6% in the year earlier period. From discontinued operations Income from Discontinued Operations. Income from the discontinued commercial operations, after tax, increased $6.6 million, or 40.3% to $23.1 million for the six months ended June 30, 1998 versus $16.5 million for the year earler period. Reported revenues from discontinued operations were $589.7 million for the six months ended June 30, 1998 versus $592.9 million for the year earlier period. Operating income for the discontinued operations were $ 39.6 million for the six months ended June 30, 1998 versus $28.0 million during the year earler period. Results of discontinued operations include allocations of consolidated interest expense totaling $2.7 million and $1.4 million for the six months ended June 30, 1998 and 1997, respectively. The allocations were based on the historic funding needs of the discontinued opertaions, including: the purchases of property, plant and equipment, acquisitions, current income tax liabilities and fluctuating working capital needs. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements have been principally related to the acquisition of businesses, working capital needs and capital expenditures. These requirements have been met through a combination of bank debt, issuances of securities and internally generated funds. Exclusive of the net assets of discontinued operations, the Company had working capital of $235.6 million and $ 148.9 million as of June 30, 1998 and December 31, 1997, respectively. The Company had cash and cash equivalents of $29.3 million and $23.9 million as of June 30, 1998 and December 31, 1997, respectively. The Company's operating cash flows and working capital requirements are significantly affected by the timing of payroll and the receipt of payment from the customer. Generally, the Company pays its Information Technology and Professional Services consultants semi-monthly, and receives payments from customers within 30 to 80 days from the date of invoice. As a result of the foregoing the Company used $9.5 million and generated $29.5 million of cash flow from operations for the six months ended June 30, 1998 and 1997, respectively. The Company used $107.9 million and $245.5 million for investing activities in the six months ended June 30, 1998 and 1997, respectively of which $87.3 million and $241.4 million, respectively, was used for acquisitions and $10.3 million and $4.1 million, respectively, was used for capital expenditures. For the six months ended June 30, 1998 and 1997, the Company was provided $98.5 million and $250.6 million of cash flows from financing activities. These amounts primarily represent net borrowings from the Company's credit facility, which were used primarily to fund acquisitions. Indebtedness of the Company Prior to the sale of Strategix, the Company had a $500 million line of credit which was syndicated to a group of 20 banks, with NationsBank, N.A. as principal agent. Subsequent to the sale of Strategix, the existing facility was paid-off, and terminated. As of October 25, 1998, the Company's indebtedness consisted solely of the acquisition notes and convertible senior debentures noted below. On October 22, 1998, the Company closed on its new $500 million revolving credit facility with NationsBank, N.A. as principal agent. The facility expires on October 21, 2003. Outstanding amounts under the credit facility will bear interest at certain floating rates as specified by the credit facility. The credit facility contains certain affirmative and negative covenants relating to the Company's operations, including a prohibition on making any business acquisitions which would result in pro forma noncompliance with the related covenants if the acquired company would meet or exceed 10% of total assets or income on a consolidated basis. In addition, approval is required by the majority lenders at such time that the cash consideration of an individual acquisition exceeds 20% of consolidated shareholder's equity. On October 16, 1995, the Company's subsidiary, Career Horizons, Inc., issued $86.25 million of 7% Convertible Senior Notes Due 2002 which were assumed by the Company pursuant to a merger. Interest on the notes is paid semiannually on May 1 and November 1 of each year. The notes are convertible at the option of the holder thereof, at any time after 90 days following the date of original issuance thereof and prior to maturity, unless previously redeemed, into shares of common stock of the Company at a conversion price of $11.35 per share, subject to adjustment in certain events. The notes are redeemable, in whole or in part, at the option of the Company, at any time on or after November 1, 1998, at stated redemption prices, together with accrued interest. On October 1, the Company called the notes to be converted as of November 1, 1998. As of November 1, 1998, the notes were either purchased by the company or converted into shares of the Companies common stock and are no longer outstanding. The Company has certain notes payable to shareholders of acquired companies. The notes payable bear interest at rates ranging from 5.0% to 8.0% and have repayment terms from January 1998 to June 2000. As of November 1, 1998 the Company owed approximately $15.1 million in such acquisition indebtedness. The Company is also obligated under various acquisition agreements to make earn-out payments to former stockholders of acquired companies over the next five years. The Company estimates the amount of these payments will total $5.6 million for the remainder of 1998, and $38.9 million, $26.2 million, $10.1 million and $3.0 million annually for the next four years. The Company anticipates that the cash generated by the operations of the acquired companies will provide a substantial part of the capital required to fund these payments. The Company anticipates that capital expenditures for furniture and equipment, including improvements to its management information and operating systems during the next twelve months will be approximately $15 million. The Company anticipates recurring expenditures in future years to be approximately $10 million per year. The Company believes that funds provided by operations, available borrowings under the credit facility, and current amounts of cash will be sufficient to meet its presently anticipated needs for working capital, capital expenditures and acquisitions for at least the next 12 months. SEASONALITY The company's quarterly operating results are affected primarily by the number of billing days in the quarter and the seasonality of its customers' businesses. Demand for services in the information technology and professional services businesses is typically lower during the first quarter until customers' operating budgets are finalized and the profitability of the Company's consultants is lower in the fourth quarter due to fewer billing days because of the higher number of holidays and vacation days. INFLATION The effects of inflation on the Company's operations were not significant during the periods presented in the financial statements. Generally, throughout the periods discussed above, the increases in revenue have resulted primarily from higher volumes, rather than price increases. RECENT ACCOUNTING PRONOUNCEMENTS During 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. This statement is effective for the Company's 1998 fiscal year. The Company is in the process of determining its preferred disclosure format. Additionally, during 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 requires, among other things, that certain general and financial information be disclosed for reportable operating segments of a company. