UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 2-28286
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The Bureau of National Affairs, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 53-0040540
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1231 25th St, N.W., Washington, D. C. 20037
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code (202) 452-4200
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Securities Registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Class A common
stock, $1.00 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
The market value of the Class A voting stock held by non-affiliates of the
registrant as of February 28, 1998 was $96,654,418. All voting stock is owned by
employees of the registrant and its subsidiaries. The market value of the Class
B and Class C non-voting stock held by non-affiliates as of February 28, 1998
was $131,418,334, and $4,400,769 respectively. In determining the above, The
Bureau of National Affairs, Inc. (the "Company"), has assumed that all of its
officers, directors, and persons known to the Company to be the beneficial
owners of more than five percent of each class of the Company's common stock are
affiliates. Such assumption should not be deemed conclusive for any other
purpose.
The number of shares outstanding of each of the registrant's classes of common
stock, as of February 28, 1998 was 3,534,418 Class A common shares, 4,541,132
Class B common shares, and 403,413 Class C common shares.
Page 1 of 166
<PAGE>2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement, filed with the SEC on
March 27, 1998, are incorporated by reference into Part III of this Form 10-K.
The Bureau of National Affairs, Inc.
Index to Form 10-K
For the fiscal year ended December 31, 1997
PART I.
Item 1. Business......................................Page No. 3
Item 2. Properties............................................ 11
Item 3. Legal Proceedings..................................... 11
Item 4. Submission of Matters to a Vote of Security Holders... 11
Item X. Executive Officers of the Registrant.................. 12
PART II.
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters.................. 14
Item 6. Selected Financial Data............................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 16
Item 8. Financial Statements and Supplementary Data........... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 42
PART III.
Item 10. Directors and Executive Officers of Registrant........ 42
Item 11. Executive Compensation................................ 42
Item 12. Security Ownership of Beneficial Owners and Management 42
Item 13. Certain Relationships and Related Transactions......... 42
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Report on
Form 8-K.................................... 43
SIGNATURES...................................................... 45
EXHIBITS........................................................ 44
INDEX........................................................... 46
<PAGE> 3
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains and incorporates by reference
certain statements that are not statements of historical fact but are
forward-looking statements. The use of such words as "believes" and "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ from those projected. Readers are cautioned not
to place undue reliance on these forward-looking statements which speak only as
of the date hereof.
PART I
Item 1. Business
General Development of Business and Narrative Description of Business
Business of BNA and Subsidiaries
The Bureau of National Affairs, Inc. (BNA), is a leading publisher of
specialized business, legislative, judicial, and regulatory information
services. BNA was founded in 1929, and was incorporated in its present form as
an employee-owned company in 1946. BNA is independent, for profit, and is the
oldest fully employee-owned company in the United States.
BNA and its publishing subsidiaries, Tax Management Inc. and Pike & Fischer,
Inc., are engaged in providing labor, legal, economic, tax, health care, and
other regulatory information to business, professional, and academic users. They
prepare, publish, and market subscription information services in print, compact
disc, and online formats, books, pamphlets, and research reports.
Sales are made principally in the United States through field sales personnel
who are supported by direct mail, space advertising, and telemarketing.
Customers include lawyers, accountants, business executives, human resource
professionals, health care administrative professionals, labor unions, trade
associations, educational institutions, government agencies, and libraries in
the United States and throughout the world.
Online products are marketed through database vendors such as LEXIS/NEXIS, West
Publishing Company, Dialog, Legislate, Cambridge Information Group. Since 1996,
the Company began offering many of its products for electronic delivery via
Lotus Notes and the World Wide Web.
BNA Software, a division of Tax Management Inc., develops, produces, and markets
tax and financial planning software for use on personal computers. Sales are
made to accountants, lawyers, tax and financial planners, and others. The
products are marketed through direct mail, space advertising, and BNA field
sales representatives.
BNA International Inc. is the company's agent outside of North America for sale
of its domestic services and also engages in independent publishing activity,
including adaptation of the Company's domestic products for sales abroad.
The McArdle Printing Co., Inc. provides printing services to mid-Atlantic area
customers. It utilizes modern equipment and its customers include publishers,
trade associations, professional societies, other non-profit organizations,
financial institutions and governmental organizations. Approximately 55 percent
of its business is derived from the BNA publishing companies.
BNA Communications Inc. is engaged in the business of producing, publishing, and
marketing multimedia programs for training in the equal employment opportunity
and safety and health related fields. The programs promote awareness, facilitate
regulatory compliance, and develop skills for managers and employees in industry
and government.
In January of 1998, the Company acquired Institute of Management and
Administration, Inc. (IOMA), a New York City-based newsletter company. As a BNA
subsidiary IOMA will build on its 15-year history and will provide a solid
platform for leveraging BNA's content in lower price-point market segments.
(Continued)
<PAGE>4
Review of Operations
BNA began its second 50 years as an employee-owned company in grand fashion.
Record financial results and accolades highlighted the year 1997. Large gains in
both operating profit and non-operating income led to a 34.1 percent increase in
net income. Earnings per share, reflecting the higher net income and fewer
outstanding shares, rose 35.8 percent.
Consolidated revenues advanced 4.9 percent to $244 million, buoyed by large
increases from Tax Management, BNA Software, McArdle, and BNA Books. Increases
in expenses were again held to modest levels. As a result, the consolidated
operating profit rose 37.8 percent over the previous year and was 8.2 percent of
revenues, the highest level since 1989. Most business units recorded higher
operating profits, including BNA Communications' progression from a 1996 loss to
a 1997 profit.
Non-operating income increased $1.3 million, reflecting a 13.9 percent increase
in investment income and a gain from the sale of a publication.
Net income of $19.6 million was 8 percent of revenues, the highest earnings
margin in the company's history. And return on equity of 26.8 percent was the
highest since 1981.
Cash and investment balances rose nearly 6 percent to $144.2 million. The
increase was generated by strong cash flows from operations and market gains on
investment securities, reduced by dividends paid to shareholders, capital
expenditures, and net repurchases of BNA stock. Stock repurchases, primarily
from estates of Class B shareholders, were the highest in the company's history,
but they were easily financed by internal cash flows.
BNA's financial strength and liquidity, in addition to providing current
investment income, ensures that the company has the resources to finance
business challenges and opportunities and to meet the stock repurchase
obligations inherent in employee ownership.
A review of 1997 operations of the parent company and each subsidiary follows.
Parent Company
Strong and steady financial progress, prestigious honors and awards, and
reorganizations designed to carry the parent company successfully into the
future, all combined to make 1997 a very good year.
For the second consecutive year, the parent company saw a substantial
improvement in its operating profit. Parent company revenues increased only 1.1
percent; however, declines in operating expenses in just about every department
resulted in a 73 percent improvement over 1996's operating profit.
As we began our second 50 years of employee ownership, the formula for success
remained the same: high quality products produced, sold, distributed, and
supported in a high quality manner by BNA's employee owners. Making that formula
work, however, in a rapidly changing business environment required continual
evaluation and experimentation with our product line and business methods.
(Continued)
<PAGE>5
The opening days of 1997 saw the establishment of the Electronic Commerce Unit
in our Sales and Marketing Department. This unit, working in partnership with
our sales representatives, was very successful in establishing a strong and
growing market for our notification services on the World Wide Web. There was
also an extensive reorganization on the marketing side with the creation of a
group of market managers who have the responsibility of growing both new sales
and revenues in each of our product lines.
On the content side, the Editorial Department dissolved the Dailies Division and
established in its place the Business Information Division, consisting of both
daily and weekly notification services addressed to corporate as well as legal
markets. The year also saw the creation of an environmental news bureau designed
to provide better coverage for our environmental news publications at lower
cost. In this electronic information age, the Information Technology Department
plays a significant role both in product creation and product maintenance. That
department got a new leader in 1997, someone from outside BNA but with extensive
industry experience. He wasted little time in overhauling the department
extensively to meet the myriad challenges of the near future.
Organizing and preparing for the future did not take all the attention in 1997.
Improving our core product line to meet immediate competitive challenges and
developing new products to grow the business were keys to 1997's success.
In the critical human resources information market, the company continued to
improve its market-leading BNA's Human Resources Library on CD, adding model
policies, a quick search tool for streamlined research, and performance
appraisal and job description software. These improvements, along with creative
marketing and a strong selling effort, led to new sales and revenue records for
this product in 1997 despite head-to-head competition from a strong competitor.
In another highly competitive area, environment information, the company
launched BNA's Environmental Compliance Series on CD. This reference product
offers practical, step-by-step guidance on complying with pollution control
requirements and plain-English explanations of federal and state laws and
regulations. The compliance series is sold both as a stand-alone product and as
part of the market-leading BNA's Environment Library on CD.
BNA's newest product line, health care information, had two great successes.
First, it created the year's best-selling new notification service, BNA's Health
Care Fraud Report. Then, the American Association of Law Libraries (AALL) named
BNA's Health Law and Business Library (HLB) the best new product in 1997. HLB is
a portfolio series that was launched in both print and CD formats
simultaneously. This was the kind of product that took significant upfront
investment and development time before being released, and it was particularly
gratifying to have that sort of long-term investment in quality products
recognized by the law library community, one of our key market groups.
One of BNA's flagship products, The United States Law Week, was extensively
revamped in 1997 in response to new technological capabilities and changing
market needs. With the new, easy-to-use format and new features-especially
Supreme Court Today, a searchable online database of the U.S. Supreme Court
docket combined with digests of lower court decisions- Law Week has been
repositioned to remain a vital tool for attorneys into the coming decades.
(Continued)
<PAGE>6
The Business Information Division launched two very untraditional products in
1997. The first was a daily fax and e-mail notification service that followed a
major transportation bill through Congress. If the bill ultimately fails, the
publication will cease, but if it results in major legislation, this "temporary"
product could well become the basis of a major new notification service. The
second product launched was a biweekly notification service on lobbying, ethics,
and campaign finance reform. That product, priced significantly below
traditional BNA services, was designed to test the proposition that BNA can
profitably create products for market segments that will not accept our
traditional pricing.
The ability to move quickly to respond to market needs for specialized
notification services is partially attributable to the continued implementation
of PS2000, a single publishing system designed to produce all of BNA's diverse
product lines. In 1997, BNA adopted a standardized "new look" for the
notification services produced on the new system. This standardized approach
reduced both the time and the cost of producing new notification services. All
of BNA's daily publications are currently produced on PS2000, and all our
notification services will be on the new system by spring of 1998.
Efforts to support our customers and their use of BNA's electronic products were
strengthened in 1997. Trainers from BNA PLUS, BNA's subscriber support unit,
conducted more than 500 sessions during the year. Customer response was positive
and enthusiastic, with many subscribers mentioning the superiority of our
product support.
Record numbers of BNA journalists were interviewed as experts in their subject
areas on television and radio in 1997. On news and analysis broadcasts
nationwide, BNA is emerging as a trusted source.
The most notable setback in 1997 was the decision to stop work on PHOENIX, the
project to create a new circulation and billing system for BNA. As the project
neared completion, deadlines were consistently missed and questions arose as to
whether it would work and whether it could be reliably maintained. Rather than
risk the possibility of a system failure that could greatly jeopardize
relationships with our subscribers, as other publishers with system failures
have experienced, the project was halted and resources were redirected into
ensuring that the present system is Year 2000 compliant. The decision to stop
work on PHOENIX resulted in a pre-tax write-off of $1.2 million in 1997.
The year ended on a very high note. BNA was named one of Fortune magazine's "100
Best Companies To Work For In America." This prestigious honor, added to the
best new product award from the AALL and the eighth straight award from Working
Mother magazine for being one of the "100 Best Companies For Working Mothers,"
made 1997 a banner year for outside recognition of our company.
Internally, we celebrated 50 years of employee ownership. In a video history of
BNA created to commemorate our anniversary, Chairman Emeritus John D. Stewart
noted that during those 50 years we had amassed a "pretty good track record."
We're off to a pretty good start to the next 50 years.
(Continued)
<PAGE>7
BNA Books
BNA Books contributed almost $2 million in operating profit to BNA in 1997,
representing an extraordinary 27.5 percent margin. This marks the fourth year in
a row that the division has produced record profits. Revenues grew an
unprecedented 33 percent.
The publication of the fifth edition of the BNA/ABA treatise How Arbitration
Works, the leading work in the field, and continued good sales of existing
products contributed heavily to the division's success in 1997. Other new titles
included International Labor and Employment Laws, a new supplement to Sexual
Harassment in Employment Law, and Trade Secrets: A State-by-State Survey, the
third treatise in a series on protecting confidential information in the
workplace.
Late in the year, the division released its first electronic product, the ABA
Labor and Employment Law Section Working Papers on CD, a collection of materials
authored by Section members. In all, Books published 32 titles in 1997.
The division's growing product line should make it a steady contributor to BNA
for years to come.
SUBSIDIARY COMPANIES
Tax Management Inc.
Tax Management and BNA Software revenues increased 14.3 percent in 1997 to a new
high of $55 million. Combined net income was nearly 57 percent ahead of the
prior year.
Record-breaking new service sales, following similar strong sales in recent
years, produced service revenues of nearly $44 million for the print and CD-ROM
products. Tax Management's operating profit was 76.5 percent ahead of 1996, as
operating expenses rose slightly and circulation of CD-ROM products increased
sharply.
Tax Management's Guide to the Taxpayer Relief Act of 1997 culminated an updating
process that began early in the legislative process when we began tracking the
legislation. Extensive coverage was provided in the Tax Management Weekly Report
and Tax Practice Series Bulletin. Its specialized journals, such as Tax
Management International Journal, and its news publications, such as Tax
Management Financial Products Report, focused on more specific areas of
interest.
The new law, one of the more challenging pieces of tax legislation in several
years, undoubtedly has many implications that will not be discovered until
practitioners grapple with the new rules in the context of planning for specific
clients. A worldwide network of top-flight tax practitioners, together with an
in-house staff of tax professionals, make Tax Management services a constantly
evolving and uniquely valuable resource.
The IRS Practice Adviser was launched in November on the same disc as Tax
Practice Series. The new product replaces the IRS Practice & Policy binder
service. The combination of compliance and audit information on the same CD-ROM
is expected to appeal to a large market of tax professionals, including enrolled
agents.
(Continued)
<PAGE>8
BNA Software
BNA Software experienced strong growth in 1997. Revenues were up 26 percent and
operating profits increased almost 38 percent. Total circulation for the
division's products increased a healthy 9 percent, with renewal rates climbing
to new highs.
This performance reflects the successful operation of its core business coupled
with above-average demand for its services due to the complexity of the new tax
legislation. The quick update to the market-leading BNA Income Tax Planner
helped thousands of CPAs, financial planners, and other financial practitioners
understand and advise their clients about the effects of the new legislation.
Results from a multi-year strategy emphasizing new product development also
played an important part in the division's success. Sales of products introduced
in the latter part of 1996 (BNA Fixed Assets Next Dimension, BNA 706 Preparer,
and BNA Sales & Use Tax Rates and Forms) continued strong in 1997. In addition,
another new product, the BNA 709 Preparer, was launched during the year.
BNA Software's excellent portfolio of products, strong team, and future plans
create great optimism for 1998 and beyond.
BNA International Inc.
Revenues from BNAI services were 8.3 percent higher than the previous year due
to the continuing growth of established products and new ones such as
International Taxation of Low-Tax Transactions and International Licensing. The
difficult Japanese economy and financial problems in other Asian countries
resulted in a decrease in foreign sales of BNA and Tax Management services after
the record levels of the previous year.
New marketing initiatives generated high sales of several BNAI services at lower
costs. Based on this initial success, BNAI will extend these new direct
marketing programs to a broader range of services in 1998.
BNAI took steps in 1997 to ensure growth in future years. A product development
manager was added and the editorial staff was improved with new talent. Those
new resources were not without short-term cost, however, and BNAI's net income
decreased 49.5 percent in 1997 following an 80.2 percent increase in 1996.
Nevertheless, BNAI remains solidly profitable and is now better positioned to
grow its bottom line.
The first result of the increased focus on product development was the launch
late in the year of World Telecom Law Report, aimed at the rapidly growing
international telecommunications market. The introduction of Asia-Pacific Focus
is the first in a series of specialized quarterly supplements to Tax Planning
International. The additional resources required to develop these new services
will continue to be directed toward identifying new publishing opportunities in
the international tax, legal, and business markets.
BNAI's focus will continue to be on achieving profitable growth from the
introduction of innovative products for the growing market for international
information, while increasing the circulation of BNA and Tax Management
publications outside of North America.
(Continued)
<PAGE>9
Pike & Fischer, Inc.
Pike & Fischer concentrated in 1997 on developing and acquiring new products and
enhancing existing services. The company launched two new newsletters, ADR
Report and Pesticide Report; acquired two others, Food Protection Report and
Food Talk; and introduced a series of seven interactive FCC Forms software
programs in 1997. In addition, the company developed a CD-ROM version of the BNA
Criminal Practice Manual, a service that had been transferred to Pike & Fischer
in 1996, and restyled the Manual's "Current Reports" section as a stand-alone
publication with a new title, The Criminal Practice Report.
Growth initiatives, however, were not enough to compensate for the significant
shortfall in royalty revenues Pike & Fischer received from one of its outside
publishing partners. Royalty revenues were down 20 percent from 1996 levels.
Total operating revenues for the year declined 6.7 percent as a result.
Aware early in 1997 that royalty revenues would not be at customary levels,
management made every effort to hold growth in expenses to a minimum, and
succeeded in keeping the overall increase in expenses to 2.1 percent from the
year before. Even a modest increase in expenses, however, when coupled with the
sharp decline in royalty revenues, meant that operating profits in 1997 were
down from 1996's historic high. Operating profit margin nevertheless was a
respectable 16.5 percent of operating revenues.
With its healthy profitability, prospects for revenue growth from 1997's new
product initiatives, and a largely stabilized royalty revenue situation, Pike &
Fischer will be a significant contributor to BNA's financial goals in 1998.
BNA Communications Inc.
New sales and marketing strategies and organizational restructuring delivered
results in 1997 as revenues increased 10.2 percent over 1996. Operating expenses
were below 1996 levels, resulting in a net income of $107,000 compared to a loss
in 1996. BNAC's cash flow was strong enough to repay all of its outstanding debt
to the parent by year-end.
BNAC's Human Resources Division was repositioned from a supplier of video-based
training programs to a provider of full-service training solutions. A new
manager of consulting and training services was hired to direct this new
emphasis. Successful new products on the HR side included Respect vs.
Harassment, a groundbreaking training program that combines diversity awareness
and harassment prevention with skills needed to heal problems in the workplace.
BNAC's Safety Division enjoyed a very successful launch of OSHA-SMART: Forklift
Safety, a new three-video series that helps organizations comply with OSHA's
newly-revised forklift standard. Other new releases include 12 new titles in
BNAC's state-of-the-art Training On A Disk (TOADR) CD-ROM training series.
Existing programs have been repackaged into successful new series focusing on
topics such as Behavior/ Motivation and Respiratory Compliance.
The challenge for 1998 is to grow from a stable, profitable business into a full
strategic partner in the BNA family.
(Continued)
<PAGE>10
BNA Washington Inc.
Operating expenses for all BNAW-owned buildings in 1997 were 2.5 percent less
than the prior year. Through aggressive management and cost control measures,
the cost of operating our buildings has remained essentially flat for the last
five years.
Renovation activity during the year was modest. A small number of projects
occurred to take care of employee growth and changes in business operations.
About 250 employees were affected in 1997 by "churn" (moving personnel and
reconfiguring office space) compared to twice that number in the two previous
years.
Planning for the Accounting & Finance and Human Resources Departments to
relocate to the 23rd Street building in 1998 began in earnest in the 4th quarter
of 1997. This move will free up much-needed space on 25th Street, particularly
for the Editorial Department.
As part of our observance of BNA's 50th anniversary of employee ownership,
display units recounting BNA's history were installed in the link lobby
connecting the North and South Buildings. BNAW worked closely on the
installation with BNA's Corporate Relations staff, who created the exhibit.
The McArdle Printing Co., Inc.
McArdle Printing Company's operating revenues increased by 11.5 percent due
primarily to a 23.8 percent increase in commercial sales. Revenues for printing,
binding, and mailing BNA publications increased by 3 percent and BNA, including
Tax Management, continues to be McArdle's largest customer, generating 55
percent of McArdle's total revenues.
In 1997, McArdle invested $2.9 million in new equipment to expand the capacity
and scope of the printing operation. Two new presses and automated finishing
equipment were purchased to support BNA's advertising program and to provide
services required by current and potential customers. The additional capacity
and capabilities have provided and will continue to provide opportunities for
revenue growth.
These investments-combined with efforts to increase sales in established
markets, and to improve quality, service, and responsiveness-have contributed to
faster revenue growth. Excellent progress has been made in expanding capacity of
the electronic pre-press, press, and bindery operations to ensure that quality
and service levels are maintained as the business grows.
McArdle's profitability, however, felt the impact of these major investments as
net income dropped in 1997. With an excellent facility, modern equipment, and
knowledgeable and productive employees, McArdle is well-positioned and confident
that profitability will rebound in 1998.
(Continued)
<PAGE>11
PART I
Item 1. Business
General Development of Business and Narrative Description of Business,
Continued
The Bureau of National Affairs, Inc. ("BNA" or the "Company"), operates
primarily in the business information publishing industry. Operations consist of
the production and marketing of information products in print and electronic
form, and outside printing services. Activities in other industry segments are
less than 10 percent of total revenue.
As a response to customer demand, advances in technology, and competition, the
Company now offers many products in CD-ROM or online delivery formats. CD-ROM's
allow the economical addition of value-added features such as searching
capabilities and additional information content. Online delivery provides more
timely receipt.
The business information industry is very competitive. Some competitors are much
larger and have more resources than BNA. In recent years, mergers and
acquisitions of many of the Company's competitors have created even larger
organizations with ownership interests outside of the United States. The Company
has invested heavily to upgrade its product offerings to take advantage of new
technologies. The resulting electronic products, with some features superior to
those of print, have competed successfully in their markets.
