SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED FEBRUARY 28, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______
Commission File Number
1-604
WALGREEN CO.
(Exact name of registrant as specified in its charter)
Illinois 36-1924025
(State of incorporation) (I.R.S. Employer Identification No.)
200 Wilmot Road, Deerfield, Illinois 60015
(Address of principal executive offices) (Zip Code)
(847) 940-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares issued and outstanding of the registrant's Common
Stock, $.078125 par value, as of March 31, 1999 was 1,001,583,172.
Page 1 of 11
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements included herein have
been prepared by the company pursuant to the rules and regulations of the
Securities and Exchange Commission. The Consolidated Condensed Balance
Sheet as of February 28, 1999, the Consolidated Condensed Statements of
Earnings for the three and six months ended February 28, 1999 and 1998, and
the Consolidated Condensed Statements of Cash Flows for the six months
ended February 28, 1999 and 1998, have been prepared without audit.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these consolidated condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the company's latest annual report on Form 10-K.
In the opinion of the company the condensed statements for the
unaudited interim periods presented include all adjustments, consisting
only of normal recurring adjustments, necessary to present a fair statement
of the results for such interim periods. Because of the influence of
certain holidays, seasonal and other factors on the company's operations,
net earnings for any interim period may not be comparable to the same
interim period in previous years, nor necessarily indicative of earnings
for the full year.
2
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
February 28, August 31,
1999 1998
ASSETS
Current Assets:
Cash and cash equivalents $ 263.6 $ 144.4
Accounts receivable 480.2 373.2
Inventories 2,139.8 2,026.9
Other current assets 82.3 78.6
Total Current Assets 2,965.9 2,623.1
Property and Equipment, at cost, less
accumulated depreciation and amortization of
$906.8 at February 28 and $816.8 at 2,308.6 2,143.4
August 31
Other Non-Current Assets 138.1 135.1
TOTAL ASSETS $ 5,412.6 $ 4,901.6
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,045.4 $ 906.9
Other current liabilities 709.2 673.2
Total Current Liabilities 1,754.6 1,580.1
Non-Current Liabilities:
Deferred income taxes 91.5 89.1
Other non-current liabilities 423.2 383.5
Total Non-Current Liabilities 514.7 472.6
Shareholders' Equity:
Preferred stock $.0625 par value; authorized
32 million shares; none issued - -
Common stock $.078125 par value; authorized
3.2 billion shares; issued and outstanding
1,000,289,186 at February 28 and
996,487,044 at August 31 78.1 77.8
Paid-in capital 172.9 118.1
Retained Earnings 2,892.3 2,653.0
Total Shareholders' Equity 3,143.3 2,848.9
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 5,412.6 $ 4,901.6
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
3
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
(In Millions Except Per Share Data)
Three Months Ended Six Months Ended
February 28, February 28,
1999 1998 1999 1998
Net sales S4,691.0 $4,093.4 $8,707.4 $7,578.6
Costs and Deductions:
Cost of sales 3,392.4 2,960.7 6,334.1 5,501.7
Selling, occupancy and
administration 968.6 854.2 1,874.6 1,655.1
4,361.0 3,814.9 8,208.7 7,156.8
Other (Income)Expense:
Interest income (1.1) (0.9) (2.3) (1.5)
Interest expense 0.1 0.4 0.2 1.1
(1.0) (0.5) (2.1) (0.4)
Earnings before income tax provision
and cumulative effect of
accounting change 331.0 279.0 500.8 422.2
Income tax provision 130.8 108.1 196.6 163.6
Earnings before cumulative effect
of accounting change 200.2 170.9 304.2 258.6
Cumulative effect of accounting change
for system development costs - - - (26.4)
Net earnings $ 200.2 $ 170.9 $ 304.2 $ 232.2
Per Share-
Basic:
Earnings before cumulative effect
of accounting change $ 0.20 $ 0.17 $ 0.30 $ 0.26
Cumulative effect of
accounting change
for system development costs - - - (0.03)
Net earnings $ 0.20 $ 0.17 $ 0.30 $ 0.23
Diluted:
Earnings before cumulative effect
of accounting change $ 0.20 $ 0.17 $ 0.30 $ 0.26
Cumulative effect of
accounting change
for system development costs - - - (0.03)
Net earnings $ 0.20 $ 0.17 $ 0.30 $ 0.23
Dividends declared $ 0.0325 $0.03125 $ 0.0650 $0.06250
Average shares outstanding 999.0 991.2 998.1 989.9
Dilutive effect of stock options 14.6 13.7 14.3 13.4
Average shares outstanding
assuming dilution 1,013.6 1,004.9 1,012.4 1,003.3
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
4
WALGREEN CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Millions)
Six Months Ended
February 28,
1999 1998
Net cash provided by operating activities $375.5 $212.2
Cash Flows from Investing Activities:
Additions to property and equipment (289.3) (329.2)
Proceeds from the surrender of corporate-
owned life insurance policies - 58.0
Other 26.6 8.9
Net cash used for investing activities (262.7) (262.3)
Cash Flows from Financing Activities:
Cash dividends paid (63.7) (60.3)
Proceeds from employee stock plans 58.1 62.3
Other 12.0 10.6
Net cash provided by financing activities 6.4 12.6
Changes in Cash and Cash Equivalents:
Net increase(decrease) in cash and cash
equivalents 119.2 (37.5)
Cash and cash equivalents at beginning of year 144.4 72.9
Cash and Cash Equivalents at end of period $263.6 $ 35.4
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these Statements.
5
WALGREEN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Inventories are valued on a lower of last-in, first-out (LIFO)
cost or market basis. At February 28, 1999 and August 31, 1998,
inventories would have been greater by $520.9 million and $490.8 million
respectively, if they had been valued on a lower of first-in, first-out
(FIFO) cost or market basis. LIFO inventory costs can only be determined
annually when inflation rates and inventory levels are finalized;
therefore, LIFO inventory costs for interim financial statements are
estimated. Cost of sales is primarily derived from an estimate based upon
point-of-sale scanning and adjusted based on periodic inventories.
(2) All share data have been adjusted to reflect a two-for-one stock
split distributed to shareholders February 12, 1999. In addition the Board
of Directors approved increases in the authorized common stock, from 1.6
billion shares to 3.2 billion shares, and in the authorized preferred
stock, from 16 million shares to 32 million shares.
(3) In accordance with the EITF (Emerging Issues Task Force) consensus
reached on November 20, 1997, the company was required to change its
accounting for business process reengineering costs. EITF 97-13
"Accounting for Costs Incurred in Connection with a Consulting Contract or
an Internal Project that Combines Business Process Reengineering and
Information Technology Transformation," requires that the cost of business
process reengineering activities that are part of a project to acquire,
develop or implement internal use software, whether done internally or by
third parties, be expensed as incurred. Previously, the company
capitalized these costs as systems development costs. The change,
effective as of September 1, 1997, resulted in a cumulative pre-tax charge
of $43 million, or $.03 per share, recorded in the quarter ended November
30, 1997.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net earnings for the second quarter, ended February 28, 1999, were $200.2
million or $.20 per share. This was a 17.1% increase over last year. Net
earnings for the six months were $304.2 million or $.30 per share. This
was a 17.6% increase over last year's earnings before an accounting change.
The accounting change involved expensing the cumulative cost of business
process reengineering activities that had been capitalized as part of
system development projects. Including that $26 million after-tax charge
($.03 per share), net earnings increased 31.0%.
Sales increased by 14.6% in the second quarter, to $4.7 billion, and rose
by 14.9% to $8.7 billion for the first six months. Drugstore sales
increases resulted from sales gains in existing stores and added sales from
new stores, each of which include an indeterminate amount of market-driven
price changes. Comparable drugstore (those open at least one year) sales
were up 9.4% and 9.8% for the quarter and first six months. New store
openings accounted for 9.7% and 9.3% of the quarterly and six-month sales
increases. The company operated 2,667 drugstores as of February 28, 1999,
compared to 2,432 a year earlier.
Prescription sales increased 22.1% for the second quarter and 22.4% for the
first six months. Prescription sales in comparable stores increased 18.4%
for the quarter and 18.7% for the six-month period. Pharmacy sales trends
are expected to continue primarily because of expansion into new markets,
increased penetration in existing markets and demographic changes such as
the aging population.
Gross margins were 27.7% of sales in the quarter and 27.3% for the six-
month period compared to 27.7% and 27.4% for the comparable periods last
year. A decline in pharmacy gross profit margins and a higher interim LIFO
provision were offset by improved gross margins in the rest of the store.