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997, with interim application not required in the initial year of adoption. During 1998, the American Institute of Certified Public Accountants' Executive Committee issued Statement of Position Number 98-1 (SOP 98-1), "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use". SOP 98-1 is effective for fiscal years beginning after December 15, 1998. Management believes that the Company is substantially in compliance with this pronouncement and that the implementation of this pronouncement will not have a material effect on the Company's consolidated financial position, results of operations or cash flows. The Company plans to adopt SOP 98-1 during fiscal 1999. OTHER MATTERS Foreign Acquisitions. During 1997, the Company, through a series of acquisitions, expanded its operations into Canada and Europe (primarily the United Kingdom). The results of operations of these acquired companies are included with those of the Company from date of acquisition and are immaterial to the Company's results of operations for fiscal 1997, and financial position as of December 31, 1997. Impact of Year 2000. Some of the Company's older computer software programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that may recognize a date using "00" as the year 1900 rather than the year 2000. The Company commenced a company-wide assessment and will modify or replace affected software so that its computer systems will function properly with respect to dates beginning in the year 2000. To the best of management's knowledge and belief, and based on the work completed to date, the required modifications or replacements of the Company's software to process data after the turn of the century are not anticipated to pose significant operational problems. On October 31, 1998, the Company's Board of Directors authorized the repurchase of up to $200.0 million of the Company's common stock. Year 2000 Compliance During 1997, the Company began projects to address potential problems within the Company's operations which could result from the century change in the Year 2000. In 1998, the Company created a Year 2000 Program Office to oversee year 2000 projects and to address potential problems within the Company's operations which could result from the century change in the year 2000. The Project Office reports to the Company's Board of Directors and is staffed primarily with representatives of the Company's Corporate Information Systems Department, and has access to key associates in all areas of the Company's operations. The Project Office also uses outside consultants on an as-needed basis. A four-phase approach has been utilized to address the Year 2000 issues: an inventory phase to identify all computer-based systems and applications (including embedded systems) which might not be Year 2000 compliant; an assessment phase to determine what revisions or replacements would be necessary to achieve compliance and what priorities would best serve the Company; a conversion phase to implement the actions necessary to achieve compliance and to conduct the tests necessary to verify that the systems are operational; and an implementation phase to transition the compliant systems into the everyday operations of the Company. Management believes that the four phases are approximately 100%, 90%, 70% and 55% complete, respectively and estimates that all critical systems will be compliant with the century change by March 1999. The Company has budgeted approximately $2.0 million to address the Year 2000 issue, which includes the estimated cost of all modifications and the salaries of associates and the fees of consultants addressing the issues. Approximately $1.1 million of this amount has been expended through November 1, 1998. As a part of the Year 2000 review, the Company is examining its relationships with certain key outside vendors and others with whom it has significant business relationships to determine to the extent practical the degree of such parties' Year 2000 compliance and to develop strategies for working with them through the century change. Other than its banking relationships, which include only large, federally insured institutions, the Company does not have a relationship with any third-party vendor which is material to the operations of the Company and, therefore, believes that the failure of any such party to be Year 2000 compliant would not have a material adverse effect on the Company. Should the Company or a third party with whom the Company deals have a systems failure due to the century change, the Company does not expect any such effect to be material and it is developing contingency plans for alternative methods of transaction processing and estimates that such plans will be finalized by March of 1999. FORWARD LOOKING STATEMENTS Statements made in this Report regarding the Company's expectation or beliefs concerning future events, including capital spending, expected results and the Company's liquidity situation during 1998, should be considered forward-looking and subject to various risks and uncertainties. The Company's actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under Risk Factors and elsewhere in the Company's prospectus dated January 15, 1997, and as discussed in the Company's reports on Forms 10-Q and 8-K made under the Securities Exchange Act of 1934. For instance, the Company's results of operations may differ materially from those anticipated in the forward-looking statements due to, among other things: the Company's ability to successfully identify suitable acquisition candidates, complete acquisitions or integrate the acquired business into its operations; the general level of economic activity in the Company's markets; increased price competition; changes in government regulations or interpretations thereof; and the continued availability of qualified temporary personnel, particularly in the information technology and other professional segments of the Company's businesses. In addition, the market price of the Company's stock may, from time to time, be significantly volatile as a result of, among other things: the Company's operating results; the operating results of other temporary staffing companies; and changes in the performance of the stock market in general. Item 3. Changes in Information About Market Risk None Part II. Other Information Item 1. Legal Proceedings None Item 2. Changes in Securities No disclosure required. Item 3. Defaults Upon Senior Securities No disclosure required. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Company's shareholders was held on May 18, 1998. Proxies were solicited from shareholders of record on the close of business on March 24, 1998. On March 24, 1998, there were 109,568,272 shares outstanding and entitled to vote at the Annual Meeting. The shareholder vote on the issues presented at the Annual Meeting was as follows: Election of Directors All of the following persons nominated were elected to serve as directors and received the number of votes set opposite their names:
Name For Withhold Authority - -------------------------------------- --------------------- ------------------------------------------ Derek E. Dewan 92,651,759 390,410 Daniel M. Doyle 92,659,632 382,537 Peter J. Tanous 92,482,692 559,477 T. Wayne Davis 92,653,153 389,016 John K. Anderson, Jr. 92,654,087 388,082 Michael D. Abney 92,658,666 383,503
