UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
September 26, 1998 Number: 1-4105
BAUSCH & LOMB INCORPORATED
(Exact name of registrant as specified in its charter)
New York 16-0345235
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Bausch & Lomb Place, Rochester NY 14604-2701
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (716) 338-6000
Indicate by checkmark 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 of Common stock of the registrant, outstanding as of
September 26, 1998, was 56,089,874 consisting of 55,416,393 shares of
Common stock and 673,481 shares of Class B stock which are identical with
respect to dividend and liquidation rights, and vote together as a single
class for all purposes.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited interim consolidated financial statements of
Bausch & Lomb Incorporated and Consolidated Subsidiaries have been prepared
by the company in accordance with the accounting policies stated in the
company's 1997 Annual Report on Form 10-K and should be read in conjunction
with the Notes To Financial Statements appearing therein, and are based in
part on approximations. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation in accordance with generally accepted accounting principles
have been included in these financial statements.
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF EARNINGS
<CAPTION>
Third Quarter Ended Nine Months Ended
Dollar Amounts In Millions - Sept 26, Sept 27, Sept 26, Sept 27,
Except Per Share Data 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales $575.6 $468.3 $1,763.7 $1,442.7
Costs And Expenses
Cost of products sold 258.2 213.1 832.6 671.8
Selling, administrative and
general 216.7 181.2 691.5 564.0
Research and development 22.9 16.4 66.4 48.1
Purchased in-process research
and development - - 85.0 -
Restructuring charges - 16.0 11.3 54.9
497.8 426.7 1,686.8 1,338.8
Operating Earnings 77.8 41.6 76.9 103.9
Other (Income) Expense
Interest and investment income (13.4) (10.9) (34.2) (30.3)
Interest expense 25.6 13.9 77.4 41.6
Gain from foreign currency, net (1.3) (1.0) (4.9) (4.8)
Gain on divestitures - - (56.0) -
10.9 2.0 (17.7) 6.5
Earnings Before Income Taxes And
Minority Interest 66.9 39.6 94.6 97.4
Provision for income taxes 24.1 15.6 34.1 39.2
Earnings Before Minority Interest 42.8 24.0 60.5 58.2
Minority interest in
subsidiaries 6.3 5.5 18.0 16.2
Net Earnings 36.5 18.5 42.5 42.0
Retained Earnings At Beginning Of
Period 893.6 919.4 916.5 924.7
Cash Dividends Declared:
Common stock, $0.26 and $0.78
per share in both 1998 and 1997 14.6 14.5 43.5 43.3
Retained Earnings At End Of
Period $915.5 $923.4 $ 915.5 $ 923.4
Basic Earnings Per Share $ 0.65 $ 0.33 $ 0.76 $ 0.76
Diluted Earnings Per Share $ 0.65 $ 0.33 $ 0.76 $ 0.75
Average Shares Outstanding -
Basic (000s) 56,022 55,369 55,714 55,421
Average Shares Outstanding -
Diluted (000s) 56,501 55,735 56,264 55,421
See Notes to Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
<CAPTION>
September 26, December 27,
Dollar Amounts In Millions 1998 1997
<S> <C> <C>
ASSETS
Current Assets
Cash, cash equivalents and short-term
investments $ 148.7 $ 183.7
Trade receivables, less allowances
of $30.2 and $14.0, respectively 496.9 374.8
Inventories, net 415.9 324.3
Deferred taxes, net 97.7 66.0
Other current assets 165.7 141.4
1,324.9 1,090.2
Property, Plant And Equipment, net 692.5 580.2
Goodwill And Other Intangibles,
less accumulated amortization
of $124.6 and $116.6, respectively 802.0 406.9
Other Investments 547.1 546.4
Other Assets 173.1 149.2
Total Assets $3,539.6 $2,772.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 193.6 $ 339.4
Current portion of long-term debt 27.5 4.4
Accounts payable 87.1 72.0
Accrued compensation 104.8 73.6
Accrued liabilities 382.5 365.9
Federal, state and foreign income taxes
payable 58.6 32.0
854.1 887.3
Long-Term Debt, less current portion 1,280.7 510.8
Other Long-Term Liabilities 112.9 119.4
Minority Interest 440.0 437.0
Total Liabilities 2,687.7 1,954.5
Shareholders' Equity
4% Cumulative Preferred stock,
par value $100 per share - -
Class A Preferred stock,
par value $1 per share - -
Common stock, par value $0.40
per share, 60,198,322 shares issued 24.1 24.1
Class B stock, par value $0.08 per share,
975,280 and 856,905 shares
issued, respectively 0.1 0.1
Capital in excess of par value 80.1 76.8
Retained earnings 915.5 916.5
Common and Class B stock
in treasury, at cost, 5,083,728 and
5,846,286 shares, respectively (193.9) (223.1)
Accumulated other comprehensive income 34.3 29.1
Other shareholders' equity (8.3) (5.1)
Total Shareholders' Equity 851.9 818.4
Total Liabilities And Shareholders'
Equity $3,539.6 $2,772.9
See Notes To Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 26, September 27,
Dollar Amounts In Millions 1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 42.5 $ 42.0
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation 87.4 68.8
Amortization 33.6 15.7
Change in deferred income taxes (0.4) (0.8)
Gain on divestitures, net of taxes (32.8) -
Restructuring charges, net of taxes 7.6 36.9
Purchased in-process research and
development, net of taxes 51.0 -
Loss on retirement of fixed assets 2.9 6.3
Changes in assets and liabilities:
Trade receivables (53.0) (30.2)
Inventories 3.8 18.0
Other current assets (14.0) (44.1)
Accounts payable and accruals (94.2) (25.8)
Income taxes 8.7 42.2
Other long-term liabilities (6.8) (13.9)
Net cash provided by operating
activities 36.3 115.1
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (132.6) (81.2)
Net cash paid for acquisition of
businesses (715.1) (46.6)
Net cash received from divestitures 135.0 -
Other 11.0 (10.4)
Net cash used in investing activities (701.7) (138.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of Common and Class B shares (0.2) (21.4)
Exercise of stock options 27.2 11.4
Net (repayments) proceeds from notes
payable (143.7) 67.9
Proceeds from issuance of long-term debt 801.2 13.5
Repayment of long-term debt (12.0) (2.7)
Payment of dividends (43.5) (43.1)
Net cash provided by financing
activities 629.0 25.6
Effect of exchange rate changes on cash,
cash equivalents and short-term
investments 1.4 (8.1)
Net decrease in cash, cash equivalents and
short-term investments (35.0) (5.6)
Cash, cash equivalents and short-term
investments, beginning of period 183.7 167.8
Cash, cash equivalents and short-term
investments, end of period $148.7 $162.2
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 71.0 $ 46.3
Income taxes $ 33.0 $ 27.5
See Notes To Financial Statements
</TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Dollar Amounts in Millions - Except Per Share Data
NOTE A: Acquisitions and Divestitures
1) As described in the 1997 Annual Report on Form 10-K, on
December 29, 1997, the company acquired Chiron Vision Corporation
(Chiron Vision) from Chiron Corporation, and on December 31,
1997, it acquired Storz Instrument Company (Storz) from American
Home Products Corporation. The acquisitions were accounted for as
purchases, whereby the purchase price, including acquisition
costs, was allocated to identified assets, including tangible and
intangible assets, purchased research and development and
liabilities based upon their respective fair values. The excess
of the purchase price over the value of identified assets and
liabilities, in the amount of approximately $168, was recorded as
goodwill and is being amortized over lives of twenty to forty
years.
The following selected, unaudited pro forma data is
presented to provide a summary of the combined
results of Bausch & Lomb, Chiron Vision and Storz as
if the acquisitions had occurred as of the beginning
of 1997. The pro forma data is for informational
purposes only and may not necessarily reflect the
results of operations had the companies operated as
one for the three- and nine-month periods ending
September 27, 1997. No effect has been given for
synergies, if any, that may be realized through the
acquisition.
<TABLE>
Third Quarter Ended Nine Months Ended
(Unaudited) September 27, 1997 September 27, 1997
<S> <C> <C>
Net sales $567.2 $1,742.9
Operating earnings $ 49.6 $ 119.7
Net earnings $ 15.5 $ 29.0
Earnings per share - basic $ 0.28 $ 0.52
Earnings per share - diluted $ 0.28 $ 0.52
</TABLE>
2) On May 22, 1998, the company sold its skin care
business to The Andrew Jergens Company for $135 in
cash plus the assumption of certain liabilities.
