-----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, EPrbIL7ISbeT2k9Ez3M2ufrMU34evn9jHy7QWrTk/aICDH8gvibfCZxyBf6/v9Wa rj50XLb2OrX44+3+rjXTSQ== 0000924646-03-000010.txt : 20030515 0000924646-03-000010.hdr.sgml : 20030515 20030515140346 ACCESSION NUMBER: 0000924646-03-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPS GROUP 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-24484 FILM NUMBER: 03703419 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: MODIS PROFESSIONAL SERVICES INC DATE OF NAME CHANGE: 19981001 FORMER COMPANY: FORMER CONFORMED NAME: ACCUSTAFF INC DATE OF NAME CHANGE: 19940606 10-Q 1 form10qtofile.txt FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2003 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 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 MPS GROUP, INC. (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.) 1 Independent Drive, Jacksonville, FL 32202 - ---------------------------------------- -------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number including area code): (904) 360-2000 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 --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No --- --- There were 101,488,430 shares with a par value of $0.01 outstanding at May 2, 2003. FORWARD-LOOKING STATEMENTS This report on Form 10-Q contains forward-looking statements that are subject to certain risks, uncertainties or assumptions and may be affected by certain other factors, including but not limited to the specific factors discussed in Part I, Item 2 of this report and under the heading 'Factors Which May Impact Future Results and Financial Condition.' In some cases, you can identify forward-looking statements by terminology such as 'will,' 'may,' 'should,' 'could,' 'expects,' 'plans,' 'indicates,' 'projects,' 'anticipates,' 'believes,' 'estimates,' 'appears,' 'predicts,' 'potential,' 'continues,' 'would,' or 'become' or the negative of these terms or other comparable terminology. In addition, except for historical facts, all information provided in Part I, Item 3, under 'Quantitative and Qualitative Disclosures About Market Risk' should be considered forward-looking statements. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on beliefs and assumptions of the Company's management and on information currently available to such management. Forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Forward-looking statements are not guarantees of performance.
MPS Group, Inc. and Subsidiaries Index Part I Financial Information Item 1 Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002.............................................................................. 3 Unaudited Condensed Consolidated Statements of Income for the Three Months ended March 31, 2003 and 2002...................................................................... 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2003 and 2002...................................................................... 5 Unaudited Notes to Condensed Consolidated Financial Statements......................................... 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11 Item 3 Quantitative and Qualitative Disclosures About Market Risks............................................ 15 Item 4 Controls and Procedures................................................................................ 18 Part II Other Information Item 1 Legal Proceedings...................................................................................... 19 Item 2 Changes in Securities and Use of Proceeds.............................................................. 19 Item 3 Defaults Upon Senior Securities........................................................................ 19 Item 4 Submission of Matters to a Vote of Security Holders.................................................... 19 Item 5 Other Information...................................................................................... 19 Item 6 Exhibits and Reports on Form 8-K....................................................................... 19 Signatures............................................................................................. 20 Certifications......................................................................................... 21 Exhibits
2 Part I. Financial Information Item 1. Financial Statements MPS Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
March 31, December 31, (dollar amounts in thousands except share amounts) 2003 2002 - ----------------------------------------------------------------------------------------------------------------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 76,421 $ 66,934 Accounts receivable, net of allowance of $17,665 and $17,506 181,577 185,510 Prepaid expenses 5,384 5,099 Deferred income taxes 3,350 3,386 Other 10,959 11,632 ---------------------------------- Total current assets 277,691 272,561 Furniture, equipment, and leasehold improvements, net 36,207 38,792 Goodwill, net 512,518 511,796 Deferred income taxes 63,258 64,085 Other assets, net 10,264 10,749 ---------------------------------- Total assets $ 899,938 $ 897,983 ================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 45,382 49,834 Accrued payroll and related taxes 41,795 35,885 Income taxes payable 17,622 14,911 ---------------------------------- Total current liabilities 104,799 100,630 Other 15,282 15,794 ---------------------------------- Total liabilities 120,081 116,424 ---------------------------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Common stock, $.01 par value; 400,000,000 shares authorized; 102,542,029 and 102,531,491 shares issued, respectively 1,025 1,025 Additional contributed capital 622,071 622,079 Retained earnings 166,734 163,781 Accumulated other comprehensive (loss) income (1,167) 66 Deferred stock compensation (3,453) (3,958) Treasury stock, at cost (783,000 shares in 2003 and 290,400 shares in 2002) (5,353) (1,434) ---------------------------------- Total stockholders' equity 779,857 781,559 ---------------------------------- Total liabilities and stockholders' equity $ 899,938 $ 897,983 ==================================
See accompanying notes to condensed consolidated financial statements. 3 MPS Group, Inc. and Subsidiaries Condensed Consolidated Statements of Income
Three months ended March 31, ------------------------------ (dollar amounts in thousands except per share amounts) 2003 2002 - ---------------------------------------------------------------------------------------------------- (unaudited) (unaudited) Revenue $ 271,799 $ 296,453 Cost of revenue 201,566 220,195 ------------------------------ Gross profit 70,233 76,258 ------------------------------ Operating expenses: General and administrative 60,602 66,547 Depreciation and intangibles amortization 4,620 4,998 ------------------------------ Total operating expenses 65,222 71,545 ------------------------------ Income from operations 5,011 4,713 Other expense, net 6 1,574 ------------------------------ Income before provision for income taxes and cumulative effect of accounting change 5,005 3,139 Provision for income taxes 2,052 1,193 ------------------------------ Income before cumulative effect of accounting change 2,953 1,946 Cumulative effect of accounting change (net of a $112,953 income tax benefit) - (553,712) ------------------------------ Net income (loss) $ 2,953 $ (551,766) ============================== Basic net income (loss) per common share: Income before cumulative effect of accounting change $ 0.03 $ 0.02 Cumulative effect of accounting change, net of tax - (5.62) ------------------------------ Basic net income (loss) per common share $ 0.03 $ (5.60) ============================== Average common shares outstanding, basic 102,004 98,475 ============================== Diluted income (loss) per common share: Income before cumulative effect of accounting change $ 0.03 $ 0.02 Cumulative effect of accounting change, net of tax - (5.49) ------------------------------ Diluted net income (loss) per common share $ 0.03 $ (5.47) ============================== Average common shares outstanding, diluted 102,677 100,799 ==============================
