SEC Filing | AMSC

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------- For The Quarter Ended: September 30, 2000 Commission File Number 0-19672 ------------------ American Superconductor Corporation ----------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-2959321 ----------------------------------- ---------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) organization or incorporation) Two Technology Drive Westborough, Massachusetts 01581 -------------------------------- (Address of principal executive offices, including zip code) (508) 836-4200 --------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $.01 per share 20,202,388 - ---------------------------------------- ----------------------------------- Class Outstanding as of November 13, 2000

AMERICAN SUPERCONDUCTOR CORPORATION INDEX ________ Page No. -------- Part I - Financial Information Consolidated Balance Sheets September 30, 2000 (unaudited) and March 31, 2000 3 Consolidated Statements of Operations for the three months ended September 30, 2000 and 1999 and the six months ended September 30, 2000 and 1999 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended September 30, 2000 and 1999 (unaudited) 5 Notes to Interim Consolidated Financial Statements 6-10 Management's Discussion and Analysis of Financial Condition and Results of Operations 11-20 Part II - Other Information 21 Signatures 22

AMERICAN SUPERCONDUCTOR CORPORATION Consolidated Balance Sheets September 30, March 31, 2000 2000 ---------------- --------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $52,075,929 $126,917,768 Accounts receivable 12,367,020 7,317,009 Inventory 12,457,378 9,246,950 Prepaid expenses and other current assets 1,138,003 809,129 ---------------- --------------- Total current assets 78,038,330 144,290,856 Property and equipment: Equipment 29,890,670 20,300,734 Furniture and fixtures 1,801,550 1,670,029 Leasehold improvements 3,020,377 3,006,814 ---------------- --------------- 34,712,597 24,977,577 Less: accumulated depreciation (16,688,717) (15,199,346) ---------------- --------------- Property and equipment, net 18,023,880 9,778,231 Long-term marketable securities 147,937,114 91,737,449 Long-term accounts receivable 1,500,000 1,750,000 Net investment in sales-type lease 279,110 279,110 Goodwill 1,240,663 0 Other assets 1,494,820 1,078,610 ---------------- --------------- Total assets $248,513,917 $248,914,256 ================ =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $7,012,299 $6,339,023 Deferred revenue 15,000 371,250 ---------------- --------------- Total current liabilities 7,027,299 6,710,273 Long-term deferred revenue 3,418,473 1,259,883 Commitments Stockholders' equity: Common stock, $.01 par value Authorized shares-50,000,000; issued and outstanding - 20,189,401 and 19,734,714 at September 30, 2000 and March 31, 2000, respectively 201,894 197,347 Additional paid-in capital 355,013,192 348,903,034 Deferred compensation (477,299) (530,333) Deferred warrant costs (486,938) (637,552) Accumulated other comprehensive income (loss) 134,879 (172,515) Accumulated deficit (116,317,583) (106,815,881) ---------------- --------------- Total stockholders' equity 238,068,145 240,944,100 ---------------- --------------- Total liabilities and stockholders' equity $248,513,917 $248,914,256 ================ =============== The accompanying notes are an integral part of the consolidated financial statements. 3

AMERICAN SUPERCONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended September 30, September 30, 2000 1999 2000 1999 --------------- --------------- --------------- --------------- Revenues: Contract revenue $694,556 $2,052,401 $1,394,988 $4,188,863 Product sales and prototype development contracts 3,999,048 458,315 7,197,502 569,426 Rental/other revenue 23,900 22,563 49,352 45,126 --------------- --------------- --------------- --------------- Total revenues 4,717,504 2,533,279 8,641,842 4,803,415 Costs and expenses: Costs of revenue 3,528,064 2,541,908 7,146,636 4,814,851 Research and development 6,030,797 3,449,361 11,338,140 6,735,466 Selling, general and administrative 3,715,354 1,639,185 6,670,225 3,683,623 --------------- --------------- --------------- --------------- Total costs and expenses 13,274,215 7,630,454 25,155,001 15,233,940 Interest income 3,499,307 305,338 6,993,730 644,778 Other income (expense), net 12,480 2,415 17,727 2,331 --------------- --------------- --------------- --------------- Net loss $(5,044,924) $(4,789,422) $(9,501,702) $(9,783,416) =============== =============== ================= =============== Net loss per common share Basic $(0.25) $(0.31) $(0.47) $(0.63) =============== =============== ================= =============== Diluted $(0.25) $(0.31) $(0.47) $(0.63) =============== =============== ================= =============== Weighted average number of common shares outstanding Basic 20,151,987 15,446,525 20,019,403 15,419,899 =============== =============== ================= =============== Diluted 20,151,987 15,446,525 20,019,403 15,419,899 =============== =============== ================= =============== The accompanying notes are an integral part of the consolidated financial statements. 4

AMERICAN SUPERCONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended September 30, 2000 1999 ---- ---- Cash flows from operating activities: Net loss $ (9,501,702) $ (9,783,416) Adjustments to reconcile net loss to net cash used by operations: Depreciation and amortization 1,577,990 944,699 Deferred compensation expense 53,034 Deferred warrant costs 177,259 221,728 Stock compensation expense Changes in operating asset and liability accounts : Accounts receivable (4,747,733) 91,942 Inventory (2,950,448) (995,277) Prepaid expenses and other current assets (328,874) 107,373 Accounts payable and accrued expenses 673,276 332,711 Deferred revenue - current and long-term 1,802,340 1,259,883 -------------- -------------- Total adjustments (3,655,758) 2,022,432 Net cash used by operating activities (13,157,460) (7,760,984) Cash flows from investing activities: Purchase of property and equipment (net) (9,561,224) (3,088,658) Purchase of long-term marketable securities (55,874,482) (340,944) Purchase of assets of Integrated Electronics, LLC (755,000) - Net investment in sales-type lease - 8,000 Increase in other assets (416,210) (192,567) -------------- -------------- Net cash used in investing activities (66,606,916) (3,614,169) Cash flows from financing activities: Net proceeds from issuance of common stock 4,922,537 647,246 -------------- -------------- Net cash provided by financing activities 4,922,537 647,246 Net increase (decrease) in cash and cash equivalents (74,841,839) (10,727,907) Cash and cash equivalents at beginning of period 126,917,768 24,969,142 -------------- -------------- Cash and cash equivalents at end of period $52,075,929 $14,241,235 ============== ============== Supplemental schedule of cash flow information: Noncash issuance of common stock $ 1,218,557 $ 59,373 The accompanying notes are an integral part of the consolidated financial statements. 5

