| TRM CORP ITEM 1A RISK FACTORS Risks Relating to Our Default Under Our Credit Agreement We are in violation of certain covenants of our credit agreement with Bank of America, NA and other lenders |
| As a result of our 2005 financial performance, we have failed to meet financial covenants in our credit agreement with Bank of America, NA and other lenders relating to our leverage and fixed charge coverage ratios |
| We describe these ratios in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Liquidity and Capital Resources – Bank of America Credit Facility |
| ” We have entered into a Forbearance Agreement and Amendment with our lenders pursuant to which they have agreed not to take any action with regard to these covenant violations prior to June 15, 2006, provided we do not default on the remaining covenants in the credit agreement and comply with new covenants relating to the delivery of monthly financial statements and other information |
| However, we do not expect to meet all of our financial covenants for the second quarter of 2006, because some of the covenant calculations include results of operations for the most recent twelve-month period, and we incurred substantial losses in the fourth quarter of 2005 |
| Therefore, we expect that the lenders will have the right to require payment in full of our outstanding debt under our credit agreement (dlra91dtta6 million at December 31, 2005) on June 15, 2006 |
| Our lenders may also require payment if we do not comply with the remaining covenants in the credit agreement or the new covenants imposed by the Forbearance Agreement and Amendment |
| We will seek to refinance the outstanding balances under our credit agreement and have begun initial efforts to do so |
| If we are unable to refinance our debt or to get our lenders to agree to any further forbearance, we might be forced to seek protection of the courts through reorganization, bankruptcy or insolvency proceedings |
| Even if the lenders were willing to extend their forbearance for one or more additional periods, the fees and increases in the rates of interest they may seek may be substantial |
| The Forbearance Agreement and Amendment limits the amount of funds we may access under the credit agreement and our capital expenditures during the forbearance period |
| The Forbearance Agreement and Amendment limits the amount we may have outstanding under our Revolving or Swing Line loans, as defined in the credit agreement, or letter of credit to an aggregate of dlra15dtta0 million and under our Foreign Loans, as defined in the credit agreement to dlra5dtta0 million |
| As of March 8, 2006, there was dlra8dtta4 8 _________________________________________________________________ [62]Table of Contents million outstanding as Revolving Loans and letters of credit and dlra3dtta5 million outstanding as Foreign Loans |
| Accordingly, we are limited in the amount of liquidity available to us from our lenders |
| Moreover, the Forbearance Agreement and Amendments limits our capital expenditures during the forbearance period to dlra3dtta5 million |
| These limitations, as well as limitations restricting incurrence of other debt or liens or making investments, will not allow us to pursue any material growth in our systems during the forbearance period, which may impair our ability to achieve profitability |
| The Forbearance Agreement increased the interest rates under our credit agreement, increasing our expense and reducing our ability to achieve profitability |
| The Forbearance Agreement and Amendment has increased the interest rates we must pay by 1dtta00prca to 1dtta25prca depending upon the type of loan and our leverage ratio |
| These increases will materially increase our interest expense, thereby reducing our ability to achieve profitability |
| Default under our Credit Agreement may constitute a default under our United States and United Kingdom vault cash agreements |
| Our default under the credit agreement may constitute a default under our United States vault cash facility, which we use to supply the cash dispensed by our ATMs |
| We have entered into a forbearance agreement with respect to the default under our United States vault cash facility; however, this agreement does not cover any defaults other than those caused by the defaults specifically covered by the Forbearance Agreement and Amendment and terminates when the Forbearance Agreement and Amendment terminates |
| If the Forbearance Agreement and Amendment terminates and we do not have new financing in place, we could lose access to the vault cash and fees that we have earned |
| See “Risks Relating To Our ATM Business – We obtain our United States ATM vault cash under an agreement that could cause us to lose our access to the vault cash and to fees that we have earned due to circumstances beyond our control |
| ” Our United Kingdom ATM business obtains vault cash under an agreement with a local bank |
| Vault cash obtained under the program remains the property of the bank |
| If we are unable to refinance our debt under the Bank of America credit facility or extend the forbearance period prior to June 15, 2006, and the lenders declare us in default with respect to such credit facility, we may be declared to be in default with respect to this agreement as well |
| Risks Related to Our Business Generally Our sales depend on transaction fees from our networks of ATMs and photocopiers |
| A decline in either transaction volume or the level of transaction fees could reduce our sales and harm our operating results |
| Transaction fees for our networks of ATMs and photocopiers produce substantially all of our sales |