Third party retail and mail order sales, which have lower gross margin
rates compared to the rest of the store, continue to become a larger
portion of pharmacy sales. The margins are under continued pressure from
the reimbursement rates demanded by managed care organizations. The
company is responding to these gross margin pressures by evaluating
contracts with the organizations on a case by case basis to insure a
reasonable return to shareholders. This may result in sacrificing sales
volume to insure that minimum gross margin standards are met.
The company uses the LIFO method of inventory valuation, which can only be
determined annually when inflation rates and inventory levels are
finalized; therefore, LIFO inventory costs for interim financial statements
are estimated. Cost of sales includes a LIFO provision of $16.2 million
and $30.1 million for the quarter and six-month period ended February 28,
1999 versus $9.9 million and $16.0 million for the same period a year ago.
Selling, occupancy and administration expenses decreased to 20.7% from
20.9% of sales in the quarter and to 21.5% from 21.8% of sales for the six
months. Lower store salaries and other direct store expenses, as a percent
to sales, were the principal reasons for the decline in the quarter and six
months. Lower advertising expenses, as a percent to sales, also
contributed to the six-month decline. The growth in mail order pharmacy,
which has a lower expense ratio, also contributed to the decreases.
7
The effective tax rate increased to 39.25% for the six-month period this
fiscal year compared to 38.75% in fiscal 1998. This increase was
principally the result of lower tax-advantaged investments.
FINANCIAL CONDITION
Cash and cash equivalents were $263.6 million at February 28, 1999,
compared to $35.4 million at February 28, 1998. Short-term investment
objectives are to maximize yields, while minimizing risk and maintaining
liquidity. To attain these objectives, investment limits are placed on the
amount, type and issuer of securities.
Net cash provided by operating activities for the first half of fiscal 1999
was $375.5 million compared to $212.2 million a year ago. The change
between periods was principally due to better inventory controls. The
company's profitability is the principal source for providing funds for
expansion and remodeling programs, dividends to shareholders and funding
for various technological improvements.
Net cash used for investing activities was $262.7 million versus $262.3
million last year. Additions to property and equipment were $289.3 million
compared to $329.2 million last year. There were 160 new or relocated
drugstores opened during the first half of this year compared to 122 for
the same period last year. There were 72 owned locations opened during the
first half of the year or under construction at February 28, 1999 versus 76
for the same period last year. During the six-month period last year, the
company surrendered corporate-owned life insurance policies resulting in
net proceeds of $58 million.
Capital expenditures for fiscal 1999 are estimated to be more than $750
million. The company expects to open at least 365 new stores in fiscal
1999. Fiscal 1999 openings include stores in Palm Springs and other
Southern California markets with additions in Atlanta, Baltimore and Salt
Lake City scheduled to occur in 2000. Estimates are that 3,000 drugstores
will be operating in the year 2000, with a goal of 6,000 by 2010. This may
necessitate future long-term borrowings. Two-thirds of the chain already
consists of convenient freestanding units, of which more than 1,300 offer
drive-thru prescription service. One-hour photofinishing is available in
more than 2,400 locations.
Net cash provided by financing activities was $6.4 million compared to
$12.6 million a year ago. At February 28, 1999, the company had $179
million in unused bank lines of credit and $100 million of unissued
authorized debt securities, previously filed with the Securities and
Exchange Commission.
The company has been addressing computer software and hardware
modifications or replacements to enable transactions to process properly in
the year 2000. Included in the hardware review is an examination of
critical non-IT systems, including embedded technology at company
facilities. Left uncorrected, the "year 2000 problem" could result in
business interruptions. However, based on currently available information,
all necessary changes are expected to occur in a timely manner.
As part of the project, a detailed work plan was developed to identify key
processes such as point-of-sale, pharmacy and inventory control. Each
process was broken down into tasks which included analysis at the program
level to identify date issues, modifications to programs where the date
processing did not properly handle the year 2000 and testing to insure the
process functions correctly in the year 2000. For many key processes such
as pharmacy, inventory control, and financial systems, year 2000
simulations were executed by running year 2000 ready processes on non-
production hardware while modifying the system date to simulate the year
2000. At February 28, 1999, it is estimated that 90%
8
of the work plan activities have been completed and approximately 70% of
the costs have been incurred. The total cost of these changes is expected
to be approximately $9 million which is based on management's best
estimates and subject to change as additional information becomes
available.
Although the company is working with suppliers and customers regarding this
issue, no assurance can be given with respect to potential adverse effects
on the company of any failure by other parties to achieve year 2000
compliance. The company is developing contingency plans that identify
"risk points" within key business processes such as pharmacy and cash flow.
For each "risk point" identified, the probability of failure is estimated
and a contingency alternative solution identified. Although effort is
being made to develop the best contingency alternative solutions, in some
cases the alternative solution is not as optimal as the process it would
replace. The goals of the contingency plans are to identify and document
alternative solutions that could be implemented in the event of failure and
would allow the company to continue to provide service to its customers and
business partners. Plans will remain flexible and subject to change.
In March 1998, Statement of Position 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" was issued. This
pronouncement, which is effective by the company's fiscal year 2000,
provides guidance on the capitalization of costs related to internal use
software. The pronouncement is not expected to materially impact the
company's consolidated financial position or results of operations.
Cautionary Note Regarding Forward-looking Statements
Certain information in this Form 10-Q, as well as in other public filings,
press releases and oral statements made by our representatives, is forward-
looking information based on current expectations and plans that involve
risks and uncertainties. Forward-looking information includes statements
concerning pharmacy sales trends, prescription margins, number of new
store openings, the level of capital expenditures and the company's
success in addressing Year 2000 issues; as well as those that include or
are preceded by the words "expects,""estimates,""believes" or similar
language. For such statements, we claim the protection of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
The following factors, in addition to those discussed elsewhere in this
Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended
August 31, 1998, could cause results to differ materially from management
expectations as projected in such forward-looking statements: changes in
economic conditions generally or in the markets served by the company;
consumer preferences and spending patterns; competition from other
drugstore chains, supermarkets, other retailers and mail order companies;
changes in state or federal legislation or regulations; the efforts of
third party payers to reduce prescription drug costs; the success of
planned advertising and merchandising strategies; the availability and cost
of real estate and construction; accounting policies and practices; the
company's ability to hire and retain pharmacists and other store and
management personnel; the company's relationships with its suppliers; the
ability of the company, its vendors and others to manage Year 2000 issues;
the company's ability to successfully implement new computer systems and
technology; and adverse determinations with respect to litigation or other
claims. The company assumes no obligation to update its forward-looking
statements to reflect subsequent events or circumstances.
9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
(a) The company held its Annual Meeting of Shareholders on
January 13, 1999.
(c) The shareholders voted for election of the following
directors to serve until the next annual meeting or
until their successors are elected and qualified (votes
in after-split number of shares):
Votes
Votes for Withheld
Charles R. Walgreen III 838,224,546 2,458,306
David W. Bernauer 844,931,276 2,458,306
William C. Foote 844,778,220 2,458,306
James J. Howard 844,805,346 2,458,306
Charles D. Hunter 837,627,258 2,458,306
L. Daniel Jorndt 844,889,836 2,458,306
Alan G. McNally 844,791,796 2,458,306
Cordell Reed 844,812,088 2,458,306
John B. Schwemm 844,875,908 2,458,306
William H. Springer 844,762,150 2,458,306
Marilou M. von Ferstel 844,878,998 2,458,306
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
3.(a) Articles of Incorporation of the company, as amended.
(b) By-Laws of the company, as amended and restated effective
as of January 13, 1999.
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
which ended February 28, 1999.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WALGREEN CO.
(Registrant)
Dated April 9, 1999 /s/R.L. Polark
R.L. Polark
Senior Vice President
(Chief Financial Officer)
Dated April 9, 1999 /s/W.M. Rudolphsen
W.M. Rudolphsen
Controller
(Chief Accounting Officer)
11
INDEX TO EXHIBITS
DOCUMENT FILED WITH THIS REPORT
Exhibit 3.(a) Articles of Incorporation of the company, as amended.
Exhibit 3.(b) By-Laws of the company, as amended and restated effective
as of January 13, 1999.
Exhibit 27 Financial Data Schedule
EXHIBIT 3(a)
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
RESTATED ARTICLE R-I
1. The name of the corporation is: Walgreen Co.
2. The corporation was incorporated February 15, 1909 under the
name:
C. R. Walgreen and Co.
3. Subsequent corporate names and the dates of their adoption
are:
Name Date Adopted
Walgreen Co. April 13, 1916
RESTATED ARTICLE R-II
The address of its registered office in the State of
Illinois on the date of this Restatement of Articles of
Incorporation is: 200 Wilmot Road, in the City of Deerfield,
County of Lake, State of Illinois, Zip Code 60015, and the name
of its Registered Agent at said address is: Allan M. Resnick.
