SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 28, 2000.
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to .
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Delaware 95-4182437
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(State or other jurisdiction of (IRS employer identification number)
Incorporation or organization)
6835 Valjean Avenue, Van Nuys, CA 91406
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(Address of principal executive offices) Zip Code
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at October 28, 2000
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Common Stock, $.02 par value per share 8,231,705
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INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets
October 28, 2000 and January 29, 2000 2
Consolidated Statements of Operations 3
Three and Nine Month periods ended October 28, 2000 and
October 30, 1999
Consolidated Statements of Cash Flows 4
Nine Month periods ended October 28, 2000 and
October 30, 1999
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
ITEM 3. Quantitative and Qualitative Disclosure
about Market Risk 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on 8-K 13
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
October 28, 2000 January 29, 2000
---------------- ----------------
Unaudited
Assets
Current assets:
Cash and cash equivalents $ 2,235,000 $ 2,253,000
Restricted cash 2,721,000 2,324,000
Receivables, net 4,770,000 4,841,000
Prepaid expenses and other current assets 833,000 28,000
Deferred tax asset 807,000 1,579,000
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Total current assets 11,366,000 11,025,000
Deferred tax asset 797,000 797,000
Securitization fees, net of accumulated amortization of $583,000
and $429,000, respectively 658,000 812,000
Property and equipment, net of accumulated depreciation of
$178,000 and $156,000, respectively 243,000 203,000
Trademarks, net of accumulated amortization of
$766,000 and $503,000, respectively 5,914,000 4,666,000
Other assets 15,000 15,000
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Total assets $ 18,993,000 $ 17,518,000
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 330,000 $ 600,000
Other accrued liabilities 2,711,000 2,286,000
Notes payable 10,500,000 10,125,000
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Total current liabilities 13,541,000 13,011,000
Other liabilities 250,000 250,000
Notes payable - long term 22,320,000 28,389,000
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Total liabilities 36,111,000 41,650,000
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Stockholders' Deficit:
Common stock, $.02 par value,20,000,000 shares authorized,
8,231,705 and 8,472,428 shares issued and outstanding at
October 28, 2000 and at January 29, 2000, respectively 165,000 170,000
Note receivable from stockholder - (365,000)
Accumulated deficit (17,283,000) (23,937,000)
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Stockholders' deficit (17,118,000) (24,132,000)
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Total liabilities and stockholders' deficit $ 18,993,000 $ 17,518,000
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See the accompanying notes which are an integral part of these consolidated financial statements.
Three months ended Nine months ended
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October 28, 2000 October 30, 1999 October 28, 2000 October 30, 1999
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Royalty revenues $4,986,000 $5,674,000 $22,275,000 $18,973,000
Selling, general and administrative expenses 1,620,000 1,688,000 6,236,000 5,760,000
---------- ---------- ----------- -----------
Operating income 3,366,000 3,986,000 16,039,000 13,213,000
Other income (expenses):
Interest expense (568,000) (689,000) (1,806,000) (2,163,000)
Investment and Interest income 109,000 104,000 332,000 287,000
---------- ---------- ----------- -----------
Total other income (expenses), net (459,000) (585,000) (1,474,000) (1,876,000)
Income before income taxes 2,907,000 3,401,000 14,565,000 11,337,000
Income tax provision 1,163,000 1,363,000 5,827,000 4,538,000
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Net income $1,744,000 $2,038,000 $ 8,738,000 $ 6,799,000
========== ========== =========== ===========
Basic earnings per share $ 0.21 $ 0.24 $ 1.04 $ 0.78
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Diluted earnings per share $ 0.21 $ 0.24 $ 1.04 $ 0.78
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Weighted average shares outstanding
Basic 8,231,705 8,588,928 8,368,659 8,666,595
========== ========== =========== ===========
Diluted 8,279,548 8,590,641 8,377,423 8,668,281
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See the accompanying notes which are an integral part of these consolidated financial statements.
