<PAGE>   1
                                                                     Exhibit 3.2


                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                             NOVELLUS SYSTEMS, INC.
                           (A CALIFORNIA CORPORATION)


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                                TABLE OF CONTENTS

<TABLE>
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<S>                      <C>                                                                                  <C>
ARTICLE I                OFFICERS..............................................................................1
                         Section 1.1        Principal Office...................................................1
                         Section 1.2        Other Offices......................................................1

ARTICLE II               DIRECTORS.............................................................................1
                         Section 2.1        Exercise of Corporate Powers.......................................1
                         Section 2.2        Number.............................................................1
                         Section 2.3        Need Not Be Shareholders...........................................1
                         Section 2.4        Compensation.......................................................1
                         Section 2.5        Election and Term of Office........................................2
                         Section 2.6        Vacancies..........................................................2
                         Section 2.7        Removal............................................................2
                                            2.7.1         General Rule.........................................2
                                            2.7.2         Supermajority Vote Required..........................2
                                            2.7.3         Class Vote...........................................2
                                            2.7.4         Effect of Reduction of Size of Board.................3
                         Section 2.8        Meetings of Directors..............................................3
                                            2.8.1         Place of Meetings....................................3
                                            2.8.2         Regular Meetings.....................................3
                                            2.8.3         Special Meetings.....................................3
                                            2.8.4         Notice of Meetings...................................3
                                            2.8.5         Quorum...............................................3
                                            2.8.6         Adjourned Meetings...................................4
                                            2.8.7         Waiver of Notice and Consent.........................4
                                            2.8.8         Action Without a Meeting.............................4
                                            2.8.9         Conference Telephone Meetings........................4
                                            2.8.10        Meetings of Committees...............................4

ARTICLE III              OFFICERS..............................................................................4
                         Section 3.1        Election and Qualifications........................................4
                         Section 3.2        Term of Office and Compensation....................................4
                         Section 3.3        Removal and Vacancies..............................................4

ARTICLE IV               CHAIRMAN OF THE BOARD.................................................................5

ARTICLE V                PRESIDENT.............................................................................5
                         Section 5.1        Powers and Duties..................................................5
                         Section 5.2        President Pro Tem..................................................5

ARTICLE VI               VICE PRESIDENT........................................................................5

ARTICLE VII              SECRETARY.............................................................................6

ARTICLE VIII             CHIEF FINANCIAL OFFICER...............................................................7

ARTICLE IX               COMMITTEES OF THE BOARD...............................................................7

                         Section 9.1        Appointment and Procedure..........................................7
</TABLE>

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                                TABLE OF CONTENTS

<TABLE>
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<S>                      <C>                                                                                  <C>
                         Section 9.2        Powers.............................................................7
                         Section 9.3        Executive Committee................................................8

ARTICLE X                MEETINGS OF SHAREHOLDERS..............................................................8
                         Section 10.1       Place of Meetings..................................................8
                         Section 10.2       Time of Annual Meetings............................................8
                         Section 10.3       Special Meetings...................................................8
                         Section 10.4       Notice of Meetings.................................................9
                         Section 10.5       Delivery of Notice................................................10
                         Section 10.6       Adjourned Meetings................................................10
                         Section 10.7       Consent to Shareholders' Meeting..................................10
                         Section 10.8       Notice of Business to be Transacted in Certain Cases..............11
                         Section 10.9       Quorum; Vote Required.............................................11
                                            10.9.1        Quorum Required.....................................11
                                            10.9.2        Continuation of Business Despite Lack of Quorum.....11
                                            10.9.3        No Votes Without Quorum.............................11
                         Section 10.10      Actions Without Meeting...........................................11
                                            10.10.1       Majority Consent....................................11
                                            10.10.2       Notice to Nonconsenting Shareholders................12
                         Section 10.11      Revocation of Consent.............................................12
                         Section 10.12      Voting Rights.....................................................12
                         Section 10.13      Determination of Holders of Record................................12
                                            10.13.1       Record Date.........................................12
                                            10.13.2       Absence of Determination By Board...................12
                                            10.13.3       Adjournments........................................13
                                            10.13.4       Effect of Post Record Date Transfers................13
                         Section 10.14      Elections for Directors...........................................13
                                            10.14.1       Right to Cumulate...................................13
                                            10.14.2       Procedure for Cumulating Votes......................13
                                            10.14.3       Directors Elected...................................13
                                            10.14.4       Ballot Optional.....................................13
                         Section 10.15      Proxies...........................................................14
                                            10.15.1       Proxies Authorized..................................14
                                            10.15.2       Term of Proxy.......................................14
                                            10.15.3       Death of Proxy Maker................................14
                         Section 10.16      Inspectors of Election............................................14
                                            10.16.1       Appointment.........................................14
                                            10.16.2       Duties..............................................14
                                            10.16.3       Good Faith; Acts....................................15

ARTICLE XI               SUNDRY PROVISIONS....................................................................15
                         Section 11.1       Shares Held by the Corporation....................................15
                         Section 11.2       Certificates of Stock.............................................15
                         Section 11.3       Lost Certificates.................................................15
</TABLE>

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                                TABLE OF CONTENTS