NOTE B: Inventories
Inventories consisted of the following:
September 26, December 27,
1998 1997
Raw materials and supplies $ 95.4 $ 96.3
Work in process 36.4 23.4
Finished products 297.4 218.1
429.2 337.8
Less: Allowance for valuation
of certain U.S.
inventories at last-
in, first-out cost 13.3 13.5
$415.9 $324.3
NOTE C: Property, Plant And Equipment
Major classes of property, plant and equipment consisted
of the following:
September 26, December 27,
1998 1997
Land $ 26.7 $ 21.0
Buildings 393.4 392.2
Leasehold improvements 38.9 34.9
Machinery and equipment 907.1 727.0
1,366.1 1,175.1
Less: Accumulated
depreciation 673.6 594.9
$ 692.5 $ 580.2
NOTE D: Adoption of SFAS No. 130
In the first quarter of 1998, the company adopted
Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income." Comprehensive
income is defined as the change in equity of a business
during a period from transactions and other events and
circumstances from non-owner sources. Under SFAS 130,
the term "comprehensive income" is used to describe the
total of net earnings plus other comprehensive income
which, for the company, includes foreign currency
translation adjustments and unrealized gains and losses
on marketable securities classified as available-for-
sale.
SFAS 130 does not impact the calculation of net earnings
or earnings per share nor does it impact reported
assets, liabilities or total shareholders' equity. It
does impact the presentation of the components of
shareholders' equity within the balance sheet and will
result in the presentation of the components of
comprehensive income within an annual financial
statement, which must be displayed with the same
prominence as other financial statements.
The components of the company's total comprehensive
income were:
Three Months Ended Nine Months Ended
Sept 26, Sept 27, Sept 26, Sept 27,
1998 1997 1998 1997
Net earnings $36.5 $18.5 $42.5 $42.0
Foreign currency translation
adjustments, net of taxes 12.0 (11.4) 5.2 (49.8)
Unrealized holding gain,
net of taxes - - - 11.8
Total Comprehensive Income $48.5 $ 7.1 $47.7 $ 4.0
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Dollar Amounts in Millions - Except Per Share Data
This financial review, which should be read in conjunction with
the accompanying financial statements, contains management's
discussion and analysis of the company's results of operations,
liquidity and an updated 1998 outlook. References within this
financial review to earnings per share refer to diluted earnings
per share.
RESULTS OF OPERATIONS
Comparability of Business Segment Information
Comparison of the company's 1998 and 1997 third quarter and nine-
month operating results requires the consideration of certain
significant events.
As announced in April 1997, the company's board of directors
approved plans to restructure portions of each of the company's
four business segments, as well as certain corporate
administrative functions. Restructuring charges concluded during
the second quarter of 1998. A pre-tax restructuring charge of
$11 was recorded for the nine-month period ending in September
1998 compared to charges of $16 and $55, respectively, for the
three- and nine-month periods ending September 1997. The after-
tax impact of these charges for the nine-month period ending in
September 1998 was $8 or $0.13 per share and, for 1997, $11 or
$0.20 per share and $37 or $0.67 per share, respectively, for the
three- and nine-month periods.
During the fourth quarter of 1997, the company divested its
thin film business, which was reported in the eyewear segment.
This business contributed sales of $4 and $13, respectively, for
the three- and nine-month periods ending in September 1997 and
operating losses of $2 and $4, respectively, for the same
periods.
As described in Note A, the company acquired Chiron Vision
and Storz during the first quarter of 1998. The purchase price
was allocated to net assets acquired and to purchased in-process
research and development (R&D). Purchased in-process R&D includes
the value of products in the development stage not considered to
have reached technological feasibility. In accordance with
applicable accounting rules, purchased in-process R&D is required
to be expensed, and, accordingly, a pre-tax charge of $85 was
recorded during the first quarter of 1998. The after-tax impact
for the nine-month period was $51 or $0.91 per share.
As described in Note A, the company sold its skin care
business during the second quarter of 1998. As a result, a non-
recurring gain of $56 ($33 or $0.59 per share after taxes) was
recorded. This business was reported in the healthcare segment
and contributed sales and operating earnings of $9 and $3,
respectively, for the quarter ended September 1997. For the nine
months ending September 1998 and September 1997, the skin care
business contributed sales of $19 and $33, respectively, and
operating earnings of $3 in 1998 and $6 in 1997.
Net Sales By Business Segment
The company's operating results are reported in four
business segments: vision care, eyewear, pharmaceuticals/surgical
and healthcare. The vision care segment includes contact lenses
and lens care products. The eyewear segment includes sunglasses,
vision accessories and the divested thin film coating business.
The pharmaceuticals/surgical segment includes prescription
ophthalmics, over-the-counter (OTC) medications, and products and
equipment for cataract, refractive and other ophthalmic surgery.
The healthcare segment includes biomedical products and services,
hearing aids and the divested skin care business.
The following is a summary of sales by business segment:
Net Sales By Business Segment
Third Quarter Nine Months
1998 1997 1998 1997
Vision Care $249.2 $241.8 $ 708.1 $ 674.4
Eyewear - ongoing 97.7 100.6 358.4 369.8
Pharmaceuticals/Surgical 151.5 43.0 453.1 146.1
Healthcare - ongoing 77.2 69.7 224.9 204.4
Continuing Net Sales 575.6 455.1 1,744.5 1,396.7
Divested - 13.2 19.2 46.0
Net Sales $575.6 $468.3 $1,763.7 $1,442.7
Total net sales for the quarter ended September 26, 1998
increased $107 or 23% from the 1997 third quarter. The results
include $101 in 1998 third-quarter revenues generated by the
acquired pharmaceutical and surgical product lines. When results
for the divested skin care and thin film businesses are excluded
from the 1998 and 1997 results, revenues increased $121 or 26%.
On a constant dollar basis (that is, excluding the effect of
foreign currency exchange rate changes), continuing business
revenues increased 29% compared to the prior-year period.
Vision Care Segment Revenues
The vision care segment includes results of the contact lens and
lens care businesses, with lenses comprising 45% and lens care
representing 55% of third quarter year-to-date revenues.
For the third quarter of 1998, revenues increased to $249,
an increase of 3% (6% on a constant dollar basis) from the 1997
third quarter, resulting from a 6% improvement in contact lens
sales combined with a 1% increase in lens care. Contact lens
revenue gains, 10% in constant dollars, were driven by continued
strong growth in planned replacement and disposable lenses
(collectively PRD), including SofLens one day disposable lenses
in Europe, which experienced a more than doubling of sales
compared with the prior year period, and Medalist lenses in
Japan, which is now the market leader in that country. PRD sales
in the U.S. grew modestly but were offset by declining sales of
rigid gas permeable and traditional lenses. Despite difficult
comparisons to the 1997 third quarter which benefited from the
initial sell-in of Renu Multiplus, revenues from lens care
products were up 3% in constant dollars, driven primarily by
strong gains in Europe.
Year-to-date, vision care revenues increased 5% or 8% on a
constant dollar basis. Improvement was driven primarily by
contact lens sales, which have posted 12% constant dollar
increases compared to 1997.
Eyewear Segment Revenues
The following analysis excludes results from the divested thin
film business. Eyewear segment results are primarily driven by
sales of sunglass products, which account for over 97% of this
segment's portfolio. For the third quarter of 1998, eyewear
segment revenues decreased 3% from the comparable 1997 period. On
a constant dollar basis, segment revenues were even with 1997.
Sunglass revenues in the U.S. increased 1% despite lower sales to
Sunglass Hut International (SHI), the region's largest customer.
Outside the U.S. revenues declined 6% or 1% on a constant dollar
basis. In Europe, revenues increased 10% but these gains were
offset by results in the Asia-Pacific and Latin America regions,
as difficult economic situations led to sales shortfalls.
Year-to-date, segment revenues declined 3% from 1997 and
were flat on a constant dollar basis. U.S. revenues declined 4%
due primarily to lower sales to SHI. If sales to SHI are excluded
from both years, U.S. sunglass sales increased 1%. Non-U.S.
revenues decreased 3% but increased 2% after adjusting for
currency.
Pharmaceuticals/Surgical Segment Revenues
Third-quarter revenues for the pharmaceuticals/surgical segment
increased $109 versus 1997, reflecting the first-quarter addition
of the former Chiron Vision and Storz product lines.
Pharmaceuticals revenues, benefiting from acquired product lines,
increased 35% or 33% on a constant dollar basis.
In the U.S., pharmaceuticals revenues for the quarter
increased 29% over 1997 due to the acquired product lines, as
well as increased revenues from Trimethoprim and Crolom and the
introduction of Lotemax and Alrex. Also contributing to this
increase was the general eye care business, where sales of Opcon-
A drove increases in revenues from 1997. Competitive pressures,
including price declines on certain generic products, partially
offset these sales increases.
Third quarter non-U.S. pharmaceuticals revenues improved 43%
over the prior year, reflecting results for the company's Dr.
Mann Pharma subsidiary in Germany, which benefited from a second
quarter 1998 acquisition. Double-digit constant dollar sales
growth in prescription ophthalmics in combination with improved
results in the OTC business, led by ibu-Vivimed, also contributed
to the third quarter sales performance.