Nine months ended
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October 28, 2000 October 30, 1999
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Operating activities
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Net income $ 8,738,000 $ 6,799,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,000 37,000
Amortization of goodwill and trademarks 263,000 189,000
Amortization of securitization fees 154,000 154,000
Amortization of debt discount 1,806,000 2,163,000
Decrease in deferred taxes 772,000 3,120,000
Interest income on note receivable from stockholder (8,000) (91,000)
Changes in current assets and liabilities:
Decrease (increase) in accounts receivable 71,000 (1,765,000)
Increase in prepaid expenses and other current assets (805,000) (133,000)
Increase (decrease) in accounts payable and accrued liabilities 155,000 (2,000)
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Net cash provided by operating activities 11,168,000 10,471,000
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Investing activities
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Purchase of trademarks (1,511,000) (1,041,000)
Purchase of property and equipment (62,000) (30,000)
Decrease in other assets - 91,000
Repayment on note receivable from stockholder 373,000 -
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Net cash used in investing activities (1,200,000) (980,000)
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Financing activities
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Cash distributions - (4,352,000)
(Increase) decrease in restricted cash (397,000) 2,179,000
Repurchase of common stock (2,101,000) (1,907,000)
Proceeds from exercise of warrants 12,000 -
Payment on notes (7,500,000) (6,750,000)
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Net cash used in financing activities (9,986,000) (10,830,000)
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Decrease in cash and cash equivalents (18,000) (1,339,000)
Cash and cash equivalents at beginning of period 2,253,000 2,847,000
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Cash and cash equivalents at end of period $ 2,235,000 $ 1,508,000
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Total paid during period:
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Income taxes $ 4,713,000 $ 1,289,000
Interest $ 1,150,000 $ 657,000
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See the accompanying notes which are an integral part of these consolidated financial statements.
CHEROKEE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of October 28, 2000 and for the three and nine month periods ended October 28, 2000 and October 30, 1999 have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These consolidated financial statements have not been audited by independent accountants but include all adjustments, consisting of normal recurring accruals, which in the opinion of management of Cherokee Inc. ("Cherokee" or the "Company") are necessary for a fair statement of the financial position and the results of operations for the periods presented. The accompanying consolidated balance sheet as of January 29, 2000 has been derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. The results of operations for the three and nine month periods ended October 28, 2000 and October 30, 1999 are not necessarily indicative of the results to be expected for the fiscal year ended February 3, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended January 29, 2000.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SPELL C. LLC, a Delaware limited liability corporation ("Spell C"). All significant intercompany accounts and transactions have been eliminated in consolidation.
Earnings Per Share Computation
The following table provides a reconciliation of the numerator and denominator of the basic and diluted per-share computations for the three and nine month periods ended October 28, 2000 and October 30, 1999:
2000 1999
3 Months 9 Months 3 Months 9 Months
---------- ---------- ---------- ----------
Numerator:
Net income-numerator for
net income per common share
and net income per common
share assuming dilution $1,744,000 $8,738,000 $2,038,000 $6,799,000
========== ========== ========== ==========
Denominator:
Denominator for net income
Per common share-weighted
average shares 8,231,705 8,368,659 8,588,928 8,666,595
Effect of dilutive securities:
Stock options 47,843 8,764 1,713 1,686
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Denominator for net income
per common share, assuming
dilution: Adjusted weighted
average shares and assumed
exercises 8,279,548 8,377,423 8,590,641 8,668,281
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Common shares issuable upon exercise of stock options that are anti-dilutive amounted to 435,068 and 503,702 for the nine month periods ended October 28, 2000 and October 30, 1999, respectively.
(3) Long Term Debt
Long term debt is comprised of Zero-Coupon Secured Notes ("Secured Notes") yielding 7% interest per annum and maturing on February 20, 2004. The Secured Notes amortize quarterly from May 20, 1998 through February 20, 2004. The following table summarizes the maturity of the long-term debt:
For the year ending: Face Value
October 28, 2001 ............................................ $10,500,000
October 28, 2002 ............................................ 10,500,000
October 28, 2003 ............................................ 10,500,000
October 28, 2004 ............................................ 5,250,000
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Total ............................................... 36,750,000
Less unamortized Note Discount ......................... 3,930,000
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32,820,000
Less current portion of long term debt ................. 10,500,000
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Long term obligation ................................... $22,320,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Cherokee Inc. (the "Company" or "Cherokee") is in the business of marketing and licensing the Cherokee and Sideout brands and related trademarks and other brands it owns or represents. The Company is one of the leading licensors of brand names and trademarks for apparel, footwear and accessories in the United States. The Company and its wholly-owned subsidiary, SPELL C. LLC ("Spell C"), hold several trademarks including Cherokee, Sideout, Sideout Sport, King of the Beach and others. The Cherokee brand has been positioned to connote quality, comfort, fit and a "Casual American" lifestyle with traditional wholesome values. The Sideout brand and related trademarks, which represent a beach- oriented, active, "Ca1ifornia" lifestyle, were acquired by the Company in November 1997.