AMERICAN SUPERCONDUCTOR CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS --- 1. Nature of the Business: ----------------------- American Superconductor Corporation (the "Company"), which was formed on April 9, 1987, is a world leader in developing and manufacturing products using superconducting materials and power electronic devices for electric power applications. The focus of the Company's development and commercialization efforts is on electrical equipment for use by electric utilities and industrial and commercial users of electrical power. For large-scale applications, the Company's development efforts are focused on high temperature superconducting ("HTS") power transmission cables, motors, generators and transformers. In the area of industrial power quality and transmission network power reliability, the Company is focused on marketing and selling commercial superconducting magnetic energy storage ("SMES") devices, on development and commercialization of new SMES products, on development of power electronics subsystems, and on providing engineering services in the area of power quality and transmission network reliability for industrial, commerical and utility customers. The Company operates in two business segments. The Company currently derives a substantial portion of its revenue from research and development contracts. A significant portion of this contract revenue relates to a development contract with Pirelli Cables and Systems ("Pirelli"), who (through an affiliated company) is a stockholder of the Company. Included in costs of revenue are research and development expenses related to externally funded development contracts of approximately $1,117,000 and $1,752,000 for the three months ended September 30, 2000 and 1999, respectively, and approximately $2,456,000 and $3,174,000 for the six months ended September 30, 2000 and 1999, respectively. Selling, general and administrative expenses included as costs of revenue were approximately $312,000 and $801,000 for the three months ended September 30, 2000 and 1999, respectively, and approximately $751,000 and $1,538,000 for the six months ended September 30, 2000 and 1999, respectively. 2. Basis of Presentation: ---------------------- The accompanying consolidated financial statements are unaudited, except for those dated as of March 31, 2000, and have been prepared in accordance with generally accepted accounting principles. Certain information and footnote disclosure normally included in the Company's annual consolidated financial statements have been condensed or omitted. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results for the interim periods ended September 30, 2000 and 1999 and the financial position at September 30, 2000. 6

AMERICAN SUPERCONDUCTOR CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year. It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2000 which are contained in the Company's Annual Report on Form 10-K covering the year ended March 31, 2000. On June 1, 2000, the Company acquired substantially all of the assets of Integrated Electronics, LLC ("IE"). The IE acquisition was accounted for under the purchase method of accounting. Goodwill of $1,329,282 represented the excess of the purchase price of $1,833,125 over the fair value of the acquired assets of $503,843 at June 1, 2000. The purchase price consisted of cash paid to IE of $675,000, miscellaneous transaction costs of $80,000, and the value of 37,500 shares of the Company's common stock at June 1, 2000 of $1,078,125. The fair value of the assets acquired were accounts receivable of $52,278, inventory of $259,980, and fixed assets of $191,585. These asset purchases are included under "Purchase of assets of Integrated Electronics, LLC" in the Consolidated Statements of Cash Flows for the period ended September 30, 2000 and thus are excluded from the "Changes in operating asset and liability accounts" section of the Consolidated Statements of Cash Flows. Certain prior year amounts have been reclassified to be consistent with the current year presentation. 3. Net Loss Per Common Share: -------------------------- The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" effective December 28, 1997. SFAS No. 128 requires presentation of basic earnings per share ("EPS") and, for companies with complex capital structures, diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes dilution and is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares include the effect of the exercise of stock options. For the three months ended September 30, 2000 and 1999, common equivalent shares of 1,976,674 and 664,678 were not included for the calculation of diluted EPS as they were considered antidilutive. For the six months ended September 30, 2000 and 1999, common equivalent shares of 2,230,780 and 804,136 were also not included for the calculation of diluted EPS as they were also considered antidilutive. 4. Cost-Sharing Agreements: ----------------------- The Company did not receive any funding under government cost-sharing agreements in the three months ended September 30, 2000, compared to approximately $470,000 from two Department of Energy cost-sharing agreements in the three months ended September 30, 1999. For the six months ended September 30, 2000 and 1999, government cost-sharing funding was $194,000 and $1,098,000, respectively. This funding was used to directly offset research and development and selling, general and administrative expenses. 7

AMERICAN SUPERCONDUCTOR CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued ___ 5. Comprehensive Loss: ------------------ The Company has adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income", which requires that an entity include in total comprehensive income certain amounts which were previously recorded directly to stockholders' equity. The Company's comprehensive loss was as follows: Three Months Ended September 30 Six Months Ended September 30 -------------------------------- ------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net loss $(5,044,924) $(4,789,422) $(9,501,702) $(9,783,416) Other comprehensive income 471,042 296 307,394 (36,631) ----------- ----------- ----------- ----------- Total comprehensive loss $(4,573,882) $(4,789,126) $(9,194,308) $(9,820,047) =========== =========== =========== =========== Other comprehensive income represents changes in foreign currency translation and unrealized gains and losses on investments. 6. Business Segment Information: ----------------------------- The Company adopted Statement of Financial Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("FAS 131"), as of March 31, 1999. The Company has two reportable business segments as defined by FAS 131--High Temperature Superconducting ("HTS") business segment, and the Superconducting Magnetic Energy Storage ("SMES") segment. The HTS business segment develops and commercializes HTS wire, wire products and systems. The focus of this segment's development efforts is on HTS wire for power transmission cables, motors, generators and transformers. The SMES business segment is focused on marketing and selling commercial SMES devices, on development and commercialization of new SMES products, on development of power electronic subsystems and on providing engineering services in the area of power quality and transmission network reliability for industrial, commercial and utility customers. The operating segment results for the HTS and SMES business segments were as follows: Three Months Ended September 30 Six Months Ended September 30 -------------------------------- ------------------------------- 2000 1999 2000 1999 ---- ----- ---- ---- Revenues - -------- HTS $1,414,204 $2,300,212 $3,194,937 $4,281,454 SMES 3,303,300 233,067 5,446,905 521,961 ------------ ------------ ------------ ------------- Total $4,717,504 $2,533,279 $8,641,842 $4,803,415 ============ ============ ============ ============= 8

AMERICAN SUPERCONDUCTOR CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued ___ Operating Income (loss) - ----------------------- HTS $(6,880,179) $(3,234,070) $(12,808,494) $ (6,605,035) SMES (1,341,600) (1,545,520) (3,034,090) (3,220,323) Unallocated Corporate Expenses (334,932) (317,585) (670,575) (605,167) ------------- ------------ --------------- ------------- Total $(8,556,711) $(5,097,175) $(16,513,159) $(10,430,525) ============= ============ =============== ============= The segment assets for the HTS and SMES business segments were as follows: September 30, 2000 March 31, 2000 ------------------ -------------- HTS $ 22,545,748 $ 16,265,634 SMES 25,955,126 13,993,405 Corporate Cash and Marketable Securities 200,013,043 218,655,217 ------------- ------------- Total $ 248,513,917 $ 248,914,256 ============= ============= The accounting policies of the business segments are the same as those described in Note 2, except that certain corporate expenses which we do not believe are specifically attributable or allocable to either business segment have been excluded from the segment operating losses. 7. New Accounting Pronouncements: ----------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. 9