Year-to-date, revenues for the segment increased $307 from
1997, due mainly to the acquired product lines. Pharmaceuticals
revenues increased 19%, or 22% on a constant dollar basis. U.S.
sales advanced 22%, primarily reflecting the acquired product
lines. Excluding incremental sales from the acquisitions
described previously, pharmaceuticals revenues were up 4% or 5%
on a constant dollar basis.
Healthcare Segment Results
The following analysis excludes 1998 and 1997 revenues from the
divested skin care business. Healthcare segment revenues for the
third quarter of 1998 increased $8 or 11% (14% on a constant
dollar basis) over the comparable period in 1997. Year-to-date
revenues increased $21 or 10% (13% on a constant dollar basis).
Sales of biomedical products rose 10% in the quarter and 8% year-
to-date, driven primarily by strong increases in the
biotechnology and services business. Hearing aid revenues
advanced 15% in the quarter and 20% year-to-date reflecting an
increase in the number of company-owned retail outlets.
Although increased company-owned retail outlets has resulted
in higher hearing aid revenues in 1998, the business's
profitability has not met management's expectations. As a result,
management is in the process of assessing the value of the
business in relation to the company's portfolio.
Net Sales By Geographic Region
The following analysis excludes revenues from the divested thin
film and skin care businesses.
Sales in markets outside the U.S. totaled $275 in the third
quarter of 1998, an increase of $54 or 24% compared with the 1997
period. Year-to-date sales were $864 compared to $707 in 1997, an
increase of 22%. Non-U.S. sales from the acquired surgical
businesses and increased revenues for vision care products,
primarily contact lenses, offset declines in the eyewear segment.
For the three- and nine-month periods, currency exchange rates
had a negative impact on non-U.S. sales of 6% and 7%,
respectively. Non-U.S. sales represented 50% and 51%,
respectively, of year-to-date consolidated revenues for the nine-
month periods ending September 1998 and 1997.
Third-quarter sales in the European region advanced 50%
versus 1997, with minimal impact due to currency, due in large
part to incremental pharmaceuticals/surgical sales and growth in
vision care sales. Sunglass sales for both the quarter and year-
to-date periods increased over the 1997 periods. Third quarter
sales in the Asia-Pacific region were flat to prior year, but
advanced 13% in constant dollars, due in large part to
incremental surgical sales and to the strong growth of PRD lenses
throughout most of the region. Revenues in Japan were down 4%
versus 1997 for the quarter, but improved 13% in constant dollars
due primarily to the continued success of Medalist contact
lenses. Revenues in Canada and Latin America increased 12% over
the prior quarter and 25% over the prior year-to-date due mainly
to incremental surgical sales and sales of vision care products,
including ReNu MultiPlus. Latin America eyewear sales declined
during the quarter as economic conditions deteriorated in the
region.
U.S. sales totaled $301 in the third quarter, an increase of
$67 or 29% from 1997, due primarily to incremental surgical
sales. For the year, sales increased $191 to $880, an increase of
28%, again primarily due to acquired businesses.
Costs And Expenses
The following analysis excludes results from the divested thin
film and skin care businesses.
The ratio of cost of products sold to sales was 44.9% during
the third quarter of 1998 versus 45.3% in 1997. Favorability in
manufacturing costs for the eyewear segment contributed to this
improvement. For the nine-month period, this ratio was 47.4% for
1998 and 46.5% for 1997. The 1998 year-to-date ratio reflected
the $32 impact of higher reported cost of products sold resulting
from purchase accounting inventory adjustments related to the
surgical acquisitions. The 1997 year-to-date ratio reflected a $9
provision for the projected cost of exiting certain Ray-Ban
product lines. Integration costs resulting from the surgical
acquisitions contributed to this unfavorable variance but were
partially offset by favorable manufacturing costs in the eyewear
segment which resulted from restructuring efforts.
Selling, administrative and general expenses, including
corporate administration, were 37.7% of sales in the third
quarter of 1998 compared to 38.9% in 1997. Year-to-date, these
expenses were 39.0% of sales versus 38.9% in 1997. The year-over-
year unfavorable ratio reflected planned increases in marketing
and advertising, higher selling costs as well as the incremental
expenses and integration costs associated with the transition of
the acquired product lines of Chiron Vision and Storz. Included
in the 1997 year-to-date amount was a $2 provision for the write-
off of the company's equity investment in a start-up eyewear
technology venture.
Corporate administration expenses were 2.0% of sales in the
third quarter of 1998, versus 2.3% in the same period of 1997.
Year-to-date, the amounts were 1.9% versus 2.5%. The reduction
reflects the continued efforts resulting from company-wide
restructuring and a higher sales base due to the surgical
acquisitions.
R&D expenses totaled $23 in the third quarter of 1998, an
increase of $7 over 1997. This represented 4.0% of sales in 1998,
as compared to 3.5% in 1997. On a year-to-date basis, R&D expense
was 3.8% of sales versus 3.3% in 1997. The increase is due
primarily to spending in the pharmaceuticals/surgical segment.
Restructuring Reserves
As described in previous filings, in the first quarter of 1997
the company's board of directors approved plans to restructure
all business segments as well as certain corporate administrative
functions. As a result, cumulative pre-tax restructuring charges
of $74 were recorded throughout 1997. An additional $11 was
recorded in the first half of 1998 in connection with these
programs.
The restructuring effort is expected to significantly reduce
the company's fixed cost structure and realign the organization
to meet its strategic objectives through the closure, relocation
and consolidation of manufacturing, distribution, sales and
administrative operations, and workforce reductions.
The following table sets forth the activity in the
restructuring reserve through September 26, 1998:
<TABLE>
Vision Pharma/ Corporate
Care Eyewear Surgical Healthcare Administration Total
<S> <C> <C> <C> <C> <C> <C>
Restructuring Provisions $23.3 $41.4 $5.0 $5.9 $9.9 $85.5
Less charges:
Non-cash items 3.3 7.1 - 1.8 0.3 12.5
Cash payments 13.0 26.5 3.4 2.4 8.9 54.2
Balance at September 26, 1998 $ 7.0 $ 7.8 $1.6 $1.7 $0.7 $18.8
</TABLE>
Remaining reserves primarily represent liabilities related
to employee separations. No further provisions are expected to
be recorded for the 1997 restructuring program.
Operating Earnings
For the third quarter of 1998, the company's reported operating
earnings were $78, compared to earnings of $42 for the same 1997
period, or $56 when discontinued businesses and restructuring
charges are excluded from 1997 results.
On a year-to-date basis, the company reported operating
earnings of $77 compared to $104 in the prior year. Ongoing
businesses generated operating earnings of $74 as compared to
$102 in 1997. This was primarily driven by the purchase
accounting adjustment for in-process R&D related to the
acquisitions of the surgical businesses. Excluding this charge
and restructuring charges in both periods, operating earnings
from ongoing businesses would have been $170 in 1998 versus $157
in 1997.
The increase in comparable basis results for both the quarter
and year-to-date was driven mainly by incremental results in the
pharmaceuticals/surgical segment as well as year-over-year
improvements in manufacturing costs in the eyewear segment.
Other Income And Expenses
Income from interest and investments totaled $13 for the third
quarter. The increase of $3 over the same period in 1997 was
primarily because of a gain on the sale of an equity investment
that was acquired as part of a prior year divestiture. Interest
expense for the quarter of $26, an increase of $12 over the third
quarter of 1997, reflected the incremental debt associated with
recent acquisitions. Foreign currency gains of $1 were primarily
the result of favorable hedging activities.
Liquidity And Financial Resources
Cash Flows From Operating Activities
Cash provided by operating activities was $36 through the third
quarter of 1998, a $79 unfavorable change versus the comparable
1997 period. Increases in accounts receivable, a payment to fund
a settlement of litigation commenced in a prior year, and the
timing of income tax payments and refunds, partially offset by
the relative favorability in the settlement of foreign exchange
contracts, were the primary reasons for the unfavorability to the
prior year period.
Cash Used In Investing Activities
Cash used in investing activities was $702 for the first nine
months of 1998, an increase of $564 from the comparable 1997
period, reflecting acquisitions and capital spending offset by an
inflow from the skin care divestiture. Capital spending increased
$51 to $133 compared to the prior year period. A significant
portion of 1998 capital spending is being used to support
expanded contact lens manufacturing capacity.
Cash Provided By Financing Activities
Through the third quarter of 1998, $629 was provided by financing
activities versus $26 for the comparable 1997 period. New
borrowings were primarily used to fund acquisitions and capital
expenditures.
Free Cash Flow
Free cash flow for the third quarter of 1998 was $75 compared to
$49 for the third quarter of 1997 due to a variety of operational
factors including increased earnings, the timing of income tax
payments and lower cash outlays for restructuring charges. For
the first nine months of 1998, free cash flow was negative $94
compared to positive $15 in the prior year, primarily due to
amounts described under "Cash Flows From Operating Activities"
above.