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                         Section 11.4       Certification and Inspection of Bylaws............................15
                         Section 11.5       Notices...........................................................16
                         Section 11.6       Reports to Shareholders...........................................16
                         Section 11.7       Indemnification of Directors, Officers, and Employees.............16
                                            11.7.1        "Agent..............................................16
                                            11.7.2        Indemnification For Third Party Claims..............16
                                            11.7.3        Indemnification for Claims by the Corporation.......17
                                            11.7.4        Indemnification For Successful Defense..............17
                                            11.7.5        Determination Required to Permit Indemnification....17
                                            11.7.6        Advances of Expenses................................18
                                            11.7.7        Prohibition of Nonconforming Arrangements...........18
                                            11.7.8        Prohibitions on Indemnification.....................18
                                            11.7.9        Insurance...........................................18
                                            11.7.10       Application of Other Laws...........................18
                         Section 11.8       Loans to Officers.................................................18

ARTICLE XII              CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW...........................19
                         Section 12.1       Definitions.......................................................19
                         Section 12.2       Bylaw Provisions Additional and Supplemental to Provisions of Law.19
                         Section 12.3       Bylaw Provisions..................................................19

ARTICLE XIII             ADOPTION, AMENDMENT, OR REPEAL OF BYLAWS.............................................19
                         Section 13.1       By Shareholders...................................................19
                         Section 13.2       By the Board of Directors.........................................19
</TABLE>

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                              AMENDED AND RESTATED
                                     BYLAWS
                                       OF
                             NOVELLUS SYSTEMS, INC.
                           (A CALIFORNIA CORPORATION)

                                   ARTICLE I
                                    OFFICERS

     Section 1.1 Principal Office. The principal office for the transaction of
the business of the corporation shall be located at 4000 North First, San Jose,
California 95134. The Board of Directors is hereby granted full power and
authority to change said principal office to another location within or without
the State of California.

     Section 1.2 Other Offices. One or more branch or other subordinate offices
may at any time be fixed and located by the Board of Directors at such place or
places within or without the State of California as it deems appropriate.

                                   ARTICLE II
                                    DIRECTORS

     Section 2.1 Exercise of Corporate Powers. Except as otherwise provided by
the Articles of Incorporation of the corporation or by the laws of the State of
California now or hereafter in force, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operation of the business of the corporation as
permitted by law provided that the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised under the ultimate
direction of the Board.

     Section 2.2 Number. The number of directors of the corporation shall not be
less than six (6) nor more than eleven (11) until changed by amendment of the
Articles of Incorporation or by a Bylaw amending this Section 2.2 duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares. The exact number of directors may be fixed from time to time, within the
limits specified in the Articles of Incorporation or in this Section 2.2, by (i)
a bylaw or amendment thereof duly adopted by the vote of a majority of the
shares entitled to vote represented at a duly held meeting at which a quorum is
present, or by the written consent of the holders of a majority of the
outstanding shares entitled to vote, or by the Board of Directors, or (ii)
resolution of the Board of Directors.

     Section 2.3 Need Not Be Shareholders. The directors of the corporation need
not be shareholders of the corporation.

     Section 2.4 Compensation. Directors shall receive such compensation for
their services as directors and such reimbursement for their expenses of
attendance at meetings as may be determined from time to time by resolution of
the Board, Nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.

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     Section 2.5 Election and Term of Office. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting, provided that if for any reason said annual meeting or an adjournment
thereof is not held or the directors are not elected thereat, then the directors
may be elected at any special meeting of the shareholders called and held for
that purpose. The term of office of the directors shall begin immediately after
their election and shall continue until their respective successors have been
elected and qualified or until the respective director reaches the age of
sixty-eight (68) years. Upon reaching sixty-eight years of age, said director
shall be allowed to complete his or her term in office but shall not be eligible
to seek re-election to the Board for a subsequent term. Any director holding
office on the date of this restatement of this Article II, Section 2.5 of the
Corporation's Bylaws shall not thereby be disallowed from seeking re-election or
re-elections to the Board until the age of seventy (70) years and to complete
his or her term or terms in office.

     Section 2.6 Vacancies. A vacancy or vacancies in the Board of Directors
shall exist when any authorized position of director is not then filled by a
duly elected director, whether caused by death, resignation, removal, change in
the authorized number of directors (by the Board or the shareholders) or
otherwise. The Board of Directors may declare vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony. A vacancy created by the removal of a director may be filled only by the
approval of the shareholders. Except for a vacancy created by the removal of a
director, vacancies on the Board may be filled by a majority of the directors
then in office, whether or not less than a quorum, or by a sole remaining
director. The shareholders may elect a director at any time to fill any vacancy
not filled by the directors, but any such election by written consent other than
to fill a vacancy created by removal requires the consent of a majority of the
outstanding shares entitled to vote. Any director may resign effective upon
giving written notice to the Chairman of the Board, the President, the
Secretary, or the Board of Directors of the corporation, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.

     Section 2.7 Removal.

          2.7.1 General Rule. Any and all of the directors may be removed
without cause if such removal is approved by the affirmative vote of a majority
of the outstanding shares entitled to vote at an election of directors, except
as set forth in subsections 2.7.2 and 2.7.3.

          2.7.2 Supermajority Vote Required. No director may be removed (unless
the entire Board is removed) when the votes cast against removal, or not
consenting in writing to such removal, would be sufficient to elect such
director if voted cumulatively at an election at which the same total number of
votes were cast (or, if such action is taken by written consent, all shares
entitled to vote were voted) and the entire number of directors authorized at
the time of the director's most recent election were then being elected;

          2.7.3 Class Vote. When by the provisions of the Articles the holders
of the shares of any class or series, voting as a class or series, are entitled
to elect one or more

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directors, any director so elected may be removed only by the applicable vote of
the holders of the shares of that class or series.