Statement 133, as amended by Statement 138, effective July 1, 2000, is effective for fiscal years beginning after June 15, 1999. In June 1999, FASB issued Statement 137 which defers the effective date to fiscal years beginning after June 15, 2000. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance. Statement 133 cannot be applied retroactively. Statement 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1997 (and, at the company's election, before January 1, 1998). We believe the impact on our financial statements of adopting Statement 133 will be immaterial. In December 1999, the SEC issued Staff Accounting Bulletin ("SAB 101, "Revenue Recognition," which outlines the basic criteria that must be met to recognize revenue and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the SEC. The SEC has subsequently delayed the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. We believe the impact on our financial statements of adopting SAB 101 will be immaterial. In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25". This interpretation clarifies (a) the definition of employee for purposes of applying Opinion 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. This interpretation is effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. To the extent that this interpretation covers events occurring during the period after December 15, 1998, or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying this interpretation are recognized on a prospective basis from July 1, 2000. There is no impact on our financial statements in the current quarter as a result of adopting FIN 44. We believe the future impact on our financial statements as a result of this interpretation will be immaterial. 10

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 Results of Operations - --------------------- Total revenues during the three months ended September 30, 2000 were $4,718,000, compared to $2,533,000 for the same period a year earlier. For the six months ended September 30, 2000, revenues were $8,642,000 as compared to $4,803,000 for the comparable period in 1999. Revenues for the quarter and six-month period increased by $2,185,000 and $3,839,000, respectively, compared to the same prior-year periods. The increase in revenue resulted from higher sales of Superconducting Magnetic Energy Storage (SMES) products. SMES sales in the quarter were $3,303,000, compared to $233,000 during the second quarter of last year, an increase of $3,070,000. SMES sales for the recent six-month period were $5,447,000, compared to $522,000 recorded during the first six months of last year, an increase of $4,925,000. These increases were partially offset by lower HTS business unit revenues of $886,000 and $1,087,000 for the quarter and six-month periods ended September 30, 2000, respectively, compared to the same prior-year periods. HTS business unit revenues declined due to lower development contract funding, but were partially offset by higher product/prototype development revenues. For the three months ended September 30, 2000, we did not record any funding under government cost-sharing agreements. For the three months ended September 30, 1999, we recorded $470,000 of funding under two cost sharing agreements with the Department of Energy ("DOE"). For the six months ended September 30, 2000, funding under government cost-sharing agreements was $194,000 compared to $1,098,000 for the comparable period in 1999. We anticipate that a portion of our funding in the future will continue to come from cost-sharing agreements as we continue to develop joint programs with government agencies. Funding from government cost-sharing agreements is recorded as an offset to research and development and selling, general and administrative expenses, as required by government contract accounting guidelines, rather than as revenues. Total costs and expenses for the three months ended September 30, 2000 were $13,274,000 compared to $7,630,000 for the same period last year. Total costs and expenses for the first six months of the current fiscal year were $25,155,000, compared to $15,234,000 for the same period last year. The increase in costs and expenses was primarily the result of our increased investment in research and development and increased costs of revenue associated mainly with the higher level of SMES product sales. Adjusted research and development ("R&D") expenses, which include amounts classified as costs of revenue and amounts offset by cost sharing funding, increased to $7,148,000 in the three months ended September 30, 2000 from $5,443,000 for the same period of the prior year. For the six-month periods ended September 30, 2000 and 1999, adjusted research and development expenses were $13,894,000 and $10,475,000, respectively. These increases were due to the continued scale-up of our internal research and development activities including the hiring of additional personnel and the purchases of materials and equipment. A portion of the R&D expenditures related to externally funded development contracts has been classified as costs of revenue (rather than as R&D expenses). These R&D expenditures that were included as costs of 11

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 revenue during the three and six-month periods ended September 30, 2000 were $1,117,000 and $2,456,000, respectively, compared to $1,752,000 and $3,174,000 for the same periods last year. Additionally, R&D expenses that were offset by cost sharing funding were $0 and $242,000 for the second quarter ended September 30, 2000 and 1999, respectively. For the six months ended September 30, 2000, this amount was $100,000 as compared to $566,000 for the comparable period in the previous year. Net R&D expenses (exclusive of amounts classified as costs of revenue and amounts offset by cost sharing funding) increased to $6,031,000 in the three months ending September 30, 2000 from $3,449,000 for the same period last year. For the six months ending September 30, 2000 and 1999, these amounts were $11,338,000 and $6,735,000, respectively. Adjusted selling, general and administrative ("SG&A") expenses, which include amounts classified as costs of revenue and amounts offset by cost sharing funding, increased to $4,027,000 for the three months ended September 30, 2000, compared to $2,668,000 for the same period a year earlier. For the six-month periods ended September 30, 2000 and 1999, adjusted SG&A expenses were $7,515,000 and $5,754,000, respectively. These increases were primarily due to the hiring of additional personnel and related expenses incurred to support corporate development and marketing activities and future planned growth. A portion of the SG&A expenditures related to externally funded development contracts has been classified as costs of revenue (rather than as SG&A expenses). These SG&A expenditures that were included as costs of revenue during the three and six-month periods ended September 30, 2000 were $312,000 and $751,000, respectively, compared to $801,000 and $1,538,000 for the same periods last year. Additionally, SG&A expenses that were offset by cost sharing funding were $0 and $228,000 for the second quarter ended September 30, 2000 and 1999, respectively. For the six months ended September 30, 2000, this amount was $94,000 as compared to $532,000 for the comparable period in the previous year. Net SG&A expenses (exclusive of amounts classified as costs of revenue and amounts offset by cost sharing funding) were $3,715,000 in the three months ending September 30, 2000 compared to $1,639,000 for the same period last year. For the six months ending September 30, 2000 and 1999, these amounts were $6,670,000 and $3,684,000, respectively. Interest income was $3,499,000 in the quarter ended September 30, 2000 compared to $305,000 for the same period in the previous year. For the six months ended September 30, 2000 and 1999, these amounts were $6,994,000 and $645,000, respectively. These increases in interest income reflect the higher cash balances available for investment as a result of receiving $205,625,000 in net proceeds from our March, 2000 public offering of 3,500,000 shares of common stock. We expect to continue to incur operating losses in the next year, as we continue to devote significant financial resources to our research and development activities and commercialization efforts. 12