The Company's operating strategy emphasizes domestic and international, retail direct and wholesale licensing whereby the Company grants retailers and wholesalers the license to use the trademarks held by the Company on certain categories of merchandise, and the licensees are responsible for designing and manufacturing the merchandise. The Company's license agreements generally provide the Company with final approval of pre-agreed upon quality standards, packaging and marketing of licensed products and also grant the Company the right to conduct periodic quality control inspections to ensure that the image and quality of licensed products remain consistent. As of October 28, 2000, the Company had 26 continuing license agreements for the Company's various trademarks, covering both domestic and international markets. The Company will continue to solicit new licensees and may, from time to time, retain the services of outside consultants to assist the Company in this regard.
In November 1997, the Company reaffirmed its relationship with Target Stores, a division of Target Corporation ("Target"), by entering into an amended licensing agreement (the "Amended Target Agreement") which grants Target the exclusive right in the United States to use the Cherokee trademarks on certain specified categories of merchandise. Under the Amended Target Agreement, Target is obligated to pay a royalty based upon a percentage of its net sales of Cherokee brand products, with a minimum guaranteed royalty of $60.0 million over the six-year initial term of the agreement.
During the three months ended October 28, 2000 (the "Third Quarter"), sales of merchandise bearing the Cherokee brand continued to increase, with total retail sales exceeding $452.7 million versus $364.0 million in total retail sales for the third quarter of last year. Zellers Inc.'s sales of merchandise bearing the Cherokee brand were in excess of $45.2 million during the Third Quarter compared to $39.4 million for the third quarter of last year.
During the Third Quarter, the Company's Sideout licensing partners continued to achieve positive results from sales of merchandise bearing the Sideout brand. Sales of Mervyn's young men's, junior's and children's apparel and accessories bearing the Sideout brand were approximately $22.7 million during the Third Quarter in comparison to $15.7 million for the third quarter of last year.
During the Third Quarter, the Company entered into an exclusive retail direct licensing agreement with Paris, France based Carrefour Group, granting the Carrefour Group the exclusive right to manufacture, promote, sell and distribute a wide range of products bearing the Company's Cherokee brand in Spain, Mexico and Brazil. The Carrefour Group is obligated to pay the Company a royalty based upon a percentage of its net sales of Cherokee branded products in those countries. The Company does not expect to receive royalties until November 2001 under this agreement, and even then there can be no guarantee that any royalties will be significant in amount. If the Carrefour Group exceeds certain retail sales thresholds for Cherokee branded product then the scope of the agreement will be automatically expanded to grant the Carrefour Group the exclusive right to manufacture, promote, sell and distribute products bearing the Cherokee brand in certain other European and South American countries not already covered by the agreement, including, among others, Italy, Greece, Poland, Argentina, Chile, Colombia, Turkey , France, the United Kingdom, Portugal and Germany. Even if the retail sales thresholds are not met, during the term of the agreement, the Carrefour Group also has a right of first refusal to add any of the European or South American countries to the territory covered by the agreement. Further, with respect to Japan, China and several other Asian countries, the Carrefour Group may elect to add any of those countries to the territory covered by the agreement, provided that at the time of such election the Company does not already have an existing license agreement covering the country to be added. The initial term of the agreement expires December 31, 2003, however, if the Carrefour Group meets certain retail sales thresholds with respect to Cherokee branded products the agreement may be extended indefinitely by the Carrefour Group for successive three year terms. The Company expects to continue to solicit additional licensees for the Cherokee brand in Asia, Europe and South America, subject to the Carrefour Group's rights under the agreement.
As an incentive for the Company's licensees to achieve higher retail sales of Cherokee or Sideout branded products, many of the Company's existing license agreements, including the Amended Target Agreement, are structured to provide royalty rate reductions for the licensees after they achieve certain levels of retail sales of Cherokee or Sideout branded products during each fiscal year. As a result, the Company's royalty revenues as a percentage of its licensees' retail sales of branded products are highest at the beginning of each fiscal year and decrease throughout each fiscal year as licensees reach certain retail sales thresholds contained in their respective license agreements. Therefore, the amount of royalty revenue received by the Company in any quarter is dependent not only on retail sales of branded products in such quarter, but also on the level of retail sales, and the resulting attainment of royalty rate reductions in any preceding quarters in the same fiscal year. The size of the royalty rate reductions and the level of retail sales at which they are achieved varies in each licensing agreement.
In addition to licensing its own brands, the Company assists other companies in identifying licensees for their brands. As previously disclosed, earlier this year the Company assisted Mossimo Inc. in locating Target as a licensee of the Mossimo brand and entered into a finders agreement with Mossimo Inc. which provides that the Company will receive a percentage of the royalties paid to Mossimo Inc. by Target. Mossimo Inc.'s filings with the Securities and Exchange Commission indicate that there is currently substantial doubt about Mossimo Inc.'s ability to continue as a growing concern. If Mossimo Inc. should enter into bankruptcy proceedings, under bankruptcy law there is a possibility Mossimo Inc. could reject the finders agreement and prevent the Company from receiving any of the royalties paid by Target to Mossimo Inc.