The positive free cash flow for the third quarter of 1998 is
consistent with historical trends whereby the company has been a
user of free cash during the first half of the year and a
provider of free cash during the second half.
Financial Position
The company's total debt, consisting of short- and long-term
borrowings, increased $647 from year-end 1997 due primarily to
the borrowings needed to complete the surgical business
acquisitions. The increase in debt is reflected in the ratio of
total debt to capital, which was 63.8% at the end of the third
quarter of 1998 versus 51.6% at the end of the comparable 1997
period.
During the third quarter of 1998, the company sold $300 of
putable / callable long-term notes with varying maturities and
interest rates, and $200 of 30-year debentures. The proceeds were
used to reduce short-term debt. During the second quarter, the
company used cash proceeds from the sale of the skin care
business to reduce outstanding short-term debt.
Cash and short-term investments totaled $149 at the end of
the 1998 third quarter compared to $184 at December 1997 and $162
at September 1997.
Access to Financial Markets
The company maintains U.S. revolving credit agreements, with both
short-term and 5-year terms, totaling $700. The interest rates
under these agreements are based on the LIBOR rate, or, at the
company's option, the higher of several other common indices. No
debt was outstanding under these agreements as of September 26,
1998. At September 26, 1998, the 5-year term portion of these
revolving credit agreements supported $300 of unsecured
promissory notes, which have been classified as long-term debt.
In addition, the company maintains other lines of credit on which
it may draw to meet its financing requirements.
The company believes its existing credit facilities will
provide adequate liquidity to meet obligations, fund capital
expenditures and invest in potential growth opportunities.
Working Capital
Working capital amounted to $471 at the end of the third quarter
of 1998, $203 at year-end 1997 and $19 at the end of the third
quarter of 1997. The increase in working capital primarily
reflects the reduction of short-term borrowings due to the
issuance of long-term debt. The current ratio was 1.6, 1.2 and
1.0 for these periods, respectively.
OTHER FINANCIAL DATA
Dividends declared on common stock were $0.26 per share in the
third quarters of both 1998 and 1997. The return on average
shareholders' equity of 6.3% for the twelve-month period ended
September 26, 1998 reflected restructuring charges, the first
quarter 1998 charge for purchased in-process R&D, the second
quarter 1998 gain on divestiture and a fourth quarter 1997 charge
for a litigation settlement. This ratio was 6.8% for the twelve-
month period ending September 27, 1997, and also reflected
restructuring and a gain on divestiture.
Risks Associated With Year 2000 Date Issues
The company has been addressing the potential risks associated
with the year 2000 date issue. It has established a formal
program to assess and renovate internal information technology
("IT") and non-information technology ("non-IT") operations that
are at risk, and further, to evaluate the year 2000 readiness of
key third party suppliers and recipients of products, services,
materials or data. Year 2000 issues are being addressed through a
combination of software replacement, system upgrades and, in
limited instances, source code modifications (collectively,
"renovation"). Ongoing reengineering projects have had the
incidental benefit of remediating several major year 2000 issues.
The assessment phase of IT systems is substantially
complete. The renovation phase is on schedule and the company
plans to have all key IT systems tested and compliant by the end
of June 1999. Other IT systems should be tested and compliant
during the first three quarters of 1999, depending on the
project. For non-IT systems, the company has engaged a leading
production systems integration firm specializing in Year 2000
assessment and remediation of manufacturing, distribution and
research and development facilities. The assessment phase is ongoing
and should be completed by the end of the first quarter 1999. Based on
information available at this time, the company plans to have all
key non-IT systems tested and compliant during the third or fourth
quarter 1999,depending on the project. The company has been assessing
the readiness of key suppliers and customers since early 1998. To
further facilitate this assessment, the company will interact with each
major supplier or recipient of data, materials, products or services,
including face-to-face interviews with those considered to be
critical to the company. This assessment is scheduled for completion
early in the fourth quarter of 1999.
Anticipated costs, comprised of both period expenses and capital
expenditures, of identifying and remediating year 2000 issues in the
above-described areas is expected to be in the range of $65-$75, of
which approximately $20 has been incurred to date. Of the total
anticipated costs, approximately 50% is expected to be capitalized as
part of system upgrades and replacements. Management believes that its
year 2000 program will substantially reduce the risk of a material
adverse impact on future financial results caused by the year 2000
issue. Potential risks of a failure to address a year 2000 issue
(whether IT, non-IT or external) that could have a materially
detrimental impact to the company include the inability to manufacture
or ship products, the inability to receive and fill orders, and problems
with customers or suppliers including the loss of electrical power or
the failure of a key customer or supplier to purchase products or
provide anticipated goods and services. At this stage, no overall
contingency plan has been developed. Specified contingency plans will
be developed as specific risks are identified.
The estimated costs of remediation and the expected completion
dates described above are based on information available at this time
and may be updated as additional information and assessment phase results
become available. Readers are referred to the section of this filing
labeled "Information Concerning Forward-Looking Statements" which
addresses forward-looking statements made by the company.
OUTLOOK
The vision care segment is expected to return to high single-
digit revenue growth in the fourth quarter and continue into 1999
as the difficult comparisons versus the ReNu Multiplus launch in
the U.S. will be mitigated. In addition, the company expects to
launch its line of disposable toric contact lenses in the U.S.
during the fourth quarter.
Fourth quarter revenues in the eyewear segment are expected
to be essentially even with the prior year. Operating margins for
the year are expected to be in the range of 3%, a 6 percentage
point increase from 1997. This is below the company's stated goal
of 5%, the result of revenue shortfalls from SHI that began in
the third quarter. The company is assessing whether the future
performance of SHI will impact the ability to meet the operating
margin goals of 10% in 1999 and 15% in 2000.
The pharmaceuticals/surgical segment is expected to
experience accelerated growth throughout the rest of the year,
due to newly introduced and acquired products. Third quarter
trends are expected to continue for pharmaceuticals products,
while surgical product revenues should accelerate due to the
launch of a new insertion system for foldable intraocular lenses,
enhancements to the Millennium line of phacoemulsiphication
equipment, and the recent signing of a major managed care
contract for cataract products. Earnings from the surgical
business are expected to be slightly accretive to the fourth
quarter and to 1998, and will gain momentum in 1999 as additional
manufacturing sites are consolidated and the company realizes the
benefit of administrative consolidations which have taken place
over the last nine months.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "anticipate," "should,"
"expect," "estimate," "project" and similar expressions are
intended to identify forward-looking statements. The forward-
looking statements contained in this report are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements involve predictions of
future company performance, and are thus dependent on a number of
factors affecting the company's performance. Where possible,
specific factors that may impact performance materially have been
identified in connection with specific forward-looking
statements. Additional risks and uncertainties include, without
limitation, the impact of competition, seasonality and general
economic conditions in the global sunglass, vision care and
ophthalmic surgical and pharmaceutical markets, where the
company's core businesses compete, changes in global economic and
political conditions, customer concentration (the company's five
largest customers accounted, in the aggregate, for over 10% of
total sales in the first nine months of 1998 changing trends in
consumer preferences and tastes, legal proceedings initiated by
or against the company, changes in government regulation of the
company's products and operations, changes in private and
regulatory schemes providing for the reimbursement of patient
medical expenses, difficulties or delays in the development,
production, testing and marketing of products and the effect of
changes within the company's organization, and such other factors
as are described in greater detail in the company's filings with
the Securities and Exchange Commission, including its 1997 Annual
Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In its 1997 Annual Report on Form 10-K, the company
reported the proposed settlement of shareholder actions
against the company, the former Chief Executive Officer
and Chairman, Daniel E. Gill and four other officers. On
October 28, 1998, the United States District Court for
the Western District of New York approved this
settlement.
Item 6. Exhibits and Reports on Form 8-K
(a) Item 601 Exhibits
Those exhibits required to be filed by Item 601 of
Regulation S-K are listed in the Exhibit Index
immediately preceding the exhibits filed herewith and
such listing is incorporated herein by reference.
(b) Reports on Form 8-K
Current Report on Form 8-K dated July 29, 1998 included
supplemental indentures No. 1 and No. 2 between the
company and Citibank N.A. and the underwriting agreement
specific to these supplemental indentures.
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.
BAUSCH & LOMB INCORPORATED
Date: November 10, 1998 By:
Robert B. Stiles
Senior Vice President
and General Counsel
Date: November 10, 1998 By:
Stephen C. McCluski
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
S-K Item 601 No. Document
(3)-a By-laws of Bausch & Lomb Incorporated, as
amended, effective October 26, 1998 (filed
herewith).
(4)-a Certificate of Incorporation of Bausch &
Lomb Incorporated (filed as Exhibit (4)-a to the
company's Annual Report on Form 10-K for the fiscal
year ended December 29, 1985, File No. 1-4105, and
incorporated herein by reference).