See accompanying notes to condensed consolidated financial statements. 4 MPS Group, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows
Three months ended March 31, ------------------------------ (dollar amounts in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------ (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $ 2,953 $ (551,766) Adjustments to net income (loss) to net cash provided by by operating activities: Cumulative effect of accounting change, net of tax - 553,712 Depreciation and intangibles amortization 4,620 4,998 Changes in certain assets and liabilities, net of acquisitions: Accounts receivable 3,023 20,059 Prepaid expenses and other assets (283) (520) Deferred income taxes 863 4,933 Deferred compensation 505 400 Accounts payable and accrued expenses (2,057) (7,209) Accrued payroll and related taxes 6,062 269 Other, net (24) 4,169 --------------- --------------- Net cash provided by operating activities 15,662 29,045 --------------- --------------- Cash flows from investing activities: Purchase of furniture, equipment and leasehold improvements, net of disposals (1,285) (513) Purchase of businesses, net of cash acquired (1,027) - --------------- --------------- Net cash used in investing activities (2,312) (513) --------------- --------------- Cash flows from financing activities: Repurchases of common stock (3,706) - Discount realized on employee stock purchase plan (38) (490) Proceeds from stock options exercised 30 2,578 Repayments on indebtedness (29) (45,359) --------------- --------------- Net cash used in financing activities (3,743) (43,271) --------------- --------------- Effect of exchange rate changes on cash and cash equivalents (120) (309) Net increase (decrease) in cash and cash equivalents 9,487 (15,048) Cash and cash equivalents, beginning of period 66,934 49,208 --------------- --------------- Cash and cash equivalents, end of period $ 76,421 $ 34,160 =============== ===============
See accompanying notes to condensed consolidated financial statements. 5 MPS Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) 1. Basis of Presentation. The accompanying condensed 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 ('SEC'). 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 statements and related notes included in the Company's Form 10-K for the year ended December 31, 2002. The accompanying condensed 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. Stock-Based Compensation During December 2002, the Financial Accounting Standards Board (FASB), issued Statement of Financial Accounting Standards (SFAS) No. 148, 'Accounting for Stock-Based Compensation - Transition and Disclosure,' which provides for alternative methods of transition for a voluntary change to the fair-value-based method of accounting for stock-based compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123, 'Accounting for Stock-Based Compensation,' to require more prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for its employee and director stock option plans in accordance with APB Opinion No. 25, 'Accounting for Stock Issued to Employees,' and related Interpretations. The Company measures compensation expense for employee and director stock options as the aggregate difference between the market value of its common stock and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the exercise prices are known. Compensation expense associated with restricted stock grants is equal to the market value of the shares on the date of grant and is recorded pro rata over the required holding period. If the Company had elected to recognize compensation cost for all outstanding options granted by the Company by applying the fair value recognition provisions of SFAS No. 148 to stock-based employee compensation, net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below.
Three months ended March 31, ------------------------------ (dollar amounts in thousands except per share amounts) 2003 2002 - ---------------------------------------------------------------------------------------------------- Net income (loss) As reported $ 2,953 $ (551,766) Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (1,245) (1,080) --------------------------- Pro forma $ 1,708 $ (552,846) =========================== Basic net income (loss) per common share As reported $ 0.03 $ (5.60) Pro forma $ 0.02 $ (5.61) Diluted net income (loss) per common share As reported $ 0.03 $ (5.47) Pro forma $ 0.02 $ (5.48)
6 2. Net Income per Common Share The calculation of basic net income (loss) per common share and diluted net income (loss) per common share is presented below:
Three months ended March 31, ------------------------------ (dollar amounts in thousands except per share amounts) 2003 2002 - ---------------------------------------------------------------------------------------------------- Basic income (loss) per common share computation: Income before cumulative effect of accounting change $ 2,953 $ 1,946 Cumulative effect of accounting change, net of tax - (553,712) ------------------------------ Net income (loss) $ 2,953 $ (551,766) ============================== Basic average common shares outstanding 102,004 98,475 ============================== Basic income (loss) per common share: Income before cumulative effect of accounting change $ 0.03 $ 0.02 Cumulative effect of accounting change, net of tax - (5.62) ------------------------------ Basic net income (loss) per common share $ 0.03 $ (5.60) ============================== Diluted income (loss) per common share computation: Income before cumulative effect of accounting change $ 2,953 $ 1,946 Cumulative effect of accounting change, net of tax - (553,712) ------------------------------ Net income (loss) $ 2,953 $ (551,766) ============================== Basic average common shares outstanding 102,004 98,475 Incremental shares from assumed exercise of stock options 673 2,324 ------------------------------ Diluted average common shares outstanding 102,677 100,799 ============================== Diluted income (loss) per common share: Income before cumulative effect of accounting change $ 0.03 $ 0.02 Cumulative effect of accounting change, net of tax - (5.49) ------------------------------ Diluted net income (loss) per common share $ 0.03 $ (5.47) ==============================