| Consequently, our future operating results will depend on both transaction volume and the amount of the transaction fees we receive |
| Our transaction volume and fees will depend principally upon: • our ability to find replacement sites in the event of merchant turnover; • competition, which can result in over-served markets, pressure both to reduce existing fee structures and increase sales discounts to merchants and reduced opportunities to secure merchant or other placements of our machines; • our ability to service, maintain and repair ATMs in our network promptly and efficiently; • continued market acceptance of our services; and • government regulation and network adjustment of our fees |
| If our transaction volume or the level of transaction fees we receive decrease in either of our primary market segments, our sales could decline, which would harm our operating results |
| Fluctuations in foreign exchange rates could affect the amounts we report in our financial statements |
| We record the results of our United Kingdom and Canadian operations in the relevant local currency and convert these results into United States dollars at the applicable exchange rate for inclusion in our consolidated financial statements |
| We have not tried historically to reduce our exposure to foreign exchange rate fluctuations by currency hedging |
| As a result, changes in exchange rates may cause the amounts we report in our financial statements to fluctuate without relation to the results of the underlying operations in the respective local currencies |
| Approximately 23prca of our consolidated sales for 2005 were produced in the United Kingdom by our United Kingdom subsidiaries and 10prca were produced in Canada by our Canadian subsidiary |
| The average exchange rate during 2005 for the British pound was dlra1dtta826 to £1dtta00, compared to dlra1dtta829 to £1dtta00 during 2004, while the average exchange rate for the Canadian dollar was US dlra0dtta824 to Cdlra1dtta00 in 2005 as compared to US dlra0dtta768 to Cdlra1dtta00 in 2004 |
| As a result of this 9 _________________________________________________________________ [63]Table of Contents increase in the value of the Canadian dollar, we reported dlra1dtta6 million more in sales during 2005 than we would have reported had the exchange rate remained constant at the average for 2004 |
| This gain was substantially offset by a corresponding increase in expenses |
| Changes in technology could reduce use of ATMs and photocopiers and, as a result, reduce our sales |
| New technology in the ATM or photocopier industries may result in the existing machines in our networks becoming obsolete, requiring us, or the merchants in our networks who own their machines, to either replace or upgrade our existing machines |
| Any replacement or upgrade program to machines that we own or that we must upgrade or replace under contracts with merchant owners would involve substantial expense, as was, and will be, the case with respect to the upgrade of our ATMs to meet EMV and triple DES requirements |
| A failure to either replace or upgrade obsolete machines could result in customers using other ATM or photocopier networks that have newer technology, thereby reducing our sales and reducing or eliminating our operating margins |
| Both the ATM and photocopier markets are highly competitive, which could limit our growth or reduce our sales |
| Persons seeking either ATM or photocopier services have numerous choices |
| For ATMs, these choices include ATMs offered by banks or other financial institutions and ATMs offered by ISOs such as ours |
| For photocopiers, the choices include specialty full-service business centers, copy and print shops, photocopiers located at other convenient merchant locations and home photocopiers and printers |
| Some of our competitors offer services directly comparable to ours while others, particularly in the photocopier market, are only indirect competitors as we describe in “Business — Competition |
| ” In addition, we believe that there will be continued consolidation in the ATM industry in the United States, the United Kingdom and Canada |
| Accordingly, new competitors may emerge and quickly acquire significant market share |
| This competition could prevent us from obtaining or maintaining desirable locations for our machines, reduce the use of our machines, and limit or reduce the transaction fees we can charge or require us to increase our merchants’ share of those fees |
| Moreover, because the economic barrier to entry into the photocopier business is low, additional competitors may enter our markets |
| The occurrence of any of these factors could limit our growth or reduce our sales |
| Our failure to achieve and maintain adequate internal control in accordance with Section 404 of the Sarbanes-Oxley Act could result in a loss of investor confidence regarding our financial reports and have an adverse effect on our business, financial condition, results of operations and stock price |
| During the course of the evaluation, attestation, and compliance process required by Section 404, we have identified material weaknesses in our internal control over financial reporting |
| For a discussion of these weaknesses and the steps we have taken and expect to take to remedy these weaknesses, see Item 9A – “Controls and Procedures |
| ” Failure to achieve and maintain an effective internal control environment, could result in a loss of investor confidence regarding the accuracy and completeness of our financial reports |
| Moreover, effective internal control is necessary for us to produce reliable financial reports |