(4)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-b to the
company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-4105, and
incorporated herein by reference).
(4)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-c to the
company's Annual Report on Form 10-K for the fiscal
year ended December 26, 1992, File No. 1-4105, and
incorporated herein by reference).
(4)-d Form of Indenture, dated as of September 1, 1991,
between the company and Citibank, N.A., as
Trustee, with respect to the company's Medium-Term
Notes (filed as Exhibit (4)-a to the company's
Registration Statement on Form S-3, File No. 33-
42858, and incorporated herein by reference).
(4)-e Supplemental Indenture No. 1, dated May 13, 1998,
between the Company and Citibank N.A. (filed as
Exhibit 3.1 to the Company's Current Report on Form
8-K, dated July 24, 1998, File No. 1-4105, and
incorporated herein by reference).
(4)-f Supplemental Indenture No. 2, dated as of
July 29, 1998, between the Company and Citibank N.A.
(filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, dated July 24, 1998, File No. 1-
4105, and incorporated herein by reference).
(11) Statement Regarding Computation of Per Share
Earnings (filed herewith).
(12) Statement Regarding Computation of Ratio of
Earnings to Fixed Charges (filed herewith).
(27) Financial Data Schedule (filed herewith).
<TABLE>
Bausch & Lomb Incorporated
Exhibit 11
Statement Regarding Computation of Per Share Earnings
(Share Amounts in Thousands Except Per Share Data)
<CAPTION>
Three Months Ended Nine Months Ended
Sept 26, Sept 27, Sept 26, Sept 27,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Earnings (in millions) (a) $36.5 $18.5 $42.5 $42.0
Actual outstanding Common and
Class B shares at beginning
of period 55,888 55,421 55,209 55,404
Sum of weighted average
activity of repurchases and
issuances of Common and
Class B stock and cancellation
of restricted stock grants 134 (52) 505 17
Weighted Basic Shares (b) 56,022 55,369 55,714 55,421
Effect of assumed exercise of
Common stock equivalents 479 366 550 279
Weighted Diluted Shares 56,501 55,735 56,264 55,700
Basic earnings per share $0.65 $0.33 $0.76 $0.76
Diluted earnings per share $0.65 $0.33 $0.76 $0.75
</TABLE>
<TABLE>
Bausch & Lomb Incorporated
Exhibit 12
Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
<CAPTION>
(Dollar Amounts In Millions)
For Nine Months For the Year
Ending Ending
Sept. 26, 1998 December 27, 1997
<S> <C> <C>
Earnings before provision for
income taxes and minority
interests $ 94.6 $118.0
Fixed charges 79.1 57.9
Capitalized interest, net of
current period amortization 0.2 0.3
Total earnings as adjusted $173.9 $176.2
Fixed charges:
Interest (including interest
expense and capitalized
interest) $ 77.4 $ 56.1
Portion of rents representative
of the interest factor 1.7 1.8
Total fixed charges $ 79.1 $ 57.9
Ratio of earnings to fixed charges 2.20<F1> 3.04<F2>
<FN>
<F1> Excluding the effects of the restructuring charges, purchased-
in-process research and development charges from the surgical
acquisitions and the gain on sale of the skin care business in
1998, the ratio of earnings to fixed charges at September 26,
1998 would have been 2.71.
</FN>
<FN>
<F2> Excluding the effects of the restructuring charges recorded in
1997, the ratio of earnings to fixed charges at December 27,
1997 would have been 4.28.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> SEP-26-1998
<CASH> 140804
<SECURITIES> 7877
<RECEIVABLES> 527107
<ALLOWANCES> (30187)
<INVENTORY> 415889
<CURRENT-ASSETS> 1324861
<PP&E> 1366088
<DEPRECIATION> 673567
<TOTAL-ASSETS> 3539639
<CURRENT-LIABILITIES> 854063
<BONDS> 1280741
0
0
<COMMON> 24148
<OTHER-SE> 827738
<TOTAL-LIABILITY-AND-EQUITY> 3539639
<SALES> 1763732
<TOTAL-REVENUES> 1763732
<CGS> 832576
<TOTAL-COSTS> 832576
<OTHER-EXPENSES> 854210
<LOSS-PROVISION> 8079
<INTEREST-EXPENSE> 77359
<INCOME-PRETAX> 94636<F1>
<INCOME-TAX> 34136
<INCOME-CONTINUING> 42542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42542
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
<FN>
<F1>Income Before Taxes and Minority Interest
</FN>
</TABLE>
BAUSCH & LOMB INCORPORATED
BY-LAWS
<PAGE>
BAUSCH & LOMB INCORPORATED
BY-LAWS ENACTED JUNE 16, 1964, AS AMENDED
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. A meeting of shareholders
entitled to vote shall be held annually for the election of
directors and the transaction of other business on such date
(except a Sunday or holiday) and at such time during regular
business hours as shall be fixed by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders may be called at any time by the Board of
Directors.
SECTION 3. PLACE OF MEETINGS. Meetings of shareholders
shall be held at the principal office of the Corporation, or
at such other place, within or without the State of New
York, as may be fixed by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS. (a) Notice of each meeting
of shareholders shall be in writing and shall state the
place, date and hour of the meeting. Notice of a Special
Meeting shall state the purpose or purposes for which it is
being called and shall also indicate that it is being issued
by or at the direction of the person or persons calling the
meeting. If, at any meeting, action is proposed to be taken
which would, if taken, entitle shareholders, fulfilling the
requirements of Section 623 of the Business Corporation law,
to receive payment for their shares, the notice of such
meeting shall include a statement of that purpose and to
that effect and be accompanied by a copy of such section and
an outline of the material terms.
(b) A copy of the notice of any meeting shall be given,
personally or by mail, not less than ten nor more than sixty
days before the date of the meeting, to each shareholder
entitled to vote at such meeting. If mailed, such notice is
given when deposited in the United States mail, with postage
thereon prepaid, directed to the shareholder at the address
for such shareholder as it appears on the record of
shareholders, or, if the shareholder shall have filed with
the Secretary a written request that notices to him or her
be mailed to some other address, then directed to him or her
at such other address.
(c) Any previously scheduled meeting of the shareholders may
be postponed, and (unless the Corporation's Certificate of
Incorporation otherwise provides or if not permitted by law)
any special meeting of the shareholders may be cancelled, by
resolution of the Board of Directors upon public notice
given prior to the date previously scheduled for such
meeting of shareholders.
SECTION 5. WAIVER OF NOTICE. Notice of meeting need not be
given to any shareholder who submits a signed waiver of
notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by that
shareholder.
SECTION 6. QUORUM AND ADJOURNED MEETINGS. (a) At any
Annual or Special Meeting the holders of a majority of the
shares of stock entitled to vote thereat, present in person
or by proxy, shall constitute a quorum for the transaction
of any business, provided that when a specified item of
business is required to be voted on by a class or series,
voting as a class, the holders of a majority of the shares
of stock of such class or series shall constitute a quorum
for the transaction of such specified item of business
except that if the holders of 4% Cumulative Preferred Stock
should be entitled to elect Directors as provided in Article
7(B) of the Company's Certificate of Incorporation, a quorum
shall, insofar as the election of such Directors is
concerned but not otherwise, be such number of shares of 4%
Cumulative Preferred Stock as shall be represented in person
or by proxy. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of
any shareholders.
(b) Despite the absence of a quorum, the Chairman of the
meeting or a majority of the shares held by shareholders
present at such meeting may adjourn the meeting to another
time and place, and it shall not be necessary to give any
notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting
at which the adjournment is taken. At the adjourned
meeting, any business may be transacted that might have been
transacted on the original date of the meeting. If, after
the adjournment, however, the Board of Directors fixes a new
record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder on the
new record date entitled to notice under Section 4 of this
Article I of the By-Laws.
SECTION 7. ORGANIZATION. At every meeting of shareholders,
the Chairman of the Board of Directors or the president, or
in the absence of both of them, a Vice President appointed
by the Board, shall act as chairman of the meeting. The
Secretary, or in the Secretary's absence a person selected
by the Chairman of the meeting, shall act as secretary of
the meeting.
SECTION 8. VOTING. (a) Whenever any corporate action,
other than the election of Directors, is to be taken by vote
of the shareholders, it shall, except as otherwise required
by law or by the Certificate of Incorporation, be authorized
by a majority of the votes cast at a meeting of shareholders
by the holders of shares entitled to vote thereon.
(b) The Chairman of the meeting shall fix and announce at
the meeting the date and time of the opening and the closing
of the polls for each matter upon which the shareholders
will vote.
(c) Directors shall, except as otherwise required by law, be
elected by a plurality of the votes cast at a meeting of
shareholders by holders of shares entitled to vote in the
election; provided, however, that a nomination shall be
accepted, and votes cast for a nominee shall be counted by
the inspectors of election, only if the person is nominated
in accordance with the procedures set forth in Subsection
8(d).