Options to purchase 8.5 million and 2.4 million shares of common stock that were outstanding as of March 31, 2003 and 2002, respectively, were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of the common shares. 3. Commitments and Contingencies Litigation The Company is a party to a number of lawsuits and claims arising out of the ordinary conduct of its business. In the opinion of management, based on the advice of in-house and external legal counsel, the lawsuits and claims pending are not likely to have a material adverse effect on the Company, its financial position, its results of operations, or its cash flows. 7 4. Segment Reporting The Company discloses segment information in accordance with SFAS No. 131, 'Disclosure About Segments of an Enterprise and Related Information,' which requires companies to report selected segment information on a quarterly basis and to report certain entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. The Company has three reportable segments: IT services, professional services, and IT solutions. The Company's reportable segments are strategic divisions that offer different services and are managed separately as each division requires different resources and marketing strategies. The IT services division offers value-added solutions such as IT project support and staffing, recruitment of full-time positions, project-based solutions, supplier management solutions, and on-site recruiting support. The professional services division provides expertise in a wide variety of disciplines including accounting and finance, law, engineering and technical, workforce management, executive search, human resource consulting, and health care. The IT solutions division, operating under the brand Idea Integration, provides IT strategy consulting, design and branding, application development, and integration. The professional services division's results for the three months ended March 31, 2003, include the results of the Company's health care staffing unit, which was acquired by the Company in July 2002, and the results from an immaterial acquisition of a legal staffing business, which was acquired in the first quarter of 2003. The Company evaluates segment performance based on revenues, gross profit, and income before provision for income taxes. The Company does not allocate income taxes or unusual items to the segments. The following table summarizes segment and geographic information:
Three Months Ended ------------------------------- March 31, March 31, (dollar amounts in thousands) 2003 2002 - ----------------------------------------------------------------------------------- Revenue IT services $ 126,620 $ 150,747 Professional services 126,977 122,908 IT solutions 18,202 22,798 ------------ ------------ Total revenue $ 271,799 $ 296,453 ============ ============ Gross profit IT services $ 27,593 $ 30,935 Professional services 36,420 37,973 IT solutions 6,220 7,350 ------------ ------------ Total gross profit $ 70,233 $ 76,258 ============ ============ Income before provision for income taxes and cumulative effect of accounting change IT services $ 575 $ 691 Professional services 4,020 6,245 IT solutions 416 (2,223) ------------ ------------ 5,011 4,713 Corporate interest and other expense, net (6) (1,574) ------------ ------------ Total income before provision for income taxes and cumulative effect of accounting change $ 5,005 $ 3,139 ============ ============ Geographic Areas Revenue United States $ 178,691 $ 201,667 U.K. 90,409 91,537 Other 2,699 3,249 ------------ ------------ Total revenue $ 271,799 $ 296,453 ============ ============ 8 March 31, December 31, 2003 2002 - ---------------------------------------------------------------------------------------------- Assets IT services $ 472,289 $ 457,163 Professional services 371,272 380,340 IT solutions 55,766 59,700 ------------ ------------ 899,327 897,203 Corporate 611 780 ------------ ------------ Total assets $ 899,938 $ 897,983 ============ ============ Geographic Areas Identifiable Assets United States $ 637,495 $ 636,351 U.K. 255,169 254,169 Other 7,274 7,463 ------------ ------------ Total assets $ 899,938 $ 897,983 ============ ============
5. Comprehensive Income The Company discloses other comprehensive income in accordance with SFAS No. 130, 'Reporting Comprehensive Income'. Comprehensive income includes unrealized gains and losses on foreign currency translation adjustments and changes in the fair value of certain derivative financial instruments which qualify for hedge accounting. A summary of comprehensive income for the three months ended March 31, 2003 and 2002, is as follows:
Three months ended March 31, ------------------------------ 2003 2002 - ----------------------------------------------------------------------------- Net income (loss) $ 2,953 $ (551,766) Unrealized loss on foreign currency translation adjustments (a) (1,233) (1,407) Unrealized gain on derivative instruments, net of deferred taxes - 830 ----------- ---------- Total other comprehensive loss (1,233) (577) Comprehensive income (loss) $ 1,720 $ (552,343) =========== ==========
(a) The currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. 9 6. Excess Real Estate Obligations During June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which requires that a liability for a cost associated with an exit or disposal activity be recognized, at fair value, when the liability is incurred rather than at the time an entity commits to a plan. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. The Company adopted the provisions of SFAS No. 146 in 2002. In the fourth quarter of 2002, the Company recorded a $9.7 million charge relating to its abandonment of excess real estate obligations for certain vacant office space. In 2001 and 2002, the Company experienced a material decrease in demand for its domestic operations. To reflect this decreased demand, the Company made attempts to realign its real estate capacity needs by vacating and reorganizing certain office space. In the fourth quarter of 2002, management determined that the Company would not be able to utilize this vacated office space and, therefore, notified the respective lessors of their intentions. This determination eliminated the economic benefit associated with the vacated office space. As a result, the Company recorded a charge for contract termination costs, mainly due to, costs that will continue to be incurred under the lease contract for its remaining term without economic benefit to the Company. While the Company looks to settle excess lease obligations, the current economic environment has made it difficult for the Company to either settle or find acceptable subleasing opportunities. The average remaining lease term for the lease obligations included herein is approximately 2.5 years. The following table summarizes the activity of the charge for contract termination costs from origination through March 31, 2003 by reportable segment:
IT Professional IT (dollar amounts in thousands) Services Services Solutions Total - ------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2002 $ 675 $ 1,163 $ 7,861 $ 9,699 Costs paid or otherwise settled during the three months ended March 31, 2003 (184) (157) (1,862) (2,203) ----------- ----------- ----------- ----------- Balance as of March 31, 2003 $ 491 1,006 5,999 7,496 =========== =========== =========== ===========