Item 5. Other Information No disclosure required. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 3 Amended and Restated Bylaws 11 Calculation of Per Share Earnings 27 Financial Data Schedule (B) Reports on Form 8-K The Company filed the following report on form 8-K during the second quarter of 1998: Form 8-K dated June 8, 1998, reporting the Company's intention to separate into two publicly-held companies by contributing its commercial division to a newly-formed subsidiary, Strategix Solutions, Inc. ("Strategix"). The Company also reported that Strategix had filed a registration statement for an initial public offering of up to 20% of its outstanding common stock. The Company further reported that the Company intends to distribute to the Company's shareholders, subject to certain conditions, all of the Company's shares of Strategix in a tax-free spin-off transaction. 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. AccuStaff Incorporated August 14, 1998 By:/S/ DEREK E. DEWAN ___________________________________________ Derek E. Dewan, President, Chairman of the Board and Chief Executive Officer August 14, 1998 By:/S/ MICHAEL D. ABNEY ___________________________________________ Michael D. Abney, Senior Vice President, Chief Financial Officer,Treasurer, Secretary and Director August 14, 1998 By:/S/ ROBERT P. CROUCH ___________________________________________ Robert P. Crouch, Vice President and Controller EX-3.(I) 2 AMENDED AND RESTATED BYLAWS BYLAWS OF ACCUSTAFF INCORPORATED (a Florida corporation)
ARTICLE 1 Definitions.............................................................................................3 Section 1.1 Definitions.......................................................................................3 ARTICLE 2 Offices.................................................................................................3 Section 2.1 Principal and Business Offices....................................................................3 Section 2.2 Registered Office.................................................................................3 ARTICLE 3 Shareholders............................................................................................3 Section 3.1 Annual Meeting....................................................................................3 Section 3.2 Special Meetings..................................................................................3 Section 3.3 Place of Meeting..................................................................................3 Section 3.4 Notice of Meeting.................................................................................3 Section 3.5 Waiver of Notice..................................................................................4 Section 3.6 Fixing of Record Date.............................................................................4 Section 3.7 Shareholders' List for Meetings...................................................................5 Section 3.8 Quorum............................................................................................5 Section 3.9 Voting of Shares..................................................................................5 Section 3.10 Vote Required....................................................................................5 Section 3.11 Conduct of Meeting...............................................................................5 Section 3.12 Inspection of Election...........................................................................6 Section 3.13 Proxies..........................................................................................6 Section 3.14 Shareholder Nominations and Proposals............................................................6 Section 3.15 Action by Shareholders Without Meeting...........................................................6 Section 3.16 Acceptance of Instruments Showing Shareholder Action.............................................7 ARTICLE 4 Board of Directors......................................................................................7 Section 4.1 General Powers and Number.........................................................................7 Section 4.2 Qualifications....................................................................................7 Section 4.3 Term of Office....................................................................................7 Section 4.4 Removal...........................................................................................7 Section 4.5 Resignation.......................................................................................7 Section 4.6 Vacancies.........................................................................................7 Section 4.7 Compensation......................................................................................8 Section 4.8 Regular Meetings..................................................................................8 Section 4.9 Special Meetings..................................................................................8 Section 4.10 Notice...........................................................................................8 Section 4.11 Waiver of Notice.................................................................................8 Section 4.12 Quorum and Voting................................................................................8 Section 4.13 Conduct of Meetings..............................................................................8 Section 4.14 Committees.......................................................................................9 Section 4.15 Action Without Meeting...........................................................................9 ARTICLE 5 Officers................................................................................................9 Section 5.1 Number............................................................................................9 Section 5.2 Election and Term of Office.......................................................................9 Section 5.3 Removal...........................................................................................9 Section 5.4 Resignation......................................................................................10 Section 5.5 Vacancies........................................................................................10 Section 5.6 President........................................................................................10 Section 5.7 Chief Operating Officer..........................................................................10 Section 5.8 Vice Presidents..................................................................................10 Section 5.9 Secretary........................................................................................10 Section 5.10 Treasurer.......................................................................................10 Section 5.11 Assistant Secretaries and Assistant Treasurers..................................................11 Section 5.12 Other Assistants and Acting Officers............................................................11 Section 5.13 Salaries........................................................................................11 ARTICLE 6 Contracts, Checks and Deposits; Special Corporate Acts.................................................11 Section 6.1 Contracts........................................................................................11 Section 6.2 Checks, Drafts, etc..............................................................................11 Section 6.3 Deposits.........................................................................................11 Section 6.4 Voting of Securities Owned by Corporation........................................................11 ARTICLE 7 Certificates for Shares; Transfer of Shares............................................................11 Section 7.1 Consideration for Shares.........................................................................11 Section 7.2 Certificates for Shares..........................................................................12 Section 7.3 Transfer of Shares...............................................................................12 Section 7.4 Restrictions on Transfer.........................................................................12 Section 7.5 Lost, Destroyed, or Stolen