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 We expect to be party to agreements which, from time to time, may result in costs incurred exceeding expected revenues under such contracts. We may enter into such agreements for a variety of reasons including, but not limited to, entering new product application areas, furthering the development of key technologies, and advancing the demonstration of commercial prototypes in critical market applications. Please refer to the "Future Operating Results" section below for a discussion of certain factors that may affect our future results of operations and financial condition. Liquidity and Capital Resources - ------------------------------- At September 30, 2000, we had cash, cash equivalents and long-term marketable securities of $200,013,000 compared to $218,655,000 at March 31, 2000. The principal uses of cash during the three months ended September 30, 2000 were the funding of our operations, the acquisition of capital equipment, primarily for research and development and manufacturing, and expenditures for our planned new HTS manufacturing facility in Devens, Massachusetts. Long-term accounts receivable of $1,500,000 represents the amount due after September 30, 2001 on the $2,500,000 recognized as revenue in the year ended March 31, 2000 for R&D work performed by us prior to the effective date (October 1, 1999) of the Pirelli development agreement. The $2,500,000 payment by Pirelli for R&D performed before October 1, 1999 is guaranteed by the agreement and is payable in quarterly installments over the five-year period between October 1, 1999 and September 30, 2004. Goodwill of $1,241,000 at September 30, 2000 represents the excess of the purchase price paid for the acquisition of substantially all of the assets of Integrated Electronics, LLC ("IE") on June 1, 2000, over the fair value of IE's assets, less amortization. The IE transaction was accounted for under the purchase method of accounting. Goodwill was initially calculated to be $1,329,000, and will be amortized over a five-year period beginning June 1, 2000, in an amount equal to $22,000 per month. Results of operations for IE since June 1, 2000 are incorporated in our consolidated financial results. We have potential funding commitments of approximately $17,463,000 to be received after September 30, 2000 from strategic partners and government and commercial customers compared to $21,324,000 at March 31, 2000. However, these commitments, including $1,881,000 on U.S. government contracts and subcontracts, are subject to certain cancellation or buyback provisions. To date, inflation has not had a material impact on our financial results. 13

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 New Accounting Pronouncements - ----------------------------- In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. Statement 133, as amended by Statement 138, effective July 1, 2000, is effective for fiscal years beginning after June 15, 1999. In June 1999, FASB issued Statement 137 which defers the effective date to fiscal years beginning after June 15, 2000. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance. Statement 133 cannot be applied retroactively. Statement 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1997 (and, at the company's election, before January 1, 1998). We believe the impact on our financial statements of adopting Statement 133 will be immaterial. In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,"Revenue Recognition," which outlines the basic criteria that must be met to recognize revenue and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the SEC. The SEC has subsequently delayed the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. We believe the impact on our financial statements of adopting SAB 101 will be immaterial. In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25". This Interpretation clarifies (a) the definition of employee for purposes of applying Opinion 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. This Interpretation is effective July 1, 2000, but certain conclusions in this Interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. To the extent that this Interpretation covers events occurring during the period after December 15, 1998, or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying this Interpretation are recognized on a prospective basis from July 1, 2000. There is no impact on our financial statements in the current quarter as a result of adopting FIN 44. We believe the future impact on our financial statements as a result of this interpretation will be immaterial. 14

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------- Our exposure to market risk through derivative financial instruments and other financial instruments, such as investments in short-term marketable securities and long-term debt, is not material. FUTURE OPERATING RESULTS Various statements included herein, as well as other statements made from time to time by our representatives, which relate to future matters (including but not limited to statements concerning our future commercial success) constitute forward looking statements and are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There are a number of important factors which could cause our actual results of operations and financial condition in the future to vary from that indicated in such forward looking statements. Factors that may cause such differences include, without limitation, the risks, uncertainties and other information set forth below. We have a history of operating losses and we expect to continue to incur losses in the future. We have been principally engaged in research and development activities. We have incurred net losses in each year since our inception. Our net loss for fiscal 1998, fiscal 1999, fiscal 2000, and the first six months of FY2001 was $12,378,000, $15,326,000, $17,598,000, and $9,502,000, respectively. Our accumulated deficit as of September 30, 2000 was $116,318,000. We expect to continue to incur operating losses in the next year and there can be no assurance that we will ever achieve profitability. There are a number of technological challenges that must be successfully addressed before our superconducting products can gain widespread commercial acceptance. Many of our products are in the early stages of commercialization and testing, while others are still under development. We do not believe any company has yet successfully developed and commercialized significant quantities of HTS wire or wire products. There are a number of technological challenges that we must successfully address to complete our development and commercialization efforts. For example, we face engineering challenges in producing HTS wire in longer lengths and commercial quantities. We also believe that several years of further development in the cable and motor industries will be necessary before a substantial number of additional commercial applications for our HTS wire in these industries can be developed and 15

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 proven. We may also need to improve the quality of our HTS wire to expand the number of commercial applications for it. We may be unable to meet such technological challenges. Delays in development, as a result of technological challenges or other factors, may result in the introduction of our products later than anticipated. The commercial uses of superconducting products are very limited today, and a widespread commercial market for our products may not develop. To date, there has been no widespread commercial use of HTS products. Although LTS products are currently used in several commercial applications, commercial acceptance of LTS products, other than for medical magnetic resonance imaging and superconducting magnetic energy storage products, has been significantly limited by the cooling requirements of LTS materials. Even if the technological hurdles currently limiting commercial uses of HTS and LTS products are overcome, it is uncertain whether a robust commercial market for those new and unproven products will ever develop. It is possible that the market demands we currently anticipate for our HTS and LTS products will not develop and that superconducting products will never achieve widespread commercial acceptance. We expect to spend significant amounts on the expansion of our manufacturing capacity, and our expansion projects may not be successful. In anticipation of significantly increased demand for our products, we have announced plans to build a facility exclusively dedicated to HTS wire manufacturing at the Devens Commerce Center in Devens, Massachusetts, and have begun construction of this facility. Over the next two years, we plan to use a portion of the net proceeds from our March 2000 stock offering to buy land, construct a building and purchase equipment for the new HTS wire manufacturing facility in Devens, and for a new SMES manufacturing facility. We can only estimate the costs of these projects, and the actual costs may be significantly in excess of our estimates. In addition, we may be unable to lease suitable space for our new facilities on commercially acceptable terms, the completion of those new facilities may be delayed, or we may experience start-up difficulties or other problems once those facilities become operational. Finally, if increased demand for our products does not materialize, we will not generate sufficient revenue to offset the cost of establishing and operating these facilities. We have no experience manufacturing our products in commercial quantities. To be financially successful, we will have to manufacture our products in commercial quantities at acceptable costs while also preserving the quality levels achieved in manufacturing these products in limited quantities. This presents a number of technological and engineering 16