          2.7.4 Effect of Reduction of Size of Board. Any reduction of the
authorized number of directors does not remove any director prior to the
expiration of such director's term of office.

     Section 2.8 Meetings of Directors.

          2.8.1 Place of Meetings. Unless otherwise specified in the notice
thereof, meetings (whether regular, special or adjourned) of the Board of
Directors of the corporation shall be held at the principal office of the
corporation for the transaction of business, as specified in accordance with
Section 1.1 hereof, which is hereby designated as an office for such purpose in
accordance with the laws of the State of California, or at any other place
within or without the State which has been designated from time to time by
resolution of the Board or by written consent of all members of the Board.

          2.8.2 Regular Meetings. Regular meetings of the Board of Directors, of
which no notice need be given except as required by the laws of the State of
California, shall be held after the adjournment of each annual meeting of the
shareholders (which meeting shall be designated the Regular Annual Meeting) and
at such other times as may be designated from time to time by resolution of the
Board of Directors, Such regular meetings shall be held at the principal office
of the corporation for the transaction of business as specified in accordance
with Section 1.1 hereof or at any other place within or without the State of
California which has been designated from time to time by resolution of the
Board or by written consent of all members of the Board, unless notice of the
place thereof be given in the same manner as for special meetings.

          2.8.3 Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board, the President, any Vice
President, the Secretary, or any two or more of the directors.

          2.8.4 Notice of Meetings. Except in the case of regular meetings,
notice of which has been dispensed with, all meetings of the Board of Directors
shall be held upon four (4) days' notice by mail or forty-eight (48) hours'
notice delivered personally or by telephone, telegraph, or other electronic or
wireless means. If the address of a director is not shown on the records and is
not readily ascertainable, notice shall be addressed to him at the city or place
in which the meetings of the directors are regularly held. Except as set forth
in subsection 2.8.6 below, notice of the time and place of holding an adjourned
meeting need not be given to absent directors if the time and place be fixed at
the meeting adjourned.

          2.8.5 Quorum. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business. Every act or
decision done or 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 except as otherwise provided by law. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.

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          2.8.6 Adjourned Meetings. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.

          2.8.7 Waiver of Notice and Consent. Notice of a meeting need not be
given to any director who signs a waiver of notice or a consent to holding the
meeting or an approval of the minutes thereof, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.

          2.8.8 Action Without a Meeting. Any action required or permitted to be
taken by the Board may be taken without a meeting, if all members of the Board
shall individually or collectively consent in writing to such action. Such
written consent or consents shall be filed with the minutes of the proceedings
of the Board. Such action by written consent shall have the same force and
effect as a unanimous vote of such directors.

          2.8.9 Conference Telephone Meetings. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting pursuant to this Section
constitutes presence in person at such meeting.

          2.8.10 Meetings of Committees. The provisions of this Section apply
also to committees of the Board and action by such committees, with such changes
in points of detail as may be necessary,

                                  ARTICLE III
                                    OFFICERS

     Section 3.1 Election and Qualifications. The officers of the corporation
shall consist of a President, one or more Vice Presidents, a Secretary, and a
Chief Financial Officer who shall be chosen by the Board of Directors and such
other officers, including a Chairman of the Board, as the Board of Directors
shall deem expedient, who shall be chosen in such manner and hold their offices
for such terms as the Board of Directors may prescribe. Any two or more of such
offices may be held by the same person. Any Vice President, Assistant Treasurer,
or Assistant Secretary may exercise any of the powers of the President, the
Chief Financial Officer, or the Secretary, respectively, as directed by the
Board of Directors, and shall perform such other duties as are imposed upon such
officer by the Bylaws or the Board of Directors.

     Section 3.2 Term of Office and Compensation. The term of office and salary
of each of said officers and the manner and time of the payment of such salaries
shall be fixed and determined by the Board of Directors and may be altered by
said Board from time to time at its pleasure, subject to the rights, if any, of
said officers under any contract of employment.

     Section 3.3 Removal and Vacancies. Any officer of the corporation may be
removed at the pleasure of the Board of Directors at any meeting or at the
pleasure of any officer who may

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be granted such power by a resolution of the Board of Directors. Any officer may
resign at any time upon written notice to the corporation without prejudice to
the rights, if any, of the corporation under any contract to which the officer
is a party. If any vacancy occurs in any office of the corporation, the Board of
Directors may elect a successor to fill such vacancy for the remainder of the
unexpired term and until a successor is duly chosen and qualified.

                                   ARTICLE IV
                              CHAIRMAN OF THE BOARD

     The Chairman of the Board of Directors, if there be one, shall have the
power to preside at all meetings of the Board of Directors, and to call meetings
of the shareholders and of the Board of Directors to be held within the
limitations prescribed by law or by these Bylaws, at such times and at such
places as the Chairman of the Board shall deem proper. The Chairman of the Board
shall have such other powers and shall be subject to such other duties as the
Board of Directors may from time to time prescribe.

                                   ARTICLE V
                                    PRESIDENT

     Section 5.1 Powers and Duties. The powers and duties of the President are:

          (a)  To act as the chief executive officer of the corporation and,
subject to the control of the Board of Directors, to have general supervision,
direction, and control of the business and affairs of the corporation.