Certificates..........................................................12 Section 7.6 Stock Regulations................................................................................12 ARTICLE 8 Seal...................................................................................................12 Section 8.1 Seal.............................................................................................12 ARTICLE 9 Books and Records......................................................................................12 Section 9.1 Books and Records................................................................................12 Section 9.2 Shareholders' Inspection Rights..................................................................13 Section 9.3 Distribution of Financial Information............................................................13 Section 9.4 Other Reports....................................................................................13 ARTICLE 10 Indemnification.......................................................................................13 Section 10.1 Provision of Indemnification....................................................................13 ARTICLE 11 Amendments............................................................................................13 Section 11.1 Power to Amend..................................................................................13
ARTICLE 1 Definitions ARTICLE 1 Definitions Section 1.1 Definitions The following terms shall have the following meanings for purposes of these bylaws: "Act" means the Florida Business Corporation Act, as it may be amended from time to time, or any successor legislation thereto. "Deliver" or "delivery" includes delivery by hand; United States mail; facsimile, telegraph, teletype or other form of electronic transmission; and private mail carriers handling nationwide mail services. "Distribution" means a direct or indirect transfer of money or other property (except shares in the corporation) or an incurrence of indebtedness by the corporation to or for the benefit of shareholders in respect of any of the corporation's shares. A distribution may be in the form of a declaration or payment of a dividend; a purchase, redemption, or other acquisition of shares; a distribution of indebtedness; or otherwise. "Principal office" means the office (within or without the State of Florida) where the corporation's principal executive offices are located, as designated in the Articles of Incorporation until an annual report has been filed with the Florida Department of State, and thereafter as designated in the annual report. ARTICLE 2 Offices Section 2.1 Principal and Business OfficesSection 2.1 Principal and Business OfficesSection 2.1 Principal and Business OfficesSection 2.1 Principal and Business OfficesSection 2.1 Principal and Business Offices. The corporation may have such principal and other business offices, either within or without the State of Florida, as the Board of Directors may designate or as the business of the corporation may require from time to time. Section 2.2 Registered Office. The registered office of the corporation required by the Act to be maintained in the State of Florida may but need not be identical with the principal office if located in the State of Florida, and the address of the registered office may be changed from time to time by the Board of Directors or by the registered agent. The business office of the registered agent of the corporation shall be identical to such registered office. ARTICLE 3 Shareholders ARTICLE 3 Shareholders Section 3.1 Annual Meeting. The annual meeting of shareholders shall be held within four months after the close of each fiscal year of the corporation on a date and at a time and place designated by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day fixed as herein provided for any annual meeting of shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of shareholders as soon thereafter as is practicable. Section 3.2 Special Meetings (1) Call by Directors or President. Special meetings of shareholders, for any purpose or purposes, may be called by the Board of Directors, the Chairman of the Board (if any) or the President. (2) Call by Shareholders. The corporation shall call a special meeting of shareholders in the event that the holders of at least forty (40%) percent of all of the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the Secretary one or more written demands for the meeting describing one or more purposes for which it is to be held. The corporation shall give notice of such a special meeting within sixty days after the date that the demand is delivered to the corporation. Section 3.3 Place of Meeting The Board of Directors may designate any place, either within or without the State of Florida, as the place of meeting for any annual or special meeting of shareholders. If no designation is made, the place of meeting shall be the principal office of the corporation. Section 3.4 Notice of MeetingSection (1) Content and Delivery. Written notice stating the date, time, and place of any meeting of shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten days nor more than sixty days before the date of the meeting by or at the direction of the President or the Secretary, or the officer or persons duly calling the meeting, to each shareholder of record entitled to vote at such meeting and to such other persons as required by the Act. Unless the Act requires otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called. If mailed, notice of a meeting of shareholders shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock record books of the corporation, with postage thereon prepaid. (2) Notice of Adjourned Meetings. If an annual or special meeting of shareholders is adjourned to a different date, time, or place, the corporation shall not be required to give notice of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment; provided, however, that if a new record date for an adjourned meeting is or must be fixed, the corporation shall give notice of the adjourned meeting to persons who are shareholders as of the new record date who are entitled to notice of the meeting. (3) No Notice Under Certain Circumstances. Notwithstanding the other provisions of this Section, no notice of a meeting of shareholders need be given to a shareholder if: (1) an annual report and proxy statement for two consecutive annual meetings of shareholders, or (2) all, and at least two, checks in payment of dividends or interest on securities during a twelve month period have been sent by first-class, United States mail, addressed to the shareholder at his or her address as it appears on the share transfer books of the corporation, and returned undeliverable. The obligation of the corporation to give notice of a shareholders' meeting to any such shareholder shall be reinstated once the corporation has received a new address for such shareholder for entry on its share transfer books. Section 3.5 Waiver of NoticeSection (1) Written Waiver. A shareholder may waive any notice required by the Act or these bylaws before or after the date and time stated for the meeting in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice. (2) Waiver by Attendance. A shareholder's attendance at a meeting, in person or by proxy, waives objection to all of the following: (1) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and (2) consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 3.6 Fixing of Record DateSection 3.6 Fixing of Record DateSection 3.6 Fixing of Record DateSection 3.6 Fixing of Record DateSection 3.6 Fixing of Record Date. (1) General. The Board of Directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to notice of a shareholders' meeting, entitled to vote, or take any other action. In no event may a record date fixed by the Board of Directors