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 challenges for us. We cannot assure you that we will be successful in developing product designs and manufacturing processes that permit us to manufacture our HTS and SMES products in commercial quantities at commercially acceptable costs while preserving quality. In addition, we may incur significant start-up costs and unforeseen expenses in our product design and manufacturing efforts. We have historically focused on research and development activities and have limited experience in marketing and selling our products. We have been primarily focused on research and development of our superconducting products. Consequently, our management team has limited experience directing our commercialization efforts which are essential to our future success. To date, we only have limited experience marketing and selling our products, and there are very few people anywhere who have significant experience marketing or selling superconducting products. Once our products are ready for commercial use, we will have to develop a marketing and sales organization that will effectively demonstrate the advantages of our products over both more traditional products and competing superconducting products or other technologies. We may not be successful in our efforts to market this new and unfamiliar technology, and we may not be able to establish an effective sales and distribution organization. We may decide to enter into arrangements with third parties for the marketing or distribution of our products, including arrangements in which our products, such as HTS wire, are included as a component of a larger product, such as a motor. We have entered into a marketing and sales alliance with GE Industrial Systems giving GE the exclusive right to offer our Distributed-SMES (D-SMES) product line in the United States to utilities and the right to sell industrial Power Quality-SMES (PQ-SMES) systems to certain of GE's global industrial accounts. By entering into marketing and sales alliances, the financial benefits to us of commercializing our products are dependent on the efforts of others. We may not be able to enter into marketing or distribution arrangements with third parties on financially acceptable terms, and third parties may not be successful in selling our products or applications incorporating our products. We depend on our strategic relationships with our corporate partners for the successful development and marketing of applications for our superconducting products. Our business strategy depends upon strategic relationships with corporate partners, which are intended to provide funding and technologies for our development efforts and assist us in marketing and distributing our products. Although we currently are party to a number of strategic relationships, we may not be able to maintain these relationships, and these relationships may not be technologically or commercially successful. 17

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 We have an agreement with Pirelli relating to HTS wire for cables used to transmit both electric power and control signals. In general, we are obligated to sell our HTS cable wire exclusively to Pirelli, and Pirelli is obligated to buy this HTS wire exclusively from us or to pay us royalties for any of this wire that it manufactures for use in these applications anywhere in the world other than Japan. Pirelli continues to provide us with substantial funding and has been critical in assisting us in the development and commercialization of HTS cable wire. Consequently, we are significantly dependent on Pirelli for the commercial success of this cable wire in these applications. As we move toward commercialization of several of our products, we plan to use strategic alliances as an important means of marketing and selling our products. We have entered into a marketing and sales alliance with GE giving GE the exclusive right to offer our D-SMES product line in the United States to utilities and the right to sell industrial PQ-SMES systems to certain of GE's global industrial accounts. Any strategic relationships established may not provide us with the commercial benefits we anticipate. Our products face intense competition both from superconducting products developed by others and from traditional, non-superconducting products and alternative technologies. As we begin to market and sell our superconducting products, we will face intense competition both from competitors in the superconducting field and from vendors of traditional products and new technologies. There are many companies in the United States, Europe, Japan and Australia engaged in the development of HTS products, including 3M, Siemens, Alcatel and Sumitomo Electric Industries. The superconducting industry is characterized by rapidly changing and advancing technology. Our future success will depend in large part upon our ability to keep pace with advancing HTS and LTS technology and developing industry standards. In addition, our SMES products compete with a variety of non-superconducting products such as dynamic voltage restorers and battery-based power supply systems. Research efforts and technological advances made by others in the superconducting field or in other areas with applications to the power quality and reliability markets may render our development efforts obsolete. Many of our competitors have substantially greater financial resources, research and development, manufacturing and marketing capabilities than we have. In addition, as the HTS, power quality and power reliability markets develop, other large industrial companies may enter those fields and compete with us. Third parties have or may acquire patents that cover the high temperature superconducting materials we use or may use in the future to manufacture our products. We expect that some or all of the HTS materials and technologies we use in designing and manufacturing our products are or will become covered by patents issued to other parties, including our competitors. If that is the case, we will need either to acquire licenses to these patents or to successfully contest the validity of these patents. The owners of these patents may 18

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 refuse to grant licenses to us, or may be willing to do so only on terms that we find commercially unreasonable. If we are unable to obtain these licenses, we may have to contest the validity or scope of those patents to avoid infringement claims by the owners of these patents. It is possible that we will not be successful in contesting the validity or scope of a patent, or that we will not prevail in a patent infringement claim brought against us. Even if we are successful in such a proceeding, we could incur substantial costs and diversion of management resources in prosecuting or defending such a proceeding. There are numerous patents issued in the field of superconducting materials and our patents may not provide meaningful protection for our technology. We own or have licensing rights under many patents and pending patent applications. However, the patents that we own or license may not provide us with meaningful protection of our technologies, and may not prevent our competitors from using similar technologies, for a variety of reasons, such as the following: . The patent applications that we or our licensors file may not result in patents being issued. . Patents and patent applications may be challenged by third parties. For example, several interference or opposition proceedings have been initiated with respect to patent applications or patents under which we hold exclusive licenses. These proceedings could result in a loss of patents or applications, which would also result in a loss of our rights under them; and in the case of an interference might also result in the issuance of a similar patent to the party initiating the interference proceeding. . Others may independently develop similar technologies not protected by our patents or design around the patented aspects of any technologies we develop. Moreover, we could incur substantial litigation costs in defending the validity of our own patents. We also rely on trade secrets and proprietary know-how to protect our intellectual property. However, our non-disclosure agreements and other safeguards may not provide meaningful protection for our trade secrets and other proprietary information. Our success is dependent upon attracting and retaining qualified personnel. Our success will depend in large part upon our ability to attract and retain highly qualified research and development, management, manufacturing, marketing and sales personnel. Hiring those persons may be especially difficult due to the specialized nature of our business. In addition, the demand for qualified personnel is particularly acute in the New England and 19

AMERICAN SUPERCONDUCTOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 Wisconsin areas, where most of our operations are located, due to the currently low unemployment rate in these regions. We are particularly dependent upon the services of Dr. Gregory J. Yurek, our co-founder and our Chairman of the Board, President and Chief Executive Officer, and Dr. Alexis P. Malozemoff, our Chief Technical Officer. The loss of the services of either of those individuals could significantly damage our business and prospects. 20