10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MPS Group, Inc. ('MPS' or the 'Company') (NYSE:MPS) is a leading global provider of business services with over 180 offices throughout the United States, Canada, the United Kingdom, and continental Europe. MPS delivers a mix of consulting, solutions, and staffing services in the disciplines such as IT services, finance and accounting, legal, engineering, IT solutions, workforce management, executive search, human capital automation, and health care. The following detailed analysis of operations should be read in conjunction with the 2002 Consolidated Financial Statements and related notes included in the Company's Form 10-K for the year ended December 31, 2002. Three Months Ended March 31, 2003 Compared To Three Months Ended March 31, 2002 Consolidated Results Revenue. Revenue decreased $24.7 million, or 8.3%, to $271.8 million in the three months ended March 31, 2003, from $296.5 million in the year earlier period. The decrease in revenue was attributable to diminished demand for the Company's services. For example, the Company's customers continued to experience a constrained ability to spend on IT initiatives due to uncertainties relating to the economy. Included in the results for the three months ended March 31, 2003, was revenue from the Company's health care staffing business, which was acquired in July 2002, and revenue from an acquisition of a legal staffing business, for $1.6 million of consideration, in the first quarter of 2003. These businesses (together, the 'acquisitions') contributed $5.3 million in revenue for the three months ended March 31, 2003. Approximately 34% of the Company's revenue for the three months ended March 31, 2003 was generated internationally, primarily in the United Kingdom. The Company's revenue is therefore subject to changes in foreign currency exchange rates. The weakening of the U.S. dollar in the first quarter of 2003 had a positive impact on revenue, as revenue, on a constant currency basis decreased 11.7%, as compared to the decrease of 8.3% above. Constant currency removes the impact on financial data from changes in exchange rates between the U.S. dollar and the functional currencies of its foreign subsidiaries, by translating the current period financial data into U.S. dollars using the same foreign currency exchange rates that were used to translate the financial data for the previous period. Gross Profit. Gross profit decreased $6.1 million or 8.0% to $70.2 million in the three months ended March 31, 2003, from $76.3 million in the year earlier period. Gross margin increased slightly to 25.8% in the three months ended March 31, 2003, from 25.7% in the year earlier period. Operating expenses. Total operating expenses decreased $6.3 million or 8.8% to $65.2 million in the three months ended March 31, 2003, from $71.5 million in the year earlier period. The Company's general and administrative ('G&A') expenses decreased $5.9 million, or 8.9%, to $60.6 million in the three months ended March 31, 2003, from $66.5 million in the year earlier period. As a percentage of revenue, the Company's G&A expenses decreased slightly to 22.3% in the three months ended March 31, 2003, from 22.4% in the year earlier period. The decrease in G&A expenses was attributable to a decrease in revenue for the first quarter of 2003, and cost reduction initiatives that were implemented throughout 2002 across MPS's divisions in response to the lower revenue levels. The decrease in revenue primarily reduces the variable component of compensation for the Company's employees. Certain of the cost reduction initiatives include the reduction of the Company's salaried workforce, and the realignment of compensation levels for the Company's employees. Income from operations. Income from operations increased $0.3 million, or 6.4%, to $5.0 million in the three months ended March 31, 2003, from $4.7 million in the year earlier period. Other expense, net. Other expense, net consists primarily of interest expense related to borrowings under the Company's credit facility and notes issued in connection with acquisitions, net of interest income related to investment income from (1) certain investments owned by the Company and (2) cash on hand. Interest expense decreased $1.6 million, or 84.2%, to $0.3 million in the three months ended March 31, 2003, from $1.9 million in the year earlier period. The decrease in interest expense is related to the reduction of borrowings under the Company's credit facility between these two periods. As of March 31, 2002, the Company had $56 million outstanding under its credit facility, while there were no borrowings outstanding during the first quarter of 2003. Interest expense was offset by $0.3 million of interest and other income in both the three months ended March 31, 2003 and 2002. Income taxes. The Company's effective tax rate increased to 41.0% in the three months ended March 31, 2003, as compared to 38.0% in the year earlier period. The increase was due to the higher level of non-deductible expenses in the first quarter of 2003. 11 Income before cumulative effect of accounting change. As a result of the foregoing, income before cumulative effect of accounting change increased $1.1 million, or 57.9%, to $3.0 million in the three months ended March 31, 2003, from $1.9 million in the year earlier period. Income before cumulative effect of accounting change as a percentage of revenue increased to 1.1% in the three months ended March 31, 2003, from 0.7% in the year earlier period. Segment Results IT Services division Revenue in the IT services division decreased $24.1 million, or 16.0%, to $126.6 million in the first quarter of 2003, from $150.7 million in the year earlier period. On a constant currency basis, excluding the effects of exchange rates, revenue decreased 19.3%. The decrease in revenue was attributable to the diminished demand for IT services. The division's customers continued to experience a constrained ability to spend on IT initiatives due to uncertainties relating to the economy. Of the division's revenue, approximately 62% and 64% was generated in the United States in the three months ended March 31, 2003 and 2002, respectively. The remainder was generated internationally, primarily in the United Kingdom. Revenue generated in the United States decreased 19.2% in the first quarter of 2003. On a constant currency basis, revenue decreased 19.6% for revenue generated internationally. Gross profit for the IT services division decreased $3.3 million, or 10.8%, to $27.6 million in the first quarter of 2003, from $30.9 million in the year earlier period. The gross margin increased to 21.8% in the three months ended March 31, 2003, from 20.5% in the year earlier period. The increase in gross margin is attributable to the division's domestic operations where the gross margin increased to 25.7% in the first quarter of 2003, from 23.3% in the year earlier period. In the year earlier period, the division's domestic operations experienced a decrease in bill rates and a shift in the mix of its services, which exceeded the related decrease in pay rates of its primarily hourly employees. The Company was able to more effectively manage the differential in the bill and pay rates throughout 2002, which resulted in an increase in gross margin from the year earlier period. For revenue generated internationally, the gross margin remained constant at 15.4% for both the three months ended March 31, 2003 and 2002. The IT services division's G&A expenses decreased $3.1 million, or 11.1%, to $24.8 million in the three months ended March 31, 2003, from $27.9 million in the year earlier period. As a percentage of revenue, the division's G&A expenses increased to 19.6% in the three months ended March 31, 2003, from 