(d) (1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to
be considered by the shareholders may be made at an annual
meeting of shareholders (A) pursuant to the Corporation's
notice of meeting,(B) by or at the direction of the Board of
Directors or (C) by any shareholder of the Corporation who
was a shareholder of record at the time of giving of notice
provided for in this By-Law, who is entitled to vote at the
meeting and who complied with the notice procedures set
forth in this By-Law.
(2) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant
to clause (C) of paragraph (d)(l) of this By-Law, the
shareholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business
must be a proper matter for shareholder action. To be
timely, a shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the
Corporation not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that
the date of the annual meeting is more than 30 days before
or more than 60 days after such anniversary date, notice by
the shareholder to be timely must be so delivered not
earlier than the close of business on the 120th day prior to
such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement
of the date of such meeting is first made. In no event
shall the public announcement of an adjournment of an annual
meeting commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's
notice shall set forth (A) as to each person whom the
shareholder proposes to nominate for election or reelection
as a director all information relating to such person that
is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or as
otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14a-11 thereunder (including such
person's written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected); (B) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any
material interest in such business of such shareholder and
the beneficial owner, if any, on whose behalf the proposal
is made; and (C) as to the shareholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such
shareholder, as they appear on the Corporation's books, and
of such beneficial owner and (ii) the class and number of
shares of the Corporation which are owned beneficially and
of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (d)(2) of this By-Law to the contrary, in the
event that the number of directors to be elected to the
Board of Directors of the Corporation is increased and there
is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of
Directors made by the Corporation at least 100 days prior to
the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this By-Law
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the
close of business on the 10th day following the day on which
such public announcement is first made by the Corporation.
(e) Only such business shall be conducted at a special
meeting of shareholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of
Directors may be made at a special meeting of shareholders
at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction
of the Board of Directors or (ii) by any shareholder of the
Corporation who is a shareholder of record at the time of
giving of notice provided for in this By-Law, who shall be
entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-Law. In the event the
Corporation calls a special meeting of shareholders for the
purpose of electing one or more directors to the Board of
Directors, any such shareholder may nominate a person or
persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of
meeting, if the shareholder's notice required by paragraph
(d)(2) of this By-Law shall be delivered to the Secretary at
the principal executive offices of the Corporation not
earlier than the close of business on the 120th day prior to
such special meeting and not later than the close of
business on the later of the 90th day prior to such special
meeting or the 10th day following the day on which public
announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall
the public announcement of an adjournment of a special
meeting commence a new time period for the giving of a
shareholder's notice as described above.
(f) (1) Only such persons who are nominated in accordance
with the procedures set forth in this By-Law shall be
eligible to serve as directors and only such business shall
be conducted at a meeting of shareholders as shall have been
brought before the meeting in accordance with the procedures
set forth in this By-Law. Except as otherwise provided by
law, the Certificate of Incorporation or the By-Laws of the
Corporation, the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made,
or proposed, as the case may be, in accordance with the
procedures set forth in this By-Law and, if any proposed
nomination or business is not in compliance with this By-
Law, to declare that such defective proposal or nomination
shall be disregarded.
(2) For purposes of this By-Law, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions or this By-
Law, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth
in this By-Law. Nothing in this By-Law shall be deemed to
affect any rights of (A) Shareholders to request inclusion
of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act or (B) the holders of
any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 9. QUALIFICATION OF VOTERS. (a) Every shareholder
of record of Common Stock or Class B Stock of the
Corporation shall be entitled at every meeting of such
shareholders to one vote for every share of Common Stock and
one vote for every share of Class B Stock standing in his or
her name on the record of shareholders on a day and hour
fixed by the Board of Directors, which day shall not be more
than sixty nor less than ten days before the date of such
meeting.
(b) Shares of stock belonging to the Corporation and shares
held by another domestic or foreign corporation of any type
or kind, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held by
the Corporation, shall not be shares entitled to vote or to
be counted in determining the total number of outstanding
shares.
(c) Shares held by an administrator, executor, guardian,
conservator, committee, or other fiduciary, except a
trustee, may be voted by such person, either in person or by
proxy, without transfer of such shares into his or her name.
Shares held by a trustee may be voted by the trustee, either
in person or by proxy, only after the shares have been
transferred into his or her name as trustee or into the name
of his or her nominee.
(d) Shares standing in the name of another domestic or
foreign corporation of any type or kind may be voted by such
officer, agent or proxy as the By-Laws of such corporation
may provide, or in the absence of such provision, as the
Board of Directors of such corporation may provide.
SECTION 10. PROXIES. (a) Every shareholder entitled to
vote at a meeting of shareholders or to express consent or
dissent without a meeting may authorize another person or
persons to act for him or her by proxy. Any such proxy
shall be delivered to the Secretary or to the inspectors of
election, if any, at or prior to the meeting.
(b) No proxy shall be valid after the expiration of eleven
months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except as otherwise
provided by law.
(c) The authority of the holder of a proxy to act shall not
be revoked by the incompetence or death of the shareholder
who executed the proxy unless, before the authority is
exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary.
(d) Without limiting the manner in which a shareholder may
authorize another person or persons to act for him or her as
proxy pursuant to Section 10(a) hereof, a shareholder may:
i. execute a writing authorizing another person or persons
to act as proxy, such execution being accomplished by the
shareholder or shareholder's authorized representative
signing such writing or causing his or her signature to be
affixed to such writing by any reasonable means including,
but not limited to, by facsimile; or
ii. authorize another person or persons to act for him or
her as proxy by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic
transmission to the person who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who
will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth
or be submitted with information from which it can
reasonably be determined that the telegram, cablegram or
other electronic transmission was authorized by the
shareholder. If it is determined that such telegrams,
cablegrams or other electronic transmissions are valid, the
inspectors, or, if there are no inspectors, such other
persons making that determination, shall specify the nature
of the information upon which they relied.
(e) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant
to paragraph 10(d) hereof may be substituted or used in lieu
of the original writing or transmission for any and all
purposes for which the original writing or transmission
could be used, provided that such copy, facsimile or
telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
SECTION 11. INSPECTORS OF ELECTION. (a) The Board of
Directors, the Chairman of the Board or the President, in
advance of any shareholders' meeting, shall appoint one or
more inspectors to act at the meeting or any adjournment
thereof. In case any person appointed fails to appear or
act, the vacancy may be filled by appointment made by the
Board of Directors, the Chairman of the Board or the
President in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign
an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the
best of his or her ability.
(b) The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine
the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. The
inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a
certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of
the facts stated and of the vote as certified by them.
SECTION 12. LIST OF SHAREHOLDERS. A list of shareholders
as of the record date, certified by the Secretary or by the
transfer agent, shall be produced at any meeting of
shareholders upon the request thereat or prior thereto of
any shareholder. If the right to vote at any meeting is
challenged, the inspectors of election, or person presiding
thereat shall require such list of shareholders to be
produced as evidence of the right of the persons challenged
to vote at such meeting, and all persons who appear from
such list to be shareholders entitled to vote thereat may
vote at such meeting.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER, TERM OF OFFICE AND CLASSIFICATION.
Subject to the provisions of the Certificate of
Incorporation relating to the rights of the holders of any
class or series of stock having a preference over the Common
Stock or Class B Stock as to dividends or upon liquidation
to elect additional directors under specified circumstances,
the number of the directors of the Corporation shall be not
less than three nor more than twenty-five persons. The
exact number of directors within the minimum and maximum
limitations specified in the preceding sentence shall be
determined from time to time by the affirmative vote of (i)
a majority of the entire Board of Directors or (ii) the
holders of at least eighty percent of the outstanding voting
power of all of the shares of the Corporation entitled to
vote generally in the election of directors, voting together
as a single class. No decrease in the number of directors
constituting the Board of Directors shall shorten the term
of any incumbent director. The directors, other than those
who may be elected by the holders of any class or series of
stock having a preference over the Common Stock or Class B
Stock as to dividends or upon liquidation, shall be
classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal
in number as possible, one class to be originally elected
for a term expiring at the annual meeting of shareholders to
be held in 1986, another class to be originally elected for
a term expiring at the annual meeting of shareholders to be
held in 1987, and another class to be originally elected for
a term expiring at the annual meeting of shareholders to be
held in 1988, with the directors in each class to hold
office until their successors are elected and qualified. At
each annual meeting of the shareholders of the Corporation,
the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term
expiring at the annual meeting of shareholders held in the
third year following the year of their election.
SECTION 2. RESIGNATIONS. Any Director may resign at any
time pursuant to written notice given to the Chairman of the
Board.
SECTION 3. VACANCIES; REMOVAL. (a) Except as otherwise
provided for or fixed by or pursuant to the provisions of
the Certificate of Incorporation relating to the rights of
the holders of any class or series of stock having a
preference over the Common Stock or Class B Stock as to
dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships
resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause
shall be filled only by the affirmative vote of a majority
of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold
office until the next annual meeting of shareholders and
until such director's successor shall have been elected and
qualified.