RESTATED ARTICLE R-III
The duration of the corporation is: Perpetual.
RESTATED ARTICLE R-IV
The purpose or purposes for which the corporation is
organized are:
To manufacture, compound, buy, sell, and generally deal in
drugs, medicines, chemicals and druggists' sundries of all kinds
at wholesale and retail together with all goods, wares and
merchandise.
AMENDED AND RESTATED ARTICLE R-V
1. The aggregate number of shares which the Corporation is
authorized to issue is 3,232,000,000 divided into two classes.
The designation of each class, the number of shares of each class
and the par value of the shares of each class, are as follows:
Class Series (if any) Number of Shares Par Value
Preferred Issuable in Series 32,000,000 $.0625
Shares
Junior Participating
Preferred, Series A
Preferred 9,845,642 $.0625
Common Shares None 3,200,000,000 $.078125
2. The preferences, qualifications, limitations,
restrictions and the special or relative rights in respect of the
shares of each class are:
SECTION A
The Preferred Shares
1. The Preferred Shares may be issued in one or more
series and with such designation for each such series sufficient
to distinguish the shares thereof from the shares of all other
series and classes, as shall be stated and expressed in the
resolution or resolutions providing for the issue of each such
series adopted by the Board of Directors. The Board of Directors
in any such resolution or resolutions is hereby expressly
authorized to divide the Preferred Shares into series and to fix
and determine the relative rights and preferences of the shares
of any series so established as to:
(i) The rate per annum at which the holders of shares
shall be entitled to receive dividends.
(ii) The price at and the terms and conditions on which
shares may be redeemed.
(iii) The amount payable upon shares in event of
involuntary liquidation.
(iv) The amount payable upon shares in event of
voluntary liquidation.
(v) The sinking fund provisions, if any, for the
redemption or purchase of shares.
(vi) The terms and conditions on which shares may be
converted, if the shares are issued with the privilege of
conversion.
The Board of Directors may increase the number of
shares designated for any existing series by a resolution adding
to such series authorized and unissued Preferred Shares not
designated for any other series.
2. All Preferred Shares of any one series shall be
identical with each other in all respects, except that shares of
any one series issued at different times as provided in paragraph
3 of this Section A, may differ as to the dates from which
dividends thereon shall be cumulative.
3. Before any dividends on the Common Shares or on any
other class or classes of stock of the Corporation, ranking
junior to the Preferred Shares with respect to payment of
dividends, shall be paid or declared or set apart for payment,
the holders of Preferred Shares shall be entitled to receive when
and as declared by the Board of Directors, cumulative cash
dividends, out of any funds legally available for the declaration
of dividends and in the case of each series at the rate per
annum, and no more, for the particular series fixed in the
resolution or resolutions providing for the issue of such series
of Preferred Shares, adopted by the Board of Directors, payable
quarterly on such dates, in each year, as may be fixed in such
resolution or resolutions. With respect to each series of the
Preferred Shares, such dividends shall be cumulative from the
respective dates of issue thereof. No dividends shall be paid on
any series of the Preferred Shares in respect of any dividend
period unless all cumulative dividends accrued prior to said
dividend period with respect to all Preferred Shares of each
other series shall have been paid or declared and set aside for
payment.
4. The holders of Preferred Shares shall be entitled to
vote as a class and otherwise as provided by law.
5. Preferred Shares which have been redeemed or shall have
been purchased, converted or otherwise acquired by the
Corporation may thereafter be reissued under such terms and
conditions, not inconsistent with the provisions of this Section
A, as the Board of Directors may thereafter determine.
6. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and
before any distribution of the assets of the Corporation shall be
made to or set apart for the holders of the Common Shares or of
any other class of shares of the Corporation ranking junior to
the Preferred Shares with respect to payment of dividends or upon
dissolution, liquidation or winding up of the Corporation, the
holders of the shares of each series of the Preferred Shares then
outstanding shall be entitled to receive payment of such amount,
as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issue of such
series; but such holders upon receipt of such payment shall be
entitled to no further payment.
7. In case of any liquidation, dissolution or winding up
of the Corporation, if the amounts payable with respect to all
series of Preferred Shares then outstanding are not paid in full,
the shares of all series of the Preferred Shares shall share
proportionately in accordance with the respective amounts which
would be payable on said shares if all amounts payable were paid
in full.
8. A consolidation or merger of the Corporation with or
into one or more corporations shall not be deemed to be a
liquidation, dissolution or winding up within the meaning of this
Section A.
SECTION B
The Common Shares
1. Subject to the limitations set forth in Section A of
this Restated Article R-V, the holders of Common Shares shall be
entitled to dividends if, when and as the same shall be declared
by the Board of Directors out of funds of the Corporation legally
available therefor.
2. The holders of Common Shares shall be entitled to vote
as provided by law.
SECTION C
The Preferred and Common Shares
No holder of any shares shall have any preemptive right to
subscribe for or to acquire any additional shares of the
corporation of the same or of any other class, whether now or
hereafter authorized (including any shares held by the
corporation in its treasury) or any options or warrants giving
the right to purchase any such shares, or any bonds, notes,
debentures or other obligations convertible into any such shares,
excepting only such right, if any, as the Board of Directors, in
its discretion from time to time shall determine and provide.
SECTION D
Upon the effective date of this amendment and restatement,
each presently issued and outstanding share of the Common Stock
of this Corporation have a par value of $.078125 per share of
Common Stock.
3. PROVISIONS APPLICABLE TO CERTAIN BUSINESS COMBINATIONS
3.01 The affirmative vote of the holders of not less than 80
percent of the outstanding shares of Common Stock of the
Corporation shall be required for the approval or authorization
of any "Business Combination" (as hereinafter defined) of the
Corporation with any "Substantial Shareholder" (as hereinafter
defined); provided, however, that such 80 percent voting
requirement shall not be applicable if:
(i) Such Business Combination was approved by at least
two-thirds of the "Continuing Directors" (as hereinafter defined)
of the Board of Directors of the Corporation; or
(ii) The Cash or fair market value (as determined by at
least two-thirds of the Continuing Directors) of the property,
securities or other consideration to be received per share by
holders of the Common Stock of the Corporation in such Business
Combination is not less than the "Highest Per Share Price" (as
hereinafter defined) paid by the Substantial Shareholder in
acquiring any of its holdings of the Corporation's Common Stock.
3.02 For purposes of this paragraph 3 of Restated Article R-
V:
(i) The term "Business Combination" shall include, without
limitation, (a) any merger or consolidation of the Corporation,
or any entity controlled by or under common control with the
Corporation, with or into any Substantial Shareholder, or any
entity controlled by or under common control with the Substantial
Shareholder, (b) any merger or consolidation of a Substantial
Shareholder, or any entity controlled by or under common control
with the Substantial Shareholder, with or into the Corporation or
any entity controlled by or under common control with the
Corporation, (c) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition, (in one transaction or a series of
transactions) of all or substantially all of the property and
assets of the Corporation, or any entity controlled by or under
common control with the Corporation, to a Substantial
Shareholder, or any entity controlled by or under common control
with the Substantial Shareholder, (d) any purchase, lease,
exchange, mortgage, pledge, transfer or other acquisition (in one
transaction or a series of transactions) of all or substantially
all of the property and assets of a Substantial Shareholder or
any entity controlled by or under common control with the
Substantial Shareholder, by the Corporation, or any entity
controlled by or under common control with the Corporation, (e)
any recapitalization of the Corporation that would have the
effect of increasing the proportionate voting power of a
Substantial Shareholder, and (f) any agreement, contract or other
arrangement providing for any of the transactions described in
this definition of Business Combination.
(ii) The Term "Substantial Shareholder" shall mean and
include any individual, corporation, partnership or other person
or entity which, together with its "Affiliates" and "Associates"
(as defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect at the
date of the adoption of this Article by the shareholders of the
Corporation (collectively, and as so in effect, the "Exchange
Act")), "Beneficially Owns" (as defined in Rule 13d-3 of the
Exchange Act) in the aggregate 10 percent or more of the
outstanding Common Stock of the Corporation, and any Affiliate or
Associate of any such individual, corporation, partnership or
other person or entity.
(iii) Without limitation, any share of Common Stock of
the Corporation that any Substantial Shareholder has the right to
acquire at any time (notwithstanding that Rule 13d-3 deems such
shares to be beneficially owned only if such right may be
exercised within 60 days) pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise,
shall be deemed to be Beneficially Owned by the Substantial
Shareholder and to be outstanding for purposes of clause (ii)
above.