| If we cannot produce reliable financial reports or otherwise maintain appropriate internal control, our business, financial condition and results of operations could be harmed, investors could lose confidence in our reported financial information, the market price for our stock could decline significantly, and we may be unable to implement our intent to refinance our Bank of America credit facility or otherwise obtain equity or debt financing |
| Risks Relating to Our ATM Business We may be unable to successfully integrate our ATM acquisitions, including the eFunds ATM acquisition, with our operations and to realize all of the anticipated benefits of those acquisitions |
| An acquisition of any significant ATM network, and in particular the eFunds ATM network, involves the integration of two operations that previously have operated independently, which can be a complex, costly and time-consuming process |
| The difficulties of combining the operations include, among other things: • operating a significantly larger combined company; • the necessity of coordinating disparate organizations, systems and facilities; • retaining merchant participants in the acquired network; and • consolidating corporate and administrative functions and implementing cost savings |
| As a result of five acquisitions during 2004, our ATM networks have grown from an average of 3cmam247 transacting ATMs in 2003 to an average of 19cmam930 transacting ATMs in 2005 materially increasing our integration risk |
| Moreover, since the ATM 10 _________________________________________________________________ [64]Table of Contents contracts in the eFunds networks we acquired have terms expiring within the next five years, the potential for merchant participants in those networks to leave is greater than with our pre-acquisition ATM networks |
| The process of combining an acquired network with ours could cause an interruption in our business and, possibly, the loss of key personnel |
| The diversion of management’s attention and any delays or difficulties encountered in connection with the acquisition and the integration of an acquired network with ours could harm our combined business, results of operations, financial condition or prospects after the acquisition |
| We depend on eFunds Corporation to provide many services on which we rely |
| Our ATM business requires close coordination of merchant relationships, cardholder relationships, cash management activities and telecommunication services |
| In connection with our acquisition of the eFunds ATM business, we entered into a master services agreement with eFunds pursuant to which eFunds will provide many of these services to us in the United States and Canada |
| eFunds also provides us with transaction processing and EFTN management services |
| As a result, we depend on eFunds to provide many services that are necessary to the operations of our ATM business |
| eFunds may be unable or unwilling to provide all of these services at a level that we consider necessary |
| In that event, if we are unable to terminate our relationship with eFunds or are unable to obtain replacement services in a timely manner, our transaction volume could be reduced and our relationships with our merchants or cardholders could deteriorate |
| If merchant-owned ATM customers terminate their relationships with us prior to the termination of their contracts or do not renew their contracts upon their expiration, it could reduce our ATM sales |
| Although our merchant-owned ATM customers have multi-year contracts with us for transaction processing services, due to competition, some of these customers may leave us for our competitors prior to the expiration of their contracts, or may not renew their contracts upon their expiration |
| When this occurs, we pursue these customers to remain processing with us or alternatively, in the event they terminate their relationship with us prior to the expiration of their contacts, we seek payment of damages under a breach of contract clause in our contracts |
| If a substantial number of merchant-owned ATM customers end their relationships with us, it could cause a reduction in our ATM sales |
| Increases in interest rates will increase our expenses |
| We have credit and vault cash facilities that carry variable interest rates |
| Consequently, a rise in interest rates would increase our operating costs and expenses |
| Our international operations may not be successful |
| As of December 31, 2005, approximately 18prca of our ATMs were located in the United Kingdom and approximately 10prca of our ATMs were located in Canada |
| Our international operations are subject to certain inherent risks, including: • exposure to currency fluctuations; • difficulties in complying with foreign laws and regulations; • unexpected changes in regulatory requirements; • difficulties in staffing and managing foreign operations; and • potentially adverse tax consequences |
| Any of these factors could have a material adverse effect on our international operations and, consequently, on our business, results of operations and financial condition |
| Our ATM business operates in a changing and unpredictable regulatory environment |
| ATM withdrawal transactions involve the electronic transfer of funds through EFTNs |
| The United States Electronic Funds Transfer Act provides the basic framework establishing the rights, liabilities and responsibilities of participants in EFTNs |
| In addition, there have been various state and local efforts to ban, limit or otherwise regulate ATM transaction fees, which make up a large portion of our sales for our full placement ATMs and the principal source of ATM revenue for merchants with merchant-owned ATMs in our network |