(b) Subject to the rights of any class or series of stock
having a preference over the Common Stock or Class B Stock
as to dividends or upon liquidation to elect directors under
specified circumstances, any director may be removed from
office, but only for cause and only by the affirmative vote
of the holders of two-thirds of the combined voting power of
the then outstanding shares of stock entitled to vote
generally in the election of directors, voting together as a
single class.
SECTION 4. FIRST MEETING. As soon as practical after each
annual election of Directors, the Board of Directors shall
meet for the purpose of organization and the transaction of
other business. Notice of such meeting need not be given.
Such first meeting may be held at any other time which shall
be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board
of Directors may be held at such times as may be fixed from
time to time by the Board of Directors without notice.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board
of Directors shall be held whenever called by the Chairman
of the Board or the President, or by any three Directors.
Notice of a special meeting shall state the date, place and
hour of such meeting and shall be deemed sufficient if given
orally, delivered in writing or sent by telegraph or
telefacsimile or electronic mail transmission, in each case,
not less than 12 hours before the meeting, or if mailed not
less than 24 hours before the meeting.
SECTION 7. PLACE OF MEETING. Meetings of the Board of
Directors shall be held at such place or places within or
without the State of New York as the Board of Directors from
time to time may by resolution determine.
SECTION 8. WAIVERS OF NOTICE. Notice of a meeting need not
be given to any Director who submits a signed waiver of
notice whether before or after the meeting, or who attends
the meeting without protesting, prior thereto or at its
commencement, the lack of such notice.
SECTION 9. QUORUM AND MANNER OF ACTING. (a) One-third of
the entire Board of Directors shall constitute a quorum for
the transaction of business or of any specified item of
business. The vote of a majority of the Directors present
at the time of the vote, if a quorum is present at such
time, shall be the act of the Board.
(b) A majority of the Directors present, whether or not a
quorum is present, may adjourn any meeting to another time
and place without notice to any Director.
SECTION 10. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, or, in the Chairman's
absence, the President, or, in the absence of both of them,
a chairman chosen by a majority of the directors present
shall preside. The Secretary shall act as secretary of the
Board of Directors. In the event the Secretary shall be
absent from any meeting of the Board of Directors, the
meeting shall select its secretary.
SECTION 11. COMPENSATION. The Board of Directors shall
have authority to fix the compensation of Directors for
services in any capacity.
SECTION 12. INTERESTED DIRECTORS. (a) No contract or other
transaction between the Corporation and one or more of its
Directors, or between the Corporation and any other
corporation, firm, association or other entity in which one
or more of its directors are Directors or Officers, or are
financially interested, shall be either void or voidable for
this reason alone or by reason alone that such Director or
Directors are present at the meeting of the Board of
Directors, or of a committee thereof, which approves such
contract or transaction, or that his or their votes are
counted for such purpose, provided the party or parties
thereto shall have established affirmatively that the
contract or transaction was fair and reasonable as to the
Corporation at the time such contract or transaction was
approved by the Board, a committee, or the shareholders.
(b) Any such contract or transaction may be approved as fair
and reasonable if: (1) the fact of common directorship,
officership or financial interest is disclosed or known to
the Board or committee and the Board or committee approves
such contract or transaction by a vote sufficient for such
purpose without counting the vote or votes of such
interested Director or Directors (although common or
interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a
Committee which approves such contract or transaction), or
(2) such common directorship, officership or financial
interest is disclosed or known to the shareholders entitled
to vote thereon, and such contract or transaction is
approved by vote of the shareholders.
SECTION 13. LOANS TO DIRECTORS. A loan shall not be made
by the Corporation to any Director unless it is authorized
by vote of the shareholders. For this purpose, the shares
of the Director who would be the borrower shall not be
shares entitled to vote or be included in determining a
quorum.
SECTION 14. ACTION WITHOUT A MEETING. Any action required
or permitted to be taken by the Board of Directors or any
committee thereof may be taken without a meeting if all
members of the Board or the committee consent in writing to
the adoption of a resolution authorizing the action. The
resolution and the written consents thereto shall be filed
with the minutes of the proceedings of the Board or
committee.
SECTION 15. PARTICIPATION IN MEETINGS BY CONFERENCE
TELEPHONE. Any one or more members of the Board of
Directors or any committee thereof may participate in a
meeting of such Board or committee by means of a conference
telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at a meeting.
ARTICLE III
COMMIITEES
SECTION 1. EXECUTIVE COMMITTEE. There shall be an
Executive Committee consisting of the Chairman of the Board,
the President and not less than three other Directors
elected by a majority of the entire Board of Directors who
shall serve at the pleasure of the Board. The Board of
Directors shall elect one of the members of the Executive
Committee to be Chairman of the Executive Committee, and may
designate one or more other Directors as alternate members
of the Committee who may be designated by the Chairman of
the Executive Committee or, in such Chairman's absence, by
the Chairman of the Board to replace any absent member or
members at any meeting of the Committee. The Executive
Committee shall have all the authority of the Board, except
it shall have no authority as to the following matters:
(1) The submission to shareholders of any action that needs
shareholders' authorization;
(2) The filling of vacancies in the Board or in any
committee;
(3) The fixing of compensation of the Directors for serving
on the Board or on any committee;
(4) The amendment or repeal of the By-laws, or the adoption
of new By-laws; and
(5) The amendment or repeal of any resolution of the Board
which, by its terms, shall not be so amendable or
repealable.
SECTION 2. ADDITIONAL COMMITTEES. The Board of Directors
by resolution adopted by a majority of the entire Board may
designate from among its members additional committees, each
of which shall consist of one or more Directors and shall
have such authority as provided in the resolution
designating the committee, except that such authority shall
not exceed the authority of the Executive Committee. The
Board may designate a member of any committee to be chairman
of the committee and may designate one or more other
Directors as alternate members of the committee who may be
designated by the chairman of the committee or, in his
absence, by the Chairman of the Board to replace any absent
member or members at any meeting of the committee. Each
committee shall serve at the pleasure of the Board.
SECTION 3. RULES OF PROCEDURE. The Executive Committee
and, except to the extent determined by the Board of
Directors, each other committee shall fix its own rules of
procedure. Regular meetings of each committee shall be held
at such times as may be fixed from time to time by the Board
or the committee. Special meetings shall be held whenever
called by the Chairman of the Board, the Chief Executive
Officer or the chairman of the committee. No notice need be
given of regular meetings. Notice of special meetings shall
comply with Article II, Section 6, of the By-laws. At all
meetings of the Executive Committee three (3) members shall
constitute a quorum for the transaction of business and at
all meetings of other committees a majority of the members
of the committee shall constitute a quorum. The vote of a
majority of the members of a committee present at the time
of the vote, if a quorum is present at such time, shall be
the act of the committee. (See also Article II, Sections 14
and 15.)
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS ENUMERATED. The offices of the
Corporation to which officers may be elected shall include a
Chairman of the Board of Directors, a President, one or more
Vice Presidents, a Secretary, a Treasurer, and a Controller.
Any two or more offices may be held by the same person.
SECTION 2. TERM OF OFFICE. Those officers whose titles are
specifically mentioned in Section 1 of this Article IV shall
be elected at the first meeting of the Board of Directors.
Unless a shorter term is provided in the resolution of the
Board electing such officer, the term of office of such
officer shall extend to and expire at the meeting of the
Board following the next Annual Meeting.
SECTION 3. OTHER OFFICERS. The Board of Directors may
elect such other officers, agents or employees as it shall
deem necessary, who shall hold their offices for such terms
and have such powers and perform such duties as shall be
prescribed from time to time by the Board.
SECTION 4. REMOVAL OF OFFICERS; RESIGNATION. Any officer
may be removed by the Board of Directors, with or without
cause, at any time. Removal of an officer without cause
shall be without prejudice to his or her contract rights, if
any, but election as an officer shall not of itself create
contract rights. Any officer may resign from his or her
position, effective pursuant to written notice to the
Secretary. Vacancies created by the removal or resignation
of an officer may, but need not, be filled as determined by
the Board of Directors.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman shall
preside over all meetings of the shareholders and of the
Board of Directors, and shall perform such other duties as
are properly required by the Board of Directors.
SECTION 6. PRESIDENT. The President shall perform such
duties as are properly required by the Board of Directors
or, if the President is not Chief Executive Officer, by the
Chief Executive Officer. The President, in the event of the
death, resignation, removal, disability or absence of the
Chairman, shall possess the powers and perform the duties of
the Chairman.