(iv) For the purposes of subparagraph 3.01 (ii) of this
paragraph 3 of Article R-V, the term "other consideration to be
received" shall include, without limitation, Common Stock or
other capital stock of the Corporation retained by its existing
stockholders other than Substantial Shareholders or other parties
to such Business Combination in the event of a Business
Combination in which the Corporation is the surviving
corporation.
(v) The term "Continuing Director" shall mean a Director
who was a member of the Board of Directors of the Corporation
immediately prior to the time that the Substantial Shareholder
involved in a Business Combination became a Substantial
Shareholder.
(vi) A Substantial Shareholder shall be deemed to have
acquired a share of the Common Stock of the Corporation at the
time when such Substantial Shareholder became the Beneficial
Owner thereof. With respect to the shares owned by Affiliates,
Associates or other persons whose ownership is attributed to a
Substantial Shareholder under the foregoing definition of
Substantial Shareholder, if the price paid by such Substantial
Shareholder for such shares is not determinable by a majority of
the Continuing Directors, the price so paid shall be deemed to be
the higher of (a) the price paid upon the acquisition thereof by
the Affiliate, Associate or other person or (b) the closing
market price per share on the New York Stock Exchange on the date
when the Substantial Shareholder became the Beneficial Owner
thereof.
(vii) The term "Highest Per Share Price" as used in this
paragraph 3 shall mean the highest price that can be determined
to have been paid at any time by the Substantial Shareholder for
any share or shares of Common Stock. In determining the Highest
Per Share Price all purchases by the Substantial Shareholder
shall be taken into account regardless of whether the shares were
purchased before or after the Substantial Shareholder became a
Substantial Shareholder. The Highest Per Share Price shall
include any brokerage commissions, transfer taxes and soliciting
dealers' fees paid by the Substantial Shareholder with respect to
the shares of common stock of the Corporation acquired by the
Substantial Shareholder. In the case of any Business Combination
with a Substantial Shareholder, the Continuing Directors shall
determine the Highest Per Share Price.
3.03 The provisions set forth in this paragraph 3 may not be
amended, altered, changed or repealed in any respect unless such
action is approved by the affirmative vote of the holders of not
less than 80 percent of the outstanding shares of common stock of
the Corporation at a meeting of the shareholders duly called for
the consideration of such amendment, alteration, change or
repeal.
RESTATED ARTICLE R-VI
The class and number of shares issued on the date of
adoption of this Amendment and Restatement of the Articles of
Incorporation and the stated capital and paid-in surplus as of
such date were:
Stated Capital
Series Number of Par with respect
Class (if any) Shares Value thereto
Preferred Issuable in 0 $.0625 $0
Shares Series
Common None *987,579,932 $.078125 *$106,904,574
Paid-in Surplus None
Total Stated Capital and Paid-in Surplus *$106,904,574
*BCA 14.30 will be filed in normal sequence.
RESTATED ARTICLE R-VII
The foregoing Amended and Restated Articles R-I to R-VI, and
Restated Article R-VIII and the Statement of Resolutions
Establishing Series described below, are an amendment to and
restatement of the Articles of Incorporation of Walgreen Co.,
effective as of the date of issuance of the Certificate of
Amendment of Articles of Incorporation by the Secretary of State,
and shall from that time supersede and stand in lieu of the
corporation's Articles of Incorporation. This Amendment and
Restatement is intended to solely effect a two-for-one split of
the shares of Walgreen Co. and restate the preexisting Articles
of Incorporation of Walgreen Co., without otherwise effecting any
substantive change or amendment to the corporation's Articles of
Incorporation.
RESTATED ARTICLE R-VIII
The Directors of the Corporation shall not be liable to the
Corporation or to the shareholders of the Corporation for
monetary damages for breach of fiduciary duties as a Director,
provided that this provision shall not eliminate or limit the
liability of the Director (i) for any breach of the Director's
duty of loyalty to the Corporation or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law, (iii) under Section
8.65 of the Illinois Business Corporation Act or (iv) for any
transaction from which the Director derived an improper personal
benefit.
AMENDED AND RESTATED
STATEMENT OF RESOLUTIONS ESTABLISHING SERIES
Pursuant to the provisions of "The Business Corporation Act of
1983," the corporation hereby submits the following:
1. The name of the corporation is Walgreen Co. (the
"Corporation").
2. The Board of Directors on July 9, 1986 duly adopted a
resolution establishing and designating one or more series
and fixing and determining the relative rights and
preferences thereof:
Pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its
Restated Articles of Incorporation, as amended, a series of
Preferred Shares, $.0625 par value per share, of the Corporation
(the "Preferred Shares") was created, and that the designation
and amount thereof, and the voting powers, preferences and
relative, participating, optional and other special rights of the
shares of such series, and the qualifications, limitations or
restrictions thereof, are as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Junior Participating Preferred,
Series A" (the "Series A Preferred") and the number of shares
constituting such series shall be 9,845,642.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the
holders of any series of Preferred Shares ranking prior and
superior to the shares of Series A Preferred with respect to
dividends, the holders of shares of Series A Preferred, in
preference to the holders of Common Shares, $.078125 par value
per share, of the Corporation (the "Common Shares") and of any
other shares ranking junior as to dividends to the Series A
Preferred, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the twelfth day
of September, December, March and June in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of
Series A Preferred, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.0625 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-
cash dividends or other distributions other than a dividend
payable in Common Shares or a subdivision of the outstanding
Common Shares (by reclassification or otherwise), declared on the
Common Shares since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction
of a share of Series A Preferred. In the event the Corporation
shall at any time declare or pay any dividend on Common Shares
payable in Common Shares, or effect a subdivision or combination
or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares,
then in each such case the amount to which holders of shares of
Series A Preferred were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is
the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Shares (other than a dividend payable
in Common Shares); provided that, in the event no dividend or
distribution shall have been declared on the Common Shares during
the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of
$0.0625 per share on the Series A Preferred shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred from the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares of Series A Preferred, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue and be cumulative from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred entitled
to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A
Preferred in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series
A Preferred entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series
A Preferred shall have the following voting rights:
(A) Each share of Series A Preferred shall entitle the
holder thereof to one vote on all matters submitted to a vote of
the shareholders of the Corporation.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred and the holders of Common
Shares shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(C) Except as set forth herein, holders of Series A
Preferred shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to
vote with holders of Common Shares as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred as provided in
Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends on, or make any
other distributions on, any shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred, except dividends paid ratably on the
Series A Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled.
(iii) redeem or purchase or otherwise acquire
for consideration shares ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Preferred, provided that the Corporation may at any time redeem,
purchase or otherwise acquire any such junior shares in exchange
for any shares of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series A Preferred; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred, or any shares
ranking on a parity with the Series A Preferred, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as to the Board of
Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued Preferred Shares and
may be reissued as part of a new series of Preferred Shares to be
created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares ranking
junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred unless, prior thereto,
the holders of shares of Series A Preferred shall have received
$100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to
the date of such payment, provided that the holders of shares of
Series A Preferred shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to
be distributed per share to holders of Common Shares, or (2) to
the holders of shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred, except distributions made ratably on the Series A
Preferred and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment
of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount to
which holders of shares of Series A Preferred were entitled
immediately prior to such event under the proviso in clause (1)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the Common Shares are
exchanged for or changed into other shares or securities, cash
and/or any other property, then in any such case the shares of
Series A Preferred then outstanding shall at the same time be
similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of shares, securities, cash and/or any
other property (payable in kind), as the case may be, into which
or for which each Common Share is changed or exchanged. In the
event the Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise) into a greater
or lesser number of Common Shares, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred shall be
adjusted by multiplying such amount by a fraction the numerator
of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred
shall not be redeemable.
Section 9. Rank. The Series A Preferred shall rank junior
to all other series of the Preferred Shares, as to the payment of
dividends and the distribution of assets, unless the terms of
such other series specifies to the contrary.
Section 10. Amendment. The Restated Certificate of
Incorporation, as amended, of the Corporation shall not be
amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred
so as to affect them adversely without the affirmative vote of
the holders of two-thirds of the outstanding shares of Series A
Preferred, voting together as a single class.
EXHIBIT 3(b)
BY-LAWS
of
WALGREEN CO.
ARTICLE I
OFFICES
SECTION 1. Principal Offices. The principal office of the
corporation shall be located in the State of Illinois and the
corporation may have such other offices, either within or without
the State of Illinois, as the business of the corporation may
require from time to time.