AMERICAN SUPERCONDUCTOR CORPORATION PART II OTHER INFORMATION ----------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- At the Company's Annual Meeting of Stockholders held on July 28, 2000, the following proposals were adopted by the vote specified below: Withheld Authority To Vote Proposal For For All Nominees -------- --- ---------------- 1. Election of Directors Gregory J. Yurek 17,775,875 381,756 Albert J. Baciocco, Jr. 17,774,775 382,856 Frank Borman 17,771,375 386,256 Peter O. Crisp 17,774,775 382,856 Richard Drouin 17,774,875 382,756 Gerard Menjon 16,036,365 2,121,266 Andrew G.C. Sage, II 17,772,075 385,556 John Vander Sande 17,775,875 381,756 Broker For Against Abstain Non-Votes --- ------- ------- --------- 2. To approve amendments to the Company's 1996 Stock Incentive Plan 6,069,261 5,017,156 49,475 7,021,739 3. To approve amendments to the Company's 1997 Director Stock Option Plan 6,936,682 4,139,397 59,813 7,021,739 4. To approve 2000 Employee Stock Purchase Plan 10,310,322 774,499 51,071 7,021,739 5. Ratification of Independent Auditors 18,115,061 26,469 16,101 - Please see the Company's Proxy Statement filed with the Commission in connection with this Annual Meeting for a description of the matters voted upon. Item 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibit 3.1 Amended and Restated By-Laws of the Company Exhibit 27.1 Financial Data Schedule 21

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN SUPERCONDUCTOR CORPORATION November 14, 2000 /s/ Gregory J. Yurek - ------------------------------- ----------------------------------- Date Gregory J. Yurek Chairman of the Board, President and Chief Executive Officer November 14, 2000 /s/ Thomas M. Rosa - ------------------------------- ----------------------------------- Date Thomas M. Rosa Chief Accounting Officer, Corporate Controller and Assistant Secretary 22

EXHIBIT 3.1 AMENDED AND RESTATED BY-LAWS OF AMERICAN SUPERCONDUCTOR CORPORATION

TABLE OF CONTENTS Page ---- ARTICLE I STOCKHOLDERS..................................................................... 1 1.1 Place of Meetings................................................................ 1 1.2 Annual Meeting................................................................... 1 1.3 Special Meetings................................................................. 1 1.4 Notice of Meetings............................................................... 1 1.5 Voting List...................................................................... 1 1.6 Quorum........................................................................... 2 1.7 Adjournments..................................................................... 2 1.8 Voting and Proxies............................................................... 2 1.9 Action at Meeting................................................................ 2 1.10 Conduct of Meetings.............................................................. 3 1.11 Action Without Meeting........................................................... 4 ARTICLE II DIRECTORS........................................................................ 4 2.1 General Powers................................................................... 4 2.2 Number; Election and Qualification............................................... 4 2.3 Enlargement of the Board......................................................... 4 2.4 Tenure........................................................................... 4 2.5 Vacancies........................................................................ 4 2.6 Resignation and Removal.......................................................... 5 2.7 Regular Meetings................................................................. 5 2.8 Special Meetings................................................................. 5 2.9 Notice of Special Meetings....................................................... 5 2.10 Meetings by Conference Communications Equipment.................................. 5 2.11 Quorum........................................................................... 5 2.12 Action at Meeting................................................................ 6 2.13 Action by Written Consent........................................................ 6 2.14 Committees....................................................................... 6 2.15 Compensation of Directors........................................................ 6 ARTICLE III OFFICERS......................................................................... 6 3.1 Titles........................................................................... 6 3.2 Election......................................................................... 7 3.3 Qualification.................................................................... 7 3.4 Tenure........................................................................... 7 3.5 Resignation and Removal.......................................................... 7 3.6 Vacancies........................................................................ 7 3.7 Chairman of the Board............................................................ 7 3.8 President; Chief Executive Officer............................................... 7 3.9 Vice Presidents.................................................................. 8 3.10 Secretary and Assistant Secretaries.............................................. 8 3.11 Treasurer and Assistant Treasurers............................................... 8 i

3.12 Salaries......................................................................... 9 ARTICLE IV CAPITAL STOCK.................................................................... 9 4.1 Issuance of Stock................................................................ 9 4.2 Certificates of Stock............................................................ 9 4.3 Transfers........................................................................ 9 4.4 Lost, Stolen or Destroyed Certificates........................................... 9 4.5 Record Date...................................................................... 10 ARTICLE V GENERAL PROVISIONS............................................................... 10 5.1 Fiscal Year...................................................................... 10 5.2 Corporate Seal................................................................... 10 5.3 Waiver of Notice................................................................. 10 5.4 Voting of Securities............................................................. 10 5.5 Evidence of Authority............................................................ 10 5.6 Certificate of Incorporation..................................................... 11 5.7 Transactions with Interested Parties............................................. 11 5.8 Severability..................................................................... 11 5.9 Pronouns......................................................................... 11 ARTICLE VI INDEMNIFICATION.................................................................. 12 6.1 Actions, Suits and Proceedings Other than by or in the Right of the Corporation.. 12 6.2 Actions or Suits by or in the Right of the Corporation........................... 12 6.3 Indemnification for Expenses of Successful Party................................. 13 6.4 Notification and Defense of Claim................................................ 13 6.5 Advance of Expenses.............................................................. 14 6.6 Procedure for Indemnification.................................................... 14 6.7 Remedies......................................................................... 14 6.8 Limitations...................................................................... 15 6.9 Subsequent Amendment............................................................. 15 6.10 Other Rights..................................................................... 15 6.11 Partial Indemnification.......................................................... 15 6.12 Insurance........................................................................ 15 6.13 Savings Clause................................................................... 16 6.14 Intent of Article................................................................ 16 6.15 Definitions...................................................................... 16 ARTICLE VII AMENDMENTS....................................................................... 16 ii

ARTICLE I STOCKHOLDERS 1.1 Place of Meetings. All meetings of stockholders shall be held at such ----------------- place as may be designated from time to time by the Board of Directors, the Chairman of the Board or the President or, if not so designated, at the principal office of the corporation. 1.2 Annual Meeting. The annual meeting of stockholders for the election -------------- of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors, the Chairman of the Board or the President (which date shall not be a legal holiday in the place where the meeting is to be held). If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these By-laws to the annual meeting of the stockholders shall be deemed to refer to such special meeting. 1.3 Special Meetings. Special meetings of stockholders for any purpose or ---------------- purposes may be called at any time by the Board of Directors, the Chairman of the Board or the President, but such special meetings may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 1.4 Notice of Meetings. Except as otherwise provided by law, written ------------------ notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the Delaware General Corporation Law) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the Delaware General Corporation Law. 1.5 Voting List. The Secretary shall prepare, at least 10 days before ----------- every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with notice of the meeting, or (ii) during ordinary

business hours, at the principal place of business of the corporation. 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. 1.6 Quorum. Except as otherwise provided by law, the Certificate of ------ Incorporation or these By-laws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum for the transaction of business. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. 1.7 Adjournments. Any meeting of stockholders may be adjourned from time ------------ to time to any other time and to any other place at which a meeting of stockholders may be held under these By-laws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 1.8 Voting and Proxies. Each stockholder shall have one vote for each ------------------ share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by the Delaware General Corporation Law by the stockholder or such stockholder's authorized agent and delivered (including by electronic transmission) to the Secretary of the corporation. No such proxy shall be voted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. 1.9 Action at Meeting. When a quorum is present at any meeting, any ----------------- matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the vote of the holders of shares of stock having a majority of the votes cast by the holders of all of the shares of stock present or represented and voting on such matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on such matter), except when a different vote is required by law, the Certificate of Incorporation or these By-laws. When a quorum is present at any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. 2