The number of employees of BNA and its subsidiaries was 1,893 at December 31,
1997.
Item 2. Properties
BNA Washington Inc. owns and manages the buildings presently used by BNA and
some of its Washington area subsidiaries. Principal operations are conducted in
three adjacent buildings at 1227-1231 25th Street, N.W., Washington, D.C. The
office building at 1227 25th Street is being used primarily by BNA and also for
commercial leasing. BNA also leases office space at 1250 23rd Street, N.W.,
Washington, D.C.
BNA's Circulation Department and BNA Communications Inc. operate in an owned
facility at 9435 Key West Avenue, Rockville, Maryland. Pike & Fischer, Inc.
leases office space for its operations at 4600 East-West Highway, Bethesda,
Maryland. BNA International Inc. conducts its operations from leased offices at
Heron House, 10 Dean Farrar Street, London, England. The McArdle Printing Co.,
Inc. owns its office and plant facilities at 800 Commerce Drive, Upper Marlboro,
Maryland.
Item 3. Legal Proceedings
The Company is involved in certain legal actions arising in the ordinary course
of business. In the opinion of management the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1997.
<PAGE>12
PART I
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were executive officers of The Bureau of National Affairs,
Inc., at December 31, 1997. Executive officers are elected annually by the Board
of Directors and serve until their successors are elected.
Name Age Present position and prior experience
- ----------------------- --- -------------------------------------
William A. Beltz 68 Chairman of the Board
Elected chairman in 1994. Served as
president from 1979 to 1995 and
chief executive officer from 1980
until 1996. Joined BNA in 1956.
Jacqueline M. Blanchard 48 Vice President for Human Resources
Elected to vice president in 1994.
Previously was director of labor
and employee relations. Joined BNA
in 1984.
John P. Boylan, Jr. 58 Vice President for Administration
Elected to present position in 1986.
Joined BNA in 1974 after employment
at Fisher-Stevens, Inc. (a former
BNA subsidiary) since 1962.
Eunice L. Bumgardner 37 Vice President and General Counsel
Elected vice president in 1996 and
general counsel in 1995. Joined BNA
in 1994 as associate general counsel.
From 1991 to 1994 was senior
associate at LeBoeuf, Lamb, Greene
& MacRae, LLP.
Kathleen D. Gill 51 Vice President and Editor in Chief
Elected to vice president and
executive editor in 1993, and
editor in chief in 1997. Joined
BNA in 1970.
Daniel C. Horsey 42 Vice President and Director of
Information Technology
Elected to vice president in 1997.
Previously was employed by the
Thomson Corporation from 1993 to
1997, most recently as Chief
Technology Officer of Thomson
Electronic Information Resources.
Joined BNA in 1997.
(Continued)
<PAGE>13
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
Name Age Present position and prior experience
John E. Jenc 55 Treasurer
Elected to present position in 1990.
Joined BNA in 1981.
George J. Korphage 51 Vice President and Chief Financial
Officer
Elected vice president in 1988 and
chief financial officer in 1989.
Joined BNA in 1972.
Mary Patricia Swords 52 Vice President and Director of Sales
and Marketing
Elected to present position in 1996.
Previously was regional manager of
Mountain sales region since 1985.
Joined BNA in 1977.
Robert L. Velte 50 Vice President for Strategic
Development
Elected to vice president in 1995.
Previously was president of BNA
Communications since 1986. Joined BNA
Communications in 1976.
Paul N. Wojcik 49 President and Chief Executive Officer
Elected president in 1995 and chief
executive officer in 1997.
Previously was chief operating
officer from 1995 to 1996, and
general counsel from 1988 to 1995.
Joined BNA in 1972.
<PAGE>14
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Market Information, Holders, and Dividends
There is no established public trading market for any of BNA's three classes of
stock, but the Stock Purchase and Transfer Plan provides a market in which Class
A stock can be bought and sold.
The Board of Directors establishes semi-annually the price at which Class A
shares can be bought and sold through the Stock Purchase and Transfer Plan and
declares cash dividends. In accordance with the corporation's bylaws, the price
and dividends on non-voting Class B and Class C stock are the same as on Class A
stock. Dividends have been paid continuously for 48 years, and they are expected
to continue.
As of March 1, 1998, there were 1,559 Class A shareholders, 234 Class B
shareholders, and 31 Class C shareholders. The company repurchased 441,678
shares of Class B stock and 9,583 shares of Class C stock from retired employees
or their estates in the 12 months ending March 1, 1998.
Established stock price and dividends declared during 1996 and 1997 were as
follows:
Stock Price
January 1, 1996 - March 23, 1996 $24.75
March 24, 1996 - September 21, 1996 26.00
September 22, 1996 - March 22, 1997 27.00
March 23, 1997 - September 20, 1997 28.50
September 21, 1997 - December 31, 1997 29.75
Record Date and Dividend Amount
March 23, 1996 $ .50
September 21, 1996 .50
March 22, 1997 .55
September 20, 1997 .55
The principal market for trading of voting shares of common stock of The Bureau
of National Affairs, Inc., is through the Trustee of the Stock Purchase and
Transfer Plan.
<PAGE>15
PART II
Item 6. Selected Financial Data
The Bureau of National Affairs, Inc.
Consolidated Operating and Financial Summary: 1997-1993
(Dollar amounts in thousands, except per share data)
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Operating Revenues $244,061 $232,632 $226,497 $215,491 $200,818
Operating Expenses 223,999 218,074 218,628 204,507 191,144
-------- -------- -------- -------- --------
Operating Profit 20,062 14,558 7,869 10,984 9,674
Non-operating Income:
Investment Income, net 7,957 6,989 6,452 4,614 5,759
Other Income 427 82 3,257 459 303
-------- -------- -------- -------- --------
Income from Operations Before
Income Taxes 28,446 21,629 17,578 16,057 15,736
Income Taxes 8,885 7,041 5,487 4,397 4,482
-------- -------- -------- -------- --------
Net Income $ 19,561 $ 14,588 $ 12,091 $ 11,660 $ 11,254
======== ======== ======== ======== ========
Profit Ratios (b):
% of Operating Revenues 8.0 6.3 5.3 5.4 5.6
% of Average Stockholders'
Equity 26.9 20.9 19.8 21.7 22.7
-------- -------- -------- -------- --------
Total Earnings per Share 2.24 1.65 1.38 1.36 1.32
Dividends per Share 1.10 1.00 0.94 0.90 0.90
======== ======== ======== ======== ========
Balance Sheet Data:
Total Assets $300,900 $299,311 $278,752 $270,599 $251,517
Long-Term Debt -- -- -- 107 1,332
======== ======== ======== ======== ========
Employee Data:
Number of Employees 1,893 1,915 1,863 1,854 1,796
Total Employment Costs $128,095 $124,322 $119,488 $120,599 $111,443
======== ======== ======== ======== ========
Stockholder Data at Year-End:
Book Value per Share $ 8.65 $ 8.15 $ 7.59 $ 6.36 $ 6.14
Number of Stockholders 1,752 1,741 1,717 1,627 1,568
Common Shares Outstanding
(In thousands) 8,500 8,848 8,858 8,652 8,553
======== ======== ======== ======== ========
<PAGE>16
PART II
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1997 vs. 1996 - Consolidated
Consolidated revenues of $244 million were up 4.9 percent from the prior year's
$233 million. Operating profit of $20.1 million was significantly higher than
last year. Net income, at $19.6 million, was a record high for the fourth
straight year.
Service revenues (from subscriptions and online products) increased 2.1 percent
over 1996 due to modest business growth in the combined subscription revenue
base for print and electronic products. Revenues for electronic products
continued to grow, while print products--although still the dominant service
revenue source--declined. Service revenues were 84.1 percent of consolidated
revenues in 1997 and 86.4 percent in 1996. Non-service revenues (from software,
outside printing, training media, books, and other units) increased by 22.5
percent. Large revenue increases were recorded for each of these units.
Increases in non-service revenues in 1998 are not expected to continue at such
high levels.
Consolidated operating expenses were only 2.7 percent higher in 1997 than in
1996. Services expenses were essentially unchanged. Increases in salaries and
staffing costs were offset by lower distribution and selling expenses.
Thirteen new subscription services were launched in 1997. Development expenses
for new products, improvements on existing products, and new delivery methods
were $4.6 million compared to $6.4 million in 1996. Operating expenses in 1997
also include an identifiable $5.1 million for developing improved business and
publishing systems and the write-off of an abandoned business system.
Non-service operating expenses were 23.5 percent higher in 1997, primarily for
increased royalties, production costs, and selling expenses related to the
higher sales activity.
Investment income was 13.9 percent higher than in 1996 due to larger portfolios.
Other non-operating income for 1997 included a gain of $.4 million on the sale
of a publication.
The consolidated federal, state, and local effective income tax rate was 31.2
percent in 1997 compared to 32.6 percent in 1996.
Earnings per share were $2.24 per share compared to $1.65 per share in 1996.
(Continued)
<PAGE>17
1996 vs. 1995 - Consolidated
Consolidated revenues of $233 million were up 2.7 percent from the prior year's
$226 million. Operating profit of $14.6 million was significantly higher than
last year. Net income, also at $14.6 million, was a record high for the third
straight year.
Service revenues (from subscriptions and online products) increased 2.6 percent
over 1995 due to modest business growth in the combined subscription revenue
base for print and CD-ROM products. This slower growth rate is the result of
slightly lower renewal rates, federal government budget uncertainties early in
the year, and lower new sales in the major CD-ROM products launched over the
past three years. Higher online service revenues from renegotiated agreements
mitigated the decline in total subscription growth. Service revenues were 86.4
percent of consolidated revenues in both 1996 and 1995. Non-service revenues
(from software, outside printing, training media, books, and other units)
increased by 3.3 percent. The increase resulted from large increases for outside
printing and books, a small increase for software, and a reduction for training
media.
Consolidated operating expenses were slightly lower in 1996 than in 1995. For
services, expense increases occurred in salaries and staffing costs and CD-ROM
production and royalty costs related to growing circulation and new products.
Selling expenses and initial fulfillment expenses, related to new sales, were
lower in 1996. The 1995 expenses had included a $2.1 million charge for a change
in accounting for advertising expenses (as discussed in Note 2 to the financial
statements). On a more comparable basis, excluding the advertising charge,
operating expenses increased only 0.7 percent over the prior year and the
comparable operating profit increased 46.7 percent.
Six new services were launched in 1996, including a mix of print, CD-ROM, and
electronic delivery. In addition, development efforts for the electronic
delivery of notification services was completed. Development expenses for new
products, improvements on existing products, and new delivery methods were $6.4
million compared to $6.6 million in 1995. Operating expenses in 1996 also
include an identifiable $5.3 million for developing improved business and
publishing systems compared to $5.5 million in 1995. Non-service operating
expenses were 2 percent lower in 1996, primarily related to cost reductions for
the training media business unit.
Investment income was 8.3 percent higher than in 1995 due to larger portfolios.
Other non-operating income for 1995 had included $3.2 million of gains on the
sale of a former printing plant site and sales of publications.
The consolidated federal, state, and local effective income tax rate was 32.6
percent in 1996 compared to 31.2 percent in 1995. The increase in the effective
rate is due to the large increase in operating income which is taxed at a higher
rate than tax-exempt investment income.
Earnings per share were $1.65 per share compared to $1.38 per share in 1995.
(Continued)
<PAGE>18
Deferred Tax Assets
The Company has recorded $19.2 million of net deferred tax assets as of year-end
1997. In assessing the realizability of the deferred tax assets, management
considers whether it is more likely than not that the deferred tax assets will
be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible. The Company has a consistent history of
profitability and taxable income, and management believes this trend will
continue. In the opinion of management, it is more likely than not that the
existing deferred tax assets will be realized in future years, and no valuation
allowance is necessary.
Financial Resources and Cash Flows
The Company maintains its financial reserves in cash and investment securities,
which, along with its operating cash flows, are sufficient to fund ongoing cash
expenditures for operations and to support employee ownership. Cash provided
from operating activities increased 18 percent to $35.1 million in 1997,
reflecting a 6.2 percent increase in collections, and 4.5 percent increase in
expenditures.
Cash outlays for investing activities netted to $14.7 million, reflecting $8.8
million reinvested in the Company's investment portfolio and capital
expenditures of $5.9 million. Capital expenditures for 1998 are budgeted to be
over $7 million, excluding the 1998 purchase of a publishing company discussed
below.
Cash used for financing activities netted to $19.9 million. The Company paid
$15.5 million for repurchases of Class A, Class B, and Class C capital stock,
including $10 million paid to the estates of retirees. Sales of Class A capital
stock to employees of $5.3 million partially offset the large repurchases. In
addition, the Company paid cash dividends of $9.7 million in 1997. During 1998,
the Company will redeem over $8 million of Class B and Class C stock, which is
expected to again exceed sales of capital stock to employees.
With $144.2 million in cash and investment portfolios and no term debt at
year-end 1997, the financial position and liquidity of the Company remains very
strong. Since subscription monies are collected in advance, cash flows from
operations, along with existing financial reserves and proceeds from the sales
of capital stock, have been sufficient in past years to meet all operational
needs, new product introductions, capital expenditures, debt repayments, and, in
addition, provide funds for dividend payments and the repurchase of stock
tendered by shareholders. Should more funding become necessary or desirable in
the future, the Company has substantial debt capacity based on its operating
cash flows and real estate equity. This capacity was partially utilized for
financing the 1998 acquisition discussed below.
Subsequent Event
In January 1998, the Company purchased all of the outstanding stock of the
Institute of Management & Administration, Inc. (IOMA), a newsletter publisher,
for a total cost of $17.8 million in cash and the guarantee of $1.4 million of
IOMA liabilities.
The acquisition was financed with Company funds and a $15 million unsecured bank
loan. Although no principal payments are required in 1998, the Company may make
such payments if it is determined to be in the Company's best interests. IOMA is
profitable and is expected to continue to be so. However, the acquisition is
expected to be initially dilutive to the Company's net income because the
negative effects of interest expense and the amortization of intangible assets
and goodwill are expected, for several years, to exceed IOMA earnings.
(Continued)
<PAGE>19
Year 2000 Compliance
The Year 2000 compliance issue concerns the inability of certain of the
Company's older computer programs to properly recognize a date using "00" for
the applicable year as the year 2000 rather than the year 1900. This could cause
miscalculations or other business disruptions.
For the last several years, the Company has been replacing its business and
publishing systems. The publishing systems are all operational and are Year 2000
compliant (all data residing on one non-compliant system is scheduled to be
migrated off by 1999). Most of the business systems must be replaced with Year
2000 compliant systems. The new business systems are in various stages of
completion, but are expected to be operational by mid-1999. The cost to complete
these projects is expected to be $2.5 million over the next two years. Some
business systems will not be replaced, but will be made Year 2000 compliant with
code changes. The cost of remediation, including code modification, testing and
implementation, is expected to be approximately $3.8 million over the next two
years. Because the Company has already been incurring substantial systems
expenses over the last several years, the 1998-1999 expenses related to Year
2000 compliance are not expected to materially impact the Company's financial
results.
The Company believes that, when operational, the new systems and remediation
projects will solve the Year 2000 compliance problem. However, if the projects
are not completed on a timely basis, Year 2000 non-compliance could have a
material impact on the operations of the Company.
Accounting Pronouncement
In June, 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 130, which requires the presentation of comprehensive income in an entity's
financial statements. Comprehensive income represents all changes in equity of
an entity during the reporting period, including net income and charges directly
to equity which are excluded from net income. Upon adoption, financial
statements for earlier periods provided for comparative purposes must be
restated. The Company plans to adopt this statement in 1998.
<PAGE>20
PART II
Item 8. Financial Statements and Supplementary Data
THE BUREAU OF NATIONAL AFFAIRS, INC.
Consolidated Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>21
Independent Auditors' Report
The Board of Directors and Stockholders
The Bureau of National Affairs, Inc.:
We have audited the consolidated financial statements of The Bureau of National
Affairs, Inc. as listed in the accompanying index in Part IV, Item 14(a)(1). In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index in Part IV, Item 14(a)(2). These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Bureau of
National Affairs, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
s\ KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Washington, D.C.
February 20, 1998
<PAGE>22
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(In thousands of dollars)
ASSETS
December 31,
------------------
1997 1996
-------- --------
CURRENT ASSETS:
Cash and cash equivalents (Note 4) $ 19,421 $ 18,898
Short-term investments (Note 4) 9,013 9,306
Receivables (Note 8) 41,307 45,111
Inventories (Note 8) 5,440 5,397
Prepaid expenses 3,368 4,240
Deferred selling expenses (Note 2) 23,244 23,841
-------- --------
Total current assets 101,793 106,793
MARKETABLE SECURITIES (Note 4) 115,809 108,020
PROPERTY AND EQUIPMENT (Note 8) 47,852 49,557
DEFERRED INCOME TAXES (Note 7) 22,296 22,341
GOODWILL (Note 6) 8,924 9,237
OTHER ASSETS (Note 8) 4,226 3,363
-------- --------
Total assets $300,900 $299,311
======== ========
(Continued)
<PAGE>23
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(In thousands of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
---------------------
1997 1996
--------- ---------
CURRENT LIABILITIES:
Payables and accrued liabilities (Note 8) $ 33,529 $ 37,328
Deferred income taxes (Note 7) 3,120 3,635
Deferred subscription revenue (Note 2) 121,934 119,821
--------- ---------
Total current liabilities 158,583 160,784
POSTRETIREMENT BENEFITS, less current portion
(Note 3) 65,410 63,487
OTHER LIABILITIES 3,356 2,915
--------- ---------
Total liabilities 227,349 227,186
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 9 & 10)
STOCKHOLDERS' EQUITY (Notes 4 & 10):
Common stock issued, $1.00 par value
Class A - 6,478,864 shares 6,479 6,479
Class B - 4,926,973 shares 4,927 4,927
Class 506,336 shares 506 506
Additional paid-in capital 35,668 31,772
Retained earnings 60,242 50,369
Treasury stock, at cost (37,329) (23,178)
Net unrealized gain on marketable securities 3,126 1,348
Foreign currency translation adjustment (68) (98)
--------- ---------
Total stockholders' equity 73,551 72,125
--------- ---------
Total liabilities and stockholders' equity $ 300,900 $ 299,311
========= ==========
See accompanying notes to consolidated financial
statements.
<PAGE>24
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars)
Percent of Operating
Revenue
----- ----- -----
1997 1996 1995 1997 1996 1995
-------- -------- -------- ----- ----- -----
OPERATING REVENUES (Notes 1
and 2) $244,061 $232,632 $226,497 100.0% 100.0% 100.0%
-------- -------- -------- ----- ----- -----
OPERATING EXPENSES (Notes 1,2,3,6,8 and 9):
Editorial, production, and
distribution 134,179 131,295 128,671 55.0 56.4 56.8
Selling, including $2,055
in 1995 for effect of
advertising adjustment 51,362 50,828 57,172 21.0 21.9 25.2
General and administrative 36,371 34,681 31,819 14.9 14.9 14.1
Profit sharing 2,087 1,270 966 0.9 0.5 0.4
-------- -------- -------- ----- ----- -----
223,999 218,074 218,628 91.8 93.7 96.5
-------- -------- -------- ----- ----- -----
OPERATING PROFIT 20,062 14,558 7,869 8.2 6.3 3.5
-------- -------- -------- ----- ----- -----
NON-OPERATING INCOME:
Investment income (Note 4) 7,957 6,989 6,452 3.2 3.0 2.8
Other income (Note 5) 427 82 3,257 0.2 -- 1.4
-------- -------- -------- ----- ----- -----
TOTAL NON-OPERATING INCOME 8,384 7,071 9,709 3.4 3.0 4.2
-------- -------- -------- ----- ----- -----
INCOME BEFORE PROVISION FOR
INCOME TAXES 28,446 21,629 17,578 11.6 9.3 7.7
PROVISION FOR INCOME TAXES
(Note 7) 8,885 7,041 5,487 3.6 3.0 2.4
-------- -------- -------- ----- ----- -----
NET INCOME $ 19,561 $ 14,588 $ 12,091 8.0% 6.3% 5.3%
======== ======== ======== ===== ===== =====
EARNINGS PER SHARE (Note 10) $ 2.24 $ 1.65 $ 1.38
======== ======== ========
See accompanying notes to consolidated financial
statements.
<PAGE>25
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars)
1997 1996 1995
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,561 $ 14,588 $ 12,091
Items with different cash requirements
than that reflected in net income
Deferred subscription revenue 2,445 2,295 (2,431)
Depreciation and amortization 8,798 8,887 10,216
Accrued postretirement benefits expense 2,133 7,357 2,096
Provision for deferred income taxes (1,530) (4,110) (3,713)
Deferred selling expenses 465 1,385 7,701
(Gain) on sales of securities (948) (542) (672)
(Gain) on disposals of property (7) (24) (2,223)
(Gain) on sales of publishing assets (420) (58) (981)
Others 197 233 22
Changes in operating assets and liabilities
Receivables 3,947 (1,970) 5,876
Payables and accrued liabilities 642 2,643 (1,634)
Inventories (47) 871 551
Film production costs (140) (70) (184)
Other assets and liabilities--net 29 (1,730) (1,276)
--------- --------- --------
Net cash provided from operating activities 35,125 29,755 25,439
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Purchases of equipment and furnishings (5,670) (4,002) (4,574)
Building improvements (256) (132) (664)
Proceeds from the sales of property 17 37 3,367
Proceeds from sales of publishing assets 184 17 943
Purchase of publishing assets (185) -- --
--------- --------- --------
Net cash used for capital expenditures (5,910) (4,080) (928)
--------- --------- ---------
(Continued)
<PAGE>26
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars)
1997 1996 1995
---------- ---------- ----------
Securities investments
Proceeds from sales and maturities 58,075 75,250 75,373
Purchases (66,824) (90,587) (90,983)
---------- ---------- ----------
Net cash used for securities investments (8,749) (15,337) (15,610)
---------- ---------- ----------
Net cash used for investing activities (14,659) (19,417) (16,538)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of capital stock to employees 5,313 5,306 6,385
Purchases of treasury stock (15,568) (5,625) (1,590)
Dividends paid (9,688) (8,884) (8,254)
Repayment of borrowings -- -- (107)
---------- ---------- ----------
Net cash used for financing activities (19,943) (9,203) (3,566)
---------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 523 1,135 5,335
CASH AND CASH EQUIVALENTS, beginning of year 18,898 17,763 12,428
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 19,421 $ 18,898 $ 17,763
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 41 $ 23 $ 95
Income taxes paid 9,490 10,884 8,121
See accompanying notes to consolidated financial
statements.