18.5% in the year earlier period. The decrease in the division's G&A expenses is associated with the decrease in revenue for the three months ended March 31, 2003, and cost reduction initiatives implemented within the division throughout 2002. Income from operations for the IT services division decreased $0.1 million, or 14.3 %, to $0.6 million in the three months ended March 31, 2003, from $0.7 million in the year earlier period. Professional services division Revenue in the professional services division increased $4.1 million, or 3.3%, to $127.0 million in the three months ended March 31, 2003, from $122.9 million in the year earlier period. Acquisitions contributed $5.3 million in revenue for the three months ended March 31, 2003. Of the division's revenue, approximately 65% and 64% was generated in the United States in the first quarter of 2003 and 2002, respectively. The remainder was generated in the United Kingdom. Excluding the contribution from acquisitions, revenue generated in the United States decreased 2.6% for the first quarter of 2003. On a constant currency basis, revenue decreased 8.8% for revenue generated in the United Kingdom. The decrease in revenue was attributable to the diminished demand for staffing services and workforce solutions provided by the division. The professional services division operates primarily through five operating units consisting of accounting and finance, legal, engineering, workforce management and executive search, and health care, which contributed 41.1%, 13.1%, 34.2%, 7.6%, and 4.0%, respectively, of the division's revenue by group during the three months ended March 31, 2003, as compared to 43.3%, 11.1%, 34.7%, 10.9%, and 0%, respectively, during the year earlier period. Gross profit for the professional services division decreased $1.6 million, or 4.2%, to $36.4 million in the first quarter of 2003, from $38.0 million in the year earlier period. The gross margin decreased to 28.7% in the three months ended March 31, 2003, from 30.9% in the year earlier period. The decrease in gross margin is primarily attributable to a decrease in bill rates for the services provided by the division and, to a lesser extent, the lower level of direct hire and permanent placement fees, which generate a higher margin. As a percentage of revenue, the division's direct hire and permanent placement fees decreased to 4.2% of revenue in the three months ended March 31, 2003, from 5.4% in the year earlier period. 12 The professional services division's G&A expenses increased $0.5 million, or 1.7%, to $30.8 million in the three months ended March 31, 2003, from $30.3 million in the year earlier period. On a constant currency basis, G&A expenses decreased 3.0%, as compared to the 1.7% increase above. As a percentage of revenue, the division's G&A expenses decreased to 24.3% in the three months ended March 31, 2003, from 24.6% in the year earlier period. The decrease in the professional services division's G&A expenses is associated with the decrease in revenue, on a constant currency basis, for the first quarter of 2003, and cost reduction initiatives implemented within the division throughout 2002. Income from operations for the professional services division decreased $2.2 million, or 35.5 %, to $4.0 million in the three months ended March 31, 2003, from $6.2 million in the year earlier period. IT Solutions division Revenue in the IT solutions division decreased $4.6 million, or 20.2%, to $18.2 million in the three months ended March 31, 2003, from $22.8 million in the year earlier period. Weak demand for IT consulting solutions was intensified by the uncertainties relating to the economy. As a result, management refined its focus by deciding to exit certain non-strategic markets. These markets, while generating revenue, were not producing positive income or cash flow from operations. Gross profit for the IT solutions division decreased $1.2 million, or 16.2%, to $6.2 million in the three months ended March 31, 2003, from $7.4 million in the year earlier period. However, the gross margin increased to 34.2% in the first quarter of 2003, from 32.2% in the year earlier period. This increase was driven by higher utilization of the Company's salaried consultants. This division's business model, unlike the Company's other divisions, uses primarily salaried consultants to meet customer demand. To reflect lower customer demand, the division significantly reduced billable headcount during 2002. The IT solutions division's G&A expenses decreased $3.3 million, or 39.8%, to $5.0 million in the three months ended March 31, 2003, from $8.3 million in the year earlier period. As a percentage of revenue, the division's G&A expenses decreased to 27.4% in the first quarter of 2003, from 36.6% in the year earlier period. The decrease in the division's G&A expenses was primarily related to reductions in its work force throughout 2002. Income from operations for the IT solutions division increased $2.6 million, to $0.4 million in the three months ended March 31, 2003, from a $2.2 million loss in the year earlier period. LIQUIDITY AND CAPITAL RESOURCES The Company's historical capital requirements have principally been related to the acquisition of businesses, working capital needs and capital expenditures. These requirements have been met through a combination of bank debt and internally generated funds. The Company's operating cash flows and working capital requirements are affected significantly by the timing of payroll and by the receipt of payment from customers. Generally, the Company pays its consultants weekly or semi-monthly, and receives payments from customers within 30 to 90 days from the date of invoice. The Company had working capital of $172.9 million and $171.9 million as of March 31, 2003 and December 31, 2002, respectively. The Company had cash and cash equivalents of $76.4 million and $66.9 million as of March 31, 2003 and December 31, 2002, respectively. For the three months ended March 31, 2003 and 2002, the Company generated $15.7 million and $29.0 million of cash flow from operations, respectively. The reduction in cash flow from operations, from 2002 to 2003, is primarily due to a reduced level of earnings in the current year, which was somewhat offset by an improvement in receivables collection. For the three months ended March 31, 2003, the Company used $2.3 million of cash for investing activities, of which $1.3 million were used for capital expenditures and $1.0 million for an acquisition of a legal staffing business. For the three months ended March 31, 2002, the Company used $0.5 million of cash for investing activities, all of which were used for capital expenditures. 