The Company's Board of Directors has authorized and approved the extension of the expiration date of the Company's stock repurchase program to July 31, 2001. From July 1999 until the Third Quarter, the Company repurchased and retired 482,000 shares of its common stock. The Company did not repurchase any shares of its common stock during Third Quarter. The Company is currently authorized to repurchase up to an aggregate of 518,000 shares of its common stock. Continued repurchases of the Company's stock, if any, will be made from time to time in the open market at prevailing market prices or in privately negotiated transactions.
In December 1997, the Company completed a series of transactions whereby it sold its rights to the Cherokee brand and related trademarks in the United States to Spell C, its wholly-owned subsidiary, and also assigned to Spell C its rights in the Amended Target Agreement. In return the Company received the gross proceeds resulting from the sale by Spell C, for an aggregate of $47.9 million, of privately placed Zero Coupon Secured Notes (the "Secured Notes"), which yield 7.0% interest per annum, amortized quarterly from May 20, 1998 through February 20, 2004 and are secured by the Amended Target Agreement and by the United States Cherokee trademarks. The aggregate scheduled amortization under the Secured Notes is $60.0 million, which equals the aggregate minimum guaranteed royalty payable under the Amended Target Agreement, which is also $60.0 million. As of the end of the Third Quarter, approximately $36.7 million remains outstanding under the Secured Notes.
Results of Operations
As reflected by the increase in year-to-date revenues by the Company's licensees, sales of Cherokee and Sideout branded merchandise by the Company's licensees has continued continue to grow, exceeding $1.25 billion for the nine months ended October 28, 2000 (the "Nine Months") in comparison to $1.02 billion for the nine months ended October 30, 1999, a 23% increase in retail sales volume. The Company's royalty revenues for the Third Quarter were less than the three month period ended October 30, 1999, primarily because the Company's primary licensees, such as Target, reached the maximum royalty rate reductions allowed by their license agreements earlier this fiscal year than last fiscal year as a result of the continued growth of retail sales of Cherokee and Sideout branded merchandise. It was not until during the fourth quarter of fiscal year ended January 29, 2000 that many of the Company's licensees realized reductions in royalty rates. The maximum royalty rate reductions will also be in effect for the Company's primary licensees during the fourth quarter of this fiscal year. If retail sales of Cherokee and Sideout branded merchandise during the initial portion of any subsequent fiscal year of the Company exceed retail sales during the initial portion of the current fiscal year, then the maximum royalty rate reductions for the Company's licensees will occur even earlier in such fiscal year and could result in a decrease in royalties received by the Company in both the third quarter and the second quarter of any such fiscal year.
Net revenues for the Third Quarter and the nine month period ended October 28, 2000 (the "Nine Months") were $5.0 million and $22.3 million, respectively, in comparison to net revenues for the three and nine month periods ended October 30, 1999 of $5.7 million and $19.0 million, respectively. Revenues for the Cherokee brand were $4.2 million and $19.9 million, respectively, for the Third Quarter and Nine Months compared to $5.1 million and $17.2 million, respectively, for the three and nine month periods ended October 30, 1999. For the Third Quarter and Nine Months, royalty revenues of $3.1 million and $15.4 million were recognized from Target, which accounted for 63% and 69% of total revenues, respectively, compared to $3.6 million and $13.4 million, or 63% and 70% of total revenues, respectively, for the three and nine months ended October 30, 1999. For the Third Quarter and Nine Months, Sideout brand
revenues were $738,000 and $2.4 million compared to $580,000 and $1.8 million for the three and nine month periods ended October 30, 1999. The increase in net revenues during the Nine Months as compared to the nine months ended October 30, 1999 is mainly due to the continued expansion by Target, in the United States, and Zellers, in Canada, of the Cherokee trademark over a broader range of categories, the increased sales of the Sideout brand at Mervyn's and other retail direct licensees and does not yet include any contributions from either Mossimo Inc. or the Carrefour Group.
The Company's royalty recognition policy provides for recognition of royalties in the quarter earned, although a large portion of such royalty payments are actually received during the month following the end of a quarter. The Company's receivable balance included the accrual of Target, Zellers and Mervyn's royalty revenues earned during the Third Quarter and subsequently received in November 2000.