<PAGE>27
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In thousands of dollars)
<CAPTION>
Capital Stock Issued Additional
------------------------------- Paid-In Retained Treasury
Class A Class B Class C Capital Earnings Stock Other
--------- --------- --------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1995 $ 6,479 $ 4,927 $ 506 $ 22,722 $ 40,828 $(18,604) $ (1,815)
Sale of Class A treasury shares to employees -- -- -- 4,973 -- 1,412 --
Repurchase of shares -- -- -- -- -- (1,590) --
Net income -- -- -- -- 12,091 -- --
Cash dividends--$.94 per share -- -- -- -- (8,254) -- --
Change in net unrealized gain (loss) on
marketable securities -- -- -- -- -- -- 3,478
Currency translation adjustment -- -- -- -- -- -- 45
--------- --------- --------- --------- ---------- ---------- ----------
BALANCE, December 31, 1995 6,479 4,927 506 27,695 44,665 (18,782) 1,708
Sale of Class A treasury shares to employees -- -- -- 4,077 -- 1,229 --
Repurchase of shares -- -- -- -- -- (5,625) --
Net income -- -- -- -- 14,588 -- --
Cash dividends--$1.00 per share -- -- -- -- (8,884) -- --
Change in net unrealized gain (loss) on
marketable securities -- -- -- -- -- -- (408)
Currency translation adjustment -- -- -- -- -- -- (50)
--------- --------- --------- --------- ---------- --------- ----------
BALANCE, December 31, 1996 6,479 4,927 506 31,772 $ 50,369 $ (23,178) $ 1,250
Sale of Class A treasury shares to employees -- -- -- 3,896 -- 1,417 --
Repurchase of shares -- -- -- -- -- (15,568) --
Net income -- -- -- -- 19,561 -- --
Cash dividends--$1.10 per share -- -- -- -- (9,688) -- --
Change in net unrealized gain (loss) on
marketable securities -- -- -- -- -- -- 1,778
Currency translation adjustment -- -- -- -- -- -- 30
--------- ---------- --------- --------- ---------- ---------- ----------
BALANCE, December 31, 1997 $ 6,479 $ 4,927 $ 506 $ 35,668 $ 60,242 $ (37,329) $ 3,058
========== ========== ========= ========= ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>28
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of The
Bureau of National Affairs, Inc. (the "Parent"), and its subsidiaries
(consolidated, the "Company"). The Company operates primarily in the business
information publishing industry. Operations consist primarily of the production
and marketing of specialized labor, legal, economic, tax, health care, and other
regulatory information services in print and electronic formats, and outside
printing services. Activities in other industry segments provide less than 10
percent of total revenues. Customers are primarily lawyers, accountants,
business executives, human resource professionals, health care administrative
professionals, labor unions, trade associations, educational institutions,
government agencies, and libraries. The Company did not derive 10 percent or
more of its revenues from any one customer or government agency or from foreign
sales, nor did it have ten percent or more of its assets in foreign locations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosures of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material intercompany transactions and balances have been eliminated. Certain
prior year balances have been reclassified to conform with current year
presentation.
(2) RECOGNITION OF SUBSCRIPTION REVENUES AND SELLING EXPENSES
Subscription revenues and related field selling expenses are deferred and
amortized over the subscription terms, which are primarily one year. Deferred
subscription revenue is classified on the balance sheet as a current item;
however the fulfillment of the Company's subscription liability will use
substantially less current assets than the liability amount shown.
During 1995, the Company adopted the provisions of the American Institute of
Certified Public Accountants' Statement of Position (SOP) 93-7, "Reporting on
Advertising Costs", which requires that advertising costs be expensed as
incurred. Prior to 1995, the Company's policy was to defer and amortize these
costs in the same manner as field selling costs. The adoption of SOP 93-7
increased 1995 operating expenses because $5,379,000 of currently incurred
advertising costs were expensed, and in addition, $2,055,000 of previously
deferred advertising costs were also required to be expensed. The effect of
expensing 1995 advertising costs as incurred, compared to the prior amortization
method, was to decrease 1995 net income by $1,064,000, or $0.12 per share.
Advertising expense in 1997 and 1996 was $5,488,000, and $5,302,000,
respectively.
<PAGE>29
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) EMPLOYEE BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering employees
of the Parent and certain subsidiaries. Benefits are based on years of service
and average annual compensation for the highest paid five years during the last
10 years of service. The plans provide for five-year cliff vesting.
The Company's funding practice is to contribute amounts which, at a minimum,
satisfy ERISA requirements. No contributions were allowed in 1996 due to
Internal Revenue Service funding limitations. The Company contributed $872,000
in 1997, and $3,899,000 in 1995.
Pension expense is recorded on an accrual basis in accordance with financial
reporting standards. Components of the net pension expense, based on the
actuarial study as of January 1 for each year, were as follows (in thousands of
dollars):
1997 1996 1995
--------- --------- ---------
Service cost benefits earned during the year $ 3,862 $ 4,131 $ 3,207
Interest cost 5,769 5,437 4,939
Actual return on plan assets during the year
(gain) loss (13,437) (8,719) (14,287)
Net asset gain (loss) deferred for later
recognition 7,786 3,427 10,146
Amortization of transition assets and
unrecognized prior service costs (101) (117) (174)
-------- -------- ---------
Net pension expense $ 3,879 $ 4,159 $ 3,831
======== ======== =========
(Continued)
<PAGE>30
The following table sets forth the funded status of the plans and the
liabilities recognized in the Company's Consolidated Balance Sheets (in
thousands of dollars, except percentages):
December 31,
--------- ---------
1997 1996
--------- ---------
Actuarial present value of benefit obligations:
Vested benefits $ 49,340 $ 48,228
Nonvested benefits 13,700 10,846
--------- ---------
Accumulated benefit obligation 63,040 59,074
Projected future compensation 21,386 18,924
--------- ---------
Projected benefit obligation 84,426 77,998
Plan assets at fair value 81,146 72,055
--------- ---------
Projected benefit obligation in excess of
plan assets 3,280 5,943
Unrecognized net asset 1,878 2,253
Unrecognized net gain (loss) 11,594 5,917
Unrecognized prior service cost (1,765) (2,029)
--------- ---------
Accrued pension liability 14,987 12,084
Less--Current Portion 105 --
--------- ---------
Long-term portion $ 14,882 $ 12,084
========= =========
Assumed discount rate 6.75% 7.25%
Assumed rate of compensation increase 5.0% 5.0%
Expected long term rate of return on assets 8.0% 8.0%
Plan assets include equity securities, fixed income securities, and temporary
investments. Calculations of benefit obligations as of December 31, 1997, have
been estimated by an independent actuary and are subject to revision upon
completion of a detailed actuarial study.
In addition, some acquired subsidiaries have defined contribution pension plans
and union-sponsored multi-employer pension plans. Contributions under some of
these plans are at the discretion of the Board of Directors of the respective
subsidiaries. Total contributions under these plans were $946,000 in 1997,
$825,000 in 1996, and $775,000 in 1995.
The Company also has a cash profit sharing plan based on operating income before
taxes, as defined, covering employees of the Parent and certain subsidiaries.
Profit sharing expense was $2,087,000 in 1997, $1,270,000 in 1996, and $966,000
in 1995.
(Continued)
<PAGE>31
In addition to providing pension benefits, the Company extends certain health
care and life insurance benefits (other postretirement benefits) to retired
employees. Most of the Company's employees are eligible for these benefits if
they retire while working for the Company. The Company's policy is to fund these
benefits either as claims and premiums are paid or through a Voluntary
Employees' Beneficiary Association (VEBA) trust established in 1997. The company
contributed $3,000,000 to the VEBA in 1997.
Other postretirement benefits expense is recorded in accordance with financial
reporting standards which require that the present value of these benefits be
accrued during employees' working careers. Components of the postretirement
benefit expense, based on the actuarial study as of January 1 for each year,
were as follows (in thousands of dollars):
1997 1996 1995
--------- --------- ---------
Service cost benefits earned during the year $ 1,659 1,980 $ 1,505
Interest cost 2,609 2,636 2,493
Unrecognized prior service cost (55) (55) --
Amortization of net gain (793) (451) (844)
--------- --------- ---------
Other postretirement benefits expense $ 3,420 4,110 $ 3,154
========= ========= =========
The following table sets forth the liabilities for these benefits recognized in
the Company's Consolidated Balance Sheets (in thousands of dollars):
December 31,
-------- --------
1997 1996
-------- --------
Actuarial present value of benefit obligation:
Retirees $ 13,466 $ 13,199
Fully eligible active plan participants 1,432 1,260
Other active plan participants 25,887 20,478
-------- --------
Accumulated benefit obligation 40,785 34,937
Plan assets at fair value 3,000 --
-------- --------
Projected benefit obligation in excess of
plan assets 37,785 34,937
Unrecognized net gain 13,408 16,976
Unrecognized prior service cost 517 567
-------- --------
Accrued other postretirement benefits liability 51,710 52,480
Less--current portion 1,182 1,077
-------- --------
Long-term portion $ 50,528 $ 51,403
======== ========
Assumed discount rate 6.75% 7.25%
Assumed rate of compensation increase 5.0% 5.0%
(Continued)
<PAGE>32
Calculations of benefit obligations as of December 31, 1997, have been estimated
by an independent actuary and are subject to revision upon completion of a
detailed actuarial study. The December 31, 1997 accumulated benefit obligation
was determined using an assumed health care cost trend rate of 5.5 percent in
1998, declining to 4.5 percent per year in the year 2001 and thereafter over the
projected payout period of the benefits.
The effect of a one percent increase in the health care cost trend rate at
December 31, 1997 would have resulted in a $7,053,000 increase in the
accumulated benefit obligation and a $876,000 increase in the 1997
postretirement benefit expense.
(4) INVESTMENTS AND INVESTMENT INCOME
Cash and investments were as follows (in thousands of dollars):
December 31,
-------- --------
1997 1996
-------- --------
Cash and cash equivalents $ 19,421 $ 18,898
Short-term investments 9,013 9,306
Marketable securities 115,809 108,020
-------- --------
Total $144,243 $136,224
======== ========
Cash equivalents consist of short-term investments, with a maturity of three
months or less at the time of purchase. Short-term investments consist of other
fixed-income investments, maturing in one year or less. Marketable securities
consist of fixed-income securities maturing in more than one year and equity
securities.
Investment income consisted of the following (in thousands of dollars):
1997 1996 1995
--------- --------- ---------
Interest income $ 5,380 $ 4,929 $ 4,906
Dividend income 1,688 1,541 969
Net gain on sales of securities 948 542 672
Interest expense (59) (23) (95)
--------- --------- ---------
Total $ 7,957 $ 6,989 $ 6,452
========= ========= =========
Proceeds from the sales and maturities of securities were $58,075,000,
$75,250,000, and $75,373,000 in 1997, 1996, and 1995, respectively. Gross
realized gains and (losses) from these sales were $1,096,000 and $(149,000) in
1997, $713,000 and $(171,000) in 1996, and $867,000 and $(195,000) in 1995. The
specific identification method is used in computing realized gains and losses.
(Continued)
<PAGE>33
The Company's investment securities have been classified as available-for-sale
and are reported at their fair values (quoted market price), which were as
follows (in thousands of dollars):
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1997 Cost Gain Losses Value
---------- ---------- ---------- --------
Equity securities $ 26,067 $ 1,776 $ -- $ 27,843
U.S. Government securities 6,014 7 (5) 6,016
Municipal bonds 83,558 3,013 (77) 86,494
Corporate debt 4,406 70 (7) 4,469
-------- -------- --------- --------
Total $120,045 $ 4,866 $ (89) $124,822
======== ======== ========= ========
December 31, 1996
Equity securities $ 30,716 $ 872 $ (113) $ 31,475
U.S. Government securities 6,403 28 (55) 6,376
Municipal bonds 76,651 1,448 (76) 78,023
Corporate debt 1,481 -- (29) 1,452
-------- -------- -------- --------
Total $115,251 $ 2,348 $ (273) $117,326
======== ======== ======== ========
The differences between amortized cost and fair value result in unrealized gains
or losses, which are reported, net of tax, as a separate component of
Stockholders' Equity.
Fair values of the Company's investment securities are inversely affected by
changes in market interest rates. Generally, the longer the maturity of
fixed-income securities, the larger the exposure to the risks and rewards
resulting from changes in market interest rates. Contractual maturities of the
fixed-income securities as of December 31, 1997 were as follows (in thousands of
dollars):
Amortized Fair
Cost Value
--------- --------
Within one year $ 8,914 $ 9,013
One through five years 32,946 33,370
Five through ten years 24,225 25,351
Over ten years 27,892 29,245
-------- --------
Total $ 93,977 $ 96,979
======== ========
<PAGE>34
(5) OTHER INCOME
Other income was comprised of the following (in thousands of dollars):
1997 1996 1995
-------- ------- --------
Gain on sales of publishing assets $ 420 $ 58 $ 981
Gain on sale of land -- -- 2,408
Gain (loss) on disposals of other property
and equipment 7 24 (185)
Other -- -- 53
-------- ------- --------
Total $ 427 $ 82 $ 3,257
======== ======= ========
(6) GOODWILL
Goodwill represents the excess of the cost of purchased publications and the
capital stock of subsidiaries over the fair value of net assets at the dates of
their respective acquisitions, net of accumulated amortization of $4,209,000 in
1997 and $3,896,000 in 1996.
Goodwill acquired prior to November 1, 1970, in the amount of $634,000, is not
being amortized because, in management's opinion, it has continuing value. Other
goodwill is amortized on a straight-line basis, using forty years. Amortization
expense was $313,000 for 1997, 1996, and 1995.
(7) INCOME TAXES
The total income tax expense (benefit) was allocated as follows (in thousands of
dollars):
1997 1996 1995
-------- -------- --------
Income Statement-Provision for Income Taxes $ 8,885 $ 7,041 $ 5,487
Stockholders' Equity--Change in:
Unrealized gain (loss) on marketable
securities 957 (220) 1,873
Foreign currency translation adjustment 16 (27) 24
-------- -------- --------
Total $ 9,858 $ 6,794 $ 7,384
======== ======== ========
(Continued)
<PAGE>35
The provision for income taxes consisted of the following (in thousands of
dollars):
1997 1996 1995
-------- -------- ---------
Taxes currently payable:
Federal $ 9,158 $ 9,365 $ 7,933
State and local 1,257 1,786 1,267
-------- -------- ---------
10,415 11,151 9,200
-------- -------- ---------
Deferred tax provision:
Federal (927) (3,364) (3,007)
State and local (603) (746) (706)
-------- -------- ---------
(1,530) (4,110) (3,713)
-------- -------- ---------
Total $ 8,885 $ 7,041 $ 5,487
======== ======== =========
Reconciliation of the U.S. statutory rate to the Company's consolidated
effective income tax rate was as follows:
Percent of Pretax Income
----------------------------
1997 1996 1995
--------- -------- ---------
Federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of Federal
income tax benefit 1.7 3.1 2.1
Goodwill amortization and other
nondeductible expenses 1.2 1.5 1.8
Tax exempt interest exclusion (4.9) (5.3) (6.7)
Dividends received exclusion (1.5) (1.7) (1.3)
Others, net (0.3) -- 0.3
-------- ------- --------
Total 31.2% 32.6% 31.2%
======== ======= ========
(Continued)
<PAGE>36
The tax effects of temporary differences that gave rise to the deferred tax
assets and liabilities were as follows (in thousands of dollars):
December 31,
------------------------
1997 1996
--------- ---------
Deferred tax assets:
Other postretirement benefits $ 20,828 $ 20,998
Pension expense 6,143 4,917
Inventories 2,070 1,965
Annual leave 1,871 1,822
Others 2,308 2,314
--------- ---------
Total deferred tax assets 33,220 32,016
--------- ---------
Deferred tax liabilities:
Deferred selling expenses (9,169) (9,401)
Depreciation (2,859) (3,066)
Others (2,016) (843)
--------- ---------
Total deferred tax liabilities (14,044) (13,310)
--------- ---------
Net deferred tax assets $ 19,176 $ 18,706
========= =========
In the opinion of management, it is more likely than not that the deferred tax
assets will be realized in future years, and no valuation allowance is
necessary.
(8) OTHER BALANCE SHEET INFORMATION
Certain year-end balances consisted of the following (in thousands of dollars):
1997 1996
--------- ---------
Receivables:
Customers $ 37,958 $ 40,150
Others 4,925 6,619
Allowance for doubtful accounts (1,576) (1,658)
--------- ---------
Total $ 41,307 $ 45,111
========= =========
(Continued)
<PAGE>37
1997 1996
-------- --------
Inventories
Materials and supplies $ 3,742 $ 3,213
Work in process 218 466
Finished goods 1,480 1,718
-------- --------
Total $ 5,440 $ 5,397
======== ========
Inventories are valued at the lower of cost (principally average cost method) or
market.
1997 1996
--------- ---------
Property and Equipment (at cost):
Land $ 4,250 $ 4,250
Buildings and improvements 49,197 48,941
Furniture, fixtures and equipment 63,195 60,273
Accumulated depreciation (68,790) (63,907)
--------- ---------
$ 47,852 $ 49,557
========= =========
The Company uses straight-line and accelerated methods of depreciation based on
estimated useful lives ranging from 5 to 45 years for buildings and improvements
and 5 to 11 years for furniture, fixtures and equipment. Depreciation expense
was $7,358,000 in 1997, $7,577,000 in 1996, and $8,761,000 in 1995. Expenditures
for maintenance and repairs are expensed while major replacements and
improvements are capitalized.
1997 1996
-------- --------
Other Assets:
Amortizable assets--
Customer lists $ 620 $ 607
Film production costs 498 850
Lease commissions 307 360
State information database 1,000 --
Software 1,299 1,194
Other 197 --
-------- --------
3,921 3,011
Notes and other receivables 305 352
-------- --------
Total $ 4,226 $ 3,363
======== ========
(Continued)
<PAGE>38
Film production costs are amortized using the revenue forecast method. Other
amortizable assets are expensed evenly over their respective estimated lives,
ranging from 3 to 10 years. Amortization expense for these assets was $1,127,000
in 1997, $997,000 in 1996, and $1,142,000 in 1995.
Accumulated amortization for customer lists was $789,000 in 1997 and $617,000 in
1996.
1997 1996
-------- --------
Payables and accrued liabilities:
Accounts payable $ 18,060 $ 22,551
Employee compensation and benefits 13,321 13,503
Postretirement benefits 1,182 1,077
Income taxes 966 197
-------- --------
Total $ 33,529 $ 37,328
======== ========
(9) COMMITMENTS AND CONTINGENCIES
The Company has non-cancelable operating leases for office space, computing and
office equipment, and vehicles. Total rent expense was $4,786,000 in 1997,
$3,944,000 in 1996, and $3,851,000 in 1995.
As of December 31, 1997, future minimum lease payments under non-cancelable
operating leases were as follows: 1998 - $4,869,000; 1999 - $4,683,000; 2000
- -$3,533,000; 2001 - $3,289,000; 2002 - $3,269,000; thereafter - $14,201,000.
The Company has a $1,500,000 unsecured line of credit. As of December 31, 1997,
$400,000 of the line had been used to secure a letter of credit.
The Company is involved in certain legal actions arising in the ordinary course
of business. In the opinion of management the ultimate disposition of these
matters will not have a material adverse effect on the consolidated financial
statements.
<PAGE>39
(10) STOCKHOLDERS' EQUITY
Ownership and transferability of Class A, Class B, and Class C stock are
substantially restricted to current and former employees by provisions of the
Parent's certificate of incorporation and bylaws. Ownership of Class A stock,
which is voting, is restricted to active employees. Class B stock and Class C
stock are nonvoting. No class of stock has preference over another upon
declaration of dividends or liquidation. As of December 31, 1997 and 1996,
authorized shares of Class A, Class B, and Class C were 6,700,000, 5,300,000,
and 1,000,000, respectively.
The Company's commitment to employee ownership is supported by its policy to
repurchase all Class B and Class C stock tendered by shareholders. As of
December 31, 1997, the total market value of Class B and Class C stock known or
expected to be tendered in the future was as follows: 1998-- $7,970,000;
1999--none, 2000--$29,000, 2001--none, 2002--$924,000, 2003--$219,000, and
2004--$7,811,000. The Company, as a matter of policy, is also committed to
repurchase any Class A stock tendered by shareholders to the Stock Purchase &
Transfer Plan Trustee which the Trustee is unable to purchase with proceeds from
the sale of Class A stock to employees.
Treasury share transactions were as follows:
Treasury Stock Shares
------------------------------------
Class A Class B Class C
---------- ---------- ----------
Balance, January 1, 1995 3,077,433 107,551 75,448
Sale of Class A shares to employees (271,896) -- --
Repurchase of shares -- 56,793 9,245
Conversion of Class A shares to Class
B shares 109,573 (109,573) --
---------- ---------- ----------
Balance, December 31, 1995 2,915,110 54,771 84,693
Sale of Class A shares to employees (204,932) -- --
Repurchase of shares 29,490 177,780 6,964
Conversion of Class A shares to Class
B shares 148,092 (148,092) --
---------- ---------- ----------
Balance, December 31, 1996 2,887,760 84,459 91,657
Sale of Class A shares to employees (185,961) -- --
Repurchase of shares 114,189 408,999 11,266
Conversion of Class A shares to Class
B shares 143,773 (143,773) --
---------- ---------- ----------
Balance, December 31, 1997 2,959,761 349,685 102,923
========== ========== ==========
(Continued)
<PAGE>40
Earnings per share have been computed based on the aggregate weighted average
number of all outstanding shares of stock, which was 8,733,778 in 1997,
8,859,586 in 1996, and 8,759,516 in 1995.