13 For the three months ended March 31, 2003, the Company used $3.7 million of cash for financing activities, which were used for the repurchase of the Company's common stock. For the three months ended March 31, 2002, the Company used $43.3 million of cash for financing activities. This amount primarily represented repayments on the Company's credit facility and on notes issued in connection with the acquisition of certain companies. These repurchases and repayments were mainly funded from cash flow from operations. The Company's Board of Directors has authorized the repurchase of up to $65.0 million of the Company's common stock. The Company began to utilize this authorization in the third quarter of 2002. As of May 2, 2003, 1.1 million shares at a cost of $5.4 million have been repurchased under this authorization. The Company anticipates that capital expenditures for furniture and equipment, including improvements to its management information and operating systems during the remainder of 2003, will be approximately $6.0 million. While there can be no assurance in this regard, the Company believes that funds provided by operations, 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. Indebtedness of the Company The Company has a $200 million revolving credit facility which is syndicated to a group of 13 banks with Bank of America as the principal agent. This facility expires on October 27, 2003. The credit facility contains certain financial and non-financial covenants relating to the Company's operations, including maintaining certain financial ratios. Repayment of the credit facility is guaranteed by the material subsidiaries of the Company. In addition, approval of an individual acquisition is required by the majority of the lenders if cash consideration for the acquisition would exceed 10% of consolidated stockholders' equity of the Company. At both December 31, 2002, and May 2, 2003, there were no borrowings outstanding under the credit facility. The Company had outstanding letters of credit in the amount of $2.4 million, reducing the amount of funds available under the credit facility to approximately $197.6 million at both December 31, 2002, and May 2, 2003. While there can be no assurance that a new credit facility can be obtained on terms acceptable to management, management expects to enter into a new revolving credit facility during 2003. The size and timing will depend upon the capital needs of the Company and the condition of the lending environment. While there can be no assurance in this regard, the Company believes that borrowings under the credit facility will not be needed to fund its operations for at least the next 12 months. SEASONALITY The Company's quarterly operating results are affected by the number of billing days in the quarter and the seasonality of its customers' businesses. Demand for the Company's services has historically been lower during the calendar year-end, as a result of holidays, through February of the following year, as the Company's customers approve annual budgets. Extreme weather conditions may also affect demand in the early part of the year as certain of the Company's client bases are located in geographic areas subject to extreme weather. 14 Item 3. Quantitative And Qualitative Disclosures About Market Risk The following assessment of the Company's market risks does not include uncertainties that are either nonfinancial or nonquantifiable, such as political, economic, tax and credit risks. Interest rates. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations under its credit facility and to the Company's investments. The Company's investment portfolio consists of cash and cash equivalents including deposits in banks, government securities, money market funds, and short-term investments with maturities, when acquired, of 90 days or less. The Company is adverse to principal loss and seeks to preserve its invested funds by placing these funds with high credit quality issuers. The Company constantly evaluates its invested funds to respond appropriately to a reduction in the credit rating of any investment issuer or guarantor. Foreign currency exchange rates. Foreign currency exchange rate changes impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. The Company generated approximately 34% of its consolidated revenues for the three months ended March 31, 2003, from international operations, approximately 97% of which were from the United Kingdom. The British pound sterling to U.S. dollar exchange rate has decreased approximately 2% in 2003, from 1.61 at December 31, 2002 to 1.58 at March 31, 2003. The Company prepared sensitivity analyses to determine the adverse impact of hypothetical changes in the British pound sterling, relative to the U.S. Dollar, on the Company's results of operations and cash flows. However, the analysis did not include the potential impact on sales levels resulting from a change in the British pound sterling. An additional 10% adverse movement in the exchange rate would have had an immaterial impact on the Company's cash flows and financial position for the three months ended March 31, 2003. While fluctuations in the British pound sterling have not historically had a material impact on the Company's consolidated results of operations, the lower level of earnings resulting from a decrease in demand for the services provided by the Company's domestic operations have increased the impact of exchange rate fluctuations. As of March 31, 2003, the Company did not hold and has not previously entered into any foreign currency derivative instruments. 15 FACTORS WHICH MAY IMPACT FUTURE RESULTS AND FINANCIAL CONDITION Demand For The Company's Services has Weakened Significantly And Demand Will Likely Remain Weak For Some Time Because Of The Current Economic Climate. The Company's results are affected by the level of business activity of its customers, which is driven by the level of economic activity in the industries and markets they serve. The current economic downturn and uncertainty has significantly hurt its results of operations. Further deterioration in global economic or political conditions could increase these effects. As long as this uncertainty remains, management believes that the demand for the Company's services will remained diminished. Therefore, management cannot predict when the demand for the Company's services will significantly improve. When the market does improve, management cannot predict, whether and to what extent, the demand for the Company's services will improve. Although the Company has implemented a largely variable cost model, as it relates to compensation for a substantial part of its business, further declines in revenue will have a material adverse impact on its results. The Company may also be adversely affected by consolidations through mergers and otherwise of major customers or between major customers with non-customers. These consolidations as well as corporate downsizings may result in redundant functions or services and a resulting reduction in demand by such customers for the Company's services. Also, spending for outsourced business services may be put on hold until the consolidations are completed. Our Market Is Highly Competitive And The Company May Not Be Able To Continue To Compete Efficiently. The Company's industry is intensely competitive and highly fragmented, with few barriers to entry by potential competitors. The Company faces significant competition in the markets that it serves and will face significant competition in any geographic market that it may enter. In each market in which the Company operates, it competes for both clients and qualified professionals with other firms offering similar services. The Company has increasingly competed against services providers offering their services from remote locations, particularly from offshore locations such as India. The substantially lower cost of the labor pool in these remote locations puts significant pricing pressure on the Company's service offerings when it competes with these service providers. While the Company believes that its service delivery model provides a superior