Selling, general, and administrative expenses for the Third Quarter and the Nine Months were $1.6 million and $6.2 million or 32.5% and 28% of net revenues. In comparison, selling, general and administrative expenses were $1.7 million and $5.8 million or 30% of net revenues during the three and nine month periods ended October 30, 1999. The increase in administrative expenses in absolute terms is primarily due to an increase in salaries due to the addition of marketing staff, an increase in trademark amortization and an increase in accrued management bonus of $300,000 based on profitability in the Nine Months as compared to the nine months ended October 30, 1999.
During the Third Quarter and the Nine Months, the Company's interest expense was $568,000 and $1.8 million compared to $689,000 and $2.2 million for the three and nine month periods ended October 30, 1999. The interest expense is attributable to the Secured Notes. The decrease in interest expense is due to the reduction in the Secured Note balance. During the Nine months, the Company paid down $7.5 million of the Secured Notes. For the Third Quarter and the Nine Months, the Company's investment and interest income was $109,000 and $332,000 in comparison to $104,000 and $287,000 for the three and nine month periods ended October 30, 1999. The increase in interest income is due to larger amounts of cash being available to invest in the Third Quarter.
During the Third Quarter and the Nine Months, the Company's net income was $1.7 million and $8.7 million or $0.21 and $1.04 per share whereas for the three and nine month periods ended October 30, 1999, net income was $2.0 million and $6.8 million or $0.24 and $.78 per share. For the Third Quarter and the Nine Months, the Company incurred a charge for income taxes of $1.2 million and $5.8 million in comparison to $1.4 million and $4.5 million for the three and nine month periods ended October 30, 1999. During the Nine Months, the effective tax rate was 40%. As of fiscal year ended January 29, 2000, the Company had fully utilized the net operating losses generated subsequent to the Company's 1994 reorganization, which were not subject to limitations under the Internal Revenue Code. For fiscal year ended February 3, 2001, the Company expects to utilize, approximately $780,000 of its limited net operating losses for both federal and state and is making quarterly estimated tax payments for its federal and state income tax liabilities.
Liquidity and Capital Resources
On October 28, 2000, the Company had approximately $4.96 million in cash and cash equivalents, which includes $2.7 million held in the collection account for distribution to the
Secured Note holders. Cash flow needs over the next 12 months are expected to be met through the operating cash flows generated from licensing revenues, and the Company's cash and cash equivalents.
During the Nine Months, net cash provided by operations was $11.2 million. Net cash used in investing activities during the Nine Months equaled $1.2 million, which was comprised of $959,000 in contingent payments made by the Company under the Sideout Purchase Agreement and $550,000 in trademark purchases and registration fees for the Cherokee and Sideout brands, partially offset by the repayment of a $373,000 stockholder note receivable. Net cash used in financing activities was $9.97 million, which was comprised of three quarterly payments on the Secured Notes totaling $7.5 million, an increase of $397,000 in restricted cash and the repurchase of Cherokee common stock totaling $2.1 million.
Inflation and Changing Prices
Inflation did not have a significant effect on the Company's operations during the Third Quarter or the prior year period.
Special Note Regarding Forward-Looking Statements
This report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward- looking statements can be identified by the fact that they do not relate strictly to historic or current facts. The words, "expect", "believe", "anticipate", "may", "estimate", "plan", "future", "intent", "will", "should", "continue" and similar expression, variations of such terms or the negative of such terms when used in this document are intended to identify such forward- looking statements. In particular, these include statements relating to future actions, expenses, the outcome of contingencies and financial results. Forward- looking statements are based on the current expectations of the Company's management and are subject to numerous risks, uncertainties and assumptions. Should one or more risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by such forward-looking statements. The Company's future operations, financial performance, business and share price may be affected by a number of risks and uncertainties, including, but not limited to, changes in consumer demands and preferences, shifting trends in the overall retail and apparel retailing markets, the impact of royalty rate reductions provided to the Company's primary licensees, restriction on distributions by Spell C, uncertainty regarding consumer acceptance of the Sideout brand, competition from other brands, dependence on a single licensee, dependence on intellectual property rights, and other factors listed in "Risk Factors" in the Company's Form 10-K for the year ending January 29, 2000 or discussed in that Form 10-K, this Form 10-Q and in the Company's other filings with the Securities and Exchange Commission. It is not possible for the Company to predict all risks and uncertainties, therefore the preceding list should not be considered a complete set of all the potential risks and uncertainties involving the Company. Given the known and unknown risks and uncertainties involving the Company, undue reliance should not be placed on the forward-looking statements contained herein. Any or all of the forward- looking statements contained herein may turn out to be wrong. In addition, the Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Market risk generally represents the risk that losses may occur in the values of financial instruments as a result of movements in interest rates, foreign currency exchange rates and commodity prices. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes.