Assets and liabilities of the Company's United Kingdom subsidiary are
denominated in British pounds and translated into U.S. dollars at year-end
exchange rates. Any resulting gain or loss is reflected, net of taxes, directly
in Stockholders' Equity in the accompanying Consolidated Balance Sheets.
(11) SUBSEQUENT EVENT
In January, 1998, the Company purchased all of the outstanding stock of the
Institute of Management & Administration, Inc. (IOMA), a newsletter publisher,
for a total cost of $17.8 million in cash and the guarantee of $1.4 million of
IOMA liabilities. The purchase cost will be assigned to assets, primarily
intangible assets, based on the Company's assessment of their respective values,
and to goodwill.
The acquisition was partially financed with a $15 million unsecured bank loan.
Half of the outstanding principal is due in 2003 and the remainder in 2004. The
operative interest rate on the loan is the London Interbank Offered Rate plus
.2%; the initial rate, effective through mid-April 1998, is 5.825%.
IOMA is profitable and is expected to continue to be so. However, the
acquisition is expected to be dilutive to the Company's net income because the
negative effects of interest expense and the amortization of intangible assets
and goodwill are expected, for several years, to exceed IOMA earnings.
<PAGE>41
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BUREAU OF NATIONAL AFFAIRS, INC.
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(In Thousands of Dollars)
- --------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------
Additions
---------------------
(1) (2)
---------------------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts-- Deductions-- End of
Description of Period Expenses Describe Describe Period
- --------------------------------------------------------------------------------
VALUATION ACCOUNTS DEDUCTED
FROM ASSETS TO WHICH THEY
APPLY:
- ---------------------------
Allowance for Doubtful
Accounts Receivable:
Year ended December 31,
1997 $1,658 $841 $107 (a) $816 (b) $1,576
Year ended December 31,
1996 1,628 742 92 (a) 804 (b) 1,658
Year ended December 31,
1995 1,446 860 62 (a) 740 (b) 1,628
Notes: (a) Charged to deferred subscription revenue; portion of allowance for
doubtful accounts receivable not included in revenues.
(b) Net accounts written off.
<PAGE>42
PART II
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements with accountants on accounting and
financial disclosures during the two years ended December 31, 1997 or through
the date of this Form 10K.
PART III
Except as set forth in this Form 10-K under Part I, Item X, "EXECUTIVE OFFICERS
OF THE REGISTRANT," the information required by Items 10, 11, 12, and 13, is
contained in the Company's definitive Proxy Statement (the "Proxy Statement")
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, to
be filed with the SEC within 120 days of December 31, 1997. Such information is
incorporated herein by reference.
Item 10. Directors and Executive Officers of the Registrant
The information required under this Item 10 is contained in the Proxy Statement
under the headings "I. Election of Directors" and "Biographical Sketches of
Nominees," and is incorporated herein by reference. Information related to
Executive Officers is omitted from the Proxy Statement in reliance on
Instruction 3 to Regulation S-K, Item 401(b), and included as Item X of Part I
of this report.
Item 11. Executive Compensation
The information required under this Item 11 is contained in the Proxy Statement
under the headings "III. Executive Compensation" and "IV. Employee Benefit
Plans" and is incorporated herein by reference.
Item 12. Security Ownership of Beneficial Owners and Management
The information required under this Item 12 is contained in the Proxy Statement
under the heading "I. Election of Directors" and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information required under this Item 13 is contained in the Proxy Statement
under the heading "III. Executive Compensation" and is incorporated herein by
reference.
<PAGE>43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K
The following documents are filed as part of this report.
(a) (1) Financial Statements:
Report of Independent Auditors 21
Consolidated Balance Sheets as of December 31, 22
1997 and 1996.
Consolidated Statements of Income, Consolidated 24
Statements of Cash Flows, and Consolidated
Statements of Changes in Stockholders' Equity
for each of the years ended December 31,
1997, 1996, and 1995
Notes to Consolidated Financial Statements 28
(2) Financial Statement Schedule:
Report of Independent Auditors as to the 21
financial statement schedule
VIII Valuation and Qualifying Accounts
and Reserves 41
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
<PAGE>44
(a)(3) Exhibits:
3.1 Certificate of Incorporation, as amended***
3.2 By laws, as amended*
11 Statement re: Computation of Per Share Earnings is contained
in the 1997 Consolidated Financial Statements in the Notes to
Consolidated Financial Statements, Note 10, "Stockholders'
Equity," at page 39 of this Form 10-K.
22 Subsidiaries of the Registrant.*
28.1 Proxy Statement for the Annual Meeting of security holders to
be held on April 18, 1998**
28.2 Annual Report on Form 11-K related to the Company's Deferred
Stock Purchase Plan for the fiscal year ended December 31,
1997.*
* Filed herewith.
** Incorporated by reference to the Company's Definitive Proxy
Statement, to be filed with the SEC within 120 days of
December 31, 1997.
*** Incorporated by reference to the Company's 1993 Form 10-K,
Commission File Number 2-28286, filed on March 31, 1994. The
exhibit numbers indicated above correspond to the exhibit
numbers in that filing.
Upon written or oral request to the Company's General Counsel,
a copy of any of the above exhibits will be furnished at cost.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the year ended
December 31, 1997.
<PAGE>45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE BUREAU OF NATIONAL AFFAIRS, INC.
By: s\Paul N. Wojcik
----------------
Paul N. Wojcik, Chief Executive Officer
Date: March 12, 1998
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on dates indicated.
By: s\Paul N. Wojcik By: s\George J. Korphage
---------------- --------------------
Paul N. Wojcik, George J. Korphage,
President and Chief Executive Vice President and Chief
Officer Financial Officer
Director (Chief Accounting Officer)
Director
Date: March 12, 1998 Date: March 12, 1998
-------------- --------------
By: s\William A. Beltz 3/12/98 By: s\Gregory C. McCaffrey 3/12/98
------------------ ------- ---------------------- -------
William A. Beltz Date Gregory C. McCaffrey Date
Chairman of the Board of Directors Director
By: s\Jacqueline M. Blanchard 3/12/98 By: s\Frederick A. Schenck 3/12/98
------------------------- ------- ---------------------- -------
Jacqueline M. Blanchard Date Frederick A. Schenck Date
Director Director
By: s\Christopher R. Curtis 3/12/98 By: s\Mary P. Swords 3/12/98
----------------------- ------- ---------------- -------
Christopher R. Curtis Date Mary P. Swords Date
Director Director
By: s\Sandra C. Degler 3/12/98 By: s\Daniel W. Toohey 3/12/98
------------------ ------- ------------------ -------
Sandra C. Degler Date Daniel W. Toohey Date
Director Director
By: s\Kathleen D. Gill 3/12/98 By: s\Loene Trubkin 3/12/98
------------------ ------- --------------- -------
Kathleen D. Gill Date Loene Trubkin Date
Director Director
By: s\John E. Jenc 3/12/98 By: s\Robert L. Velte 3/12/98
-------------- ------- ----------------- -------
John E. Jenc Date Robert L. Velte Date
Director Director
By: s\Eileen Z. Joseph 3/12/98
------------------ -------
Eileen Z. Joseph Date
Director
<PAGE>46
EXHIBIT INDEX
Exhibit Sequential Page
Number Description Number
3.1 Certificate of Incorporation, as amended**
3.2 Bylaws, as amended 47
11 Statement re: Computation of Per Share
Earnings is contained in the 1997
Consolidated Financial Statements in
the Notes to Consolidated Financial
Statements, Note 10, "Stockholders'
Equity," 39
22 Subsidiaries of the Registrant 155
28.1 Proxy Statement for the Annual Meeting of
Stockholders to be held on April 18, 1998 *
28.2 Annual Report on Form 11-K related to the 156
Company's Deferred Stock Purchase Plan for
the fiscal year ended December 31, 1997.
* The Definitive Proxy Statement is expected to be filed with the
SEC within 120 days of December 31, 1997.
** Incorporated by reference to the Company's Form 10K, commission
File Number 2-28286, filed on March 31, 1994. The exhibit numbers
indicated above correspond to the exhibit numbers in that filing.
<PAGE>47
EXHIBIT 3.2
BYLAWS
OF
THE BUREAU OF NATIONAL AFFAIRS, INC.
<PAGE>48
TABLE OF CONTENTS
Page Number
Section I - Offices
Delaware Office 1
Other Offices 1
Section II - Seal 1
Section III - Meetings of Stockholders 2
Place of Meeting 2
Notice of Meeting 2
Annual Meeting 2
Special Meetings 3
Quorum 4
Voting Rights 4
Manner of Voting 5
Nominations of Directors 6
Section IV - Determination of Eligible Stockholders 7
Closing Transfer Books 7
Record Date for Stockholders 7
<PAGE>49
Page Number
Section V - Directors 8
Eligibility 8
Powers 8
Number; Election; Term 9
Meetings 10
Quorum 11
Annual Statement 11
Indemnification 11
Indemnification - Fiduciaries 14
Section VI - Executive and Other Committees 17
Powers 17
Meetings 19
Section VII - Compensation of Directors 19
Section VIII - Officers 20
Appointment and Tenure 20
Chairman of the Board 21
President 22
Chief Executive Officer 23
Vice-Presidents 24
President Pro Tem 25
Secretary 25
Treasurer 26
Chief Financial Officer 26
Bonding of Officers 27
Delegation of Powers 27
<PAGE>50
Page Number
Section IX - Capital Stock 27
Amount 27
Eligible Stockholders 28
Class A Stock 28
Class B Stock 29
Class C Stock 31
Transfer on Death 32
Consideration for Class A Stock 33
Rate of Exchange of Class B Stock 33
Form of Certificates 33
Transfer of Stock 33
Purchase of Class A and Class B Stock by Corporation 34
Redemption of Class B Stock by the Corporation 37
Purchase Price 37
Class A Stock 37
Class B Stock 38
Fractional Shares 40
Dissolution of Distribution of Assets 40
Lost Certificate 40
Section X - Distribution and Marketing of Stock 41
Stock Transfer in Conformity with Section 41
Stock Purchase and Transfer Plan 41
Operation by Trustee 41
Eligibility for Participation 41
Stock Purchase Fund 42
Functions of Stock Purchase Fund 42
<PAGE>51
Page Number
Priorities in Purchase and Sale of Stock 43
Price of Class A Stock 44
Issuance of Class A Stock to Fund 45
Settlement Dates 45
Payroll Deductions for Purchase of Stock 45
Offers to Buy 47
Place and Sale of Stock 50
Register of Supplemental Bids 50
Stock Transfer Pursuant to Supplemental Bids 51
Priority in Execution 51
Annual Statement of Trustee 51
Sale of Stock of the Corporation 51
Section XI - Optional Agreements For Transfer Of
Class A Stock On Termination Of Employment 52
Section XII - Books and Accounts 56
Place 56
Inspection 56
Section XIII - Checks 57
Section XIV - Dividends; Reserves 57
Dividends 57
Reserves 57
Section XV - Definitions 57
<PAGE>52
Page Number
Section XVI - Notices 58
Form 58
Waiver 58
Section XVII - Amendments 58
Footnotes 59
<PAGE>53
BY-LAWS
OF
THE BUREAU OF NATIONAL AFFAIRS, INC.
SECTION I - OFFICES
1. Delaware Office
The principal office of the Corporation in the State of Delaware shall be
at 100 West Tenth Street in the City of Wilmington and County of New Castle; and
the resident agent in charge thereof shall be the Corporation Trust Company, 100
West Tenth Street, Wilmington, Delaware.<F74> (a)
2. Other Offices
The Corporation may also have an office or offices in the City of
Washington, District of Columbia, and at such other places as the Board of
Directors may from time to time designate or appoint, or as the business of the
Corporation may require.
SECTION II - SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its incorporation, and the words "Incorporated
Delaware, 1946."
(a) Footnotes showing prior versions of changed provisions appear at end of
By-Laws in numerical and chronological order of the By-Laws changes.
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SECTION III - MEETINGS OF STOCKHOLDERS
1. Place of Meeting
Meetings of stockholders shall be held at the main office of the
Corporation in the City of Washington, District of Columbia, or at such other
place as may be fixed by resolution of the Board of Directors.<F121>
2. Notice of Meeting
Written notice of all meetings of stockholders stating the time and place
thereof shall be mailed by the Secretary, postage prepaid, to each stockholder
of record, at his or her post office address as it appears on the books of the
Corporation.
In the case of a regular annual meeting, such notice shall be so mailed at
least 40 days in advance thereof; and in the case of a special meeting, such
notice shall be so mailed at least 10 days<F132> in advance thereof. Notice of
any special meeting of stockholders shall also state the purpose or purposes
thereof, and may provide for the transaction of such other business as may
properly come before the meeting.
3. Annual Meeting
(a) An annual meeting of stockholders shall be held at 10 o'clock A.M. on
the succeeding Saturday. At such meeting, the stockholders entitled to vote
thereat<F55> shall elect a Board of Directors<F3> and may transact such other
business as may properly be brought before the meeting. If the election for
directors is not held on the day designated third Saturday in April of each
year,<F2> but if that day be a legal holiday then on the next herein, the Board
of Directors shall cause the election to be held as soon thereafter as
conveniently may be.
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(b) No change of the time or place of a meeting for the election of
directors as fixed by these By-Laws shall be made within sixty (60) days
preceding the day on which such election is to be held. In the event of any
change in such time or place for such election of directors, notice thereof
shall be given to each stockholder at least twenty (20) days before the election
is held, in person or by letter mailed to his or her last known post office
address.
(c) At least ten (10) days before every election of directors, the
Secretary shall prepare and make a complete list of stockholders entitled to
vote at said elections, arranged in alphabetical order (with the residence of
each and the number of voting shares held by each). Such list shall be open for
said ten (10) days to the examination of any stockholder at the place where said
election is to be held and shall be produced at the time and place of election
and kept open during the whole time thereof for the inspection of any
stockholder who may be present. The original or duplicate stock ledger of the
Corporation shall be the only evidence as to the stockholders entitled to
examine such list.
4. Special Meetings
Special meetings of the stockholders for any purpose or purposes may be
called by the President, and shall be called by the President or Secretary at
the request in writing or by vote of a majority of the directors or at the
request in writing of stockholders of record owning a majority in amount of the
shares of the stock of the Corporation outstanding and entitled to vote. Such
request shall state the purpose or purposes of the proposed meeting.
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5. Quorum
At any meeting of stockholders the holders of a majority of the Class A
stock<F56> outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or herein. In the absence of a quorum, the stockholders
entitled to vote at said meeting, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time until a quorum shall
be secured, whereupon any business may be transacted which might have been
transacted at the meeting as originally notified or fixed.
6. Voting Rights
(a) At every meeting of stockholders, each stockholder entitled to vote
thereat shall have one vote for each share of Class A stock <F56> registered in
his name on the books of the Corporation.<F4>
(b) The original or duplicate stock ledger of the Corporation shall be the
only evidence as to the stockholders entitled to vote. The Board of Directors
may, however, close the transfer books of the Corporation or fix a record date
for the determination of its stockholders entitled to vote, as provided in
Section IV of these By-Laws. Except where the transfer books shall have been so
closed or a record date for voting stockholders have been so fixed, no share of
stock shall be voted on at any election for directors which shall have been
transferred on the books of the Corporation within twenty (20) days next
preceding such election.
(c) Except as otherwise provided in the Certificate of Incorporation or
By-Law,<F5> all questions before any meeting of stockholders shall be decided by
a vote of the holders of a majority of the shares of stock entitled to vote
thereat.
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7. Manner of Voting
(a) The vote for directors at any meeting of stockholders shall be by
ballot. The vote upon any other question at any meeting of stockholders shall be
by ballot or viva voce, as may be determined by the presiding officer: PROVIDED,
That if objection be raised by any stockholder to the manner of voting
designated by the presiding officer upon any such question, the manner of voting
shall be determined by the holders of the majority of the shares of stock
present or represented at any such meeting and entitled to vote thereat.
(b) Each stockholder entitled to vote at any meeting of stockholders may
vote (i) in person, or (ii) by proxy appointed by an instrument in writing
subscribed by him and bearing a date no more than six (6) months prior to said
meeting, unless said instrument provides for a longer period, or (iii) at any
election for directors, but on no other question, by mail as provided in
sub-paragraph (c) of this Paragraph 7.
(c) At any election for directors, any stockholder entitled to vote thereat
may submit his vote or votes for directors by mailing to the Secretary of the
Corporation or his designees<F201> a written ballot subscribed by him setting
forth the names of the directors for whom he desires to vote and the number of
shares to be voted for each director;<F6> PROVIDED, That said ballot in order to
be effective as the vote of the stockholder, must be received by the Secretary
of the Corporation or his designees<F201> not later than the day before the
meeting for such election of directors.
(d) If at any meeting of stockholders there shall be presented in behalf of
a stockholder more than one proxy signed by him on any question before said
meeting, or if at any election for directors there shall be presented in behalf
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<PAGE>58
of a stockholder more than one proxy signed by him authorizing the casting of
votes in his behalf or more than one ballot mailed by him pursuant to the
preceding subparagraph or both a proxy and a mailed ballot, then all such
proxies and mailed ballot signed by such stockholder shall be invalid unless
identical.
(e) A proxy may be withdrawn for filing written notice thereof with the
Secretary at any time prior to the presiding officer's call for a vote at any
meeting of stockholders.<F7>
8. Nominations of Directors
(a) At least forty-five (45) days prior to any annual meeting of
stockholders a list of nominations for directors, prepared by a Nominating
Committee to be appointed by the Board of Directors, shall be mailed by the
Secretary to each Class A<F56> stockholder. The Committee shall make at least as
many nominations as there are directorships to be filled at the annual
meeting,<F8> but may nominate candidates in excess of such number. Three<F216>
nominees shall be neither stockholders of the Corporation nor active or retired
officers or employees of the Corporation or of one of its subsidiary
corporations.<F170> Said list shall also state the total number of shares of
Class A stock of the Corporation then outstanding.<F56>
(b) Any Class A<F56> stockholder or stockholders owning at least two (2)
percent of the outstanding Class A<F56> shares of the Corporation may submit
additional nominations to the Nominating Committee not less than thirty (30)
<F189> days prior to such annual meeting.<F50> Each additional nomination made
pursuant to this sub-paragraph shall be accompanied by the nominee's written
acceptance of his or her nomination.<F190>
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(c) A final list of nominations, including nominations made in the manner
provided by sub-paragraph (b) together with nominations made pursuant to
sub-paragraph (a), shall be mailed by the Secretary to Class A<F56> stockholders
not less than twenty-two (22)<F191> days prior to such annual meeting.<F192>
SECTION IV - DETERMINATION OF ELIGIBLE STOCKHOLDERS
1. Closing Transfer Books
The Board of Directors may, in its discretion, close the stock transfer
books of the Corporation for a period not exceeding fifty (50) days preceding
the date of any meeting of the stockholders, or the date for payment of any
dividend, or the date for the allotment of rights, or the date when any change,
conversion, or exchange of capital stock shall go into effect, or a date for
obtaining the consent of the stockholders for any purpose.
2. Record Date for Stockholders
In lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date not exceeding fifty (50) days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change,
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining the consent of stockholders for any purpose, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting and adjournment thereof, or entitled to receive and
exercise the other rights and privileges referred to in this paragraph. In such
case only stockholders of record on the date so fixed shall be entitled to the
notice, voting rights, and other rights and privileges referred to herein above,
notwithstanding the transfer of any stock on the books of the Corporation after
such record date fixed as aforesaid.
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SECTION V - DIRECTORS
1. Eligibility
(a) Three<F217> persons who are not stockholders of the Corporation and not
active or retired officers or employees of the Corporation or of one of its
subsidiary corporations shall be elected or appointed as directors.
(b) Other than the persons elected or appointed as directors pursuant to
sub-paragraph (a) above, no person shall be elected or appointed as a director
unless he is a holder of Class A or Class B stock and, in addition, is an active
or retired officer or employee of the Corporation or of one of its subsidiary
corporations, and any director elected or appointed pursuant to this Paragraph
who ceases to fulfill these requirements shall be disqualified to exercise any
of the powers or duties of director and shall be deemed to have resigned from
such position.<F171>
2. Powers
The property and business of this Corporation shall be managed and
controlled by its Board of Directors. The Board of Directors shall have power --
(a) To purchase or otherwise acquire for the Corporation property, real and
personal, tangible and intangible, and any rights or privileges, at such prices
and upon such terms as the Board may deem proper.
(b) To pay for such property, rights, or privileges in whole or in part
with money, services, stock, bonds, debentures, or other securities of the
Corporation, or by the delivery of other property of the Corporation.
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(c) To create, make, and issue mortgages, bonds, deeds of trust, trust
agreements, and negotiable or transferable instruments and securities, secured
by mortgages or otherwise, and to do every act and thing necessary to effectuate
the same.
(d) To appoint agents, clerks, assistants, factors, and to dismiss them at
its discretion, to fix their duties and emoluments and to change them from time
to time, and to require security as it may deem proper.
(e) To confer on any officer of the Corporation the power of selecting,
discharging, or suspending employees.
(f) To determine by whom and in what manner the Corporation's bills, notes,
receipts, acceptances, endorsements, checks, releases, contracts, or other
documents shall be signed.
(g) To exercise any and all powers of the Corporation, including the power
to do all lawful acts and things on behalf of the Corporation which are not by
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholder.