SECTION 7. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall be either the Chairman of the Board or the
President, as the Board of Directors shall from time to time
determine, and shall, subject to the control of the Board of
Directors, have the general powers and duties of supervision
and management of the Corporation which usually pertain to
the office of chief executive officer, and shall perform
such other duties as are properly required by the Board of
Directors. The duties of the Chief Executive Officer shall
in the event of his or her absence or disability be
performed by such other officer as the Chief Executive
Officer or the Board of Directors shall designate.
SECTION 8. VICE PRESIDENT. The Vice President or, if there
be more than one, the Vice Presidents shall generally assist
the Chief Executive Officer and the President and perform
such duties and exercise such powers as may be assigned and
delegated to them by the Chief Executive Officer or the
President.
SECTION 9. SECRETARY. The Secretary shall act as secretary
of all meetings of the Board of Directors and of the
shareholders and shall record all votes and the minutes of
all proceedings in a book to be kept for that purpose. The
Secretary shall give or cause to be given all notices
required to be given by the Corporation. The Secretary
shall prepare or cause to be prepared for use at meetings of
shareholders the list of shareholders as of the record date
required by Article I, Section 12 of these By-Laws and shall
certify or cause the transfer agent to certify such list.
The Secretary shall keep a current list of the Directors and
officers of the Corporation and shall be the custodian of
the seal of the Corporation and shall affix the seal, or
cause it to be affixed to all agreements, documents and
other papers requiring the seal. The Secretary shall also
have custody of the certificate books and shareholder
records and such other books and records as the Board may
direct and shall perform all other duties incident to such
office or which the Board may from time to time assign.
SECTION 10. TREASURER. The Treasurer shall have the care
and custody of the corporate funds and other valuable
effects, including securities, and shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by
the Board of Directors. The Treasurer shall perform all
other duties incident to the office of Treasurer which the
Board may from time to time assign.
SECTION 11. SALARIES. The salaries of the Chairman of the
Board and the President of the Company shall be fixed by the
Board, and the salaries of all other officers elected by the
Board of Directors shall be fixed by the Board or a
Committee thereof designated by the Board to do so.
ARTICLE V
CAPITAL STOCK
SECTION 1. SHARE CERTIFICATES. Shares of the Corporation
shall be represented by Certificates or shall be
uncertificated as shall be approved by the Board of
Directors. Certificates representing shares shall be signed
by one or more of the Chairman of the Board, the President
or any Vice President and by the Secretary or the Treasurer.
The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the
Corporation itself or its employee. In case any officer who
has signed or whose facsimile signature has been placed upon
a 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 he or she were such
officer at the date of issue.
SECTION 2. TRANSFER AND TRANSFER AGENTS. Upon surrender to
the Corporation or to any transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or such
transfer agent to issue a new certificate to the person
entitled thereto, to cancel the old certificate and to
record the transaction upon its books. The Board of
Directors shall have power and authority to make all such
rules and regulations as it may deem expedient, not
inconsistent with this section of the By-laws, concerning
the issue, registration and transfer of certificates of
stock, and may appoint transfer agents and registrars
thereof.
SECTION 3. REGISTERED SHAREHOLDERS. Except as otherwise
provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends or other
distributions, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books
as the owner of shares, and shall not be bound to recognize
any equitable or legal claim to or interest in such share or
shares on the part of any other person.
SECTION 4. RECORD DATE. (a) For the purpose of determining
the shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment
of any rights, or for the purpose of any other action
affecting the interests of shareholders, the Board of
Directors may fix, in advance, a record date. Such date
shall not be more than sixty nor less than ten days before
the date of any such meeting, nor more than sixty days prior
to any other action.
(b) In each such case, except as otherwise provided by law,
only such persons as shall be shareholders of record on the
date so fixed shall be entitled to notice of, and to vote
at, such meeting and any adjournment thereof, or to express
such consent or dissent, or to receive payment of such
dividend, or such allotment of rights, or otherwise to be
recognized as shareholders for the purpose of any other
action affecting the interests of shareholders,
notwithstanding any registration of transfer of shares on
the books of the Corporation after any such record date so
fixed.
SECTION 5. LOST, MUTILATED OR DESTROYED CERTIFICATES. The
Board of Directors may direct a new certificate for shares
to be issued in place of any certificate theretofore issued
by the Corporation alleged to have been lost, mutilated or
destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate to be lost, mutilated or
destroyed. When authorizing such issue of a new
certificate, the Board may, in its discretion, and as a
condition precedent to the issuance thereof, require the
owner of such lost, mutilated or destroyed certificate, or
such person's legal representative, to give the Corporation
a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect
to the certificate alleged to have been lost or destroyed.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the outstanding
shares of the Corporation may be declared by the Board of
Directors at any regular or special meeting, pursuant to
law, and may be paid in cash, in property or in shares of
the Corporation.
SECTION 2. RESERVES. Before payment of any dividend, there
may be set aside out of any funds of the Corporation
available for the payment of dividends such sum or sums as
the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for such
other purpose as the Board shall think conducive to the
interests of the Corporation, and the Board may modify or
abolish any such reserve in the manner in which it was
created.
SECTION 3. DEPOSITS. All monies and other valuable effects
shall be deposited in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors.
SECTION 4. OBLIGATIONS. All checks, notes, drafts or other
instruments evidencing indebtedness or obligations of the
Corporation shall be signed by an officer or officers or
other person or persons, and in the manner (whether manually
or by facsimile), designated by the Board or an officer
authorized by the Board to make such designation.
SECTION 5. AUTHORIZED SIGNATURES. All deeds, bonds,
mortgages, contracts, and other instruments requiring a
seal, and all endorsements, assignments, transfers, stock
powers, bond powers or other instruments of transfer of
securities standing in the name of the Corporation, and all
proxies to vote upon or consents with respect to shares of
stock of other companies standing in the name of the
Corporation may be signed or executed by the Chief Executive
Officer or by the President or by any other officer
authorized to sign such instrument by the Chief Executive
Officer or by the President or by the Board of Directors.
SECTION 6. SEAL. The seal of the Corporation shall be in
such form as shall be approved by the Board of Directors and
shall, at least, have inscribed thereon the name of the
Corporation and the date of its incorporation. The seal may
be used by causing it or a facsimile thereof, to be
impressed or affixed or otherwise reproduced.
ARTICLE VII
AMENDMENTS
Subject to any greater vote that may be required by law or
pursuant to the Certificate of Incorporation, these By-Laws
may be amended, repealed or altered, in whole or in part, by
a majority vote of the shares of stock of the Corporation,
represented at any regular meeting of shareholders, or at
any special meeting where notice of such amendment is
incorporated in the notice calling such special meeting, or
by the Board of Directors. No amendment of these By-Laws
pertaining to the election of Directors or the procedures
for the calling and conduct of a meeting of shareholders
shall affect the election of Directors or the procedures for
the calling or conduct in respect of any meeting of
shareholders unless adequate notice thereof is given to the
shareholders in a manner reasonably calculated to provide
shareholders with sufficient time to respond thereto prior
to such meeting.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
SECTION 1. RIGHT TO INDEMNIFICATION. To the fullest extent
authorized or permitted by law, each person who was or is
made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or
was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a
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 or agent
or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the Corporation against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided,
however, that no indemnification may be made to or on behalf
of any director or officer if a judgment or other final
adjudication adverse to the director or officer establishes
that his acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained
in fact a financial profit or other advantage to which he or
she was not legally entitled, and further provided 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 in this Section 1
shall be a contract right (which shall not be abrogated by
any amendment or repeal of this Section 1 with respect to
matters arising prior to such amendment or repeal) and shall
include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its
final disposition; provided, however, that 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 if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under
this Section 1 or otherwise. The Corporation may, by action
of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and
officers.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim
under Section 1 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 such 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 has
been tendered to the Corporation) that the claimant has not
met the standards of conduct which make it permissible under
Section 1 for the Corporation to indemnify the claimant for
the amount claimed, 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 because he or she has met the applicable
standard of conduct set forth in Section 1, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its shareholders)
that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable
standard of conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The right to
indemnification and the payment or expense 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 certificate of
incorporation, by-law, agreement, vote of shareholders or
disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain
insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or
loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or
loss under this Article or applicable law.
Enacted June 16, 1964; Amended 11/65, 2/66, 3/67, 4/69,
12/70, 5/71, 6/71, 5/72, 11/74, 9/75, 8/76, 11/77, 2/78,
11/78, 4/79, 12/80, 4/81, 5/81, 11/81, 2/83, 7/84, 4/85,
10/86, 10/98.
Note: The following provisions of these by-laws were
amended by Resolution of the Board of Directors on October
26, 1998. Article I, Sections 1, 4, 5, 6, 7, 8, 9, 10, 11;
Article II, Sections 1, 2, 6, 8, 10, 12, 13; Article III,
Sections 1, 2; Article IV, Sections 1, 2, 4, 5, 6, 7, 9, 10;
Article V, Sections 1, 4, 5; Article VII; Article VIII,
Section 1.