1.10 Conduct of Meetings. ------------------- (a) Chairman of Meeting. Meetings of stockholders shall be presided ------------------- over by the Chairman of the Board, if any, or in the Chairman's absence by the Vice Chairman of the Board, if any, or in the Vice Chairman's absence by the President, or in the President's absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen by vote of the stockholders at the meeting. The Secretary shall act as secretary of the meeting, but in the Secretary's absence the chairman of the meeting may appoint any person to act as secretary of the meeting. (b) Rules, Regulations and Procedures. The Board of Directors of the --------------------------------- corporation may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. (c) Closing of Polls. The chairman of the meeting shall announce at ---------------- the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. If no announcement is made, the polls shall be deemed to have opened when the meeting is convened and closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted. (d) Inspectors of Election. In advance of any meeting of ---------------------- stockholders, the Board of Directors, the Chairman of the Board or the President shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the corporation. Each inspector, before entering upon the discharge of such inspector's duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the 3

best of such inspector's ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote in completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. 1.11 Action Without Meeting. Any action required or permitted to be ---------------------- taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is 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 on such action were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation. ARTICLE II DIRECTORS 2.1 General Powers. The business and affairs of the corporation shall be -------------- managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law, the Certificate of Incorporation or these By-laws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2.2 Number; Election and Qualification. The number of directors which ---------------------------------- shall constitute the whole Board of Directors shall be determined from time to time by resolution of the Board of Directors or by the stockholders at the annual meeting or any special meeting of the stockholders, but in no event shall be less than three. Except as provided in Section 2.5 of these By-Laws, the directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the corporation. 2.3 Enlargement of the Board. The number of directors may be increased at ------------------------ any time by a majority of the directors then in office. 2.4 Tenure. Each director shall hold office until the next annual meeting ------ and until a successor is elected and qualified, or until such director's earlier death, resignation or removal. 2.5 Vacancies. Any vacancy in the Board of Directors, however occurring, --------- including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of such director's predecessor in office, and a director chosen to fill a position resulting from an increase in the number of 4

directors shall hold office until the next annual meeting of stockholders and until a successor is elected and qualified, or until such director's earlier death, resignation or removal. 2.6 Resignation and Removal. Any director may resign by delivering a ----------------------- resignation in writing or by electronic transmission to the corporation at its principal office or to the Chairman of the Board, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by the Delaware General Corporation Law or the Certificate of Incorporation. 2.7 Regular Meetings. Regular meetings of the Board of Directors may be ---------------- held without notice at such time and place as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. 2.8 Special Meetings. Special meetings of the Board of Directors may be ---------------- held at any time and place designated in a call by the Chairman of the Board, the President, two or more directors, or by one director in the event that there is only a single director in office. 2.9 Notice of Special Meetings. Notice of any special meeting of -------------------------- directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy or electronic mail, or delivering written notice by hand, to such director's last known business, home or electronic mail address at least 48 hours in advance of the meeting, or (iii) by sending written notice, via first-class mail or reputable overnight courier, to such director's last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 2.10 Meetings by Conference Communications Equipment. Directors may ----------------------------------------------- participate in meetings of the Board of Directors or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 2.11 Quorum. A majority of the total number of the whole Board of ------ Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 5

2.12 Action at Meeting. Every act of decision made by a majority of the ----------------- directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law, the Certificate of Incorporation or these By-Laws. 2.13 Action by Written Consent. Any action required or permitted to be ------------------------- taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents and electronic transmissions are filed with the minutes of proceedings of the Board or committee. 2.14 Committees. The Board of Directors may designate one or more ---------- committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members 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 and subject to the provisions of law, 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. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-laws for the Board of Directors. 2.15 Compensation of Directors. Directors may be paid such compensation ------------------------- for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service. ARTICLE III OFFICERS 3.1 Titles. The officers of the corporation shall consist of a President, ------ a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors may determine, including a Chairman of the Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate. 6

3.2 Election. The President, Treasurer and Secretary shall be elected -------- annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting. 3.3 Qualification. No officer need be a stockholder. Any two or more ------------- offices may be held by the same person. 3.4 Tenure. Except as otherwise provided by law, by the Certificate of ------ Incorporation or by these By-laws, each officer shall hold office until such officer's successor is elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer's earlier death, resignation or removal. 3.5 Resignation and Removal. Any officer may resign by delivering a ----------------------- written resignation to the corporation at its principal office or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer's resignation or removal, or any right to damages on account of such removal, whether such officer's compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation. 3.6 Vacancies. The Board of Directors may fill any vacancy occurring in --------- any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of such officer's predecessor and until a successor is elected and qualified, or until such officer's earlier death, resignation or removal. 3.7 Chairman of the Board. The Board of Directors may appoint from its --------------------- members a Chairman of the Board. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the corporation's Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.8 of these By- laws. Unless otherwise provided by the Board of Directors, the Chairman of the Board shall preside at all meetings of the Board of Directors and stockholders. 3.8 President; Chief Executive Officer. Unless the Board of Directors has ---------------------------------- designated the Chairman of the Board or another person as the corporation's Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The Chief Executive Officer shall have general charge and supervision of the business of the corporation subject to the direction of the Board of Directors. The President shall perform such other duties and shall have such other powers as the Board of Directors and the Chief Executive Officer (if the Chairman of the Board or another person is serving in such position) may from time to time prescribe. 7

3.9 Vice Presidents. Any Vice President shall perform such duties and --------------- possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer, the President (if the President is not the Chief Executive Officer), and then the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors), shall perform the duties of the Chief Executive Officer and when so performing shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 Secretary and Assistant Secretaries. The Secretary shall perform such ----------------------------------- duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting. 3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such ---------------------------------- duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 8