| For example, in Tennessee, Nebraska and Iowa only bank-sponsored ATMs can impose withdrawal fees |
| As a result, in these states we must make arrangements with a local bank to act as a sponsor of ATMs in our networks, which typically involves additional documentation costs and payment of a fee to the bank |
| In the United Kingdom, ATM owners must elect to receive either interchange fees or withdrawal fees; we have elected to receive withdrawal fees |
| As a result, any limitation on the ability to charge withdrawal fees in areas where we have a concentration of ATMs could reduce our ATM sales from our full placement ATMs and reduce the incentive that merchants with merchant-owned ATMs would have to keep ATMs in our network on their premises |
| In addition, if existing regulations are made more restrictive or new regulations are enacted, we may incur significant expense to comply with them |
| 11 _________________________________________________________________ [65]Table of Contents Because of reported instances of fraudulent use of ATMs, legislation is pending that would require state or federal licensing and background checks of ATM operators |
| There are proposals pending in some jurisdictions, including New York and New Jersey, that would require merchants that are not financial institutions to be licensed in order to maintain an ATM on their premises; other jurisdictions currently require such licensing |
| New licensing requirements could increase our cost of doing business in those markets |
| New government and industry standards will increase our costs and, if we cannot meet compliance deadlines, could require us to remove non-compliant machines from service |
| The Digital Encryption Standard, or DES, is the encryption standard that ATMs use to encrypt the personal identification number that is sent to an ATM processing agent during an ATM transaction |
| As we discuss in “Business — Government and Industry Regulation,” due to security concerns, MasterCard International, one of the largest EFTNs in the United States, LINK, the principal EFTN in the United Kingdom, and Interac, the principal EFTN in Canada, have required that ATMs using their networks be compliant with a new DES, known as “triple DES” Compliance is required by December 31, 2006 for MasterCard International and is already required by LINK Interac requires that a compliance plan be in place by February 28, 2008 |
| For European ATMs, MasterCard International has already required compliance with a standard known as Europay MasterCard Visa, or EMV While substantially all of our United Kingdom ATMs were compliant with the new standards as of December 31, 2005, as of that date approximately 80prca of the ATMs we own in our networks for the US were not equipped with triple DES encryption |
| We believe that the remaining cost of upgrading the ATMs we own, as well as merchant-owned ATMs where we have or will assume upgrade costs, to comply with triple DES will be approximately dlra3dtta2 million in the United States |
| We do not currently have an upgrade estimate for Canadian ATMs due to uncertainty as to the timing of required completion dates for upgrades |
| The Americans with Disabilities Act, or ADA, currently includes provisions regulating the amount of clear floor space required in front of each ATM, prescribing the maximum height and reach depth of each ATM, and mandating that instructions and all information for use of the ATM be made accessible to and independently usable by persons with vision impairments |
| The United States Department of Justice is currently drafting new accessibility guidelines under the ADA that will cover virtually all aspects of commercial activity relating to disabled persons |
| We expect that these new guidelines will include provisions addressing ATMs and how to make them more accessible to the disabled |
| Under the current proposals, height and reach requirements would be shortened, keypads would be required to be laid out in the manner of telephone keypads with selected Braille symbols and ATMs would be required to possess speech capabilities |
| These new guidelines would affect the manufacture of ATM equipment going forward and could require us to retire or upgrade many of the ATMs we own, as well as merchant-owned ATMs where we are responsible for upgrade costs, potentially at significant expense to us |
| The comment period on the proposed guidelines ended May 31, 2005 |
| No guidelines have yet been promulgated |
| Should the guidelines proposed become final, we anticipate an 18-month phase-in before new equipment in new locations must comply with new accessibility requirements |
| We also expect that the guidelines may affect placement of our photocopiers within stores but will not otherwise impact our photocopier business |
| If ATMs in our network are not compliant with triple DES, EMV and any applicable ADA guidelines by the respective deadlines and we cannot obtain compliance waivers, we could have to remove the non-compliant ATMs from service and, as a result, our ATM net sales could be materially reduced during the period of time necessary to become compliant |
| If we, our transaction processors, our EFTNs or our other service providers experience system failures, the ATM products and services we provide could be delayed or interrupted, which would harm our business |
| Our ability to provide reliable service largely depends on the efficient and uninterrupted operations of our transaction processors, EFTNs and other service providers |