          (b)  To preside at all meetings of the shareholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors.

          (c)  To call meetings of the shareholders and also of the Board of
Directors to be held, subject to the limitations prescribed by law or by these
Bylaws, at such times and at such places as the President shall deem proper,

          (d)  Subject to the direction of the Board of Directors, to have
general charge of the property of the corporation and to supervise and control
all officers, agents, and employees of the corporation.

     Section 5.2 President Pro Tem. If neither the Chairman of the Board, the
President, nor any Vice President is present at any meeting of the Board of
Directors, a President pro tem may be chosen to preside and act at such meeting.
If neither the President nor any Vice President is present at any meeting of the
shareholders, a President pro tem may be chosen to preside at such meeting.

                                   ARTICLE VI
                                 VICE PRESIDENT

     In case of the absence, disability, or death of the President, the Vice
President, or one of the Vice Presidents, shall exercise all the powers and
perform all the duties of the President. If there is more than one Vice
President, the order in which the Vice Presidents shall succeed to the

                                       5

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powers and duties of the President shall be fixed by the Board of Directors. The
Vice President or Vice Presidents shall have such other powers and perform such
other duties as may be granted or prescribed by the Board of Directors.

                                  ARTICLE VII
                                    SECRETARY

     The powers and duties of the Secretary are:

          (a)  To keep a book of minutes at the principal office of the
corporation, or such other place as the Board of Directors may order, of all
meetings of its directors and shareholders with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings thereof.

          (b)  To keep the seal of the corporation and to affix the same to all
instruments which may require it.

          (c)  To keep or cause to be kept at the principal office of the
corporation, or at the office of the transfer agent or agents, a share register,
or duplicate share registers, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for shares, and the number and date of cancellation of every
certificate surrendered for cancellation.

          (d)  To keep a supply of certificates for shares of the corporation,
to fill in all certificates issued, and to make a proper record of each such
issuance; provided, that so long as the corporation shall have one or more duly
appointed and acting transfer agent of the shares, or any class or series of
shares, of the corporation, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents,

          (e)  To transfer upon the share books of the corporation any and all
shares of the corporation; provided, that so long as the corporation shall have
one or more duly appointed and acting transfer agent of the shares, or any class
or series of shares, of the corporation, such duties with respect to such shares
shall be performed by such transfer agent or transfer agents, and the method of
transfer of each certificate shall be subject to the reasonable regulations of
the transfer agent to which the certificate is presented for transfer, and also,
if the corporation then has one or more duly appointed and acting registrars, to
the reasonable regulations of the registrar to which the new certificate is
presented for registration; and provided, further, that no certificate for
shares of stock shall be issued or delivered or, if issued or delivered, shall
have any validity whatsoever until and unless it has been signed or
authenticated in the manner provided in Section 11.2 hereof.

          (f)  To make service and publication of all notices that may be
necessary or proper, and without command or direction from anyone. In case of
the absence, disability, refusal, or neglect of the Secretary to make service or
publication of any notices, then such notices may be served and/or published by
the President, a Vice President, any person

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thereunto authorized by either of them, the Board of Directors, or the holders
of a majority of the outstanding shares of the corporation.

          (g)  Generally to do and perform all such duties as pertain to the
office of Secretary and as may be required by the Board of Directors,

                                  ARTICLE VIII
                             CHIEF FINANCIAL OFFICER

     The powers and duties of the Chief Financial Officer are:

          (a)  To supervise and control the keeping and maintaining of adequate
and correct accounts of the corporation's properties and business transactions,
including accounts of its assets, liabilities, receipts, disbursements, gains,,
losses, capital, retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director,

          (b)  To have the custody of all funds, securities evidences of
indebtedness, and other valuable documents of the corporation, and, at the Chief
Financial Officer's discretion, to cause any or all thereof to be deposited for
the account of the corporation with such depositary as may be designated from
time to time by the Board of Directors,

          (c)  To receive or cause to be received, and to give or cause to be
given, receipts and acquittances for moneys paid in for the account of the
corporation.

          (d)  To disburse, or cause to be disbursed, all funds of the
corporation as may be directed by the Board of Directors, taking proper vouchers
for such disbursements.

          (e)  To render to the President and the Board of Directors, whenever
they may require, accounts of all transactions and of the financial condition of
the corporation.

          (f)  Generally to do and perform all such duties as pertain to the
office of Chief Financial Officer and as may be required by the Board of
Directors,

                                   ARTICLE IX
                             COMMITTEES OF THE BOARD

     Section 9.1 Appointment and Procedure. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of at least two or more
directors, to serve at the pleasure of the Board. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors.

     Section 9.2 Powers. Any committee appointed by the Board of Directors, to
the extent provided in the resolution of the Board or in these Bylaws, shall
have all the authority of the Board except with respect to:

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<PAGE>   12

          (a)  the approval of any action which requires the approval or vote of
the shareholders;

          (b)  the filling of vacancies on the Board or on any committee;

          (c)  the fixing of compensation of the directors for serving on the
Board or on any committee;

          (d)  the amendment or repeal of Bylaws or the adoption of new Bylaws;

          (e)  the amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable;

          (f)  a distribution as defined at Section 166 of the California
Corporations Code, except at a rate or in a periodic amount or within a price
range set forth in the Articles of Incorporation or determined by the Board;

          (g)  the appointment of other committees of the Board or the members
thereof.