SECTION 2. Registered Office. The registered office of the
corporation required by The Business Corporation Act of the State
of Illinois to be maintained in the State of Illinois may be, but
need not be, identical with the principal office in the State of
Illinois, and the address of the registered office may be changed
from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. Annual Meeting. (a) The annual meeting of the
shareholders shall be held on the second Wednesday in January in
each year, or such other day in January as the Board of Directors
may designate, at a time set by the Chairman of the Board, for
the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday, such
meeting shall be held on the next succeeding business day. If
the election of directors shall not be held on the day designated
herein for any annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a
meeting of the shareholders as soon thereafter as may be
convenient.
(b) At any annual meeting of the shareholders of the
corporation, only such business shall be conducted as shall have
been brought before the meeting (i) by or at the direction of the
Board of Directors or (ii) by any shareholder of the corporation
that complies with the procedures set forth in this Section 1.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice
thereof in proper written form to the Secretary of the
corporation. To be timely, a shareholder's notice must be
delivered or mailed and received at the principal executive
offices of the corporation not less than ninety (90) days nor
more than one hundred twenty (120) days prior to the date
corresponding to the date of the prior year's annual meeting of
shareholders. To be in proper written form, a shareholder's
notice to the Secretary shall set forth in writing 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 address,
as they appear in the corporation's books, 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 By-laws to the
contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this
Section 1. 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 1, and if he should so determine, he
shall so declare to the meeting that any such business not
properly brought before the meeting shall not be transacted.
SECTION 2. Special Meetings. Special meetings of the
shareholders may be called by the Chairman of the Board, by the
Chief Executive Officer, by the President, by the Board of
Directors or by the holders of not less than one-fifth of all the
outstanding shares of the corporation.
SECTION 3. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of
Illinois, as the place of meeting for any annual meeting or for
any special meeting called by the Board of Directors. If no
designation is made, or if a special meeting be otherwise called
and the Board of Directors fails to designate the place of such
meeting, the place of such meeting shall be the registered office
of the corporation in the State of Illinois.
SECTION 4. Notice of Meetings. Written or printed notice
stating the place, day and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than sixty
days before the date of the meeting or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or
exchange of assets not less than twenty days nor more than sixty
days before the date of the meeting, either personally or by
mail, by or at the direction of the Chairman of the Board, the
Chief Executive Officer, the President, or the Secretary, or the
officer or persons calling the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his or her address
as it appears on the records of the corporation, with postage
thereon prepaid.
SECTION 5. Fixing of Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors
of the corporation may fix in advance a date as the record date
for any such determination of shareholders, such date in any case
to be not more than 60 days and, for a meeting of shareholders,
not less than 10 days, or in the case of a merger, consolidation,
share exchange, dissolution or sale, lease or exchange of assets
not less than 20 days, immediately preceding such meeting. If no
record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date
on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has
been made as provided in this Section, such determination shall
apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of
the transfer books for shares of the corporation shall make,
within twenty days after the record date for a meeting of
shareholders or ten days before such meeting, whichever is
earlier, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of
and the number of shares held by each, which list, for a period
of ten days prior to such meeting, shall be kept on file at the
registered office of the corporation and shall be subject to
inspection by any shareholder and to copying at the shareholder's
expense, at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original share ledger
or transfer book, or a duplicate thereof kept in this State,
shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book or
to vote at any meeting of shareholders.
SECTION 7. Quorum. A majority of outstanding shares entitled
to vote on a matter, represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders; provided that
if less than a majority of the outstanding shares are represented
at said meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. In
no event shall a quorum consist of less than one-third of the
outstanding shares entitled to vote.
If a quorum is present, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote on a
matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by The Business
Corporation Act or the Articles of Incorporation of the
corporation.
SECTION 8. Proxies. A shareholder may appoint a proxy to vote
or otherwise act for him or her by signing an appointment form
and delivering it to the person so appointed. No shareholder may
name more than three persons as proxies to attend and vote the
shareholder's shares at any such meeting. Such proxy shall be
filed with the Secretary of the corporation before or at the time
of the meeting. No proxy shall be valid after eleven months from
the date of its execution, 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 thereon,
except to the extent such proxy is irrevocable. 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,
or by attendance at the 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.
Notwithstanding any provision contained in these By-laws, a
shareholder may electronically transmit or authorize the
electronic transmission of his or her proxy, if done as
prescribed by law.
SECTION 9. Voting of Shares. Subject to the provisions of
Section 11 of this Article, each outstanding share, regardless of
class, shall be entitled to one vote upon each matter submitted
to a vote at a meeting of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares of the
corporation held by the corporation in a fiduciary capacity may
be voted and shall be counted in determining the total number of
outstanding shares entitled to vote at a given time.
Shares registered in the name of another corporation, domestic
or foreign, may be voted by any officer, agent, proxy or other
legal representative authorized to vote such shares under the law
of incorporation of such corporation. The corporation may treat
the president or other person holding the position of chief
executive officer of such other corporation as authorized to vote
such shares, together with any other person indicated and any
other holder of an office indicated by the corporate shareholder
to the corporation as a person or an office authorized to vote
such shares as the by-laws of such corporation may prescribe, or,
in the absence of such provision, as the board of directors of
such corporation may determine.
Shares registered in the name of a deceased person, a minor ward
or person under legal disability, may be voted by his or her
administrator, executor, or court appointed guardian, either in
person or by proxy without a transfer of such shares into the
name of such administrator, executor, or court appointed
guardian. Shares registered in the name of a trustee may be
voted by him or her, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into
his or her name if authority so to do is contained in an
appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name
of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
SECTION 11. Cumulative Voting. In all elections for directors,
every shareholder shall have the right to vote, in person or by
proxy, the number of shares owned by such shareholder, for as
many persons as there are directors to be elected, or to cumulate
such votes and give one candidate as many votes as shall equal
the number of directors multiplied by the number of such shares,
or to distribute such cumulative votes in any proportion among
any number of candidates.
SECTION 12. Voting by Ballot. Voting on any question or in any
election may be viva voce unless the presiding officer shall
order that voting be by ballot.
SECTION 13. Adjournments. Any meeting of shareholders may be
adjourned. Notice of the adjourned meeting or of the business to
be transacted there, other than by announcement at the meeting at
which the adjournment is taken, shall not be necessary, unless
otherwise required by law. At an adjourned meeting at which a
quorum is present or represented, any business may be transacted
which could have been transacted at the meeting originally
called.
SECTION 14. Inspectors of Election. The Board of Directors, in
advance of any meeting of shareholders, may appoint one or more
persons as inspectors to act at such meeting or any adjournment
thereof. If inspectors of election are not so appointed, the
person acting as chairman at any such meeting may, and on the
request of any shareholder shall, make such appointment.
The inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the
validity and effect of proxies; count all votes and report the
results; and do such other acts as are proper to conduct the
election and voting with impartiality and fairness to all the
shareholders.
Each report of an inspector shall be in writing and signed by
him or her or by a majority of them if there is more than one
inspector acting at such meeting. If there is more than one
inspector, the report of a majority shall be the report of the
inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of
the voting shall be prima facie evidence thereof.
SECTION 15. Notice of Shareholder Nominees. Only persons who
are nominated in accordance with the procedures set forth in this
Section 15 shall be eligible for election at a meeting of
shareholders as directors of the corporation. Nominations of
persons for election to the Board of Directors of the corporation
may be made at a meeting of shareholders (a) by or at the
direction of the Board of Directors or (b) by any shareholder of
the corporation who is a shareholder of record at the time of
giving of notice provided for in this Section, who shall be
entitled to vote for the election of directors at the meeting and
who complies with the procedures set forth in this Section 15.
Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received
at the principal executive offices of the corporation not less
than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days'
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business
on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was
made. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or
re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (including, without
limitation, such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if
elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the corporation's books, of
such shareholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such shareholder. At
the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish
to the Secretary of the corporation that information required to
be set forth in a shareholder's notice of nomination which
pertains to the nominee. No person shall be eligible to serve as
a Director of the corporation unless nominated in accordance with
the procedures set forth in this by-law. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the
procedures prescribed by the By-laws, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 15, a shareholder shall also comply
with all applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder
with respect to the matters set forth in this Section.
SECTION 16. Action by Written Consent. (a) In order that the
corporation may determine the shareholders entitled to consent to
corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be
more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. Any
shareholder of record seeking to have the shareholders authorize
or take corporate action by written consent shall, by written
notice to the Secretary, request the Board of Directors to fix a
record date. The Board of Directors shall promptly, but in all
events within 10 days after the date on which such a request is
received, adopt a resolution fixing the record date. If no
record date has been fixed by the Board of Directors within 10
days of the date on which such a request is received, the record
date for determining shareholders entitled to consent to
corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by applicable law,
shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its principal place of business or
to any officer or agent of the corporation having custody of the
book in which proceedings of meetings of shareholders are
recorded. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining shareholders
entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which
the Board of Directors adopts the resolution taking such prior
action.