3.12 Salaries. Officers of the corporation shall be entitled to such -------- salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE IV CAPITAL STOCK 4.1 Issuance of Stock. Unless otherwise voted by the stockholders and ----------------- subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any shares of the authorized capital stock of the corporation held in the corporation's treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such lawful consideration and on such terms as the Board of Directors may determine. 4.2 Certificates of Stock. Every holder of stock of the corporation --------------------- shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by such holder in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these By-laws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. 4.3 Transfers. Except as otherwise established by rules and regulations --------- adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws. 4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a -------------------------------------- new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such 9

indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar. 4.5 Record Date. The Board of Directors may fix in advance a date as a ----------- record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. 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. ARTICLE V GENERAL PROVISIONS 5.1 Fiscal Year. Except as from time to time otherwise designated by the ----------- Board of Directors, the fiscal year of the corporation shall begin on the first day of April of each year and end on the last day of March in each year. 5.2 Corporate Seal. The corporate seal shall be in such form as shall be -------------- approved by the Board of Directors. 5.3 Waiver of Notice. Whenever notice is required to be given by law, ---------------- by the Certificate of Incorporation or by these By-laws, a written waiver signed by the person entitled to notice or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time stated in such waiver, or the attendance of such person at such meeting shall be deemed equivalent to such notice. 5.4 Voting of Securities. Except as the Board of Directors may otherwise -------------------- designate, the President or the Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. 5.5 Evidence of Authority. A certificate by the Secretary, or an --------------------- Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or 10

any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action. 5.6 Certificate of Incorporation. All references in these By-laws to the ---------------------------- Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time. 5.7 Transactions with Interested Parties. No contract or transaction ------------------------------------ between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors at which the contract or transaction is authorized or solely because any such director's or officer's votes are counted for such purpose, if: (a) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 5.8 Severability. Any determination that any provision of these By-laws ------------ is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-laws. 5.9 Pronouns. All pronouns used in these By-laws shall be deemed to -------- refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 11

ARTICLE VI INDEMNIFICATION 6.1 Actions, Suits and Proceedings Other than by or in the Right of the ------------------------------------------------------------------- Corporation. The corporation shall indemnify each person 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, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its --------------- equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 6.2 Actions or Suits by or in the Right of the Corporation. The ------------------------------------------------------ corporation shall indemnify any Indemnitee 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 or was, or has agreed to become, a director or officer of the corporation, or is or was serving, or has agreed to serve, at the request of the corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no 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 shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware shall deem proper. 12

6.3 Indemnification for Expenses of Successful Party. Notwithstanding the ------------------------------------------------ other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2 of these By-Laws, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that --------------- the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto. 6.4 Notification and Defense of Claim. As a condition precedent to his --------------------------------- right to be indemnified, the Indemnitee must notify the corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the corporation is so notified, the corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the corporation to the Indemnitee of its election so to assume such defense, the corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such action, suit, proceeding or investigation, other than as provided below in this Section 6.4. The Indemnitee shall have the right to employ his own counsel in connection with such action, suit, proceeding or investigation, but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and the Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or (iii) the corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the corporation, except as otherwise expressly provided by this Article. The corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The corporation shall not be required to indemnify the Indemnitee under this Article for any amounts paid in settlement of any action, suit, proceeding or investigation effected without its written consent. The corporation shall not settle any action, suit, proceeding or investigation in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. Neither the corporation nor the Indemnitee will unreasonably withhold or delay its consent to any proposed settlement. 13

6.5 Advance of Expenses. Subject to the provisions of Section 6.6 of the ------------------- se By-Laws, in the event that the corporation does not assume the defense pursuant to Section 6.4 of these By-Laws of any action, suit, proceeding or investigation of which the corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the corporation in advance of the final disposition of such matter; provided, however, that the payment of such expenses incurred by -------- ------- the Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the corporation as authorized in this Article; and further provided that no such advancement of expenses shall be made if it is determined (in the manner described in Section 6.6) that (i) the Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, or (ii) with respect to any criminal action or proceeding, the Indemnitee had reasonable cause to believe his conduct was unlawful. Such undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such repayment. 6.6 Procedure for Indemnification. In order to obtain indemnification or ----------------------------- advancement of expenses pursuant to Section 6.1, 6.2, 6.3 or 6.5 of these By- Laws, the Indemnitee shall submit to the corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the corporation of the written request of the Indemnitee, unless with respect to requests under Section 6.1, 6.2 or 6.5 of these By-Laws the corporation determines within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 6.1, 6.2 or 6.5 of these By-Laws, as the case may be. Any such indemnification, unless ordered by a court, shall be made with respect to requests under Section 6.1 or 6.2 only as authorized in the specific case upon a determination by the corporation that the indemnification of the Indemnitee is proper because the Indemnitee has met the applicable standard of conduct set forth in Section 6.1 or 6.2, as the case may be. Such determination shall be made in each instance (a) by a majority vote of the directors of the corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), whether or not a quorum, (b) by a majority vote of a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c), if there are no disinterested directors, or if disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the corporation) in a written opinion, or (d) by the stockholders of the corporation. 6.7 Remedies. The right to indemnification or advances as granted by this -------- Article shall be enforceable by the Indemnitee in any court of competent jurisdiction. Neither the failure of the corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the corporation pursuant to Section 6.6 of these By-Laws that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable 14

standard of conduct. The Indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the corporation. 6.8 Limitations. Notwithstanding anything to the contrary in this Article, ----------- except as set forth in Section 6.7 of these By-Laws, the corporation shall not indemnify an Indemnitee in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the corporation. Notwithstanding anything to the contrary in this Article, the corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the corporation makes any indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund such indemnification payments to the corporation to the extent of such insurance reimbursement. 6.9 Subsequent Amendment. No amendment, termination or repeal of this -------------------- Article or of the relevant provisions of the Delaware General Corporation Law or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 6.10 Other Rights. The indemnification and advancement of expenses ------------ provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the corporation or other persons serving the corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 6.11 Partial Indemnification. If an Indemnitee is entitled under any ----------------------- provision of this Article to indemnification by the corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 6.12 Insurance. The corporation may purchase and maintain insurance, at --------- its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit 15

plan) against any expense, liability or loss 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 indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. 6.13 Savings Clause. If this Article or any portion hereof shall be -------------- invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 6.14 Intent of Article. This intent of this Article is to provide for ----------------- indemnification and advancement of expenses to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. to the extent that such Section or any successor section may be amended or supplemented from time to time, this Article shall be amended automatically and construed so as to permit indemnification and advancement of expenses to the fullest extent from time to time permitted by law. 6.15 Definitions. Terms used in this Article and defined in Section ----------- 145(h) and Section 145(i) of the Delaware General Corporation Law shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i). ARTICLE VII AMENDMENTS These By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation. 16

5 1,000 3-MOS MAR-31-2001 JUL-01-2000 SEP-30-2000 52,076 147,937 12,367 0 12,457 78,038 34,713 (16,689) 248,514 7,027 0 0 0 202 237,866 248,514 3,999 4,718 2,840 3,528 9,746 0 0 (5,045) 0 (5,045) 0 0 0 (5,045) (0.25) (0.25)