| Any significant interruptions could severely harm our business and reputation and result in a loss of sales |
| Additionally, if we cause any such interruption, we could lose the affected merchants or damage our relationships with them |
| Our systems and operations, and those of our transaction processors, EFTNs and other service providers, could be exposed to damage or interruption from fire, natural disaster, unlawful acts, terrorist attacks, power loss, telecommunications failure, unauthorized entry and computer viruses |
| We cannot be certain that any measures we and our service providers have taken to prevent system failures will be successful or that we will not experience service interruptions |
| Further, our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur |
| We rely on EFTNs and transaction processors; if we cannot renew our agreements with them, if they are unable to perform their services effectively or if they decrease the level of the transaction fees we receive, it could harm our business |
| 12 _________________________________________________________________ [66]Table of Contents We rely on several EFTNs and transaction processors to provide card authorization, data capture and settlement services to us and our merchant customers |
| Any inability on our part to renew our agreements with these or similar service providers or their failure to provide their services efficiently and effectively may damage our relationships with our merchants and may permit those merchants to terminate their agreements with us |
| Our ATM net sales depend to a significant extent upon the transaction fees we receive through EFTNs |
| If one or more of the EFTNs in which we participate reduces the transaction fees it pays us, and we are unable to route transactions to other EFTNs to replace them, our ATM net sales would be reduced |
| For example, Visa/Plus, which accounted for approximately 19prca of our United States ATM transactions during the year ended December 31, 2005, has divided ATM providers into two tiers, and reduced the interchange fees it pays to second tier providers for withdrawals and balance inquiries by $ |
| Our ATMs do not meet all of the requirements for first tier status |
| As a means of mitigating the impact of the lower interchange rates paid by Visa/Plus we have had our processing agents adjust priority routing tables to, whenever possible, move transactions through EFTNs whose interchange rates are higher than those paid by the Visa/Plus EFTN The Cirrus and MasterCard networks implemented a $ |
| 05 per transaction ATM Convenience Fee in April 2005 |
| This fee is netted out of interchange dollars paid to us |
| For the year ended December 31, 2005, approximately 12prca of our United States transactions routed through the Cirrus and MasterCard networks |
| We obtain our United States ATM vault cash under an arrangement that could cause us to lose our access to the vault cash and to fees that we have earned due to circumstances beyond our control |
| Our United States vault cash facility is secured by the cash we draw from it to place in ATMs, as well as by the withdrawal and interchange fees we have earned but not yet collected, so the lender under that arrangement could seize the cash and fees in the event of a default |
| We obtain the cash that we use to fill our full placement ATMs and some of the merchant-owned ATMs in our networks, which we call vault cash, in the United States pursuant to an agreement with TRM Inventory Funding Trust, for which one of our subsidiaries, TRM ATM Corporation, acts as servicer |
| Under the terms of the loan and servicing agreement, the Trust and the servicer must make periodic payments of fees related to the arrangement |
| The obligations under the loan and servicing agreement are secured by pledges of all of the Trust’s assets, including the vault cash, and our uncollected withdrawal and interchange fees |
| If there is a default under the loan and servicing agreement, the lender may terminate the loan and servicing agreement and seize the collateral, including existing vault cash and fees we have not yet received |
| As a result, a default under the loan and servicing agreement could cause us to lose fees we had earned and suspend our full placement ATM operations in the United States unless we were able to rapidly arrange an alternative source of vault cash |
| See also “Risks Relating to Our Default under Our Credit Agreement – Default under our credit agreement may constitute a default under our United States vault cash agreement |
| ” Our United States vault cash arrangement could go into default as a result of factors over which we have no control |
| The loan and servicing agreement for our United States vault cash facility contains events of default that include: • An “event of bankruptcy” with respect to any entity on whose property more than 10prca of our United States ATMs are located, if we are unable to remove all cash from those ATMs within five business days after the event of bankruptcy occurs |
| An event of bankruptcy includes the filing of a bankruptcy petition with a court, an entity admitting in writing that it is unable to satisfy its obligations as they become due or the board of directors of the entity voting to cause an event of bankruptcy, regardless of whether we are informed of any of these actions |
| • Any depository bank or transportation agent, excepting one pre-approved bank and one pre-approved transportation agent, failing to maintain a specified debt rating |