(b) Every written consent shall bear the date of signature of
each shareholder who signs the consent and no written consent
shall be effective to take the corporate action referred to
therein unless, within 60 days of the record date established in
accordance with paragraph (a) of this Section 16, a written
consent or consents signed by a sufficient number of holders to
take such action are delivered to the corporation in the manner
prescribed in paragraph (a) of this Section.
(c) In the event of the delivery, in the manner provided by this
Section, to the corporation of the requisite written consent or
consents to take corporate action and/or any related revocation
or revocations, the corporation shall engage nationally
recognized independent inspectors of elections for the purpose of
promptly performing a ministerial review of the validity of the
consents and revocations. For the purpose of permitting a prompt
ministerial review by the independent inspectors, no action by
written consent without a meeting shall be effective until the
earlier of (i) five business days following delivery to the
corporation of consents signed by the holders of the requisite
minimum number of votes that would be necessary to take such
action, which delivery shall be accompanied by a certification by
the shareholder of record (or his or her designee) who delivered,
in accordance with paragraph (a) above, the written notice to the
Secretary requesting the Board of Directors to fix a record date
or (ii) such date as the independent inspectors certify to the
corporation that the consents delivered to the corporation in
accordance with this Article represent at least the minimum
number of votes that would be necessary to take the corporate
action. Nothing contained in this paragraph shall in any way be
construed to suggest or imply that the Board of Directors or any
shareholder shall not be entitled to contest the validity of any
consent or revocation thereof, whether during or after such five
business day period, or to take any other action (including,
without limitation, the commencement, prosecution or defense of
any litigation with respect thereto).
ARTICLE III
DIRECTORS
SECTION 1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of its
Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of
directors of the corporation shall be not less than seven nor
more than twelve. Within the limits above specified, the number
of directors shall be determined from time to time by resolution
of the Board of Directors or by resolution of the shareholders.
Each director shall hold office until the next annual meeting of
shareholders or until his or her successor shall have been
elected. Directors need not be residents of Illinois or
shareholders of the corporation. It shall be the policy of the
corporation not to nominate as a director any person who has
reached his or her seventieth birthday.
A director may resign at any time by giving written notice to
the Board of Directors, its Chairman or to the Chief Executive
Officer or to the President or Secretary of the corporation. A
resignation shall be effective when the notice is given, unless
the notice specifies a future date.
SECTION 3. Regular Meetings. A regular annual meeting of the
Board of Directors shall be held without other notice than this
by-law, immediately after, and at the same place as, the annual
meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the
State of Illinois, for the holding of additional regular meetings
without other notice than such resolution; but if not so provided
then such additional regular meetings may be convened in the same
manner as provided in Section 4 of this Article in respect of
special meetings.
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of
the Board or any two directors. The person or persons authorized
to call special meetings of the Board of Directors may fix any
place, either within or without the State of Illinois, as the
place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be
given at least one day prior thereto if notice is given
personally, at least two days prior thereto if notice is given by
telegram or by a delivery service assuring delivery within twenty-
four hours, or at least five days prior thereto if notice is
given by mail. If notice is given by telegram, such notice shall
be deemed to be delivered when the telegram, addressed to the
director at his or her business address, is delivered to the
telegraph company. If notice is given by delivery service, such
notice shall be deemed to be delivered when delivered, so
addressed, to the delivery service company. If mailed, such
notice shall be deemed to be delivered when deposited in the
United States mail addressed to the director at his or her
business address, with postage thereon prepaid. Any director may
waive notice of any meeting. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice
or waiver of notice of such meetings.
SECTION 6. Quorum. A majority of the Board of Directors then
in office, but in no event less than a majority of the minimum
number of directors specified in Section 2 of this Article shall
constitute a quorum for the transaction of business at any
meeting of the Board of Directors, provided that if less than a
majority of the directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to
time without further notice.
SECTION 7. Manner of Acting. Except as provided in the Articles
of Incorporation of the corporation, the act of the majority of
the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 8. Vacancies. Any vacancy occurring in the Board of
Directors and any directorship to be filled by reason of an
increase in the number of directors or for any other reason may
be filled by election at an annual meeting of shareholders,
election at a special meeting of shareholders called for that
purpose or by election by the Board of Directors at a regular or
special meeting of the Board of Directors.
SECTION 9. Presumption of Assent. A director of the
corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
conclusively presumed to have assented to the action taken unless
his or her dissent is entered in the minutes of the meeting or
unless such director shall file his or her written dissent to
such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such
dissent by registered or certified mail to the Secretary of the
corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 10. Informal Action by Directors. Any action required
to be taken at a meeting of the Board of Directors, or any other
action which may be taken at a meeting of the Board of Directors,
may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by all the directors
entitled to vote with respect to the subject matter thereof.
SECTION 11. Adjournment. Any meeting of the Board of Directors
may be adjourned. Notice of the adjourned meeting or of the
business to be transacted there, other than by announcement at
the meeting at which the adjournment is taken, shall not be
necessary. At an adjourned meeting at which a quorum is present,
any business may be transacted which could have been transacted
at the meeting originally called.
SECTION 12. Directors Conflict of Interest. If a transaction
is fair to the corporation at the time it is authorized, approved
or ratified, the fact that a director of the corporation is
directly or indirectly a party to the transaction shall not be
grounds for invalidating the transaction.
SECTION 13. Compensation of Directors. By the affirmative vote
of a majority of the directors then in office, and irrespective
of any personal interest of any member of the Board of Directors,
the Board of Directors may establish reasonable compensation of
all directors for services to the corporation as directors,
officers or otherwise. No such establishment of reasonable
compensation shall be deemed a director conflict of interest.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. Establishment of Committees. A majority of the
directors may create one or more committees and appoint members
of the Board of Directors to serve on the committee or
committees. Each committee shall have two or more members, who
serve at the pleasure of the Board of Directors. The Board of
Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. Any
vacancy in a committee may be filled by the Board of Directors.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors as required.
SECTION 2. Manner of Acting. A majority of any committee shall
constitute a quorum and a majority of a quorum shall be necessary
for action by any committee. A committee may act by unanimous
consent in writing without a meeting. The committee, by majority
vote of its members, shall determine the time and place of
meetings and the notice required therefor.
SECTION 3. Authority of Committees. To the extent specified by
resolution of the Board of Directors and these By-laws, each
committee may exercise the authority of the Board of Directors,
provided, however, a committee may not:
a) authorize distributions;
b) approve or recommend to shareholders any act requiring
the approval of shareholders;
c) fill vacancies on any committee;
d) elect or remove officers or fix the compensation of
any member of the committee;
e) adopt, amend or repeal these By-laws;
f) approve a plan of merger not requiring shareholder
approval;
g) authorize or approve reacquisition of shares, except
according to a general formula or method prescribed
by the Board of Directors;
h) authorize or approve the issuance or sale, or contract for
sale, of shares, or determine the designation and relative
rights, preferences, and limitations of a series of shares,
except that a committee may fix the specific terms of the
issuance or sale or contract for sale, or the number of
shares to be allocated to particular employees under an
employee benefit plan; or
i) amend, alter, repeal, or take action inconsistent with
any resolution or action of the Board of Directors when
the resolution or action of the Board of Directors provides
by its terms that it shall not be amended, altered or
repealed by action of a committee.
SECTION 4. Executive Committee. The Board of Directors may
establish an Executive Committee. The Executive Committee, during
intervals between meetings of the Board of Directors, shall have,
and may exercise, subject to the limitations contained in
Section 3 of this Article, the powers of the Board of Directors
in the management of the business and affairs of the corporation.
SECTION 5. Compensation Committee. The Board of Directors may
establish a Compensation Committee consisting of directors who
are not otherwise employed by the corporation. The Compensation
Committee shall review, from time to time, the salaries,
compensation and employee benefits of the officers and employees
of the corporation and shall make recommendations to the Board of
Directors concerning such matters.
SECTION 6. Audit Committee. The Board of Directors shall
establish an Audit Committee consisting of directors who are not
otherwise employed by the corporation. The Audit Committee shall
review the selection and qualifications of the independent public
accountants employed by the corporation to audit the financial
statements of the corporation and the scope and adequacy of their
audits. The Audit Committee shall also consider recommendations
made by such independent public accountants, review the internal
financial audits of the corporation, and report any additions or
changes it deems advisable to the Board of Directors.