Interest
From time to time the Company invests its excess cash in interest-bearing temporary investments of high-quality issuers. Due to the short time the investments are outstanding and their general liquidity, these instruments are classified as cash equivalents in the consolidated balance sheet of the Company and do not represent a material interest rate risk to the Company. The Company's only long-term debt obligations are the Secured Notes, which are zero-coupon secured notes yielding interest of 7.0% per annum. This long-term debt obligation does not represent a material interest rate risk to the Company.
Foreign Currency
The Company conducts business in various parts of the world. The Company is exposed to fluctuations in exchange rates to the extent that the foreign currency exchange rate fluctuates in countries where the Company's licensees do business. For the Third Quarter, a hypothetical 10% strengthening of the US dollar relative to the foreign currencies of countries where the Company operates was not material.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the Third Quarter, the Company was not involved in any legal claims or litigation and management is not aware of any current pending litigation involving the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON 8-K
3.1 Amended and Restated Certificate of Incorporation of Cherokee Inc.
3.2 Bylaws of Cherokee Inc.
27.1 Article 5 of Regulation S-X - Financial Data Schedule
The Company filed no reports on Form 8-K during the Third Quarter.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 29, 2000
CHEROKEE INC.
By: /s/ Robert Margolis
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Robert Margolis
Chief Executive Officer
By: /s/ Carol Gratzke
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Carol Gratzke
Chief Financial Officer
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Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CHEROKEE INC.
Under Section 303 of the General Corporation Law of Delaware
The undersigned, being the Vice President and secretary of Cherokee Inc. (the "Corporation"), a corporation organized and existing under the laws of Delaware, do hereby certify as follows:
FIRST: The Corporation was originally incorporated under the name Green Acquisition Company on May 17, 1988. The Corporation's first Amended and Restated Certificate of Incorporation was filed on June 11, 1991. A Certificate of Agreement and Plan of Merger which amended and restated the Corporation's Certificate of Incorporation was filed on June 1, 1993.
SECOND: This Amended and Restated Certificate of Incorporation is being filed under Section 303 of the General Corporation Law of Delaware and pursuant to the Corporation's plan of reorganization, filed on November 7, 1994 with the United States Bankruptcy Court for the District of Delaware (the "Court") and confirmed by the Court on December 14, 1994.
THIRD: The Corporation's Certificate of Incorporation is hereby amended and restated to read as follows:
ARTICLE I
The name of this Corporation is: CHEROKEE INC.
ARTICLE II
The address of its registered office in the State of Delaware is 32 Loockerman Square, Suite 1-100, in the City of Dover, County of Kent. The name of its registered agent at such address is the United States Corporation Company.
ARTICLE III
The purpose and business of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE IV
Section 4.1. Authorized Capital. The total number of shares of all classes of capital stock with which the Corporation shall have authority to issue is 21,00,000, consisting of 1,000,000 shares of Preferred Stock, par value $.02 per share (the "Preferred Stock"), and 20,000,000 shares of Common Stock, par value $.02 per share (the "Common Stock").
The number of authorized shares of any class or classes of capital stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the capital stock of the Corporation entitled to vote on all matters to be voted on by the stockholders of the Corporation.
The powers, preferences and rights of each class of capital stock and the qualifications, limitations and restrictions thereof, and the express grant of authority of the Board of Directors to fix by resolution the designations and the powers, preferences and rights of each share of Preferred Stock and the qualifications, limitations and restrictions thereof which are not fixed by this Certificate of Incorporation, are set forth below.
Section 4.2. Preferred Stock.
(a) The Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon the Preferred Stock or any series thereof with respect to any wholly unissued class or series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.
Upon such designation, the Secretary of the Corporation shall cause a Certificate of Designation setting forth a copy of such resolution and the number of shares of the Preferred Stock as to which the resolution applied to be executed, acknowledged, filed and recorded in accordance with Section 103 of the General Corporation Law of the State of Delaware.
(b) No holder of Preferred Stock shall be entitled as a matter of right to subscribe for or purchase, or have any preemptive right with respect to, any part of any new or additional issue of stock of any class whatsoever, or of securities convertible into any stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend.
(c) Except as otherwise provided by the Board of Directors in accordance with paragraph (a) above of this Section 4.2 in respect of any series of the Preferred Stock, all voting rights of the Corporation shall be vested exclusively in the holders of the Common Stock who shall be entitled to vote as described in Section 4.3 below.
Section 4.3. Common Stock.