be a date preceding the date upon which the resolution fixing the record date is adopted or a date more than seventy days before the date of meeting or action requiring a determination of shareholders. (2) Special Meeting. The record date for determining shareholders entitled to demand a special meeting shall be the close of business on the date the first shareholder delivers his or her demand to the corporation. (3) Shareholder Action by Written Consent. If no prior action is required by the Board of Directors pursuant to the Act, the record date for determining shareholders entitled to take action without a meeting shall be the close of business on the date the first signed written consent with respect to the action in question is delivered to the corporation. If prior action is required by the Board of Directors pursuant to the Act, such record date shall be the close of business on the date on which the Board of Directors adopts the resolution taking such prior action unless the Board of Directors otherwise fixes a record date. (4) Absence of Board Determination for Shareholders' Meeting. If the Board of Directors does not determine the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting, such record date shall be the close of business on the date before the first notice with respect thereto is delivered to shareholders. (5) Adjourned Meeting. A record date for determining shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. (6) Certain Distributions. If the Board of Directors does not determine the record date for determining shareholders entitled to a distribution (other than one involving a purchase, redemption, or other acquisition of the corporation's shares or a share dividend), such record date shall be the close of business on the date on which the Board of Directors authorizes the distribution. Section 3.7 Shareholders' List for MeetingsSection 3.7 Shareholders' List for MeetingsSection 3.7 Shareholders' List for MeetingsSection 3.7 Shareholders' List for MeetingsSection 3.7 Shareholders' List for Meetings. (1) Preparation and Availability. After a record date for a meeting of shareholders has been fixed, the corporation shall prepare an alphabetical list of the names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder for a period of ten days prior to the meeting or such shorter time as exists between the record date and the meeting date, and continuing through the meeting, at the corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the corporation's transfer agent or registrar, if any. A shareholder or his or her agent may, on written demand, inspect the list, subject to the requirements of the Act, during regular business hours and at his or her expense, during the period that is available for inspection pursuant to this Section. The corporation shall make the shareholders' list available at the meeting and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. (2) Prima Facie Evidence. The shareholders' list is prima facie evidence of the identity of shareholders entitled to examine the shareholders' list or to vote at a meeting of shareholders. (3) Failure to Comply. If the requirements of this Section have not been substantially complied with, or if the corporation refuses to allow a shareholder or his or her agent or attorney to inspect the shareholders' list before or at the meeting, on the demand of any shareholder, in person or by proxy, who failed to get such access, the meeting shall be adjourned until such requirements are complied with. (4) Validity of Action Not Affected. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. Section 3.8 QuorumSection (1) What Constitutes a Quorum. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. If the corporation has only one class of stock outstanding, such class shall constitute a separate voting group for purposes of this Section. Except as otherwise provided in the Act, a majority of the votes entitled to be cast on the matter shall constitute a quorum of the voting group for action on that matter. (2) Presence of Shares. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. (3) Adjournment in Absence of Quorum. Where a quorum is not present, the holders of a majority of the shares represented and who would be entitled to vote at the meeting if a quorum were present may adjourn such meeting from time to time. Section 3.9 Voting of Shares. Except as provided in the Articles of Incorporation or the Act, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a meeting of shareholders. Section 3.10 Vote RequiredSection (1) Matters Other Than Election of Directors. If a quorum exists, except in the case of the election of directors, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Act requires a greater number of affirmative votes. (2) Election of Directors. Each director shall be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors at a meeting at which as quorum is present. Each shareholder who is entitled to vote at an election of directors has the right to vote the number of shares owned by him or her for as many persons as there are directors to be elected. Shareholders do not have a right to cumulate their votes for directors. Section 3.11 Conduct of MeetingSection 3.11 Conduct of MeetingSection 3.11 Conduct of MeetingSection 3.11 Conduct of MeetingSection 3.11 Conduct of Meeting. The Chairman of the Board of Directors, and if there be none, or in his or her absence, the President, and in his or her absence, a Vice President in the order provided under the Section of these bylaws entitled "Vice Presidents", and in their absence, any person chosen by the shareholders present shall call a shareholders' meeting to order and shall act as presiding officer of the meeting, and the Secretary of the corporation shall act as secretary of all meetings of the shareholders, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. The presiding officer of the meeting shall have broad discretion in determining the order of business at a shareholders' meeting. The presiding officer's authority to conduct the meeting shall include, but in no way be limited to, recognizing shareholders entitled to speak, calling for the necessary reports, stating questions and putting them to a vote, calling for nominations, and announcing the results of voting. The presiding officer also shall take such actions as are necessary and appropriate to preserve order at the meeting. The rules of parliamentary procedure need not be observed in the conduct of shareholders' meetings; however, meetings shall be conducted in accordance with accepted usage and common practice with fair treatment to all who are entitled to take part. Section 3.12 Inspection of Election. Inspectors of election may be appointed by the Board of Directors to act at any meeting of shareholders at which any vote is taken. If inspectors of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, make such appointment. The inspectors of election shall determine the number of shares outstanding, the voting rights with respect to each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; receive votes, ballots, consents, and waivers; hear and determine all challenges and questions arising in connection with the vote; count and tabulate all votes, consents, and waivers; determine and announce the result; and do such acts as are proper to conduct the election or vote with fairness to all shareholders. No inspector, whether appointed by the Board of Directors or by the person acting as presiding officer of the meeting, need be a shareholder. Section 3.13 Proxies (1) Appointment. At all meetings of shareholders, a shareholder may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. If an appointment form expressly provides, any proxy holder may appoint, in writing, a substitute to act in his or her place. A telegraph, telex, or a cablegram, a facsimile transmission of a signed appointment form, or a photographic, photostatic, or equivalent reproduction of a signed appointment form is a sufficient appointment form. (2) When Effective. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the corporation authorized to tabulate votes. An appointment is valid for up to eleven months unless a longer period is expressly provided in the appointment form. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Section 3.14 Shareholder Nominations and ProposalsSection 3.14 Shareholder Nominations and ProposalsSection 3.14 Shareholder Nominations and ProposalsSection 3.14 Shareholder Nominations and ProposalsSection 3.14 Shareholder Nominations and Proposals. Any shareholder nomination for director or proposal for action at a forthcoming shareholder meeting must be delivered to the corporation no later than the deadline for submitting shareholder proposals pursuant to Securities Exchange Commission Regulations Section 240.14a-8. The presiding officer at any shareholder meeting shall not be required to recognize any nomination or proposal which did not comply with such deadline. Section 3.15 Action by Shareholders Without MeetingSection 3.15 Action by Shareholders Without MeetingSection 3.15 Action by Shareholders Without MeetingSection 3.15 Action by Shareholders Without MeetingSection 3.15 Action by Shareholders Without Meeting. (1) Requirements for Written Consents. Any action required or permitted by the Act to be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote if one or more written consents describing the action taken shall be signed and dated by the holders of outstanding stock entitled to vote thereon 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. Such consents must be delivered to the principal office of the corporation in Florida, the corporation's principal place of business, the Secretary, or another officer or agent of the corporation having custody of the books in which proceedings of meetings of shareholders are recorded. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the date of the earliest dated consent delivered in the manner required herein, written consents signed by the number of holders required to take action are delivered to the corporation by delivery as set forth in this Section. (2) Revocation of Written Consents. Any written consent may be revoked prior to the date that the corporation receives the required number of consents to authorize the proposed action. No revocation is effective unless in writing and until received by the corporation at its principal office in Florida or its principal place of business, or received by the Secretary or other officer or agent having custody of the books in which proceedings of meetings of shareholders are recorded. (3) Notice to Nonconsenting Shareholders. Within ten days after obtaining such authorization by written consent, notice must be given in writing to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action and, if the action be such for which dissenters' rights are provided under the Act, the notice shall contain a clear statement of the right of shareholders dissenting therefrom to be paid the fair value of their shares upon compliance with the provisions of the Act regarding the rights of dissenting shareholders. (4) Same Effect as Vote at Meeting. A consent signed under this Section has the effect of a meeting vote and may be described as such in any document. Whenever action is taken by written consent pursuant to this Section, the written consent of the shareholders consenting thereto or the written reports of inspectors appointed to tabulate such consents shall be filed with the minutes of proceedings of shareholders. Section 3.16 Acceptance of Instruments Showing Shareholder ActionSection 3.16 Acceptance of Instruments Showing Shareholder ActionSection 3.16 Acceptance of Instruments Showing Shareholder ActionSection 3.16 Acceptance of Instruments Showing Shareholder ActionSection 3.16 Acceptance of Instruments Showing Shareholder Action. If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver, or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (1) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity; (2) The name signed purports to be that of an administrator, executor, guardian, personal representative, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waiver, or proxy appointment; (3) The name signed purports to be that of a receiver or trustee in bankruptcy, or assignee for the benefit of creditors of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver, or proxy appointment; (4) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver, or proxy appointment; or (5) Two or more persons are the shareholder as covenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The corporation may reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer of agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. ARTICLE 4 Board of Directors ARTICLE 4 Board of Directors Section 4.1 General Powers and Number. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, the Board of Directors. The corporation shall have seven (7) directors initially. The number of directors may be increased or decreased from time to time by vote of a majority of the entire Board of Directors, but shall never be less than four nor more than eleven. Section 4.2 Qualifications. Directors must be natural persons who are eighteen years of age or older but need not be residents of this state or shareholders of the corporation. Section 4.3 Term of Office. Each director shall hold office until the next annual meeting of shareholders and until his or her successor shall have been elected and, if necessary, qualified, or until there is a decrease in the number of directors which takes effect after the expiration of his or her term, or until his or her prior death, resignation or removal. Section 4.4 Removal. The shareholders may remove one or more directors with or without cause. A director may be removed by the shareholders at a meeting of shareholders, provided that the notice of the meeting states that the purpose, or one of the purposes, of the meeting is such removal. Section 4.5 Resignation. A director may resign at any time by delivering written notice to the Board of Directors or its Chairman (if any) or to the corporation. A director's resignation is effective when the notice is delivered unless the notice specifies a later effective date. Section 4.6 Vacancies (1) Who May Fill Vacancies. Except as provided below, whenever any vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of directors, it may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors, or by the shareholders. If the directors first fill a vacancy, the shareholders shall have no further right with respect to that vacancy, and if the shareholders first fill the vacancy, the directors shall have no further rights with respect to that vacancy. (2) Directors Electing by Voting Groups. Whenever the holders of shares of any voting group are entitled to elect a class of one or more directors by the provisions of the Articles of Incorporation, vacancies in such class may be filled by holders of shares of that voting group or by a majority of the directors then in office elected by such voting group or by a sole remaining director so elected. If no director elected by such voting group remains in office, unless the Articles of Incorporation provide otherwise, directors not elected by such voting group may fill vacancies. (3) Prospective Vacancies. A vacancy that will occur at a specific later date, because of a resignation effective at a later date or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. Section 4.7 Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may establish a reasonable compensation of all directors for services to the corporation as directors, officers, or otherwise, or