level of service than many of these offshore based competitors, the increased pricing pressure from these providers may have a material adverse impact on the Company's business. Competition creates an aggressive pricing environment and higher wage costs, which puts pressure on gross margins. The Company may also be adversely effected by the consolidation of vendor lists. As customers have consolidated their number of vendors, the Company historically has a high percentage of wins in that it has remained on these shortened lists of approved vendors. Competition to be an approved vendor has only intensified and if the Company fails to maintain its percentage of wins for these consolidated vendor lists, its failure will have a material impact on the Company's results. The Company's Business May Suffer From The Loss of Key Personnel The Company's operations are dependent on the continued efforts of its officers and executive management. In addition, it is dependent on the performance and productivity of its local managers and field personnel. The Company's ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key officers and members of executive management may cause a significant disruption to our business. Moreover, the loss of its key managers and field personnel may jeopardize existing client relationships with businesses that continue to use the Company's services based upon past relationships with these local managers and field personnel. The loss of such key personnel could materially adversely affect the Company's operations, including its ability to establish and maintain client relationships. Possible Changes In Governmental Regulations Could Have A Material Impact On The Company's Business From time to time, legislation is proposed in the United States Congress, state legislative bodies, and the foreign governments of the United Kingdom and continental Europe, that would have the effect of requiring employers to provide the same or similar employee benefits to consultants and other temporary personnel as those provided to full-time employees. The enactment of such legislation would eliminate one of the key economic reasons for outsourcing certain business resources and could significantly adversely impact the Company's staff augmentation business. In addition, the Company's costs could increase as a result of future laws or regulations that address insurance, benefits or other employment-related matters. There can be no assurance that the Company could successfully pass any such increased costs to its clients. 16 IRS Adjustments During Periodic Income Tax Audits May Have A Material Impact On The Company's Results The Company is subject to periodic review by federal, state, and local taxing authorities in the ordinary course of business. During 2001, the Company was notified by the Internal Revenue Service that certain prior year income tax returns will be examined. As part of this examination, the net tax benefit associated with an investment in a subsidiary that the Company recognized in 2000 of $86.3 million is also being reviewed. In the fourth quarter of 2002, the Company recorded an $8.7 million charge for a proposed adjustment related to its ongoing audit of prior years' tax returns. While management has not received notice of any additional proposed adjustments relating to its ongoing audit of prior years' tax returns, there can be no assurance that the Internal Revenue Service will not propose additional adjustments. Additional adjustments may affect the Company's financial condition and financial covenants of the Company's credit facility. The Price Of The Company's Common Stock May Fluctuate Significantly, Which May Result In Losses For Investors The market price for MPS's Common Stock has been and may continue to be volatile. For example, during the year ended December 31, 2002, the prices of its Common Stock as reported on the New York Stock Exchange ranged from a high of $9.80 to a low of $4.35. Its stock price can fluctuate as a result of a variety of factors, including factors listed in the above Risk Factors and others, many of which are beyond the Company's control. These factors include: - actual or anticipated variations in the Company's quarterly operating results; - announcement of new services by the Company or its competitors; - announcements relating to strategic relationships or acquisitions; - changes in financial estimates or other statements by securities analysts; and - changes in general economic conditions. Because of this volatility, the Company may fail to meet the expectations of its shareholders or of securities analysts, and its stock price could decline as a result. 17 Item 4. Controls And Procedures Our management, including the Chief Executive Officer and Chief Financial Officer, supervised and participated in an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14) within the 90-day period preceding the filing of this report. Based on their evaluation, the Chief Executive officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the date of that evaluation. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date that Chief Executive Officer and Chief Financial Officer completed their last evaluation of internal controls. 18 Part II. Other Information Item 1. Legal Proceedings No disclosure required. Item 2. Changes in Securities and Use of Proceeds No disclosure required. Item 3. Defaults Upon Senior Securities No disclosure required. Item 4. Submission of Matters to a Vote of Security Holders No disclosure required. Item 5. Other Information No disclosure required. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 3.2 Amended and Restated Bylaws. 10.16(a) Amendment to Executive Deferred Compensation Plan. 10.16(b) Executive Deferred Compensation Plan, as amended. 10.17 Form of Executive Employment Agreement entered into by Gregory D. Holland, Tyra H. Tutor, and Richard L. White. 10.18 Form of Director's and Officer's Indemnification Agreement entered into by Richard J. Heckmann and Arthur B. Laffer. 24(a) Form of Power of Attorney entered into by Richard J. Heckmann and Arthur B. Laffer. 99.1 Certification of Timothy D. Payne pursuant to 18 U.S.C. Section 1350. 99.2 Certification of Robert P. Crouch pursuant to 18 U.S.C. Section 1350. B. Reports on Form 8-K Reports on Form 8-K dated January 24, 2003 and February 5, 2003, were filed by the Company in January and February, respectively. The reports were filed under Item 5, Other Events. 19 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ Timothy D. Payne President, Chief May 15, 2003 Timothy D. Payne Executive Officer and Director /s/ Robert P. Crouch Senior Vice President, Chief May 15, 2003 Robert P. Crouch Financial Officer, Treasurer, and Chief Accounting Officer 20 CERTIFICATION I, Timothy D. Payne, President and Chief Executive Officer of MPS Group, Inc., certify that: (1) I have reviewed this quarterly report on Form 10-Q of MPS Group, Inc.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 15, 2003 /s/ Timothy D. Payne - ------------------------------------- Timothy D. Payne President and Chief Executive Officer 21 CERTIFICATION I, Robert P. Crouch, Senior Vice President and Chief Financial Officer of MPS Group, Inc., certify that: (1) I have reviewed this quarterly report on Form 10-Q of MPS Group, Inc.; (2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 15, 2003 /s/ Robert P. Crouch - ------------------------------------- Robert P. Crouch Senior Vice President and Chief Financial Officer 22 EX-3.