     Section 9.3 Executive Committee. In the event that the Board of Directors
appoints an Executive Committee, such Executive Committee, in all cases in which
specific directions to the contrary shall not have been given by the Board of
Directors, shall have and may exercise, during the intervals between the
meetings of the Board of Directors, all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation
(except as provided in Section 9.2 hereof) in such manner as the Executive
Committee may deem best for the interests of the corporation.

                                   ARTICLE X
                            MEETINGS OF SHAREHOLDERS

     Section 10.1 Place of Meetings. Meetings (whether regular, special, or
adjourned) of shareholders of the corporation shall be held at the principal
office for the transaction of business as specified in accordance with Section
1.1 hereof, or any place within or without the State which may be designated by
written consent of all the shareholders entitled to vote thereat, or which may
be designated by the Board of Directors.

     Section 10.2 Time of Annual Meetings. The annual meeting of the
shareholders shall be held at the hour of 10:00 o'clock in the morning on the
last day in March in each year, if not a legal holiday, and if a legal holiday,
then on the next succeeding business day not a legal holiday, or such other time
or date within fifteen months of the date of incorporation or the date of the
last annual meeting of shareholders (whichever is later) as may be set by the
Board of Directors.

     Section 10.3 Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors, the Chairman of the Board, the President, or
the holders of shares entitled to cast not less than 10% of the vote at the
meeting.

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     Section 10.4 Notice of Meetings. Whenever shareholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given not less than 10 (or, if sent by third-class mail, 30) nor more than 60
days before the day of the meeting to each shareholder entitled to vote thereat.
Such notice shall state the place, date, and hour of the meeting and (a) in the
case of a special meeting, the general nature of the business to be transacted,
and no other business may be transacted, or (b) in the case of the annual
meeting, those matters which the Board, at the time of the mailing of the
notice, intends to present for action by the shareholders. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of the notice to be presented by the Board of Directors for
election.

     Subject to the provisions of Section 10.8 hereof any matter properly
brought before an annual meeting may be presented at the meeting for such
action. To be properly brought before an annual meeting, business must be
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, otherwise properly brought before the
meeting by or at the direction of the Board of Directors or otherwise properly
brought before the meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation, not less than 45 days nor more than 75 days prior to the date on
which the corporation first mailed its proxy materials for the previous year's
annual meeting of shareholders (or the date on which the corporation mails its
proxy materials for the current year if during the prior year the corporation
did not hold an annual meeting or if the date of the annual meeting was changed
more than 30 days from the prior year). A shareholder's notice to the secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of the shareholder proposing
such business, (iii) the class and number of shares of the corporation which are
beneficially owned by the shareholder, and (iv) any material interest of the
shareholder in such business.

     Notwithstanding anything in the Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 10.4, provided, however, that nothing in this Section 10.4
shall be deemed to preclude discussion by any shareholder of any business
properly brought before the annual meeting in accordance with said procedure.

     The chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 10.4, and if he should
so determine he shall so declare to the meeting, and any such business not
properly brought before the meeting shall not be transacted.

     Nothing in this Section 10.4 shall affect the right of a shareholder to
request inclusion of a proposal in the corporation's proxy statement to the
extent that such right is provided by an applicable rule of the Securities and
Exchange Commission.

                                       9

<PAGE>   14

     Section 10.5 Delivery of Notice. Notice of a shareholders' meeting or the
furnishing of any report shall be given either personally or by first-class
mail, or, if the corporation has outstanding shares held of record by 500 or
more persons on the record date for the shareholder's meeting, notice may be
sent third-class mail, or other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice; or if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. The notice or report shall be deemed to
have been given at the time when delivered personally or deposited in the mail
or sent by other means of written communication. A verified statement of mailing
of any notice or report in accordance with the provisions of this Section,
executed by the secretary, assistant secretary, or any transfer agent, shall be
prima facie evidence of the giving of the notice or report. If any notice or
report addressed to the shareholders at the address of such shareholder
appearing on the books of the corporation is returned to the corporation by
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice or report to the shareholder at such
address, all future notices or reports shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
to all other shareholders.

     Section 10.6 Adjourned Meetings. When a shareholders' meeting is adjourned
to another time or place, unless these Bylaws otherwise require, notice need not
be given of the adjourned meeting if the time and place thereof is announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 45 days or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting,

     Section 10.7 Consent to Shareholders' Meeting. The transactions of any
meeting shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote not present in person or by
proxy signs a written waiver of notice or consent to the holding of the meeting
or an approval of the minutes thereof. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the California
General Corporation Law to be included in the notice but not so included in the
notice if such objection is expressly made at the meeting, Neither the business
to be transacted at nor the purpose of any regular or special meeting of
shareholders need be specified in any written notice, consent to the holding of
the meeting or approval of the minutes thereof, unless otherwise provided in the
Articles of Incorporation or Bylaws, except as provided in Section 10.8.