3. Number; Election; Term
The Board of Directors shall consist of fifteen(15)<F214> members who shall
be elected by the Class A<F56> stockholders at the regular annual meeting of
stockholders.<F150> The Board of Directors so elected shall be composed of (i)
the three<F218> (3) nominees eligible only under sub- paragraph (a) of Paragraph
1 hereof who shall have received the highest number of votes among the nominees
eligible only under that provision, and (ii) the twelve(12)<F218> nominees
eligible only under sub-paragraph (b) of Paragraph 1 hereof who shall have
received the highest number of votes among the nominees eligible only under that
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provision.<F173> Each director shall hold office until the succeeding annual
election and until his successor shall have been elected and shall have duly
qualified: PROVIDED, that if there be a vacancy in the Board by reason of death,
resignation, or otherwise, such vacancy shall be filled for the unexpired term
by majority vote of all the remaining directors, although less than a quorum.
4. Meetings
(a) After each election of directors at a meeting of stockholders, the
newly elected directors shall meet for the purposes of organization, the
election of officers, and the transaction of other business, at such place and
time as may be designated by the stockholders at such annual meeting, or in the
absence of such designation, as may be fixed by written consent of a majority of
the newly elected directors. If a majority of the directors be present at such
place and time, no prior notice of such meeting need be given to the directors.
(b) Regular meetings of the Board of Directors shall be held at 9:00
a.m.<F213> on the Thursday<F186> after the first Saturday in each month except
January and August<F215> at the main office of the Corporation in Washington,
District of Columbia, and/or at such other times and places as may be fixed by
resolution of the Board or by written waiver of all its members.<F174> No other
notice of any regular meeting shall be required.
(c) Special meetings of the Board of Directors may be called by the
Chairman of the Board<F99> or the President at any time upon notice to all the
directors; and upon the written request of two or more directors, special
meetings shall be called by the President or Secretary upon one day's notice.
Such meetings may be held within or without the State of Delaware, at such time
and place indicated in the notice or waiver of notice thereof.
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5. Quorum
At all meetings of the Board of Directors four directors shall constitute a
quorum for the transaction of business, but if less than four be present at any
meeting they may adjourn from time to time without further notice until a quorum
is secured. The act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may otherwise be specifically provided by statute or by the Certificate of
Incorporation or by these By-Laws.
6. Annual Statement
The Board of Directors shall present at each annual meeting of stockholders
a full and clear statement of business and conditions of the Corporation.
7.<F196> Indemnification
Any person who was or is a party, or who was or is threatened to be made a
party, to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, investigative, or otherwise by reason
of the fact that he or she is or was a director or officer of the Corporation or
of one of the Corporation's subsidiaries shall be indemnified by the Corporation
to the fullest extent now or hereafter permitted by law. Without limiting the
generality of the foregoing.
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he or she is or was a director or officer of the Corporation or one of
its subsidiaries against expenses (including attorney's fees), judgment, fines
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and amounts paid in settlement actually and reasonably incurred by him or her
in connection with such action, suit, or proceeding, if he or she is acted in
good faith and in a manner he or she reasonably believed to be in the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct to be
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in the best
interests of the Corporation and, with cause to believe that his or her conduct
was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director or officer of the
Corporation or one of its subsidiaries against expenses (including attorney's
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner reasonably believed to be in the best interests of the
Corporation, except that no indemnification shall be made with respect to any
claim, issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty of the
Corporation unless and only to the extent that the Court of Chancery of Delaware
or the Court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, such person is fairly
and reasonably entitled to indemnity for such expenses which the Court of
Chancery of Delaware or such other Court shall deem proper.
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(c) To the extent that a director or officer of the Corporation has been
successful on the merits in defense of any action, suit, or proceeding referred
to in Subparagraph (a) and (b) of this Paragraph, or in defense of any claim,
issue, or matter therein, he or she shall be indemnified against expenses
(excluding attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
(d) Any indemnification under Subparagraph (a) or (b) of this Paragraph
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that the indemnification of the
director or officer is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subparagraph (a) or (b). Such
determination may be made (i) by the Board of Directors by a majority vote of a
quorum consisting of directors who were or are not parties to such action, suit,
or proceeding, or (ii) if such a quorum is not obtainable, or even if obtainable
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders. Such determination shall not be
arbitrary but shall be made in keeping with the precepts expressed in this
Paragraph. Upon such determination, the Board of Directors shall promptly
authorize indemnification in accordance with such determination and in
accordance with Subparagraphs (a) and (b) of this Paragraph.
(e) Expenses incurred in defending a civil or criminal action, suit, or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit, or proceeding as authorized by the Board of Directors in the
manner provided by Subparagraph (d) of this Paragraph upon receipt of an
undertaking by or on behalf of the director or officer involved to repay such
amounts unless it shall ultimately be determined that he or she is entitled to
be indemnified by the Corporation.
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(f) The indemnification provided in this Paragraph shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders, or disinterested directors, or
otherwise, both as to action in his or her official capacity and as to action in
any other capacity while holding such office, and shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
(g) It shall be conclusively presumed that every person entitled to
mandatory indemnification under this Paragraph served the Corporation in
reliance hereon. Any such person may continue to rely on the provisions of this
Paragraph, as presently constituted, even after its amendment, unless and until
he or she is given written notice of such amendment or unless he or she is a
member of the Board of Directors which so amends this Paragraph.
(h) For the purposes of this Paragraph, references to the "Corporation"
include all subsidiaries of the Corporation and all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director or officer of such a
constituent corporation shall stand in the same position under the provisions of
this Paragraph with respect to the resulting or surviving corporation as he or
she would if he or she had served the resulting or surviving corporation in the
same capacity.
8.<F197> Indemnification-Fiduciaries
Any person who was or is a party, or who was or is threatened to be made a
party, to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, investigative, or otherwise by reason
of the fact that he or she is or was serving at the request of the Corporation
or at the request of one of the Corporation's subsidiaries as a trustee or as a
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"fiduciary" as the term "fiduciary" is defined in the Employee Retirement Income
Security Act of 1974, as the Act may be amended, under any employee benefit plan
at any time established or maintained by the Corporation shall be indemnified by
the Corporation to the fullest extent now or hereafter permitted by law. Without
limiting the generality of the foregoing.
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
by reason of the fact that he or she is or was serving at the request of the
Corporation or at the request of one of the Corporation's subsidiaries as a
trustee or fiduciary against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit, or proceeding, if he or she acted in
good faith and in a manner he or she reasonably deemed to be in the best
interests of the participants of the employee benefit plan or plans involved
and/or their beneficiaries, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct to be
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the exclusive purposes of providing benefits to participants of the
employee benefit plan or plans involved and their beneficiaries, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
(b) In any proceeding involving a trustee or fiduciary no indemnification
shall be provided with respect to any claim, issue, or matter as to which the
trustee or fiduciary shall have been adjudged to have dealt with the assets of
the employee benefit plan or plans involved in his or her own interest or for
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his or her own account or to have received consideration for his or her personal
account from a party dealing with the plan. This Paragraph shall not provide
indemnification for any bank, trust company, insurance company, partnership, or
other entity or person not an officer, director, or employee of the Corporation,
even though retained as an investment advisor, actuary, custodian, trustee, or
consultant to any plan, or for any director, officer, agent, employee of any
such bank, trust company, insurance company, partnership, other entity, or
person.
(c) Any indemnification under Subparagraph (a) of this Paragraph (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that the indemnification of the trustee or
fiduciary is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Subparagraph (a) of this Paragraph.
Such determination may be made (i) by independent legal counsel in a written
opinion, or (ii) by the stockholders. Such determination shall not be arbitrary
but shall be made in keeping with the precepts expressed in this Paragraph. Upon
any such determination, the Board of Directors shall promptly authorized
indemnification in accordance with such determination and in accordance with
Subparagraphs (a) and (d) of this Paragraph.
(d) Expenses incurred in defending a civil or criminal action, suit, or
proceeding, as contemplated by this Paragraph may be paid by the Corporation in
advance of the final disposition of such action, suit, or proceeding, upon
authorization by the Board of Directors and upon receipt by the Board of
Directors of an undertaking by or on behalf of the trustee or fiduciary to repay
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such amounts unless it shall ultimately be determined that he or she is
entitled to be indemnified by the Corporation.
(e) The indemnification provided in this Paragraph shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any agreement, vote of stockholders, or otherwise, both as to action in his or
her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a trustee or
fiduciary and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
(f) It shall be conclusively presumed that every person entitled to
mandatory indemnification under this Paragraph served the Corporation or other
organization or enterprise at the Corporation's request in reliance hereon. Any
such person may continue to rely on the provisions of this Paragraph, as
presently constituted, even after their amendment unless and until he or she is
given written notice of such amendment or unless he or she is a member of the
Board of Directors which so amends this Paragraph.
SECTION VI - EXECUTIVE AND OTHER COMMITTEES
1. Powers
(a) The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate an Executive Committee and one or more
other committees, each consisting of two or more directors.
(b) The Executive Committee shall have such powers and duties as may be
directed or authorized by the Board of Directors from time to time, including
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the authority to exercise all powers of the Board when the Board is not in
session; and during the intervals between meetings of the Board of Directors the
Executive Committee shall advise with and aid the officers of the Corporation in
all matters concerning its interest and the management of its business:
PROVIDED, That the Executive Committee shall not have the power to make, alter,
amend, or repeal the By-Laws, nor to fill any vacancies on the Board of
Directors or the Executive Committee. Vacancies in the membership of the
Executive Committee shall be filled by the Board of Directors.
(c)<F194> The Audit Committee of the Board of Directors shall consist of
three to five members of the Board of Directors elected annually by a majority
of the Board of Directors at the Directors' meeting immediately following the
annual meeting of stockholders. The Committee shall consist, so far as possible,
of non-employee directors and in no case shall an operating officer of the
Corporation be elected to serve as a member of the Committee. Immediately
following election of the Committee, the Board of Directors shall elect one of
its members to serve as chairman of the Committee. No member of the Committee
shall serve as chairman for more than two consecutive years.
The duties and functions of the Audit Committee shall be as follows: (i) to
make recommendations to the Board of Directors concerning the selection,
retention, or termination of the independent auditors; (ii) review with the
Board of Directors and the independent auditors the accounting principles
bearing upon the financial statements, and in particular with respect to any
changes in accounting principles; (iii) review the proposed scope of the audit
and the report of the independent auditors, and review the auditors' statements,
if any, regarding weaknesses in internal accounting controls, and the corrective
action taken by management; (iv) review the audit and non- audit services
performed by the independent auditors and the related fees; (v) review with
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management and the independent auditors recommendations made by the auditors
with respect to changes in accounting procedures and internal accounting
controls, growing out of the results of the audit; (vi) maintain minutes of each
meeting of the Audit Committee, copies of which should be furnished to the Board
of Directors, and report regularly on Committee activities to the Board of
Directors and make recommendations as appropriate; and (vii) perform such other
duties as may be directed or authorized by the Board of Directors from time to
time.
Vacancies in the membership of the Audit Committee shall be filled by a
majority of the Board of Directors at the first regular meeting of the Board of
Directors following the occurrence of a vacancy or vacancies on the Committee.
(d)<F195> Other committees designated by the Board of Directors shall have
such powers as may be specifically delegated to them by resolution of the Board.
2. Meetings
The Executive Committee and any other committees shall meet at stated times
or on notice to all by any of its members. Each committee shall keep regular
minutes of its proceedings, shall report the same to the Board of Directors, and
shall fix its rules of procedure, but an affirmative vote of a majority of the
whole Committee shall be necessary in every case for the action of the
Committee.
SECTION VII - COMPENSATION OF<F158> DIRECTORS
Directors and members of committees who are on the payroll of the
Corporation or of one of its subsidiary corporations<F165> shall<F167> not
receive any salary or fee for their services as such, but by resolution of the
Board they shall be allowed reimbursement for their traveling and other
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<PAGE>72
reasonably necessary expenses for attendance at any regular or special meeting:
Provided, That nothing herein contained shall preclude any director or member of
a committee from serving the Corporation in any other capacity upon a
compensated basis.<F159>
SECTION VIII - OFFICERS
1. Appointment and Tenure
(a) The officers of the Corporation shall be a Chairman and a Vice Chairman
<F160> of the Board,<F86> a President, one or more Vice-Presidents, a Secretary,
and a Treasurer. The Chairman of the Board and the President may be the same
person, the<F87> Secretary and the Treasurer may be the same person, and a Vice-
President may hold at the same time the office of Vice Chairman of the
Board,<F161> Secretary, or Treasurer. The Chairman and Vice Chairman<F162> of
the Board<F100>, the President, and one Vice-President shall be chosen from
among the directors; the other officers may, but need not be, chosen from among
the directors. No person shall be an officer of the Corporation unless he or
she, if eligible to purchase stock under the Corporation's By-Laws, is a holder
of Class A stock or Class B stock, and any officer who ceases to hold any shares
of stock in the Corporation shall be disqualified to exercise any of the powers
or duties of an officer and shall be deemed to have resigned from
office.<F59><F220>
(b) The directors shall at their first meeting after each annual meeting of
stockholders choose a Chairman and a Vice Chairman<F160> of the Board, a<F88>
President, a Vice-President, a Secretary, and a Treasurer. They may also choose
additional Vice-Presidents, an Assistant Secretary, and one or more Assistant
Treasurers.<F175> In the event that the Board shall elect two or more
Vice-Presidents, it may<F193> designate one of them as Senior
Vice-President.<F113> The directors shall designate either the Chairman of the
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<PAGE>73
Board or the President, in their discretion, as the Chief Executive Officer of
the Corporation.<F101>
(c) The officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer chosen or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors, with or without
cause. If the office of any officer or officers becomes vacant for any reason,
the vacancy shall be filled by the affirmative vote of a majority of the whole
Board of Directors.
2. Chairman of the Board
(a) The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors. He shall serve as chairman of the
Executive Committee, if such committee is designated, and of any other committee
designated by the Board of Directors, except as otherwise provided by resolution
of the Board.
(b) On behalf of the Board of Directors, and in association with the
President, he shall make to stockholders an annual statement of the business
operations and financial condition of the Corporation and such reports as the
Board shall direct.
(c) He shall oversee generally, on behalf of the Board of Directors, the
operation and administration of all employee benefit plans and of any plan for
the sale and purchase of the stock of the Corporation.
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<PAGE>74
(d) He shall consult with and advise the President, or any officer or
manager as the President requests, regarding such matters or problems as
mutually may be chosen by him and the President.
(e) He shall perform such other functions and duties as may be prescribed
by the Board of Directors.
(f) In the absence or disability of the Chairman of the Board, the
foregoing stated functions shall be performed by the Vice Chairman of the
Board.<F102><F163>
3. President
(a) The President shall be responsible for the active management of the
day-to-day business and operations of the Corporation. He shall be the chief
administrative officer and shall appoint and have supervision and direction of
the operating and staff managers of the business, except as otherwise provided
in this Section.
(b) He shall make such undertakings, and execute such contracts and
agreements, in the name of the Corporation, as may be necessary to the normal,
budgeted operations of the Corporation, subject to any limitations prescribed by
the Board of Directors.
(c) He shall be responsible for submitting for approval to the Board of
Directors, or to such committee of the Board as it shall determine, not later
than 45<F111> days preceding each fiscal year, a proposed operating budget and
financial forecast for such succeeding fiscal year.
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<PAGE>75
(d) He shall submit to the Board of Directors an annual report of the
operations of the Corporation, not later than the regular meeting of directors
next preceding the annual meeting of stockholders, and he shall make to
stockholders, in association with the Chairman of the Board, an annual statement
of the business operations of the Corporation.
(e) He shall perform such other functions and duties as may be prescribed
by the Board of Directors.
(f) In the absence or disability of the President, the foregoing stated
functions shall be performed by the Senior Vice-President.<F103><F114>
4. Chief Executive Officer
(a) The Chief Executive Officer (the Chairman of the Board or the
President, as the Board of Directors may designate) shall have final supervisory
power over the business and affairs of the Corporation and ultimate
responsibility and accountability to the Board of Directors for the
Corporation's total efforts and total results. He shall see that all orders and
resolutions of the Board of Directors are carried into effect. It shall be his
duty to assure that adequate planning and attention are given to the long-term
stability and growth of the Corporation. He shall develop over-all objectives
and broad basic policies and plans of the Corporation for the approval of the
Board of Directors.
(b) He shall conducts the Corporation's external financial and legal
relations and shall be the Corporation's principal representative in its
relations with the public, the community, other businesses, and government
agencies.
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<PAGE>76
(c) Except where by law the signature of the President is required, he
shall execute all deeds, bonds, mortgages, and other obligations and instruments
(other than such contracts and agreements that may be necessary to the normal,
budgeted operations of the Corporation) in the name of the Corporation.
(d) He shall approve the appointment by the President of the principal
operating and staff managers of the business, and shall have final general
responsibility for the setting and adjusting of the salaries of all employees of
the Corporation.
(e) He shall have general supervision and direction of the other officers
in their corporate capacities and shall see that their corporate duties are
properly performed.<F104>
(f) In the absence or disability of the President, when he has been
designated the Chief Executive Officer, the foregoing stated functions shall be
performed by the Chairman of the Board. In the absence or disability of the
Chairman of the Board, when he has been designated the Chief Executive Officer,
the foregoing stated functions shall be performed by the Vice Chairman of the
Board.<F164.
5.<F92> Vice-Presidents
In the absence or disability of both the President and the Chairman of the
Board,<F105> the Senior Vice-President<F116> shall be vested with all the powers
and be required to perform all the duties of the President. The Vice-President
or Vice-Presidents shall perform such duties as may be prescribed by the Board
of Directors.<F117>
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<PAGE>77
6.<F93> President Pro Tem
In the absence or disability of the President and the Vice-President or
Vice-Presidents, the Board may appoint from its own number a president pro tem.
7.<F94> Secretary
(a) The Secretary shall attend all meetings of the Board of Directors, the
stockholders, and the Executive Committee. He shall act as clerk thereof, and
shall record all votes and all of the proceedings of such meetings in a book to
be kept for that purpose; and shall perform like duties for the standing
committees of the Board of Directors when required.
(b) He shall give or cause to be given proper notice of meeting of
stockholders and directors, whenever required.<F106>
(c) He shall record and effectuate all proper transfers of stock, and shall
keep an account of stock registered and transferred, in such manner and subject
to such regulations as the Board of Directors may prescribe.
(d) He shall have custody of the seal of the Corporation and shall affix
the seal to contracts, agreements, deeds, mortgages and other instruments of the
Corporation requiring a seal; and when the seal is so affixed, it shall be
attested by his signature, or by the signature of the Treasurer.
(e) He shall perform all other functions incident to the office of
Secretary, and such other functions as the Board of Directors or the Chief
Executive Officer may prescribe.<F107>
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8. Treasurer
(a) The Treasurer shall have custody of the funds and securities of 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 disburse the funds of the
Corporation as may be ordered by the Board of Directors and either the Chief
Executive Officer or the President, in relation to their functions, taking
proper vouchers for such disbursements, and shall render to the Chief Executive
Officer and the directors, whenever they may require it, an account of all his
or her transactions as Treasurer.
(b) The Treasurer shall invest funds of the Corporation pursuant to
guidelines established by the Board of Directors and shall perform such other
duties as are properly required of him or her by the Board of Directors,
including the payment of dividends as declared by the Board of
Directors.<F184>
9. Chief Financial Officer
The Chief Financial Officer (a vice president) shall have responsibility
for the financial management of the business, including: obtaining financing for
the business; managing the accounting system and other financial reporting
systems; formulating financial plans and evaluating performance under such
plans; complying with the financial reporting requirements of appropriate taxing
and other regulatory agencies; and consulting with other company units
concerning the financial aspects of their activities. The Chief Financial
Officer shall also be responsible for maintaining accurate records of all
financial transactions of the Corporation. In relation thereto, the Chief
Financial Officer shall establish and supervise the functions of the office of
the Controller of the Corporation. He or she shall be the primary liaison
between the Corporation and its independent auditors and shall render to the
Chief Executive Officer and the directors, whenever they may require it, an
account of the financial condition of the Corporation, and at the meeting of the
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<PAGE>79
Board of Directors next preceding the annual meeting of stockholders he or she
shall make a like report for the preceding fiscal year.
10. Bonding of Officers
Any officer shall give the Corporation a bond at the expense of the
Corporation, if required to do so by the Board of Directors, in such sum and in
form and with security satisfactory to the Board, for the faithful performance
of the duties of his or her office and the restoration to the Corporation, in
case of his or her death, resignation, retirement, or removal from office, of
all books, papers, vouchers, money and other property of whatever kind belonging
to the Corporation in his or her possession or under his or her
control.<F185>
11.<F96> Delegation of Powers
In case of the absence or disability of any officer of the Corporation, or
for any other reason deemed sufficient by a majority of the whole Board of
Directors, the Board may delegate any or all of the powers or duties of such
officer to any other officer, or to any director, for the time being.
SECTION IX - CAPITAL STOCK<F11>
1. Amount
The total number of shares of stock which the Corporation is authorized to
issue is thirteen million (13,000,000) shares divided into three classes: one
class designated as Class A common shares shall consist of six million seven
hundred thousand (6,700,000) shares, $1.00 par value per share and with voting
rights, another class designated as Class B common shares shall consist of five
million three hundred thousand (5,300,000) shares, $1.00 par value per share and
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<PAGE>80
without voting rights, and another class designated as Class C common shares
shall consist of one million (1,000,000) shares, $1.00 par value per share
without voting rights.<F208><F219>
2. Eligible Stockholders
(a) Class A Stock
(i) The shares of Class A stock shall be issued only to persons (1) who
are officers or employees of the Corporation or of a subsidiary eighty (80)
percent or more of whose stock is owned by the Corporation and (2) who possess
such other qualifications as the Board of Directors shall from time to time
prescribe by resolution (all such officers and employees being hereinafter in
this Section IX referred to as "officers and employees of the Corporation") and
to a trustee under a stock bonus plan of the Corporation.<F136>
(ii) Except as provided in Sections V and VIII of these By-Laws, in
respect of qualifications of directors and officers, no officers and<F137>
employees of the Corporation shall be obligated or required to subscribe for or
own any stock of the Corporation; and the subscription or failure to subscribe
for any shares of stock of the Corporation shall in no way affect or prejudice
the position, status, tenure, continued employment, or advancement of any
officer or<F138> employee.