(a) Liquidation of Dissolution. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Common Stock shall receive a pro rata distribution of any remaining assets after payment or provision for liabilities and the liquidation preference on Preferred Stock, if any.
(b) Voting Rights. The holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation. The Corporation shall be prohibited from issuing non-voting equity securities to the extent required by Section 1123(a)(6) of the Bankruptcy Code.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the Corporation.
ARTICLE VI
(a) The Board of Directors shall consist of one class of directors. The number of directors shall be as from time to time fixed by, or in the manner provided in, the Bylaws of the Corporation.
(b) The directors initially appointed shall serve for a term ending on the date of the 1995 annual meeting of stockholders of the Corporation. Thereafter, all directors shall be elected on an annual basis.
(c) Each director shall serve until his successor is elected and qualified or until his death, retirement, resignation, or removal prior to the expiration of such term. No director may be removed during his term except for cause. If a vacancy occurs or is created in the Board of Directors, the remaining directors, even if they constitute less than a quorum, or a committee of directors authorized by the Bylaws of the Corporation shall elect a director to fill the vacancy for the remainder of the full term.
(d) Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
No directors of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after the date of the filing of this Certificate to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. No repeal or modification of this Article SEVENTH shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed in its corporate name this 23 day of December, 1994.
/s/ Michael Seyhun ------------------------------------------ Michael Seyhun Vice President and Chief Operating Officer /s/ Cary D. Cooper ------------------------------------------ Cary D. Cooper Secretary and Chief Financial Officer |
Exhibit 3.2
BY-LAWS OF CHEROKEE INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the corporation.
Section 2. The annual meeting of stockholders shall be held each year on a date and a time designated by the Board of Directors. At each annual meeting directors shall be elected and any other proper business may be transacted.
Section 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a now record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one
upon which by express provision of the statutes, or the Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question.
Section 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the Secretary of the corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of vi the corporation on the record date set by the Board of Directors as provided in Article V, Section 6 hereof All elections shall be had and all questions decided by a plurality vote.
Section 6. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or the Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding, and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation.
Section 8. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete fist of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 9. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole Board shall be seven (7). The directors need not be stockholders.
Section 2. The Board of Directors shall initially consist of the persons appointed as on the effective date of the Corporation's Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code. The directors initially appointed shall serve for a term ending on the date of the next annual meeting of stockholders and all directors shall be elected on annual basis thereafter.
Section 3. At each annual meeting, the stockholders shall elect all directors and each director so elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any such director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. Any director may resign at any time upon written notice to the Company.
Section 4. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
Section 5. The property and business of the corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The directors may hold their meetings and have one or more offices, and keep the books of the corporation outside of the State of Delaware.
Section 7. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board.
Section 8. Special meetings of the Board of Directors may be called by the President on forty-eight hours' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or the Secretary in like manner and on like notice on the written request of two directors unless the Board consists of only one director; in which case special meetings shall be called by the President or Secretary in like manner or on like notice on the written request of the sole director.
Section 9. At all meetings of the Board of Directors a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. If only one director is authorized, such sole director shall constitute a quorum.
Section 10. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each such committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.
Section 13. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
INDEMNIFICATION
Section 15.(a) The corporation shall indemnify any person, if, as and to the full extent authorized by applicable law, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding.
(b) The corporation shall indemnify any person, if, as and to the full extent authorized by applicable law, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit; provided, that no such indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the corporation shall be successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances under applicable law. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized by statute. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 14 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
(g) The Board of Directors may authorize, by a vote of a majority of a quorum of the Board of Directors, the corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnity him against such liability under the provisions of this Section 14.
(h) For the purposes of this Section 14, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnity its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.
The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 14 shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
ARTICLE IV
OFFICERS
Section 1. The officers of this corporation shall be chosen by the Board of Directors and shall include a President, a Secretary, and a Chief Financial Officer. The
corporation may also have at the discretion of the Board of Directors such other officers as are desired, including a Chairman of the Board, two or more Vice Chairmen of the Board, one or more Vice presidents, one or more Assistant Secretaries, and such other officers as may be appointed in accordance with the provisions of Section 3 hereof. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the corporation.
Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.
Section 4. The salaries of all officers of the corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these By-Laws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article IV.
PRESIDENT
Section 7. Subject, to such supervisory powers, if any, as may be given by the Board of Directors to the Co-Chairman of the Board, or Chairman of the Board, if there be such officers or officer, the President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence of the Co-Chairmen or Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be an ex-officio member of all committees and shall have the general powers and duties of management usually vested in the office of President
and Chief Executive Officer of corporations, and shall have such other powers and duties as may be prescribed by the Board of Directors or these By-Laws.