                                       10

<PAGE>   15

     Section 10.8 Notice of Business to be Transacted in Certain Cases. Any
shareholder approval at a meeting, other than unanimous approval by those
entitled to vote, on any of the matters listed below shall be valid only if the
general nature of the proposal so approved was stated in the notice of meeting
or in any written waiver of notice:

          (a)  a proposal to approve a contract or other transaction between a
corporation and one or more of its directors, or between a corporation and any
corporation, firm, or association in which one or more director has a material
financial interest;

          (b)  a proposal to amend the Articles of Incorporation;

          (c)  a proposal regarding a reorganization, mergers or consolidation
involving the corporation;

          (d)  a proposal to wind up and dissolve the corporation;

          (e)  a proposal to adopt a plan of distribution of the shares,
obligations, or securities of any other corporation, domestic or foreign, or
assets other than money which is not in accordance with the liquidation rights
of any preferred shares as specified in the Articles of Incorporation.

     Section 10.9 Quorum; Vote Required.

          10.9.1 Quorum Required. The presence in person or by proxy of the
persons entitled to vote a majority of the voting shares at any meeting shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes is
required by law, the Articles of Incorporation, or these Bylaws, and except as
provided in subsection 10.9.2.

          10.9.2 Continuation of Business Despite Lack of Quorum. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of the number of enough shareholders to leave less than a quorum, if
any action taken (other than adjournment) is approved by at least a majority of
the shares required to constitute a quorum.

          10.9.3 No Votes Without Quorum. In the absence of a quorum, any
meeting of shareholders may be adjourned from time to time by the vote of a
majority of the shares represented either in person or by proxy, but no other
business may be transacted, except as provided in subsection 10.9.2.

     Section 10.10 Actions Without Meeting.

          10.10.1 Majority Consent. Any action which may be taken at any annual
or special meeting of shareholders may be taken without a meeting and without
prior notices if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to

                                       11

<PAGE>   16

authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted; provided that, subject to the provisions of
Section 2.6, directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors.

          10.10.2 Notice to Nonconsenting Shareholders. Unless the consents of
all shareholders entitled to vote have been solicited in writing,

          (a)  notice of any shareholder approval on matters described in
subsections (a), (c), or (e) of Section 10.8 or respecting indemnification of
agents of the corporation without a meeting by less than unanimous written
consent shall be given at least ten (10) days before the consummation of the
action authorized by such approval, and

          (b)  prompt notice shall be given of the taking of any other corporate
action approved by shareholders without a meeting by less than unanimous written
consent, to those shareholders entitled to vote but who have not consented in
writing; the provisions of Section 10.5 shall apply to such notice.

     Section 10.11 Revocation of Consent. Any shareholder giving a written
consent, or the shareholder's proxy-holders, or a transferee of the shares or a
personal representative of the shareholder or their respective proxy-holders,
may revoke the consent by a writing received by the corporation prior to the
time that written consents of the number of shares required to authorize the
proposed action have been filed with the secretary of the corporation, but may
not do so thereafter. Such revocation is effective upon its receipt by the
secretary of the corporation.

     Section 10.12 Voting Rights. Except as provided in Section 10.14, in the
Articles of Incorporation, or in any statute relating to the election of
directors or to other particular matters, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote of
shareholders. Any holder of shares entitled to vote on any matter may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, other than elections to office, but,
if the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.

     Section 10.13 Determination of Holders of Record.

          10.13.1 Record Date. In order that the corporation may determine the
shareholders entitled to notice of any meeting, to vote, to receive payment of
any dividend or other distribution or allotment of any rights, or to exercise
any rights in respect of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than 60 nor less than 10
days prior to the date of such meeting nor more than 60 days prior to any other
action.

          10.13.2 Absence of Determination By Board. In the absence of any
record date set by the Board of Directors pursuant to subsection 10.13.1 above,
then:

          (a)  The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the business day next

                                       12

<PAGE>   17

preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held,

          (b)  The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the day on which the first written consent
is given.

          (c)  The record date for determining share holders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto, or the 60th day prior to the date of such other
action, whichever is later.

          10.13.3 Adjournments. A determination of shareholders of record
entitled to notice of or to a vote at a meeting of shareholders shall apply to
any adjournment of the meeting unless the Board fixes a new record date for the
adjourned meeting, but the Board shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original meeting.

          10.13.4 Effect of Post Record Date Transfers. Shareholders at the
close of business on the record date are entitled to notice and to vote or to
receive the dividend, distribution, or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided in
the Articles, these Bylaws, agreement, or applicable law.

     Section 10.14 Elections for Directors.

          10.14.1 Right to Cumulate. Every shareholder complying with subsection
10.14.2 and normally entitled to vote at any election of directors may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder thinks fit.

          10.14.2 Procedure for Cumulating Votes. No shareholder shall be
entitled to cumulate votes (i.e., cast for any candidate a number of votes
greater than the number of the votes which such shareholder normally is entitled
to cast) unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given written notice to
the chairman of the meeting at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination.

          10.14.3 Directors Elected. In any election of directors, the
candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them up to the number of directors to elected by such
shares are elected; votes against directors and votes withheld shall have no
effect.

          10.14.4 Ballot Optional. Elections for directors need not be by ballot
unless a shareholder demands election by ballot at the meeting and before the
voting begins.

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<PAGE>   18

     Section 10.15 Proxies.