| • The amount of vault cash held by or maintained on the premises of entities, which would generally be our transportation agents and merchants, that have experienced an event of bankruptcy when added to the amount of cash owed from settlement banks that is past due exceeding a designated level |
| 13 _________________________________________________________________ [67]Table of Contents Due to these provisions, the bankruptcy or financial difficulty of our merchants or the companies on which we rely for services could cause an event of default under our loan and servicing agreement and prevent us from having access to the vault cash we require to operate our full placement and some of our merchant-owned United States ATMs |
| We do not have any operational control over our merchants or other service providers and may not be able to determine whether any of these entities are facing financial difficulty that could increase our risk of default under the loan and servicing agreement |
| As a result, we could lose access to our United States vault cash due to circumstances that we would be unable to foresee and that are beyond our control |
| If our United States vault cash arrangement terminates, we may be unable to obtain vault cash from alternative sources on acceptable terms or at all |
| If we do not have access to vault cash for our full placement ATMs and those of our merchant-owned ATMs for which we provide vault cash, we will have to suspend our operations with respect to these ATMs, our results of operations will be reduced and the value of your investment will decrease |
| We experienced substantial theft losses in our ATM operations in 2005 |
| If these losses were to continue, our results of operations would be harmed |
| During 2005, our ATM operations experienced dlra2dtta2 million in unreimbursed theft losses |
| We have implemented measures to counter theft and vandalism |
| We cannot assure you that these measures will be sufficient to reduce the level of loss in 2006 |
| Failure to do so or to devise additional measures to counteract theft and vandalism may result in substantial theft and vandalism losses, harming our results of operations |
| For the policy year beginning July 1, 2005, due to proposed increases in both the deductible level and the cost of the insurance, we are insuring only against catastrophic cash losses |
| Risks Relating To Our Photocopier Business Loss of our photocopier placement contract with Albertson’s would materially reduce our photocopier sales |
| For 2005, Albertson’s represented 9dtta7prca of our photocopier net sales, and 8dtta7prca of our photocopiers were located with them |
| A loss of this contract would result in a material reduction in our photocopier sales and, due to the number of photocopiers affected and the potential difficulty of redeploying these machines, could result in a write-down of our fixed assets |
| The average remaining term of our photocopier placement contracts is approximately nine months |
| To the extent merchants do not renew their contracts with us, our photocopier sales will decline |
| As of December 31, 2005, the average remaining term of our photocopier contracts was nine months |
| If a significant number of merchants choose not to renew their contracts with us for photocopier placement, it could reduce our sales and operational profitability |
| If photocopy volumes continue to decline, it could reduce our sales |
| Our photocopier volume has declined significantly over the past five years |
| Our program of increasing prices, while reducing the declining sales trend in 2003 and 2004, has amplified the volume decline and in 2005, resulted in a significant decline in photocopier gross profit |
| If the volume decline continues and we are unable to institute offsetting price increases, our photocopier sales and gross profit will be reduced further |
| Risks Relating to Our Common Stock We do not plan to pay dividends on our common stock |
| We do not plan to declare dividends on our common stock for the foreseeable future and, in any event, under the terms of our credit facility with Bank of America as amended by the Forbearance Agreement and Amendment, are prohibited from doing so |
| Our charter documents and Oregon law may inhibit a takeover that shareholders may consider favorable |
| The Oregon Business Corporation Act, our restated articles of incorporation and our restated bylaws contain provisions that could have the effect of delaying, deferring or preventing a change in control of our company or our management that shareholders may consider favorable or beneficial, which could reduce the value of your investment |
| 14 _________________________________________________________________ [68]Table of Contents These provisions could discourage proxy contests and make it more difficult for you and other shareholders to elect directors and take other corporate actions |
| These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock |
| These provisions include: • authorization to issue “blank check” preferred stock, which is preferred stock that can be created by our board of directors without prior shareholder approval and with rights senior to those of common stock; • a classified board of directors, so that it could take three successive annual meetings to replace all directors; • authority for directors to establish the size of the board of directors without shareholder approval; • a requirement of a 75prca vote of shareholders to remove a director for cause; • a requirement of a 75prca vote of shareholders for business combinations with a 5prca or greater shareholder that is not approved by our board of directors, with only limited exceptions; and • an advance notice requirement for shareholder proposals |