may delegate such authority to an appropriate committee. The Board of Directors also shall have the authority to provide for or delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers, and employees and to their families, dependents, estates, or beneficiaries on account of prior services rendered to the corporation by such directors, officers, and employees. Section 4.8 Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this bylaw immediately after the annual meeting of shareholders and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the meeting of shareholders which precedes it, or such other suitable place as may be announced at such meeting of shareholders. The Board of Directors may provide, by resolution, the date, time, and place, either within or without the State of Florida, for the holding of additional regular meetings of the Board of Directors without notice other than such resolution. Section 4.9 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the President or one-third of the members of the Board of Directors. The person or persons calling the meeting may fix any place, either within or without the State of Florida, as the place for holding any special meeting of the Board of Directors, and if no other place is fixed, the place of the meeting shall be the principal office of the corporation in the State of Florida. Section 4.10 Notice. Special meetings of the Board of Directors must be preceded by at least two days' notice of the date, time, and place of the meeting. The notice need not described the purpose of the special meeting. Section 4.11 Waiver of Notice. Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Section 4.12 Quorum and Voting A quorum of the Board of Directors consists of a majority of the number of directors prescribed by these bylaws. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the Board of Directors. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless: (a) he or she objects at the beginning of the meeting (or promptly upon his or her arrival) to holding it or transacting specified business at the meeting; or (b) he or she votes against or abstains from the action taken. Section 4.13 Conduct of Meetings (1) Presiding Officer. The Board of Directors may elect from among its members a Chairman of the Board of Directors, who shall preside at meetings of the Board of Directors. The Chairman, and if there be none, or in his or her absence, the President, and in his or her absence, a Vice President in the order provided under the Section of these bylaws titled "Vice Presidents", and in their absence, any director chosen by the directors present, shall call meetings of the Board of Directors to order and shall act as presiding officer of the meeting. (2) Minutes. The Secretary of the corporation shall act as secretary of all meetings of the Board of Directors but in the absence of the Secretary, the presiding officer may appoint any other person present to act as secretary of the meeting. Minutes of any regular or special meeting of the Board of Directors shall be prepared and distributed to each director. (3) Adjournments. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who are not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors. (4) Participation by Conference Call or Similar Means. The Board of Directors may permit any or all directors to participate in a regular or a special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. Section 4.14 Committees The Board ofDirectors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an Executive Committee and one or more other committees (which may include, by way of example and not as a limitation, a Compensation Committee, an Audit Committee and a Nominating Committee) each of which, to the extent provided in such resolution, shall have and may exercise all the authority of the Board of Directors, except that no such committee shall have the authority to: (1) approve or recommend to shareholders actions or proposals required by the Act to be approved by shareholders; (2) fill vacancies on the Board of Directors or any committee thereof; (3) adopt, amend, or repeal these bylaws; (4) authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors; or (5) authorize or approve the issuance or sale or contract for the sale of shares, or determine the designation and relative rights, preferences, and limitations of a voting group except that the Board of Directors may authorize a committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the Board of Directors. Each committee must have two or more members, who shall serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this Section, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee. The provisions of these bylaws which govern meetings, notice and waiver or notice, and quorum and voting requirements of the Board of Directors apply to committees and their members as well. Section 4.15 Action Without Meeting. Any action required or permitted by the Act to be taken at a meeting of the Board of Directors or a committee thereof may be taken without a meeting if the action is taken by all members of the Board or of the committee. The action may be evidenced by one or more written consents describing the action taken, signed by each director or committee member and retained by the corporation. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date. A consent signed under this Section has the effect of a vote at a meeting and may be described as such in any document. ARTICLE 5 ARTICLE 5 Officers Section 5.1 NumberSection The principal officers of the corporation may be a President, a Chief Operating Officer, the number of Vice Presidents, if any, as authorized from time to time by the Board of Directors, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. The Board of Directors may also authorize any duly appointed officer to appoint one or more officers or assistant officers. The same individual may simultaneously hold more than one office. Section 5.2 Election and Term of Office.The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as is practicable. Each officer shall hold office until his or her successor shall have been duly elected or until his or her prior death, resignation, or removal. Section 5.3 Removal. The Board of Directors may remove any officer and, unless restricted by the Board of Directors, an officer may remove any officer or assistant officer appointed by that officer, at any time, with or without cause and notwithstanding the contract rights, if any, of the officer removed. The appointment of an officer does not of itself create contract rights. Section 5.4 Resignation. An officer may resign at any time by delivering notice to the corporation. The resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, the pending vacancy may be filled before the effective date but the successor may not take office until the effective date. Section 5.5 Vacancies. A vacancy in any principal office because of death, resignation, removal, disqualification, or otherwise, shall be filled as soon thereafter as practicable by the Board of Directors for the unexpired portion of the term. Section 5.6 President. The President shall be the principal executive officer of the corporation and, subject to the direction of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. The President shall, when present, preside at all meetings of the shareholders and, if no Chairman of the Board has been elected, shall preside at all meetings of the Board of Directors. The President shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the President. The President shall have authority to sign certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors, and to execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, contracts, leases, reports, and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, the President may authorize