          10.15.1 Proxies Authorized. Every person entitled to vote shares
(including voting by written consent) may authorize another person or other
persons to act by proxy with respect to such shares. Any proxy purporting to be
executed in accordance with the provisions of the General Corporation Law of the
State of California shall be presumptively valid. "Proxy" means a wirtten
authorization signed or an electronic transmission authorized by a shareholder
or the shareholder's attorney-in-fact giving another person or persons power to
vote with repsect to the shares of such shareholder. "Signed" for the purpose of
this Section means the placing of the shareholder's name or other authorization
on the proxy (whether by manual signature, typewriting, telegraphic, or
electronic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A proxy may be transmitted by an oral telephone transmission
if it is submitted with information from which it may be determiend that the
proxy was authorized by the shareholder, or his or her attorney-in-fact.

          10.15.2 Term of Proxy. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy. Every
proxy continues in full force and effect until revoked by the person executing
it prior to the vote pursuant thereto, except as otherwise provided in this
Section. Such revocation may be effected by a writing delivered to the
corporation stating that the proxy is revoked or by a subsequent proxy executed
by the person executing the prior proxy and presented to the meeting, or as to
any meeting by attendance at such meeting and voting in person by the person
executing the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed.

          10.15.3 Death of Proxy Maker. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, written notice of
such death or incapacity is received by the corporation.

     Section 10.16 Inspectors of Election.

          10.16.1 Appointment. In advance of any meeting of shareholders, the
Board may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or if any
persons so appointed fail to appear or refuse to act, the chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election (or persons to replace
those who so fail or refuse) at the meeting. The number of inspectors shall be
either one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one or three inspectors are to be appointed,

          10.16.2 Duties. The inspectors of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the authenticity, validity, and effect
of proxies, receive votes, ballots, or consents, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count, and tabulate all votes and consents, determine when the

                                       14

<PAGE>   19

polls shall close, determine the result, and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders.

          10.16.3 Good Faith; Acts. The inspectors of election shall perform
their duties impartially, in good faith, to the best of their ability, and as
expeditiously as is practical. If there are three inspectors of election, the
decision, act, or certificate of a majority is effective in all respects as the
decision, act, or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.

                                   ARTICLE XI
                                SUNDRY PROVISIONS

     Section 11.1 Shares Held by the Corporation. Shares in other corporations
standing in the name of this corporation may be voted or represented and all
rights incident thereto may be exercised on behalf of this corporation by the
President or by any other officer of this corporation authorized so to do by
resolution of the Board of Directors.

     Section 11.2 Certificates of Stock. There shall be issued to each holder of
fully paid shares of the capital stock of the corporation a certificate or
certificates for such shares. Every holder of shares in the corporation shall be
entitled to have a certificate signed in the name of the corporation by the
Chairman or Vice Chairman of the Board, the President, or a Vice President and
by the Chief Financial Officer, an Assistant Treasurer, the Secretary, or any
Assistant Secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the
certificates may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent, or registrar at the date of
issue.

     Section 11.3 Lost Certificates. The corporation may issue a new share
certificate or a new certificate for any other security in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the corporation may require the owner of the lost, stolen, or
destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of such new certificate. The Board of Directors may
adopt such other provisions and restrictions with reference to lost
certificates, not inconsistent with applicable law, as it shall in its
discretion deem appropriate.

     Section 11.4 Certification and Inspection of Bylaws. The corporation shall
keep at its principal executive office in this state, or if its principal
executive office is not in this state at its principal business office in this
state, the original or a copy of these Bylaws as amended to date, which shall be
open to inspection by the shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside this
state and the corporation has no principal business office in this state, it
shall upon the written request of any shareholder furnish to such shareholder a
copy of the Bylaws as amended to date.

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<PAGE>   20

     Section 11.5 Notices. Any reference in these Bylaws to the time a notice is
given or sent means, unless otherwise expressly provided, the time a written
notice by mail is deposited in the United States mails, postage prepaid; or the
time any other written notice is personally delivered to the recipient or is
delivered to a common carrier for transmission, or actually transmitted by the
person giving the notice by electronic means, to the recipient; or the time any
oral notice is communicated, in person or by telephone or wireless, to the
recipient or to a person at the office of the recipient who the person giving
the notice has reason to believe will promptly communicate it to the recipient.

     Section 11.6 Reports to Shareholders. Except as may otherwise be required
by law, the rendition of an annual report to the shareholders is waived so long
as there are less than 100 holders of record of the shares of the corporation
(determined as provided in Section 605 of the California General Corporation
Law), At such time or times, if any, that the corporation has 100 or more
holders of record of its shares, the Board of Directors shall cause an annual
report to be sent to the shareholders not later than 120 days after the close of
the fiscal year or within such shorter time period as may be required by
applicable law, and such annual report shall contain such information and be
accompanied by such other documents as may be required by applicable law.

     Section 11.7 Indemnification of Directors, Officers, and Employees.

          11.7.1 "Agent." For the purposes of this Section, "agent" means any
person who is or was a director, officer, employee, or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation which
was a predecessor corporation of the corporation, or of another enterprise at
the request of such predecessor corporation; "proceeding" means any threatened,
pending, or completed action or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes without limitation
attorneys' fees and any expenses of establishing a right to indemnification
under subsection 11.7.4 or paragraph (c) of subsection 11.7.5.

          11.7.2 Indemnification For Third Party Claims. Subject to the specific
determination required by subsection 11.7.5, the corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that such person is or
was an agent of the corporation, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with such proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in the best interests of the corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contenders or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith or in a manner which the person reasonably believed to be
in the best interests of the corporation or that the person had reasonable cause
to believe that the person's conduct was unlawful.