SECTION 7. Nominating and Governance Committee. The Board of
Directors may establish a Nominating and Governance Committee
consisting of directors who are not otherwise employed by the
corporation. The Nominating and Governance Committee shall
consider matters related to corporate governance, develop general
criteria regarding the selection and qualifications for members
of the Board of Directors and shall recommend candidates for
election to the Board of Directors.
SECTION 8. Finance Committee. The Board of Directors may
establish a Finance Committee. The Finance Committee shall
review major financial decisions of the corporation and shall
make recommendations to the Board of Directors concerning such
matters.
ARTICLE V
OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
Chairman of the Board, a Chief Executive Officer, a President,
and such Executive or Senior Vice Presidents and other Vice
Presidents as the Board of Directors may from time to time elect
or appoint, a Treasurer, a Controller, a General Auditor and a
Secretary, and such Assistant Treasurers, Assistant Secretaries,
Assistant Controllers or other officers as may be from time to
time elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person.
SECTION 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the Board of Directors
at the first meeting of the Board of Directors held after each
annual meeting of shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold
office until his or her successor shall have been duly elected
and shall have qualified or until his or her death or until he or
she shall resign or shall have been removed in the manner
hereinafter provided. No officer shall be elected or re-elected
after reaching sixty-five years of age.
SECTION 3. Removal. Any officer or agent of the corporation
may be removed by the Board of Directors whenever in its judgment
the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the
term.
SECTION 5. Chief Executive Officer. The Chairman of the Board
may, but need not, be the Chief Executive Officer of the
corporation. The Chief Executive Officer shall determine and
administer the policies of the corporation, subject to the
instructions of the Board of Directors.
Except where, by law, the signature of some other officer or
agent of the corporation is required, the Chief Executive Officer
may sign: certificates for shares of the corporation; any deeds,
mortgages, bonds, leases concerning real and personal property
both as landlord and as tenant; contracts and other instruments
in furtherance of the business of the corporation, including
instruments of guaranty as to any of such documents which may be
executed by subsidiaries of the corporation; proxies on behalf of
the corporation with respect to the voting of any shares of stock
owned by the corporation; and assignments of shares of stock
owned by the corporation. The Chief Executive Officer shall have
the power to appoint such agents and employees as in the Chief
Executive Officer's judgment may be necessary or proper for the
transaction of the business of the corporation and to fix their
compensation, all subject to the ratification of the Board of
Directors.
The Chief Executive Officer shall submit to the Board of
Directors, prior to the date of the annual meeting of
shareholders, an annual report of the operations of the
corporation and its subsidiaries, including a balance sheet
showing the financial condition of the corporation and its
subsidiaries consolidated as at the close of such fiscal year and
statements of consolidated income and surplus. The Chief
Executive Officer shall perform such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors.
SECTION 7. President. The President shall be the Chief
Operating Officer of the corporation and shall in general be in
charge of the operations of the corporation. The President may,
but need not, be the Chief Executive Officer.
Except where, by law, the signature of some other officer or
agent of the corporation is required, the President or a Vice
President may sign: certificates for shares of the corporation;
any deeds, mortgages, bonds, leases concerning real and personal
property both as landlord and as tenant; contracts or other
instruments in furtherance of the business of the corporation,
including instruments of guaranty as to any of such documents
which may be executed by subsidiaries of the corporation; proxies
on behalf of the corporation with respect to the voting of any
shares of stock owned by the corporation; and assignments of
shares of stock owned by the corporation. The President shall
perform such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 8. The Vice Presidents. In the absence of the
President or in the event of the President's inability or refusal
to act, a Vice President, selected by the Board of Directors,
shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice President may execute
documents as provided in Section 7 of this Article and shall
perform such other duties as from time to time may be assigned to
such Vice President by the Chief Executive Officer, the President
or by the Board of Directors. The Board of Directors may
designate one or more of the Vice Presidents as Executive or
Senior Vice President with such additional duties as from time to
time may be assigned by the Chief Executive Officer, the
President or by the Board of Directors.
SECTION 9. The Treasurer. The Treasurer shall have the custody
of all of the funds and securities of the corporation. When
necessary and proper the Treasurer shall endorse, or authorize on
behalf of the corporation the endorsement of, all checks, notes
or other obligations and evidences of the payment of money,
payable to the corporation or coming into the Treasurer's
possession, and shall deposit the funds arising therefrom with
all other funds of the corporation, coming into the Treasurer's
possession, in such banks as may be selected as the depositories
of the corporation, or properly care for them in such other
manner as the Board of Directors may direct. Either alone or
jointly with the Chief Executive Officer, the President or such
other officers as may be designated by the Board of Directors,
the Treasurer shall, except as herein otherwise provided, be
authorized to sign all checks and other instruments drawn on or
payable out of the funds of the corporation, and all bills, notes
and other evidences of indebtedness of the corporation. Whenever
required by the Board of Directors to do so, the Treasurer shall
exhibit a complete and true statement of the Treasurer's cash
account and of the securities and other property in the
Treasurer's possession, custody or control. The Treasurer shall
enter, or direct or cause to be entered, regularly in books
belonging to the corporation and to be kept by the Treasurer for
such purpose, a full and accurate account of all money received
and paid by the Treasurer on account of the corporation, together
with all other business transactions. The Treasurer shall, at
all reasonable times within the hours of business, exhibit the
Treasurer's books and accounts to any director. The Treasurer
shall perform all duties which are incident to the office of the
Treasurer of a corporation, subject, however, at all times to the
direction and control of the Board of Directors. If the Board of
Directors shall so require, the Treasurer shall give bond, in
such sum and with such securities as the Board of Directors may
direct, for the faithful performance of the Treasurer's duties
and for the safe custody of the funds and property of the
corporation coming into the Treasurer's possession.
SECTION 10. The Secretary. The Secretary shall keep the
minutes of all meetings of the Board of Directors, the minutes of
all meetings of the committees of the Board of Directors, and the
minutes of all meetings of the shareholders, in books provided by
the corporation for such purposes, and shall act as Secretary at
all such meetings. The Secretary shall attend to the giving and
serving of all notices of the corporation of meetings of the
Board of Directors, committees of the Board of Directors and
shareholders. The Secretary shall prepare all lists of
shareholders and their addresses required to be prepared by the
provisions of any present or future statute of the State of
Illinois. The Secretary may sign with the Chief Executive
Officer, the President or a Vice President, in the name of the
corporation, all contracts and instruments and may affix the seal
of the corporation thereto. The Secretary shall have charge of
such books and papers as the Board of Directors may direct. The
Secretary shall have the authority to certify the By-laws,
resolutions of the Board of Directors and the committees thereof,
and other documents of the corporation as true and correct copies
thereof. The Secretary shall, in general, perform all the duties
which are incident to the office of Secretary of a corporation,
subject at all times to the direction and control of the Board of
Directors.
SECTION 11. The Controller. The Controller shall be the
principal accounting officer of the corporation and shall be in
charge of all general and cost accounting books and records of
the corporation, and shall see that all moneys due to the
corporation, all disbursements and all properties and assets are
properly accounted for. The Controller shall prepare the
corporation's balance sheets, income accounts and other financial
statements and reports, and render on a periodic basis a report
covering the operations of the corporation for the month and year
to date. The Controller shall perform all duties which are
incident to the office of the Controller of a corporation,
subject, however, at all times to the control of the Board of
Directors.
SECTION 12. General Auditor. The General Auditor shall be
responsible for the conduct of audits in order to determine that
the corporation's accounting systems of internal checks and
balances are properly designed and function so that the
corporation's assets are being adequately protected. The General
Auditor shall perform audits of any of the corporation's
operations and accounting which will permit him or her to
adequately discharge the General Auditor's responsibilities. The
General Auditor shall render findings to the General Auditor's
immediate superior and, in the event that in the General
Auditor's opinion, proper corrective action is not being taken or
the General Auditor is being denied free access to information
needed to perform the General Auditor's duties, shall have the
right, and it is the General Auditor's responsibility, to report
this to the Chief Executive Officer of the corporation or
directly to the Board of Directors.
SECTION 13. Assistant Treasurers, Assistant Secretaries and
Assistant Controllers. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. Each
Assistant Treasurer, Assistant Secretary and Assistant
Controller, in the absence or inability or refusal to act of the
Treasurer, the Secretary or the Controller, as the case may be,
may perform the duties of the office to which he or she is an
assistant and in general shall perform such duties as shall be
assigned to him or her by the Treasurer, the Secretary or the
Controller, respectively, or by the Chief Executive Officer, the
President or the Board of Directors.