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<PAGE>81
(b) Class B Stock
(i) The Class B stock shall be issued only in exchange for Class A
stock (A) to officers or employees of the Corporation upon retirement because of
age or disability, or (B) upon the death of officers or employees of the
Corporation, to the estates of such officers or employees, to the dependents of
such officers or employees, or to persons who are the natural objects of the
bounty of such officers or employees: Provided, That death occurs (1) while the
officers or employees are in the service of the Corporation or on military or
disability leave, or (2) within 90 days after retirement because of age or
disability.<F122>
(ii) No person shall be obligated or required to accept Class B stock
in exchange for Class A stock.
(iii) Any person qualified under sub-paragraph (b)(i) above to receive
Class B stock in exchange for Class A stock who elects to exercise such right of
exchange shall so notify the Secretary of the Corporation in writing at the
following times:
(A) In the case of an officer or employee of the Corporation
entitled to exchange Class A stock for Class B stock upon retirement, within
ninety (90) days after retirement, and in the case of anyone entitled to
exchange Class A stock for Class B stock upon the death of a retired officer or
employee, within one hundred eighty (180) days after the death of such officer
or employee;
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<PAGE>82
(B) In the case of anyone entitled to exchange Class A stock for
Class B stock upon the death of an officer or employee of the Corporation while
in the service of the Corporation or on military or disability leave, within
one hundred (180) days after such death.<F123>
PROVIDED, however, that with respect to an exchange involving stock
distributed to a qualified person under a stock bonus plan of the Corporation,
the aforesaid ninety (90) day and one hundred and eighty (180) day periods
<F124> for notification shall begin to run upon distribution of stock by the
trustee of said plan.<F61>
(iv) In the event that a holder of Class A stock elects to exercise a
right to exchange such stock for Class B stock and that at such time the
Corporation does not have available authorized Class B stock with which to
effectuate such exchange, said holder of Class A stock shall be so informed by
the Corporation and such Class A stock may be retained by the holder thereof
until receipt of notification from the Corporation that Class B stock is so
available. Upon receipt of such notification from the Corporation, the
exchange shall promptly be effected: Provided, That nothing contained herein
shall preclude such holder of Class A stock prior to receipt of such
notification from the Corporation from tendering any or all of such shares of
Class A stock (A) to the Corporation for purchase by it in accordance with
Paragraph 7 of this Section or (B) for purchase in accordance with the
provisions of the Stock Purchase and Transfer Plan of the Corporation.<F125>
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(c) Class C Stock
The Class C common stock of the Corporation may be issued only in exchange
for Class A stock to officers and employees of any subsidiary corporation,
eighty (80) percent or more of whose stock is owned by the Corporation or to the
officers and employees of the Corporation assigned to such a subsidiary
corporation, upon the disposition of that subsidiary or upon reduction of the
Corporation's stock ownership to less than eighty (80) percent. The exchange of
Class A stock for Class C stock shall be at the option of such officer and
employee and shall be on a share for share basis. An election to exercise such
right of exchange shall be made by so notifying the Secretary of the Corporation
in writing by the later of July 19, 1986, or ninety (90) days after the
disposition or reduction.
Any holder of Class C stock may at any time, by written notice to the
Secretary of the Corporation, tender any or all shares of such stock to the
Corporation for purchase by it. The Board of Directors may accept or reject such
tender, in whole or in part; and if it accepts the tender or any part thereof,
the Corporation shall purchase the shares of stock so accepted at the price in
effect for purchase and sale of shares of Class A stock of the Corporation under
the Stock Purchase and Transfer Plan of the Corporation. If the Board of
Directors rejects such tender in whole or in part, the shares may be transferred
to any person whomsoever, subject, however, to a continuing right of the
Corporation to purchase any and all of said shares in the event that, and at
such times as, any or all of such shares are presented for transfer, and the
price payable by the Corporation shall be the price in effect for the purchase
and sale of Class A stock of the Corporation under the Stock Purchase and
Transfer Plan of the Corporation. Except as provided above, no shares of Class C
stock may be transferred or pledged without the written consent of the Board of
Directors.
The Corporation shall have the right to redeem from the holder thereof all
or any part of the outstanding shares of Class C stock (a) one (1) year after
the death of the officer or employee, or (b) ninety (90) days after the officer
or employee has held the Class C stock for the number of years equal to his or
her years of service as an officer or employee of the Corporation or the
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the subsidiary company while the subsidiary was owned at least eighty (80)
percent by the Corporation, whichever shall first occur. Prior to exercising
such right of redemption, the Corporation shall notify the holder of the Class C
stock by written notice to the address of such holder as it appears on the stock
books of the Corporation and shall give the holder the opportunity to tender the
shares to the Corporation in accordance with the previous paragraph. If the
holder fails to tender the shares, the Corporation may exercise the right to
redeem the outstanding shares of Class C stock at a price per share equal to the
book value per outstanding share at the close of the next preceding calendar
year, as determined by independent auditors, and the said holder shall have no
further rights, privileges, or powers in respect of such stock.<F204>
(d) Transfer on Death<F221>
Notwithstanding any provision of this Paragraph 2 of Section IX to the
contrary, any holder of shares of Class A, Class B, or Class C stock shall be
entitled to hold such shares in transfer-on-death ("TOD") form pursuant to the
provisions of Chapter 8 of Part III, Title 12 of the Delaware Code ("Uniform TOD
Security Registration Act") subject to such conditions as the Board of Directors
may establish by resolution from time to time and in accordance with
registration procedures to be adopted by the Secretary of the Corporation. Upon
receipt of (i) an affidavit of the personal representative of the deceased
owner's estate or such other proof of death of the deceased owner as may be
satisfactory to the Secretary of the Corporation, and (ii) satisfaction of such
other requirements as the Corporate Secretary may establish, shares of Class A
stock, Class B stock, or Class C stock transferred upon the death of the owner
pursuant to TOD registration shall be registered in the name of the surviving
beneficiary(ies). Shares of any class of the Corporation's stock received by any
person as a surviving beneficiary (or the surviving beneficiary's
representatives, if applicable) under a TOD registration of such shares shall be
subject to the provisions of the Corporation's Certificate of Incorporation and
By-Laws in the same manner as if such shares had been received by such holder
under a will or under the laws of descent and distribution. Without limiting the
generality of the foregoing sentence, any such shares shall be subject to the
Corporation's redemption or repurchase rights applicable to the personal
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<PAGE>85
representative of any deceased holder of the Corporation's stock or to any
recipient of the Corporation's stock under a will or under the laws of descent
and distribution.
3. Consideration for Class A Stock
The Class A stock shall be issued for money only, at such price as the
Board of Directors may from time to time prescribe by resolution, except as
issued pursuant to the provisions of a stock bonus plan of the
Corporation.<F62>
4. Rate of Exchange of Class B Stock
The exchange of Class A stock for Class B stock shall be on a share for
share basis.<F126>
5. Form of Certificates
The certificates of stock of the Corporation shall, as to each class of
stock, be numbered consecutively and shall be entered in the books of the
Corporation as they are issued. Each certificate shall exhibit the holder's name
and the number of shares of stock represented thereby, and shall be signed by
the President or a Vice-President, and by either the Secretary, the Treasurer,
the Assistant Secretary or the Assistant Treasurer.
6. Transfer of Stock
(a) Except as provided in<F64> Paragraph 7 of this Section and in Sections
X and XI,<F16> no shares of Class A and Class B<F65> stock may be transferred or
pledged without the written consent or authorization of the Board of Directors
or of such officer as may be designated by it to grant such consent or
authorization.
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(b) All transfers of stock of the Corporation shall be made upon its books
by the person named in the certificate or by his lawfully constituted
representative, and upon surrender of the certificate for cancellation. For
purposes of this Paragraph 6(b) and Article IV, Section 1A, Paragraph 16 of the
Corporation's Certificate of Incorporation, a transfer of stock registered in
TOD form that occurs upon the death of the holder thereof shall be deemed to be
made "by the person named in the certificate," provided that the Corporation has
received an affidavit of the personal representative of the deceased owner's
estate or such other proof of death of the deceased owner as may be satisfactory
to the Secretary of the Corporation.<F222>
(c) The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof, and accordingly shall
not be bound to recognize any equitable or other claims to or interest in such
shares on the part of any person, whether or not it shall have express or other
notice thereof, save as expressly provided by the laws of Delaware.
7. Purchase of Class A and Class B<F65> Stock by Corporation
(a) Any holder of Class A<F66> stock may at any time, by written notice to
the Secretary of the Corporation, tender any or all of his shares to the
Corporation for purchase by it. The Board of Directors may accept or reject such
tender, in whole or in part; and if it accepts the tender or any part thereof,
the Corporation shall purchase the shares of Class A<F66> stock so accepted at
the price provided for in sub-paragraph (a) of Paragraph 9 hereof, determined as
of the date of presentation for transfer.<F18>
(b) In the event of (i)<F19> the resignation, retirement, dismissal or
death of any officer or employee of the Corporation who owns any shares of Class
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A<F66> stock thereof or (ii) the distribution of shares of Class A<F66> stock of
the Corporation by a trustee under any stock bonus plan of the Corporation,<F20>
the Corporation shall have the exclusive right, subject to the provisions of
sub-paragraph (b) of Paragraph 2 of this Section and to the provisions of
Section X and Section XI of the By-Laws,<F21> for a period of ninety (90) days
from the occurrence of such event<F22> to purchase any or all such Class A<F66>
stock so owned or so distributed.<F23> If the Board of Directors elects to
exercise such right of purchase, it shall notify the stockholder or his personal
representative or the distributee under a stock bonus plan of the
Corporation<F24> within said period of ninety (90) days by written notice sent
to the stockholder or his representative at the address of the stockholder as it
appears on the stock books of the Corporation and by written notice to the
distributee at his address as it appears on the records of the Administrative
Committee established under the stock bonus plan,<F127> and within not more than
one (1) year after such exercise of its right to purchase the Corporation shall
pay the said stockholder or his representative or the said distributee<F25> the
applicable price per share specified in sub-paragraph (a) of Paragraph 9 of this
Section, determined as of the date of such separation or such distribution<F26>
and with interest at the rate of six percentum (6%) per annum from the date of
such purchase until the date of payment. Upon the exercise by the Corporation of
its right to purchase any such shares of Class A<F66> stock, the said
stockholder or his representative or the said distributee<F27> shall have no
further rights, privileges, or powers in respect of such stock. If payment of
the purchase price for such shares is not made by the Corporation at the time of
such purchase, the Corporation shall within a reasonable time thereafter issue
to the stockholder or his representative or the distributee<F28> a note or other
evidence of indebtedness fixing the amount to be paid by the Corporation
pursuant to sub-paragraph (a) of Paragraph 9 of this Section and bearing
interest at the rate of six percent (6%) per annum from the date of purchase to
the date of payment. If the Board of Directors elects not to exercise such right
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of purchase within the said period of ninety (90) days, the shares may be
retained by or transferred to any person whatsoever, subject to the continuing
right of the Corporation to purchase all or any of said shares in the event
that, and at such times as, any or all of such shares are presented for transfer
to any other person, and the price payable by the Corporation shall be<F29> the
applicable price per share specified in sub-paragraph (a) of Paragraph 9 of this
Section,30 determined as of the date of presentation for transfer.<F31>
(c) The Corporation shall have the right to purchase Class A<F56> stock
through the Stock Purchase Plan for the purposes set forth in Section X,
Paragraph 4, of the By-Laws.<F51>
(d) Any holder of Class B stock may at any time, by written notice to the
Secretary of the Corporation, tender any or all his shares to the Corporation
for purchase by it. The Board of Directors may accept or reject such tender, in
whole or in part; and if it accepts the tender or any part thereof, the
Corporation shall purchase the shares so accepted at a price determined in
accordance with the provisions of sub-paragraph (b)(i) of Paragraph 9 hereof.
Where shares are tendered by several stockholders, the Board of Directors may
accept all or any part thereof as it deems proper, either in the chronological
order of tender, or according to a percentage of all shares tendered, or by any
combination of these methods, at its discretion. If the Board of Directors
rejects such tender in whole or in part, the shares may be transferred to any
person whatsoever, subject to the continuing right of the Corporation to
purchase any or all of said shares in the event that, and at such times as, any
or all of such shares are presented for transfer to any other person, and the
price payable by the Corporation shall be a price per share determined in
accordance with the provisions of sub-paragraph (b)(ii) of paragraph 9 hereof,
determined as of the date of presentation for transfer.<F67>
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8. Redemption of Class B Stock by the Corporation
The Corporation shall have the right at any time (a) after the expiration
of eight (8) years from the date of retirement of an officer or employee or one
(1) year after the death of such retired officer or employee, whichever of the
two periods is longer, to redeem from the holder thereof all or any part of the
outstanding shares of Class B stock issued to such retired officer or employee,
and (b) after the expiration of eight (8) years from the date of death of an
officer or employee (i) while in the service of the Corporation or on military
or disability leave or (ii) who dies within ninety (90) days after retirement,
to redeem from the holder thereof all or any part of the outstanding shares of
Class B stock issued in exchange for Class A stock to the estate, dependents, or
persons who are the natural objects of the bounty of such employee or officer.
If the Corporation elects to exercise such right of redemption, it shall so
notify the holder of the Class B stock by written notice sent to the address of
such holder as it appears on the stock books of the Corporation and, upon such
exercise by the Corporation of its right to redeem any of such shares of Class B
stock, the said holder shall have no further rights, privileges, or powers in
respect of such stock.<F128> The Corporation shall make payment for the shares
redeemed at a price per share determined in accordance with the provisions of
sub-paragraph (b)(iii) of Paragraph 9 hereof, as of the date of redemption.<F68>
9. Purchase Price
(a) Class A<F66> Stock
The price to be paid by the Corporation for any shares of Class A <F66>
stock acquired by it pursuant to a tender under Subparagraph (a) of Paragraph 7
of this Section, or pursuant to notice or demand under sub-paragraph (b) of
Paragraph 7 of this Section shall be as follows:
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<PAGE>90
(i) During the period ending December 31, 1950, the book value per
outstanding share for the next preceding calendar year, as determined by
independent auditors.
(ii) From and after January 1, 1951, the book value per outstanding
share at the close of<F32> the next preceding calendar year, as determined by
independent auditors: PROVIDED, That if the book value per outstanding
share,<F33> as so determined, exceeds ten times the average annual net earnings
per outstanding share,<F34> if any, of the Corporation (after taxes, including
income taxes) for the next preceding three calendar years, as determined by
independent auditors then the price shall be the average of such two figures
(book value and ten times average net earnings) per outstanding share.
(b) Class B Stock
(i) The price to be paid by the Corporation for any shares of Class B
stock acquired by it pursuant to tender under Subparagraph (d) of Paragraph 7
hereof shall be:
(A) The price in effect for purchase and sale of shares of Class A
stock of the Corporation under the Stock Purchase and Transfer Plan of the
Corporation, if tender is made prior to the time that the Corporation shall
first have the right under Paragraph 8 hereof to redeem such Class B stock
from the holder thereof; or
(B) The price determined for the purchase of Class A stock in
accordance with the provisions of sub-paragraph (a) of Paragraph 9 hereof, if
tender is made at a time when the Corporation shall first have the right under
38
<PAGE>91
Paragraph 8 hereof to redeem such Class B stock from the holder thereof. <F129>
(ii) Except as provided for in Subparagraph (iv) hereof, the price to
be paid by the Corporation for any share of Class B stock acquired by it
pursuant to the exercise of its right under sub-paragraph (d) of Paragraph 7
hereof after rejection of tender shall be:
(A) The price in effect for the purchase and sale of shares of
Class A stock of the Corporation under the Stock Purchase and Transfer Plan
of the Corporation, if the stock is presented for transfer prior to the time
that the Corporation shall first have the right under Paragraph 8 hereof to
redeem such Class B stock from the holder thereof; or
(B) The price determined for the purchase of Class A stock in
accordance with the provisions of sub-paragraph (a) of Paragraph 9 hereof, if
the stock is presented for transfer at a time when the Corporation shall first
have the right under Paragraph 8 hereof to redeem such Class B stock from
the holder thereof.<F130>
(iii) Except as provided for in sub-paragraph (iv) hereof, the price to
be paid by the Corporation for any share of Class B stock acquired by it under
Paragraph 8 hereof shall be a price determined in accordance with the provisions
of sub-paragraph (a) of Paragraph 9 hereof.
(iv) If the Corporation shall refuse a tender of Class B stock made
pursuant to the provisions of sub-paragraph (d) of Paragraph 7 hereof within six
39
<PAGE>92
months prior to the time at which the Corporation shall first have the right
under Paragraph 8 hereof to redeem such Class B stock from the holder thereof,
<F131> the price to be paid by the Corporation upon acquisition of such Class B
stock either under the provisions of sub-paragraph (d) of Paragraph 7 or
Paragraph 8 hereof shall be the price in effect at the time of acquisition for
the purchase and sale of Class A stock under the Stock Purchase and Transfer
Plan of the Corporation.<F69>
10. Fractional Shares
No fractional shares of<F70> stock may be subscribed for, issued or
exchanged, except as the Board of Directors may by resolution determine to be
necessary or advisable in the effectuation of a stock bonus plan of the
Corporation.<F35> The Board of Directors may, in its discretion, provide for the
payment of a sum of money to cover fractional interests arising from an
exchange, redemption or acquisition of stock by the Corporation.
11. Dissolution or Distribution of Assets
In the event of dissolution of, or any distribution of the assets of, the
Corporation, the holders of Class A stock, Class B stock, and Class C stock
shall be entitled to participate ratably, share for share, and without
preference of any class over the others.<F205>
12. Lost Certificate
If a certificate of stock of the Corporation be lost or destroyed, another
certificate of the same tenor and for the same number of shares may be issued in
its stead, upon proof of such loss or destruction and the giving of a
satisfactory bond of indemnity in an amount sufficient to indemnify the
Corporation against any claim: PROVIDED, That the Board of Directors may waive
the requirement of a bond if in its judgment it is proper to do so.
40
<PAGE>93
SECTION X - DISTRIBUTION AND MARKETING OF STOCK<F36>
1. Stock Transfer in Conformity with Section
For all transfers of Corporation stock made in conformity with the
requirements of this Section, approval by the Board of Directors shall not be
required.
2. Stock Purchase and Transfer Plan
The Board of Directors shall set up a Stock Purchase and Transfer Plan
which shall contain the following features:
(a) Operation by Trustee
The Plan shall be operated in accordance with the provisions of this
Section by a Trustee, who shall be designated by the Board and shall serve at
the pleasure of the Board. The Board may designate one or more Assistant
Trustees with powers to perform any of the Trustee's duties herein prescribed in
the absence of the Trustee.<F198>
(b) Eligibility for Participation
Except as otherwise provided in this Section, officers and employees
eligible to participate shall be persons (1) who are officers or employees of
the Corporation or of a subsidiary corporation eighty (80) percent or more of
whose stock is owned by the Corporation and (2) who possess such other
qualifications as the Board of Directors shall from time to time prescribe by
resolution (all such officers and employees being hereinafter in this Section X
referred to as "officers and employees").<F140> The term "stockholder," used
without qualification, means any holder of Class A stock<F66> whether he is an
officer or<F138> employee or not.
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<PAGE>94
(c) Stock Purchase Fund
The Board of Directors shall set up a Stock Purchase Fund under the
direction and control of the Trustee. The Trustee is empowered to select a
depository with which this fund is to be deposited. Withdrawal of amounts from
the account with the depository may be made upon the signature of the Trustee or
his duly designated agent.
(d) Functions of Stock Purchase Fund
The functions of the Stock Purchase Fund shall be:
(i) To accept deductions from the weekly or biweekly salary of eligible
officers and<F137> employees authorizing deductions for the purchase of Class
A<F66> stock of the Corporation. The deducted amounts shall remain in the Fund
to the credit of the respective officers and<F137> employees until they are
applied to the purchase of stock. In the event of termination of employment, any
amount in the Stock Purchase Fund to the credit of the officer or<F138> employee
shall be refunded.
(ii) To maintain a list of "offers to buy" from eligible officers
and<F137> employees.
(iii) To purchase from stockholders Class A<F66> stock of the
Corporation, so far as available, up to the amount sufficient to satisfy the
claims of those who (1) have deposited funds with the Fund through payroll
deductions and (2) have listed with the Trustee "offers to buy."
(iv) To purchase from the Corporation such treasury Class A<F66> stock
or unissued Class A<F66> stock as the Board of Directors may authorize to be
42
<PAGE>95
purchased, for the purpose of satisfying the demands of those who (1) have
deposited funds with the Fund through payroll deductions and (2) have listed
with the Trustee "offers to buy".
(v) To sell stock to the Corporation for the purposes set forth in
Section X, Paragraph 4, of the By-Laws.<F52>
(e) Priorities in Purchase and Sale of Stock
The Trustee shall observe the following rules as to priorities in purchase
and distribution of Class A<F66> stock:
(i) When the number of shares which can be purchased with accumulated
funds from payroll deductions and by calling upon officers and employees who
have submitted "offers to buy" exceeds the total of shares which are available
to the Fund for distribution, the claims of those who have contributed funds
through payroll deductions shall be satisfied before satisfaction of any of the
claims of those who have submitted "offers to buy".
(ii) When the number of shares offered to the Fund by stockholders plus
the shares subject to purchase by the Fund under the optional agreements
provided for in Section XI of these Bylaws exceeds the number of shares for
which there is a demand through payroll deductions and "offers to buy," the
Trustee shall apply such funds as are available to purchase stock in the
following order of priority:
(aa) Such shares of stock held by a former officer or<F138>
employee, or the heirs or legatees of a former officer or <F138> employee, whose
employment has been terminated for three years or more and whose stock is
subject to purchase by the Fund pursuant to the agreement set forth in Section
XI of these Bylaws.