                                       16

<PAGE>   21

          11.7.3 Indemnification for Claims by the Corporation. Subject to the
specific determination required by subsection 11.7.5, the corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was an agent of the corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith, in a manner such person
believed to be in the best interests of the corporation, and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like position
would use under similar circumstances. No indemnification shall be made under
this subsection 11.7.3:

          (a)  In respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable to the corporation in the performance of
such person's duty to the corporation, unless and only to the extent that the
court in which such proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for the expenses which such court
shall determine;

          (b)  Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or

          (c)  Of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.

          11.7.4 Indemnification For Successful Defense. To the extent that an
agent of a corporation has been successful on the merits in defense of any
proceeding referred to in subsection 11.7.2 or 11.7.3 or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.

          11.7.5 Determination Required to Permit Indemnification. Except as
provided in subsection 11.7.4, any indemnification under this Section shall be
made by the corporation only if authorized in the specific case, upon a
determination that indemnification of the agent is proper in the circumstances
because the agent has met the applicable standard of conduct set forth in
subsection 11.7.2 or 11.7.3, by:

          (a)  A majority vote of a quorum consisting of directors who are not
parties to such proceeding;

          (b)  Approval of the shareholders, with the shares owned by the person
to be indemnified not being entitled to vote thereon; or

          (c)  The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not such
application by the agent, attorney, or other person is opposed by the
corporation.

                                       17

<PAGE>   22

          11.7.6 Advances of Expenses. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of the agent to
repay such amount unless it shall be determined ultimately that the agent is
entitled to be indemnified as authorized in this Section.

          11.7.7 Prohibition of Nonconforming Arrangements. No provision made by
the corporation to indemnify its or its subsidiary's directors or officers for
the defense of any proceeding, whether contained in a resolution of shareholders
or directors, an agreement, or otherwise, shall be valid unless consistent with
this Section, Nothing contained in this Section shall affect any right to
indemnification to which persons other than such directors and officers may be
entitled by contract or otherwise.

          11.7.8 Prohibitions on Indemnification. No indemnification or advance
shall be made under this Section, except as provided in subsection 11.7.4 or
paragraph (c) of subsection 11.7.5, in any circumstance where it appears:

          (a)  That it would be inconsistent with a provision of the Articles,
Bylaws, a resolution of the shareholders, or an agreement in effect at the time
of the accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or

          (b)  That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.

          11.7.9 Insurance. The corporation shall have the power to purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Section.

          11.7.10 Application of Other Laws. Nothing in this Section shall
restrict the power of the corporation to indemnify its agents under any
provision of law from time to time applicable to the corporation, nor shall
anything in this Section authorize the corporation to indemnify its agents in
situations prohibited by law.

     Section 11.8 Loans to Officers. The Board may approve loans of money or
property to, and guaranties of the obligations of, officers of the corporation,
and may adopt employee benefit plans authorizing such loans and guaranties to
officers of the corporation, without the approval of the shareholders of the
corporation, provided that:

          (a)  the corporation has outstanding shares held of record by more
than 100 persons;

          (b)  the vote of any interested director or directors is not counted;
and

          (c)  the Board determines that such loan, guaranty, or plan may
reasonably be expected to benefit the corporation.

                                       18

<PAGE>   23

                                  ARTICLE XII
                             CONSTRUCTION OF BYLAWS
                       WITH REFERENCE TO PROVISIONS OF LAW

     Section 12.1 Definitions. Unless defined otherwise in these Bylaws or
unless the context otherwise requires, terms used herein shall have the same
meaning, if any, ascribed thereto in the California General Corporation Law, as
amended from time to time.

     Section 12.2 Bylaw Provisions Additional and Supplemental to Provisions of
Law. All restrictions, limitations, requirements, and other provisions of these
Bylaws shall be construed, insofar as possible, as supplemental and additional
to all provisions of law applicable to the subject matter thereof and shall be
fully complied with in addition to the said provisions of law unless such
compliance shall be illegal.

     Section 12.3 Bylaw Provisions. Contrary to or Inconsistent with Provisions
of Law. Any article, section, subsection, paragraph, subparagraph, sentence,
clause, or phrase of these Bylaws which upon being construed in the manner
provided in Section 12.2 hereof shall be contrary to or inconsistent with any
applicable provision of law shall not apply so long as said provision of law
shall remain in effect, but such result shall not affect the validity or
applicability of any other portions of these Bylaws, it being hereby declared
that these Bylaws would have been adopted and each article, section, subsection,
subsection, sentence, clause, or phrase thereof, irrespective of the fact that
any one or more articles, sections, subsections, subsections, sentences,
clauses, or phrases is or are illegal.

                                  ARTICLE XIII
                    ADOPTION, AMENDMENT, OR REPEAL OF BYLAWS

     Section 13.1 By Shareholders. Bylaws may be adopted, amended, or repealed
by the approval of the affirmative vote of a majority of the outstanding shares
of the corporation entitled to vote.

     Section 13.2 By the Board of Directors. Subject to the right of
shareholders to adopt, amend, or repeal Bylaws, Bylaws other than a Bylaw or
amendment thereof changing the authorized number of directors or any provision
of this Article XIII may be adopted, amended, or repealed by the Board of
Directors. A Bylaw adopted by the shareholders may restrict or eliminate the
power of the Board of Directors to adopt, amend, or repeal any or all Bylaws.


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