any Vice President or other officer or agent of the corporation to execute and acknowledge such documents or instruments in his or her place and stead. In general he or she shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. Section 5.7 Chief Operating Officer. The Chief Operating Officer shall: (a) be responsible for supervising and controlling the daily operations of the corporation; and (b) in general perform all duties incident to the office of Chief Operating officer and have such other duties and exercise such authority as from time to time may be delegated or assigned by the President or by the Board of Directors. Section 5.8 Vice Presidents. In the absence of the President or in the event of the President's death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the President or by the Board of Directors. The execution of any instrument of the corporation by any Vice President shall be conclusive evidence, as to third parties, of his or her authority to act in the stead of the President. Section 5.9 Secretary. The Secretary shall: (a) keep, or cause to be kept, minutes of the meetings of the shareholders and of the Board of Directors (and of committees thereof) in one or more books provided for that purpose (including records of actions taken by the shareholders or the Board of Directors (or committees thereof) without a meeting); (b) be custodian of the corporate records and of the seal of the corporation, if any, and if the corporation has a seal, see that it is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (c) authenticate the records of the corporation; (d) maintain a record of the shareholders of the corporation, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and class or series of shares held by each shareholder; (e) have general charge of the stock transfer books of the corporation; and (f) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned by the President or by the Board of Directors. Section 5.10 Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) maintain appropriate accounting records; (c) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies, or other depositaries as shall be selected in accordance with the provisions of these bylaws; and (d) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned by the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. Section 5.11 Assistant Secretaries and Assistant Treasurers. There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the President or the Board of Directors. Section 5.12 Other Assistants and Acting Officers. The Board of Directors shall have the power to appoint, or to authorize any duly appointed officer of the corporation to appoint, any person to act as assistant to any officer, or as agent for the corporation in his or her stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors or an authorized officer shall have the power to perform all the duties of the office to which he or she is so appointed to be an assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the appointing officer. Section 5.13 Salaries. The salaries of the principal officers shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof, and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the corporation. ARTICLE 6 Contracts, Checks and Deposits; Special Corporate Acts Section 6.1. The Board of Directors may authorize any officer or officers, or any agent or agents to enter into any contract or execute or deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages, and instruments of assignment or pledge made by the corporation shall be executed in the name of the corporation by the President or one of the Vice Presidents. The Secretary or an Assistant Secretary, when necessary or required, shall attest and affix the corporate seal, if any, thereto. When so executed, no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. Section 6.2 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of a resolution of the Board of Directors. Section 6.3 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositaries as may be selected by or under the authority of a resolution of the Board of Directors. Section 6.4 Voting of Securities Owned by Corporation. Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this corporation may be voted at any meeting of security holders of such other corporation by the President of this corporation if he or she be present, or in his or her absence by any Vice President of this corporation who may be present, and (b) whenever, in the judgment of the President, or in his or her absence, of any Vice President, it is desirable for this corporation to execute a proxy or written consent in respect of any such shares or other securities, such proxy or consent shall be executed in the name of this corporation by the President or one of the Vice Presidents of this corporation, without necessity of any authorization by the Board of Directors, affixation of corporate seal, if any, or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this corporation shall have full right, power, and authority to vote the shares or other securities issued by such other corporation and owned or controlled by this corporation the same as such shares or other securities might be voted by this corporation. ARTICLE 7 Certificates for Shares; Transfer of Shares Section 7.1 Consideration for SharesSection . The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, promises to perform services evidenced by a written contract, or other securities of the corporation. Before the corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for the shares to be issued is adequate. The determination of the Board of Directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable. The corporation may place in escrow shares issued for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against this purchase price, until the services are performed, the note is paid, or the benefits are received. If the services are not performed, the note is not paid, or the benefits are not received, the corporation may cancel, in whole or in part, the shares escrowed or restricted and the distributions credited. Section 7.2 Certificates for Shares. Every holder of shares in the corporation shall be entitled to have a certificate representing all shares to which he or she is entitled unless the Board of Directors authorizes the issuance of some or all shares without certificates. Any such authorization shall not affect shares already represented by certificates until the certificates are surrendered to the corporation. If the Board of Directors authorizes the issuance of any share without certificates, within a reasonable time after the issue or transfer of any such shares, the corporation shall send the shareholder a written statement of the information required by the Act or these bylaws to be set forth on certificates, including any restrictions on transfer. Certificates representing shares of the corporation shall be in such form, consistent with the Act, as shall be determined by the Board of Directors. Such certificates shall be signed (either manually or facsimile) by the President or any Vice President or any other persons designated by the Board of Directors and may be sealed with the seal of the corporation or a facsimile thereof. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. Unless the Board of Directors authorizes shares without certificates, all certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except as provided in these bylaws with respect to lost, destroyed, or stolen certificates. The validity of a share certificate is not affected if a person who signed the certificate (either manually or in facsimile) no longer holds office when the certificate is issued. Section 7.3 Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer, the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications, and other