(II) 2 bylaws.txt EX. 3.2 BYLAWS BYLAWS OF MODIS PROFESSIONAL SERVICES, INC. (a Florida corporation) (as amended 5/26/99) Page ARTICLE 1 Definitions...............................................1 ----------- Section 1.1 Definitions.............................1 ----------- ARTICLE 2 Offices...................................................1 ------- Section 2.1 Principal and Business Offices..........1 ------------------------------ Section 2.2 Registered Office.......................1 ----------------- ARTICLE 3 Shareholders..............................................2 ------------ Section 3.1 Annual Meeting..........................2 -------------- Section 3.2 Special Meetings........................2 ---------------- Section 3.3 Place of Meeting........................2 ---------------- Section 3.4 Notice of Meeting.......................2 ----------------- Section 3.5 Waiver of Notice........................3 ---------------- Section 3.6 Fixing of Record Date...................3 --------------------- Section 3.7 Shareholders' List for Meetings.........4 ------------------------------- Section 3.8 Quorum..................................5 ------ Section 3.9 Voting of Shares........................5 ---------------- Section 3.10 Vote Required..........................5 ------------- Section 3.11 Conduct of Meeting.....................6 ------------------ Section 3.12 Inspection of Election.................6 ---------------------- Section 3.13 Proxies................................6 ------- Section 3.14 Shareholder Nominations and Proposals..7 ------------------------------------- Section 3.15 Action by Shareholders Without Meeting.7 -------------------------------------- Section 3.16 Acceptance of Instruments Showing Shareholder Action.............8 -------------------------- ARTICLE 4 Board of Directors........................................8 ------------------ Section 4.1 General Powers and Number...............8 ------------------------- Section 4.2 Qualifications..........................9 -------------- Section 4.3 Term of Office..........................9 -------------- Section 4.4 Removal.................................9 ------- Section 4.5 Resignation.............................9 ----------- Section 4.6 Vacancies...............................9 --------- Section 4.7 Compensation............................9 ------------ Section 4.8 Regular Meetings........................10 ---------------- Section 4.9 Special Meetings........................10 ---------------- Section 4.10 Notice.................................10 ------ Section 4.11 Waiver of Notice.......................10 ---------------- Section 4.12 Quorum and Voting......................10 ----------------- Section 4.13 Conduct of Meetings....................10 ------------------- Section 4.14 Committees.............................11 ---------- Section 4.15 Action Without Meeting.................12 ---------------------- ARTICLE 5 Officers..................................................12 -------- Section 5.1 Number..................................12 ------ Section 5.2 Election and Term of Office.............12 --------------------------- Section 5.3 Removal.................................12 ------- Section 5.4 Resignation.............................12 ----------- Section 5.5 Vacancies...............................13 --------- Section 5.6 President...............................13 --------- Section 5.7 Chief Operating Officer.................13 ----------------------- Section 5.8 Vice Presidents.........................13 --------------- Section 5.9 Secretary...............................13 --------- Section 5.10 Treasurer..............................14 --------- Section 5.11 Assistant Secretaries and Assistant Treasurers....................14 -------------------- Section 5.12 Other Assistants and Acting Officers...14 ------------------------------------ Section 5.13 Salaries...............................14 -------- ARTICLE 6 Contracts, Checks and Deposits; Special Corporate Acts....15 ------------------------------------------------------ Section 6.1 Contracts...............................15 --------- Section 6.2 Checks, Drafts, etc.....................15 -------------------- Section 6.3 Deposits................................15 -------- Section 6.4 Voting of Securities Owned by Corporation..........................15 -------------- ARTICLE 7 Certificates for Shares; Transfer of Shares...............16 ------------------------------------------- Section 7.1 Consideration for Shares................16 ------------------------ Section 7.2 Certificates for Shares.................16 ----------------------- Section 7.3 Transfer of Shares......................16 ------------------ Section 7.4 Restrictions on Transfer................17 ------------------------ Section 7.5 Lost, Destroyed, or Stolen Certificates.17 --------------------------------------- Section 7.6 Stock Regulations.......................17 ----------------- ARTICLE 8 Seal......................................................17 ---- Section 8.1 Seal....................................17 ---- ARTICLE 9 Books and Records.........................................17 ----------------- Section 9.1 Books and Records........................17 ----------------- Section 9.2 Shareholders' Inspection Rights.........18 ------------------------------- Section 9.3 Distribution of Financial Information...18 ------------------------------------- Section 9.4 Other Reports...........................18 ------------- ARTICLE 10 Indemnification............................................18 --------------- Section 10.1 Provision of Indemnification............18 ---------------------------- ARTICLE 11 Amendments................................................19 ---------- Section 11.1 Power to Amend..........................19 -------------- ARTICLE 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 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 Section 3.1 Annual Meeting. The annual meeting of the shareholders shall be held on a dated 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. 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. 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 Meeting. (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. 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 Notice. (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 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. 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. 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. 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 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 Quorum. (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 Required. 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. 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 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 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 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 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. (6) 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 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 of Directors, 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 Officers Section 5.1 Number. 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 appoin