SECTION 14. Execution of Agreements. The Chief Executive
Officer, the Chairman of the Board or the President or any Vice
President, at any time and without any express authority of the
Board of Directors may sign and execute all agreements to sell,
purchase, lease or otherwise acquire stores or other property of,
in behalf of, and for the corporation. The authority herein
given by this paragraph shall not impair or restrict any
authority, expressed, implied or otherwise, herein conferred upon
any officer or officers.
SECTION 15. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer
shall be prevented from receiving such salary by reason of the
fact that such officer is also a director of the corporation.
ARTICLE VI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. Right to Indemnification. Each person who was or is
a party, or is threatened to be made a party to or called as a
witness in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and any appeal thereof (hereinafter a
"proceeding"), by reason of the fact that he or she is, was or
agreed to become a director or officer, of the corporation or is
or was serving at the request of the corporation as a director,
officer, employee, trustee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in
an official capacity as a director, officer, employee, trustee,
fiduciary or agent, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Illinois
Business Corporation Act, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide
broader indemnification rights than said law permitted the
corporation to provide prior to such amendment), against all
expenses (including attorneys' fees and other expenses of
litigation), judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement actually and reasonably incurred
by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director,
officer, employee, trustee, fiduciary or agent and shall inure to
the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 2 hereof,
the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors of the
corporation. The right to indemnification conferred by this
Article shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of
its final disposition, including any appeal thereof; provided
however, that, if the Illinois Business Corporation Act requires,
the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced unless it
shall ultimately be determined that such director or officer is
entitled to be indemnified under this Article or otherwise. The
corporation may, by action of its Board of Directors, provide (a)
indemnification to employees and agents of the corporation or
others and (b) for such other indemnification of persons
indemnified by this Article as it deems appropriate.
SECTION 2. Right of Claimant to Bring Suit. If a claim under
Section 1 of this Article is not paid in full by the corporation
within thirty days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting the claim.
It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
corporation) that indemnification of the claimant is prohibited
by applicable law, but the burden of proving such defense shall
be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or
its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances, nor an actual determination by
the corporation (including its Board of Directors, independent
legal counsel, or its shareholders) that indemnification of the
claimant is prohibited by applicable law, shall be a defense to
the action or create a presumption that indemnification of the
claimant is prohibited by applicable law.
SECTION 3. Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision
of the corporation's Articles of Incorporation, By-laws,
agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in such person's official capacity
and as to action in another capacity while holding such office.
SECTION 4. Insurance. The corporation may purchase and
maintain insurance, at its expense, to protect itself and any
person who is or was a director, officer, employee, fiduciary,
trustee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership joint venture, trust or
other enterprise (including employee benefit plans) against any
liability asserted against such person and incurred by such
person in any such capacity, or arising out of his or her status
as such, whether or not the corporation would have the power to
indemnify such person against such liability under the Illinois
Business Corporation Act.
SECTION 5. Report to Shareholders. The corporation shall
report in writing to shareholders any indemnity or advanced
expenses paid to a director, officer, employee or agent with or
before the notice of the next shareholders' meeting.
SECTION 6. Contractual Nature. The provisions of this Article
shall be applicable to all proceedings commenced or continuing
after its adoption, whether such arise out of events, acts or
omissions which occurred prior or subsequent to such adoption,
and shall continue as to a person who has ceased to be a
director, officer or a person serving at the request of the
corporation as a director, trustee, fiduciary, employee, agent or
officer of another corporation, partnership, joint venture, trust
or other enterprise and shall inure to the benefit of the heirs
of such person. This Article shall be deemed to be a contract
between the corporation and each person who, at any time that
this Article is in effect, serves or agrees to serve in any
capacity which entitles him to indemnification hereunder and any
repeal or other modification of this Article or any repeal or
modification of the Illinois Business Corporation Act or any
other applicable law shall not limit any rights of
indemnification for proceedings then existing or later arising
out of events, acts or omissions occurring prior to such repeal
or modification, including, without limitation, the right to
indemnification for proceedings commenced after such repeal or
modification to enforce this Article with regard to proceedings
arising out of acts, omissions or events occurring prior to such
repeal or modification.
SECTION 7. Severability. If any portion of this Article shall
be invalidated or held to be unenforceable on any ground by any
court of competent jurisdiction, the decision of which shall not
have been reversed on appeal, such invalidity or unenforceability
shall not affect the other provisions hereof, and this Article
shall be construed in all respects as if such invalid or
unenforceable provisions had been omitted therefrom.
ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract
or execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or
confined to specific instances.
SECTION 2. Checks, Drafts, and Orders for the Payment of Money.
The Board of Directors may appoint one or more persons who may
severally be authorized by the Board of Directors to sign checks,
drafts, or orders for the payment of money and any or all of whom
may be further authorized by the Board of Directors, in its
discretion, to authorize other individuals to sign checks,
drafts, or orders for the payment of money.
SECTION 3. Deposits. The Board of Directors may appoint one or
more persons who may severally be authorized by the Board of
Directors to select and designate as a depository of and for the
moneys and funds of the corporation such bank or banks as such
person may from time to time determine; and the said person or
persons so authorized by the Board of Directors may further be
authorized severally to terminate and cancel the designation of
any bank or banks as a depository of this corporation.
ARTICLE VIII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the
corporation may be represented by certificates signed by the
Chairman of the Board or Chief Executive Officer, the President
or a Vice President and the Secretary or an Assistant Secretary
and sealed with the seal of the corporation. Such seal may be a
facsimile. Where such certificate is countersigned by a transfer
agent other than the corporation itself or an employee of the
corporation, or by a transfer clerk and registered by a
registrar, the signatures of the Chairman of the Board or Chief
Executive Officer, the President or Vice President and the
Secretary or Assistant Secretary upon such certificate may be
facsimiles, engraved or printed. In case any officer who has
signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with
the same effect as if such officer had not ceased to be such at
the date of its issue. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the
person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the
books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate
shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in
case of a lost, destroyed or mutilated certificate a new one may
be issued therefor upon such terms and indemnity to the
corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the books of the corporation by
the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to
transfer, or by his or her attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary of the
corporation, and on surrender for cancellation of the certificate
for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed the owner thereof for
all purposes as regards the corporation.
SECTION 3. Transfer Agent and Registrar. The Board of Directors
may from time to time appoint such Transfer Agents and Registrars
in such locations as it shall determine, and may, in its
discretion, appoint a single entity to act in the capacity of
both Transfer Agent and Registrar in any one location.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day
in September in each year and shall end on the succeeding thirty-
first day of August.
ARTICLE X
DIVIDENDS
The Board of Directors may from time to time declare and the
corporation may pay dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its
Articles of Incorporation.
ARTICLE XI
SEAL
The Board of Directors shall provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon
the name of the corporation and the words "Corporate Seal,
Illinois".
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of these By-laws or under the provisions of the
Articles of Incorporation or under the provisions of The Business
Corporation Act of the State of Illinois, a waiver thereof in
writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XIII
AMENDMENTS
SECTION 1. By Directors. These By-laws may be altered, amended
or repealed and new By-laws may be adopted at any meeting of the
Board of Directors of the corporation by a majority vote of the
directors present at the meeting, subject to the restrictions set
forth in Section 2 of this Article.
SECTION 2. By Shareholders. These By-laws may be altered,
amended or repealed and new By-laws may be adopted by the
shareholders at any annual meeting, or at any special meeting
called for such purpose. If such By-law so provides, a By-law
adopted by the shareholders may not be altered, amended or
repealed by the Board of Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED FEBRUARY 28, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 264
<SECURITIES> 0
<RECEIVABLES> 504
<ALLOWANCES> 24
<INVENTORY> 2,140
<CURRENT-ASSETS> 2,966
<PP&E> 2,309
<DEPRECIATION> 907
<TOTAL-ASSETS> 5,413
<CURRENT-LIABILITIES> 1,755
<BONDS> 27
0
0
<COMMON> 251
<OTHER-SE> 2,892
<TOTAL-LIABILITY-AND-EQUITY> 5,413
<SALES> 8,707
<TOTAL-REVENUES> 8,707
<CGS> 6,334
<TOTAL-COSTS> 6,334
<OTHER-EXPENSES> 1,875
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 501
<INCOME-TAX> 197
<INCOME-CONTINUING> 304
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304
<EPS-PRIMARY> 0.30<F1>
<EPS-DILUTED> 0.30<F1>
<FN>
<F1>EARNING PER SHARE DATA HAVE BEEN ADJUSTED TO RELECT A TWO-FOR-ONE STOCK
SPLIT DISTRIBUTED TO SHAREHOLDERS FEBRUARY 12, 1999. PRIOR FINANCIAL
DATA SCHEDULES HAVE NOT BEEN RESTATED TO REFLECT THE SPLIT.
</FN>
</TABLE>