43
<PAGE>96
(bb) All other stock offered to the Fund for purchase in the
chronological order in which such offers have been received in writing by the
Trustee: PROVIDED, however, that, whenever the Trustee has unsatisfied offers
of stock from two or more stockholders, not more than three thousand two hundred
(3,200) shares may be purchased from a stockholder having a higher priority
until three thousand two hundred (3,200) shares (or all shares offered, if less
than three thousand two hundred (3,200)) have been purchased from each such
stockholder having a lower priority. Where two or more offers of stock are
received simultaneously by the Trustee, the order shall be determined by lot.
<F209>
(f) Price of Class A<F56> Stock
Not more than 70<F80> days and not less than 15 days prior to (1) the date
of record for voting at the regular annual meeting of stockholders and (2) the
date which follows such record date by six months, the Board of Directors shall
determine the price of the Class A<F56> stock for purchase and sale by the fund
during the six-month periods beginning with the two dates specified above. The
price set shall not be below the book value per share as determined from the
most recent period financial statement available to the Board at the time
determination is made. The price shall be the same for stock purchase by the
Stock Purchase Fund and for stock sold by the Fund. Announcement of the price
shall be made to all stockholders and eligible officers and<F137> employees at
least one week<F112> in advance of the effective date.
44
<PAGE>97
(g) Issuance of Class A<F56> Stock to Fund
The Board of Directors shall determine twice each year whether to make
available treasury or unissued Class A stock<F56> for purchase by the Stock
Purchase Fund and, if it decided to make such stock available, it shall
determine the maximum number of shares to be sold to the Fund. The price at
which such stock shall be sold shall be the same as the price fixed for purchase
and sale of stock by the Stock Purchase Fund.<F120>
(h) Settlement Dates
On the dates designated below, money accumulated in the Stock Purchase Fund
shall be applied to the purchase of Class A stock<F66> in the name of the
officers and<F137> employees authorizing payroll deductions for the purpose. As
of these dates the Trustee of the Fund shall also make available, to those who
have submitted "offers to buy," stock to satisfy these offers to the extent that
such stock is available to the Fund. Stock certificates shall be issued to each
officer or<F138> employee for shares then fully paid through payroll deductions
or by satisfaction of "offers to buy" as soon as possible after each settlement
date. The settlement dates are the days next preceding each of the following
dates:
(i) Record date fixed prior to (a) regular stockholders' meetings:
(b) special stockholders' meeting; and (c) payment of dividends.
(ii) Date six months after record date of regular stockholders'
meetings.
(i) Payroll Deductions for Purchase of Stock
Eligible officers and<F137> employees may, upon written authorization, have
deducted from their salaries and paid into the Stock Purchase Fund designated
amounts each pay period to be applied on purchase of Class A stock<F66> of the
Corporation, subject to the following rules:
45
<PAGE>98
(i) Limitations on Amount
Deductions from salary for such purchase shall not be in excess of 80 times
the current price per share and not less than one dollar ($1.00) per
week.<F210>
(ii) When Deductions Begin
Deductions from payroll for the purpose of this subparagraph shall begin
with salary for the first full pay period<F156> after receipt of the
authorization, except that deductions from payroll authorized within the
forty-two<F202> days preceding the close of the then current Plan shall begin
with salary for the first full week of the succeeding Plan period. <F152>
(iii) Change in Amount of Authorized Deduction
Any eligible officer or<F138> employee who has authorized a payroll
deduction for the purposes of this subparagraph may increase or decrease the
amount of the deduction authorized, subject to the limitations of subdivision
(i) of this subparagraph, by giving written notice to the Trustee of the Stock
Purchase Fund. Such notice shall take effect with salary for the first full pay
period<F156> after submission of notice, except that if such notice is received
within the forty-two<F202> days preceding the close of the then current Plan it
shall take effect with salary for the first full week of the succeeding Plan
period.<F153>
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<PAGE>99
(iv) Withdrawal of Authorization
Any eligible officer or<F138> employee who has authorized a payroll
deduction for the purposes of this subparagraph may withdraw his authorization
at any time by giving written notice to the Trustee of the Stock Purchase Fund.
Such notice shall take effect with salary for the first full pay period<F156>
after submission of notice.<F47> Upon request, and with two weeks' notice, a
person withdrawing from the Plan may have refunded any amount deducted from
salary which has not at that time been applied to the purchase of stock. <F82>
(v) No Fractional Shares
No fractional shares shall be purchased or distributed. On any settlement
date, the Stock Purchase Fund shall refund to any office or<F138> employee on
request any amount remaining after application of the deductions to the purchase
of full shares of stock.
(j) "Offers to Buy"
Eligible officers and<F137> employees may at any time before the
forty-second<F202> day preceding the close of the then current Plan submit to
the Trustee "offers to buy" shares of the Class A stock<F66> of the
Corporation.<F48> Such "offers to buy" may be either (a) limited, to be
satisfied at the price currently established, in which case they shall become
void at any time the price of the stock is changed, or (b) unlimited, to be
satisfied at any price which may prevail at the time stock becomes available for
purchase from the Fund, in which case the offer shall remain in effect until
withdrawn or satisfied.
Stock may be sold by the Trustee in satisfaction of "offers to buy"
whenever he has stock available for sale after the satisfaction of all claims
arising from those who have authorized payroll deductions for purchase of stock:
PROVIDED, however, that no treasury or unissued stock shall be issued to satisfy
47
<PAGE>100
such "offers to buy" except at the following settlement dates: (1) the day next
preceding the record date for the regular annual stockholders' meeting and (2)
the day next preceding the date six months after such record date.
(i) Filing
"Offers to buy" must be submitted in writing in a form prescribed by the
Board of Directors and filed with the Trustee.
(ii) Records
The Trustee shall keep a record of "offers to buy" filed with him, which
shall show the name, date of filing, terms of offer, and date and extent of
satisfaction or date of withdrawal or decrease. He shall assign to each "offer
to buy" a listing number, which shall show the time sequence in which such
"offers to buy" have been filed. When two or more offers are received at the
same time, priority among them shall be determined by lot.
(iii) Obligations Entailed
"Offers to buy" when filed, shall constitute a binding obligation upon the
person filing the same to execute the purchase at any time when called upon by
the Trustee to do so. If the offeror does not then execute the purchase, all of
his "offers to buy" shall be canceled by the Trustee and the offeror's
subsequent "offers to buy" shall not be accepted prior to the beginning of the
next Plan period.<F157>
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<PAGE>101
(iv) Limitations on Amount
"Offers to buy" may be satisfied by the Trustee, if stock is available for
each eligible officer and employee without limitation in amount: PROVIDED
however, that shares made available to the Trustee from unissued or treasury
stock may not be sold to any one individual in excess of that amount necessary
to permit such individual to purchase a total of three thousand two hundred
(3,200) shares of stock through "offers to buy" in any period of six
months.<F211>
(v) Withdrawal or Decrease in Amount
Any person who has filed an "offer to buy" may, on two weeks' written
notice, withdraw such offer or decrease the amount thereof.<F49>
(vi) Increase in Amount
An "offer to buy" may not be increased in amount, but any person who
already has filed an "offer to buy" may file one or more additional "offers to
buy" up to the applicable limits. Allotments of stock shall not be made to such
additional offer until the first offer has been satisfied.
(vii) Fulfillment
Offers to buy" shall be satisfied in order of priority based on the date
when the "offer to buy" is listed according to the following system:
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<PAGE>102
When the Trustee has available shares for sale to makers of "offers to
buy," he shall allot to each "live" listing number in numerical sequence one
hundred and sixty (160) shares, or the full amount of the "offer to buy" if the
"offer" is for fewer than one hundred and sixty (160) shares, until all listing
numbers have received their allotments or until all the available shares have
been allotted. If additional shares for allotment remain, they shall be
allocated in the same manner, one hundred and sixty (160) or fewer (if the
unfulfilled "offer to buy" is less than one hundred sixty (160) shares being
allotted to each number in rotation until all available shares are sold. After
each such allotment the "live" listing shall be reconstituted, beginning with
the first "offer to buy" that was not satisfied in the previous allotment, and
the same procedure followed on subsequent allotments.<F212>"
(k) Place and Sale of Stock
All stock under this Plan is to be issued, sold, and paid for in
Washington, D.C. No notice of participation in the Plan is effective until
received and accepted at the principal office of the Corporation.
3. Register of Supplemental Bids
The Trustee of the Stock Purchase and Transfer Plan shall maintain a
Register of Supplemental Bids. In this Register shall be entered bids for Class
A<F66> of the Corporation which have been communicated in writing to the Trustee
by eligible officers and<F137> employees. The Register shall show in the order
of receipt the name of the bidder, the price at which he bid for stock, the
number of shares bid for, and the date as of which the bid expires (unless the
bid is open). Any bid may be withdrawn upon one week's written notice to the
Trustee. The Register shall be open for inspection at the principal office of
the Corporation at all reasonable hours to stockholders and eligible officers
50
<PAGE>103
and<F137> employees. The Trustee shall reply promptly to mail inquiries of
stockholders and eligible officers and<F137> employees respecting the Register.
(a) Stock Transfer Pursuant to Supplemental Bids
Whenever the Trustee shall certify that the Stock Purchase Fund is unable
to absorb stock subject to purchase by the Fund pursuant to agreements provided
for in Section XI of these Bylaws, or offered for sale by stockholders, any
stockholder may offer his stock in satisfaction of the registered bids, and
transfer shall be made upon the books of the Corporation from the offerer to the
bidder.
(b) Priority in Execution
When two or more bids at the same price have been registered, bids at that
price will be satisfied in time order of their registration.
(c) Annual Statement of Trustee
The Trustee shall send once each year to all Class A<F56> stockholders and
eligible officers and<F137> employees a statement of the manner in which the
system of Supplemental Bids will be operated and the conditions which must be
met by those who wish to avail themselves of its use.
4. Sale of Stock of the Corporation.
(a)<F97> In the event the Board of Directors, during any six months' period
specified in Subparagraph (f) of Paragraph 2 of this Section X, shall determine
that the orderly and successful operation of the Stock Purchase and Transfer
Plan requires, and that the best interests of the Corporation and its
stockholders and employees will be served by, the purchase by the Corporation
through the Stock Purchase Fund of the whole, or any part, of the Class A <F66>
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stock of the Corporation, which, during such six months' period, is subject to
purchase by the Fund pursuant to agreements provided for in Section XI of these
By-Laws or is offered for sale by stockholders, but which the Fund is unable to
absorb unless purchased by the Corporation, the Trustee shall sell to the
Corporation all, or such part of, the said unabsorbed stock as the Board,
through its designated officer, shall notify the Trustee the Corporation will
purchase, at the price determined pursuant to Subparagraph (f) of Paragraph 2 of
Section X for the purchase and sale of stock by the Fund during the said six
months' period.<F53>
(b) In the event that, during any six months' period in sub-paragraph (f)
of Paragraph 2 of this Section X, any Class A stock offered for sale by the
trustee under a stock bonus plan of the Corporation in order to effectuate the
purposes of such plan is not absorbed through the Stock Purchase Fund, including
purchases by the Corporation pursuant to Subparagraph (a) of this Paragraph 4,
the Trustee shall sell to the Corporation, and the Corporation shall purchase,
the stock so offered, at the price determined pursuant to sub-paragraph (f) of
Paragraph 2 of Section X for the purchase and sale of stock by the Fund during
the said six months' period.<F98>
SECTION XI - OPTIONAL AGREEMENTS FOR TRANSFER OF
CLASS A<F66> STOCK ON TERMINATION OF EMPLOYMENT<F37><F223>
1. The Corporation shall, prior to January 1, 1998, offer to all officer and
employee holders of Class A stock the option to execute the following agreement:
Agreement between The Bureau of National Affairs, Inc., party of the first
part, and _____________, holder of one or more shares of the Class A stock of
The Bureau of National Affairs, Inc., party of the second part:
52
<PAGE>105
In consideration of mutual advantages accruing therefrom, the parties
hereby covenant and agree as follows:
1. The party of the second part will, within not more than three (3) years
of his or her separation from employment by The Bureau of National Affairs, Inc.
(herein called the Corporation) or by a subsidiary eighty (80) percent or more
of whose stock is owned by the Corporation, offer all Class A stock of the
Corporation held by him or her to be purchased under the Stock Purchase and
Transfer Plan set up pursuant to Section X of the By-laws of the Corporation.
Such offer or offers may be made at any time within the said three (3) years for
any part or all of the Class A stock so held.
2. In the event that the Stock Purchase Fund, provided for in the said
Plan, is unable to purchase any or all of the shares offered, the party of the
second part may, at that time, at his or her option, accept Supplemental Bids,
if any, registered with the Trustee of the Plan. If such Supplemental Bids are
not accepted, the party of the second part may retain his or her shares for
later offers through the Stock Purchase and Transfer Plan, including acceptance
of Supplemental Bids.
3. If at the end of three (3) years after termination of his or her
employment, the party of the second part still retains any Class A stock of the
Corporation, she or he shall offer it forthwith for purchase through the Stock
Purchase Fund. If the Stock Purchase Fund is unable to purchase any or all of
the shares so offered, the Trustee of the Plan shall so notify her or him and
she or he may thereafter retain such shares as have not been purchased or may
dispose of them by accepting Supplemental Bids. Upon receipt of notification
from the Trustee that the Fund is able to purchase any part or all of the shares
then held, the party of the second part shall, within sixty (60) days from the
mailing of such notification, which shall state the number of shares the Fund
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<PAGE>106
can purchase from the stockholder, present such shares to the Trustee for
purchase by the Fund. A like procedure shall be followed until all shares held
by the party of the second part have been purchased by the Fund.
4. If the party of the second part, or his/her heirs or legatees, offers
any or all of his/her shares for sale other than as herein specified, this
agreement shall become null and void.
5. This agreement shall be binding upon the heirs and legatees of the party
of the second part.
6. Nothing herein contained shall diminish the right of the party of the
second part to exchange Class A stock for Class B stock of the Corporation
pursuant to Paragraph 2(b) of Section IX of the By-laws.
7. The provisions of Paragraph 7(b) of Section IX of the By-laws shall not
apply to the party of the second part, or his/her heirs or legatees, so long as
this agreement is in force and effect.
2. The Corporation shall, on and after January 1, 1998, offer to all officer
and employee holders of Class A stock the option to execute the following
agreement:
Agreement between The Bureau of National Affairs, Inc., party of the first
part, and _____________, holder of one or more shares of the Class A stock of
The Bureau of National Affairs, Inc., party of the second part:
In consideration of mutual advantages accruing therefrom, the parties
hereby covenant and agree as follows:
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<PAGE>107
1. The party of the second part will, within not more than one (1) year of
his or her separation from employment by The Bureau of National Affairs, Inc.
(herein called the Corporation) or by a subsidiary eighty (80) percent or more
of whose stock is owned by the Corporation, offer all Class A stock of the
Corporation held by him or her to be purchased under the Stock Purchase and
Transfer Plan set up pursuant to Section X of the By-laws of the Corporation.
Such offer or offers may be made at any time within the said one (1) year for
any part or all of the Class A stock so held.
2. In the event that the Stock Purchase Fund, provided for in the said
Plan, is unable to purchase any or all of the shares offered, the party of the
second part may, at that time, at his or her option, accept Supplemental Bids,
if any, registered with the Trustee of the Plan. If such Supplemental Bids are
not accepted, the party of the second part may retain his or her shares for
later offers through the Stock Purchase and Transfer Plan, including acceptance
of Supplemental Bids.
3. If at the end of one (1) year after termination of his or her
employment, the party of the second part still retains any Class A stock of the
Corporation, she or he shall offer it forthwith for purchase through the Stock
Purchase Fund. If the Stock Purchase Fund is unable to purchase any or all of
the shares so offered, the Trustee of the Plan shall so notify her or him and
she or he may thereafter retain such shares as have not been purchased or may
dispose of them by accepting Supplemental Bids. Upon receipt of notification
from the Trustee that the Fund is able to purchase any part or all of the shares
then held, the party of the second part shall, within sixty (60) days from the
mailing of such notification, which shall state the number of shares the Fund
can purchase from the stockholder, present such shares to the Trustee for
purchase by the Fund. A like procedure shall be followed until all shares held
by the party of the second part have been purchased by the Fund.
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<PAGE>108
4. If the party of the second part, or his/her heirs or legatees, offers
any or all of his/her shares for sale other than as herein specified, this
agreement shall become null and void.
5. This agreement shall be binding upon the heirs and legatees of the party
of the second part.
6. Nothing herein contained shall diminish the right of the party of the
second part to exchange Class A stock for Class B stock of the Corporation
pursuant to Paragraph 2(b) of Section IX of the by-laws.
7. The provisions of Paragraph 7(b) of Section IX of the by-laws shall not
apply to the party of the second part, or his/her heirs or legatees, so long as
this agreement is in force and effect.
SECTION XII - BOOKS AND ACCOUNTS<F38>
1. Place
The books, accounts, and records of the Corporation shall be kept at the
main office of the Corporation in the City of Washington, District of Columbia,
or at such other place or places within or without the State of Delaware as may
from time to time be designated by resolution of the Board of Directors, but the
original or duplicate stock ledger shall be kept at the principal office of the
Corporation in Wilmington, Delaware.
2. Inspection
The directors shall determine from time to time under what conditions and
regulations the accounts and books of the Corporation, or any of them, shall be
open to the inspection of stockholders, subject to the rights of inspection
granted to stockholders by law.
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SECTION XIII - CHECKS<F39>
All checks, drafts, orders for the payment of money, and notes of the
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
SECTION XIV - DIVIDENDS; RESERVES<F40>
1. Dividends
Dividends may be declared by the Board of Directors at any regular or
special meeting. The holders of Class A stock, Class B stock, and Class C stock
shall be entitled to participate ratably, share for share, and without
preference of any class over the others in all dividends when and as declared by
the Board of Directors.<F206>
2. Reserves
Before declaration of any dividend or any distribution of profits, the
Board of Directors may set aside from time to time out of the funds of the
Corporation available for dividends such sum or sums as the Board in its
discretion may think proper as a reserve fund for any proper purpose, and the
Board may alter or abolish any such reserve or reserves.
SECTION XV - DEFINITIONS<F41><F147>
Except as the context may otherwise require, the unqualified word
"stockholder" as used in these By-Laws shall mean the holders of Class A
<F66> stock of the Corporation and shall not include holders of Class B<F72>
stock or Class C<F207> stock of the Corporation.
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As used in Sections IX, X and XI of these By-Laws, the terms "separation
from employment", "dismissal" and other terms of like import do not include a
lay-off of less than ninety (90) days' duration.<F148>
SECTION XVI - NOTICES<F42>
1. Form
Whenever under the provisions of these By-Laws notice is required to be
given to any stockholder, director, or officer, it shall not be construed to
require personal notice, but such notice may be given in writing by mail, by
depositing the same in the post office or letter-box in a postpaid, sealed
wrapper, addressed to such stockholder, director, or officer at such address as
appears for him on the books of the Corporation, or in default of any such
address, to the stockholder, director, or officer at his last known place of
address or at the general post office in the City of Wilmington, State of
Delaware; and any such notice shall be deemed to be given at the time that the
same shall be thus mailed.
2. Waiver
Any stockholder, director, or officer may waive in writing any notice
required to be given under these By-Laws, whether before or after the time
stated herein.
SECTION XVII - AMENDMENTS<F43>
These By-Laws may be supplemented, amended, altered, or repealed by the
affirmative vote of the holders of a majority of the stock issued and
outstanding and entitled to vote thereat at any regular meeting of the
stockholders, or at any special meeting of the stockholders if notice of the
proposed action in respect of the By-Laws be contained in the notice of the
meeting; or by the affirmative vote of a majority of the whole Board of
Directors at a regular meeting.
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<TABLE>
<S> <C>
FOOTNOTES
<FN>
Footnote 1 <F1>
As amended 1/3/48 by directors' resolution. Previously, agent was
Delaware Charter Company and address was 927 Market Street.
Footnote 2 <F2>
Originally read: "An annual meeting of stockholders shall be held at 2
o'clock p.m. on the first Saturday in December," etc. Amended 12/6/47 by
stockholders' resolution to read: "at 2 o'clock p.m. on the second Saturday of
May", etc. Further amended 5/13/50 by stockholders' resolution to read as shown.
Footnote 3 <F3>
Words "in accordance with the provisions for cumulative voting contained in
Article V of the Certificate of Incorporation," originally appearing here
stricken 3/27/48 by stockholders' resolution.
Footnote 4 <F4>
Words ": Provided, That cumulative voting shall be in effect at all
elections for directors, as prescribed by Article V of the Certificate of
Incorporation" originally appearing here stricken 3/27/48 by stockholders'
resolution.
Footnote 5 <F5>
Words "and subject to the provisions for cumulative voting in Article V of
the Certificate of Incorporation," originally appearing here stricken 3/27/48 by
stockholders' resolution.
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<PAGE>112
Footnote 6 <F6>
Words "subscribed by him" inserted, and word "and" substituted for comma
preceding "the number of shares", 10/18/47 by directors' resolution.
Words ", and an oath or affirmation before a notary public or other
official authorized to administer oaths that the said ballot is the true and
voluntary act and deed of the stockholder" originally appearing here stricken
10/18/47 by director's resolution.
Footnote 7 <F7>
Sub-paragraph (e) inserted 10/18/47 by Board resolution.
Footnote 8 <F8>
The "(a)" immediately following title of Paragraph 8 and the words "to be
filled" at the annual meeting" inserted 10/18/47 by Board resolution.
Footnote 9 <F9>
Sub-paragraph (b) as amended 10/18/47 by Board resolution. Originally read,
without paragraph identification, as follows: "Any stockholder or stockholders
owning at least five (5) per cent of the outstanding shares of stock of the
Corporation may submit additional nominations to the Nominating Committee no
less than twenty-five (25) days prior to the annual meeting, and such additional
names together with the list of original nominations shall be placed upon a
final list of nominations to be mailed to stockholders not less than fifteen
(15) days prior to such meeting."