VICE PRESIDENTS
Section 8. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors.
SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these By-Laws. He shall keep in safe custody the seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
CHIEF FINANCIAL OFFICER
Section 11. The Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Chief Financial Officer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond, in such sum
and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Every holder of stock of the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by, the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President, and by the Secretary or an Assistant Secretary, certifying the number of shares represented by the certificate owned by such stockholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar fore such certificate is issued, it may be issued by the corporation with the same effect as if e were such officer, transfer agent, or registrar at the date of issue.
Section 3. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 5. Upon surrender to the corporation, or the transfer agent of the corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a now certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 6. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall riot be more than sixty nor less than tan days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 7. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or equalizing dividends, or for repairing or maintaining any property of
the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve.
CHECKS
Section 3. All checks or demands for money and notes of the corporation shall signed by such officer or officers as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the ration, the year of its organization and the words "Corporate Seal, Delaware". Said seal be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
NOTICES
Section 6. Whenever, under the provisions of the statutes or of the Certificate Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.
Section 7. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ANNUAL STATEMENT
Section 8. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
ARTICLE VII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new By- Laws may be adopted by the stockholders or by the Board of Directors, when such
power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of now By- Laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Certificate of Incorporation it shall not divest or Emit the power of the stockholders to adopt, amend or repeal By-Laws.
ARTICLE VIII
EMERGENCY BY-LAWS
Section 1. The Emergency By-Laws provided in this Section 1 shall be operative during any emergency in the conduct of the business of the corporation resulting from an attack on the United States or on a locality in which the corporation conducts its business or customarily holds meetings of its Board of Directors or its stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action notwithstanding any different provision in the preceding By-Laws or in the Certificate of Incorporation or in the law. To the extent not inconsistent with provisions of this Section, the By-Laws of the Corporation shall-remain in effect during any emergency and upon its termination the Emergency By-laws shall cease to be operative. Any amendments of these Emergency By-Laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.
During any such emergency: (A) A meeting of the Board of Directors or a committee thereof may be called by any officer or director of the Corporation. Notice of the time and place of the meeting shall be given by the person calling the meeting to such of the directors as it may be feasible to reach by any available means of communication. Such notice shall be given at such time in advance of the meeting as circumstances permit in the judgment of the person calling the meeting; (B) The director or directors in attendance at the meeting shall constitute a quorum; (C) The officers or other persons designated on a list approved by the Board of Directors before the emergency, all in such order of priority and subject to such conditions and for such period of time (not longer than reasonably necessary after the termination of the emergency) as may be provided in the resolution approving the list, shall, to the extent required to provide a quorum at any meeting of the Board of Directors, be deemed directors for such meeting; (D) The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such emergency any or all officers or agents of the corporation shall for any reason be rendered incapable of discharging their duties; (E) The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do; and (F) To the extent required to constitute a quorum at any meeting of the Board of Directors during such emergency, the officers of
the corporation who are present shall be deemed, in order of rank and within the same rank in order of seniority, directors for such meeting.
No officer, director or employee acting in accordance with any Emergency By-Laws shall be liable except for willful misconduct. These Emergency By-Laws shall be subject to repeal or change by further action of the Board of Directors or by action of the stockholders.
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS | 9 MOS |
| FISCAL YEAR END | FEB 03 2001 | FEB 03 2001 |
| PERIOD START | JUL 30 2000 | JAN 30 2000 |
| PERIOD END | OCT 28 2000 | OCT 28 2000 |
| CASH | 4,956 | 4,956 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 4,770 | 4,770 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 0 | 0 |
| CURRENT ASSETS | 11,366 | 11,366 |
| PP&E | 421 | 421 |
| DEPRECIATION | 178 | 178 |
| TOTAL ASSETS | 18,993 | 18,993 |
| CURRENT LIABILITIES | 330 | 330 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 0 | 0 |
| COMMON | 165 | 165 |
| OTHER SE | (17,283) | (17,283) |
| TOTAL LIABILITY AND EQUITY | 18,993 | 18,993 |
| SALES | 4,986 | 22,275 |
| TOTAL REVENUES | 4,986 | 22,275 |
| CGS | 0 | 0 |
| TOTAL COSTS | 1,620 | 6,236 |
| OTHER EXPENSES | 0 | 0 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 568 | 1,806 |
| INCOME PRETAX | 2,907 | 14,565 |
| INCOME TAX | 1,163 | 5,827 |
| INCOME CONTINUING | 1,744 | 8,738 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | 1,744 | 8,738 |
| EPS BASIC | .21 | 1.04 |
| EPS DILUTED | .21 | 1.04 |