Footnote 10 <F10>
Sub-paragraph (c) inserted 10/18/47 by Board resolution.
Footnote 11 <F11>
Entire Section amended 7/7/50 by Board resolution to read as shown except
as to subsequent changes noted by the indicated footnotes.
Original Section stated below.
In the first line of Paragraph 4 of original Section, words "sub-paragraph
(a) and (b)" substituted for "sub-paragraph (b)" 4/2/49 by Board resolution.
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<PAGE>113
In sub-paragraph (a) of Paragraph 5 of original Section, sentence added
4/2/49 by Board resolution as follows: If the Board of Directors rejects such
tender in whole or in part, the shares may be transferred to any person
whatsoever, subject to the continuing right of the Corporation to purchase any
or all of said shares at any time, upon demand by the Board of Directors and at
the applicable price per share specified in Paragraph 6 of this Section,
determined as of the date of demand."
Section IX originally read as follows:
"1. Eligible Stockholders
(a) The capital stock of the Corporation, consisting of 30,000 shares
of common stock without par value, shall be issued only to persons who are
employees or officers of the Corporation, and who possess such other
qualifications as the Board of Directors shall from time to time prescribe by
resolution.
"(b) Except as provided in Sections V and VIII of these By-Laws, in
respect of the qualification of directors, President and one Vice-President, no
officer or employee of the Corporation shall be obligated or required to
subscribe for or own any stock of the Corporation; and the subscription or
failure to subscribe for any shares of stock of the Corporation shall in no way
affect or prejudice the position, status, tenure, continued employment, or
advancement of any officer or employee.
"2. Form of Certificate
The certificates of stock of the Corporation shall be numbered
consecutively and shall be entered in the books of the Corporation as they are
issued. Each certificate shall exhibit the holder's name and the number of
shares of stock represented thereby, and shall be signed by the President or a
Vice-President, and by either the Secretary, the Treasurer, the Assistant
Secretary or the Assistant Treasurer.
"3. Consideration for Stock
The stock of this Corporation shall be issued for money only, at such price
as the Board of Directors may from time to time prescribe by resolution.
"4. Transfer of Stock
(a) Except as provided in sub-paragraph (b) of Paragraph 5 of this
Section, no shares of stock may be transferred or pledged without the written
consent or authorization of the Board of Directors or of such officer as may be
designated by it to grant such consent or authorization.
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<PAGE>114
"(b) All transfers of stock of the Corporation shall be made upon its
books by the person named in the certificate or by his lawfully
constituted representative, and upon surrender of the certificate for
cancellation.
"(c) The Corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claims to or interest in
such shares on the part of any person, whether or not it shall have express or
other notice thereof, save as expressly provided by the laws of Delaware.
"5. Purchase of Stock by Corporation
(a) Any stockholder may at any time, by written notice to the
Secretary of the Corporation, tender any or all of his shares to the Corporation
for purchase by it. The Board of Directors may accept or reject such tender, in
whole or in part; and if it accepts the tender or any part thereof, the
Corporation shall purchase the shares so accepted at the price provided for in
Paragraph 6 of this Section. Where shares are tendered by several stockholders,
the Board of Directors may accept all or any part thereof as it deems proper,
either in the chronological order of tender, or according to a percentage of all
shares tendered, or by any combination of these methods, in its discretion.
"(b) In the event of the resignation, retirement, dismissal or death of
any officer or employee of the Corporation who owns any shares of stock thereof,
the Corporation shall have the exclusive right for a period of ninety (90) days
from the occurrence of the said event to purchase any or all of the shares held
by such person. If the Board of Directors elects to exercise such right of
purchase, it shall so notify the stockholder or his personal representative
within said period of ninety (90) days, and within not more than one (1) year
after such exercise of its right to purchase the Corporation shall pay the said
stockholder or his representative the applicable price per share specified in
Paragraph 6 of this Section, determined as of the date of such separation and
with interest at the rate of six percentum (6%) per annum from the date of such
purchase until the date of payment. Upon the exercise by the Corporation of its
right to purchase any such of stock, the said stockholder or his representative
shall have no further rights, privileges, or powers in respect of such stock. If
payment of the purchase price for such shares is not made by the Corporation at
the time of such purchase, the Corporation shall within a reasonable time
thereafter issue to the stockholder or his representative a note or other
evidence of indebtedness fixing the amount to be paid by the Corporation
pursuant to Paragraph 6 of this Section and bearing interest at the rate of six
percentum (6%) per annum from the date of purchase to the date of payment. If
the Board of Directors elects not to exercise such right of purchase within the
said period of ninety (90) days, the shares may be retained by or transferred
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<PAGE>115
to any person whatsoever, subject to the continuing right of the Corporation to
purchase all or any of said shares at any time, no matter by whom such shares
are held, upon demand by the Board of Directors and at the applicable price per
share specified in Paragraph 6 of this Section, determined as of the date of
demand.
"6. Purchase Price
The price to be paid by the Corporation for any shares acquired by it
pursuant to a tender under sub-paragraph (a) of Paragraph 5 of this Section, or
pursuant to notice or demand under sub-paragraph (b) of Paragraph 5 of this
Section shall be as follows:
(a) During the period from January 1, 1947 to December 31, 1947, the
original issuance price of such shares.
(b) During the period from January 1, 1948 to December 31, 1950, the
book value per outstanding share for the next preceding calendar year, as deter
mined by independent auditors.
(c) From and after January 1, 1951, the book value per
outstanding share for the next preceding calendar year, as determined by
independent auditors: PROVIDED, That if the book value of all outstanding
shares, as so determined, exceeds ten times the average annual net earnings, if
any, of the Corporation (after taxes, including income taxes) for the next
preceding three calendar years, as determined by independent auditors, then the
price shall be the average of such two figures (book value and ten times average
net earnings) per outstanding share.
"7. Lost Certificate
If a certificate of stock of the Corporation be lost or destroyed, another
certificate of the same tenor and for the same number of shares may be issued in
its stead, upon proof of such loss or destruction and the giving of a
satisfactory bond of indemnity in an amount sufficient to indemnify the
Corporation against any claim: Provided, That the Board of Directors may waive
the requirement of a bond if in its judgment it is proper to do so."
Footnote 12 <F12>
Words "or to a trustee designated or appointed under a stock bonus plan of
the Corporation" inserted by directors' resolution of 11/3/51. For language in
effect prior to 7/7/50, see footnote 11.
63
<PAGE>116
Footnote 13 <F13>
Words "to heirs, legatees or beneficiaries upon the death of employees or
officers" substituted for "to heirs or legatees of employees or officers who
die" by directors' resolution of 11/3/51. For language in effect prior to
7/7/50, see footnote 11.
Footnote 14 <F14>
Words "Provided, That the said sixty * * * of the Corporation" added by
directors' resolution of 11/3/51. For language in effect prior to 7/7/50, see
footnote 11.
Footnote 15 <F15>
Words "except as issued pursuant to the provisions of a stock bonus plan of
the Corporation" added by directors' resolution of 11/3/51. For language in
effect prior to 7/7/50, see footnote 11.
Footnote 16 <F16>
Words "and in Sections X and XI" inserted 12/1/51 by stockholders'
resolution.
Footnote 17 <F17>
Words "in the event * * * the Corporation shall be" substituted for words
"at any time upon the demand of the Board of Directors and at" 12/1/51 by
stockholders' resolution.
Footnote 18 <F18>
Words "presentation for transfer" substituted for word "demand" 12/1/51 by
stockholders' resolution.
Footnote 19 <F19>
Designation "(i)" added by directors' resolution of 11/3/51.
Footnote 20 <F20>
Words "or (ii) the distribution of shares of common stock of the
Corporation by a trustee under any stock bonus plan of the Corporation" added by
directors' resolution of 11/3/51.
Footnote 21 <F21>
Words "and to the provisions of Section X and Section XI of the By-Laws"
inserted 12/1/51 by stockholders' resolution.
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<PAGE>117
Footnote 22 <F22>
Word "such" substituted for "the said" by directors' resolution of 11/3/51.
Footnote 23 <F23>
Words "such common stock so owned or so distributed" substituted for
"shares of such common stock held by such person" by directors' resolution of
11/3/51.
Footnote 24 <F24>
Words "or the distributee under a stock bonus plan of the Corporation"
inserted by directors' resolution of 11/3/51.
Footnote 25 <F25>
Words "or the said distributee" inserted by directors' resolution of
11/3/51.
Footnote 26 <F26>
Words "or such distribution" inserted by directors' resolution of 11/3/51.
Footnote 27 <F27>
Words "or the said distributee" inserted by directors' resolution of
11/3/51.
Footnote 28 <F28>
Words "or the distributee" inserted by directors' resolution of 11/3/51.
Footnote 29 <F29>
Words "in the event * * * the Corporation shall be" substituted for words
"at any time, upon the demand of the Board of Directors and at" 12/1/51 by
stockholders' resolution.
Footnote 30 <F30>
Words "determined as of the date of demand" deleted 12/1/51 by
stockholders' resolution.
Footnote 31 <F31>
Comma substituted for period and words "determined as of the date of
presentation for transfer" added 12/8/51 by directors' resolution.
65
<PAGE>118
Footnote 32 <F32>
Words "at the close of" substituted for word "for" 12/1/51 by stockholders'
resolution.
Footnote 33 <F33>
Words "per outstanding share" substituted for words "of all outstanding
shares" 12/1/51 by stockholders' resolution.
Footnote 34 <F34>
Words "per outstanding share" added 12/1/51 by stockholders' resolution.
Footnote 35 <F35>
Words "except as the Board * * * of the Corporation" added by directors'
resolution of 11/3/51.
Footnote 36 <F36>
New Section X, titled Distribution and Marketing of Stock, added 12/1/51 by
stockholders' resolution.
Footnote 37 <F37>
New Section XI, titled Optional Agreements for Transfer of Common Stock on
Termination of Employment, added 12/1/51 by stockholders' resolution.
Footnote 38 <F38>
Renumbered as shown 12/1/51 by stockholders' resolution. Originally
numbered X.
Footnote 39 <F39>
Renumbered as shown 12/1/51 by stockholders' resolution. Originally
numbered XI.
Footnote 40 <F40>
Renumbered as shown 12/1/51 by stockholders' resolution. Originally
numbered XII. Entire Section amended 7/7/50 by Board resolution to read as shown
in footnote 73. It originally read:
66
<PAGE>119
"1. Declaration
Dividends upon the stock of the Corporation may be declared by the Board of
Directors at any regular or special meeting.
2. Reserves
Before declaration of any dividend or any distribution of profits, the
Board of Directors may set aside from time to time out of the funds of the
Corporation available for dividends such sum or sums as the Board in its
discretion may think proper as a reserve fund for any proper purposes, and the
Board may alter or abolish any such reserve or reserves."
Footnote 41 <F41>
Section inserted 7/7/50 by Board resolution, as new Section XIII.
Renumbered as shown 12/1/51 by stockholders' resolution.
Footnote 42 <F42>
Renumbered as shown 12/1/51 by stockholders' resolution. Originally
numbered XIII; then renumbered XIV 7/7/50 by director's resolution.
Footnote 43 <F43>
Renumbered as shown 12/1/51 by stockholders' resolution. Originally
numbered XIV; then renumbered XV 7/7/50 by director's resolution.
Footnote 44 <F44>
Subdivision (i) as amended 9/21/52 by Board resolution, except as to
subsequent change noted by the indicated footnote. Originally read as follows:
"(i) Limitations on Amount. Deductions from salary for such purpose shall be not
in excess of ten ($10.00) dollars and not less than one ($1.00) dollar per
week."
Footnote 45 <F45>
Subdivision (ii) as amended 4/3/54 by Board resolution. Originally read as
follows: "(ii) When Deductions Begin. Deductions from payroll for the purposes
of this sub-paragraph shall begin with salary for the first full pay period
after receipt of the authorization."
67
<PAGE>120
Footnote 46 <F46>
Second sentence of subdivision (iii) as amended 4/3/54 by Board resolution.
Originally read as follows: "Such notice shall take effect with salary for the
first full payroll period after submission of notice."
Footnote 47 <F47>
Second sentence of subdivision (iv) as amended 4/3/54 by Board resolution.
Originally read as follows: "Such notice shall take effect with salary for the
first full payroll period after submission of notice."
Footnote 48 <F48>
First sentence of sub-paragraph (j) as amended 4/3/54 by Board resolution.
Originally read as follows: "Eligible employees may at any time submit to the
Trustee "offers to buy" shares of the common stock of the Corporation."
Footnote 49 <F49>
Subdivision (v) as amended 4/3/54 by Board resolution. Originally read as
follows: "(v) Withdrawal or Decrease in Amount. Any person who has filed an
'offer to buy' may, on one week's written notice, withdraw such offer or
decrease the amount thereof."
Footnote 50 <F50>
Sub-paragraph (b) as amended 3/5/55 by Board resolution. Previously read as
follows (as amended 10/18/47 by Board resolution): "(b) Any stockholder or
stockholders owning at least five (5) per cent of the outstanding shares of
stock of the Corporation may submit additional nominations to the Nominating
Committee not less than twenty-five (25) days prior to such annual meeting."<F9>
Footnote 51 <F51>
Sub-paragraph (c) inserted 6/10/55 by Board resolution.
Footnote 52 <F52>
Sub-paragraph (v) inserted 6/10/55 by Board resolution.
Footnote 53 <F53>
Paragraph 4(a) inserted 6/10/55 by Board resolution.
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<PAGE>121
Footnote 54 <F54>
Subdivision (iv) as amended 8/8/55 by Board resolution, except as to
subsequent change noted by the indicated footnote. Originally read as follows:
"(iv) Limitation on Amount. 'Offers to buy' may be satisfied by the Trustee, if
stock is available, for each eligible employee in any calendar year, up to a
total of 100 shares: Provided, however, that shares made available to the
Trustee from unissued or treasury stock may not be sold to any one individual in
excess of 50 shares in any period of six months."
Footnote 55 <F55>
Words "entitled to vote thereat" inserted by directors' resolution of
12/6/58.
Footnote 56 <F56>
Words "Class A" inserted by directors' resolution of 12/6/58.
Footnote 57 <F57>
Paragraph 1 as amended by directors' resolution of 12/6/58. Originally read
as follows: "1. Eligibility. - No person shall be elected or appointed as a
director unless he is a stockholder of the Corporation, and any director who
ceases to hold any shares of stock of the Corporation shall be disqualified to
exercise any of the powers or duties of director and shall be deemed to have
resigned from such office."
Footnote 58 <F58>
Words "other than the President" inserted by directors' resolution of
12/6/58.
Footnote 59 <F59>
Last sentence of sub-paragraph (a) inserted by directors' resolution of
12/6/58.
Footnote 60 <F60>
Paragraph 1 as amended by directors' resolution of 12/6/58. Previously read
as follows: "1. Amount. - The total authorized capital stock of the Corporation
consists of 45,000 shares divided into 30,000 shares of common stock without par
value and 15,000 shares of preferred stock having a par share of ten dollars
($10.00) per share and without voting rights.
Footnote 61 <F61>
Paragraph 2 as amended by directors' resolution of 12/6/58, except as to
subsequent change indicated in sub-paragraph (a)(i). Previously read as follows:
69
<PAGE>122
"2. Eligible Stockholders
"(a) Common stock
(i) The shares of common stock shall be issued only to persons
who are employees or officers of the Corporation and who possess such other
qualifications as the Board of Directors shall from time to time prescribe by
resolution, or to a trustee designated or appointed under a stock bonus plan of
the Corporation.<F12>
"(ii) Except as provided in Sections V and VIII of these By-Laws,
in respect of qualifications of directors, President and one Vice- President, no
officer or employee of the Corporation shall be obligated or required to
subscribe for or own any stock of the Corporation; and the subscription or
failure to subscribe for any shares of stock of the Corporation shall in no way
affect or prejudice the position, statue, tenure, continued employment, or
advancement of any officer or employee.<F138>
"(b) Preferred stock
(i) The shares of preferred stock shall be issued only in
exchange for common stock to employees or officers of the Corporation upon their
retirement because of age or disability, and to heirs, legatees or beneficiaries
upon the death of employees or officers<F13> while in the service of the
Corporation.
"(ii) No person shall be obligated or required to accept
preferred stock in exchange for common stock. Any person qualified under sub-
paragraph (b)(i) above to receive preferred stock in exchange for common stock
who elects to exercise such right of exchange shall so notify the Secretary of
the Corporation in writing within sixty (60) days after the occurrence of the
event which gave rise to such right: Provided, That the said sixty (60) days'
period for notification shall begin to run upon distribution with respect to an
exchange involving common stock distributed to a qualified person under a stock
bonus plan of the Corporation.<F14>"
Footnote 62 <F62>
Paragraph 3 as amended by directors' resolution of 12/6/58. Previously read
as follows: "3. Consideration for Common Stock. - The common stock of the
Corporation shall be issued for money only, at such price as the Board of
Directors may from time to time prescribe by resolution, except as issued
pursuant to the provisions of a stock bonus plan of the Corporation.<F15>
70
<PAGE>123
Footnote 63 <F63>
Paragraph 4 as amended by directors' resolution of 12/6/58, except as to
subsequent changes noted by the indicated footnotes. Originally read as follows:
"4. Rate of Exchange of Preferred Stock for Common Stock. The exchange of
preferred stock for common stock shall be at the rate of one share of preferred
stock for each ten dollars ($10.00) of the then current repurchase price of
common stock so exchanged, as specified in Paragraph 9 of this Section."
Footnote 64 <F64>
Words "sub-paragraphs (a) and (b) of" deleted by directors' resolution of
12/6/58.
Footnote 65 <F65>
Words "Class A and Class B" substituted for word "common" by directors'
resolution of 12/6/58.
Footnote 66 <F66>
Words "Class A" substituted for word "common" by directors' resolution of
12/6/58.
Footnote 67 <F67>
Sub-paragraph (d) inserted by directors' resolution of 12/6/58.
Footnote 68 <F68>
Paragraph 8 as amended by directors' resolution of 12/6/58. Originally read
as follows: "8. Redemption of Preferred Stock by the Corporation. - The
Corporation shall have the right at any time to redeem all or any part of the
outstanding shares of preferred stock of the Corporation. If the Board of
Directors elects to exercise the right to redeem less than all such outstanding
shares, the Corporation shall redeem a pro rata number of shares from each
holder of preferred stock, but no fractional shares shall be redeemed. The
Corporation shall make payment for the shares redeemed at the price per share
provided for in sub-paragraph (b) of Paragraph 9 of this Section."
Footnote 69 <F69>
Sub-paragraph (b) as amended by directors' resolution of 12/6/58.
Originally read as follows: "(b) Preferred Stock. The price to be paid by the
Corporation for any shares of preferred stock acquired by it pursuant to notice
or demand under Paragraph 8 of this Section shall be ten dollars and fifty cents
($10.50) per share."
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<PAGE>124
Footnote 70 <F70>
Words "the common stock or the preferred" deleted by directors' resolution
of 12/6/58.
Footnote 71 <F71>
Paragraph 11 as amended by directors' resolution of 12/6/58. Originally
read as follows: "11. Dissolution or Distribution of Assets. - In the event of
dissolution of, or any distribution of the assets of, the Corporation, the
holders of the preferred stock shall be entitled to be paid the full par value
of ten dollars ($10.00) per share before any amount shall be paid to the holders
of the common stock."
Footnote 72 <F72>
Words "Class B" substituted for word "preferred" by directors' resolution
of 12/6/58.
Footnote 73 <F73>
Paragraph 1 as amended by directors' resolution of 12/6/58. Originally read
as follows: "1. Dividends. - Dividends may be declared by the Board of Directors
at any regular or special meeting. The registered owner of each share of
preferred stock shall be entitled to receive dividends as declared at the rate
of seven percentum (7%) per annum, payable quarterly on the first days of
January, April, July, and October of each year. No dividend shall be paid on the
common stock unless (a) dividends on the preferred stock have been declared and
paid for the preceding four quarters, and (b) if any quarterly dividend
installment on the preferred stock thereafter remains undeclared and unpaid
since the issuance thereof, a dividend is simultaneously declared and paid on
the preferred stock in an amount per share equal to the amount of the dividend
paid on the common stock, up to the amount of the undeclared and unpaid
dividends on the preferred stock. Subject to the foregoing, the registered owner
of each share of common stock shall be entitled to dividends as declared by the
Board of Directors."
Footnote 74 <F74>
As amended 2/7/59 by directors' resolution. Previously read as follows: "1.
Delaware Office. - The principal office of the Corporation in the State of
Delaware shall be at 927 Market Street in the City of Wilmington and County of
New Castle; and the resident agent in charge thereof shall be the Corporation
Guarantee and Trust Company, 927 Market Street, Wilmington, Delaware 1 "
Footnote 75 <F75>
Paragraph 1 as amended by directors' resolution of 3/7/59. Previously read
as follows: "1. Amount. - The total number of shares of stock which the
Corporation is authorized to issue is thirty- five thousand (35,000) shares
divided into two classes: one class designated as Class A common shares shall
consist of thirty thousand (30,000) shares without par value and with voting
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<PAGE>125
rights, and the other class designated as Class B common shares shall consist of
five thousand (5,000) shares without par value and without voting rights.<F60>
Footnote 76 <F76>
Paragraph 2(a)(i) as amended by directors' resolution of 3/7/59. Previously
read as follows: "(i) The shares of Class A stock shall be issued in place of
and upon surrender of certificates for an equal number of previously-issued
shares of capital stock of the Corporation having no par value; or shall be
issued only to persons who are officers or employees of the Corporation and who
possess such other qualifications as the Board of Directors shall from time to
time prescribe by resolution, or to trustees designated or appointed under a
stock bonus plan of the Corporation."
Footnote 77 <F77>
"eight hundred (800)" substituted for figure "200" by directors' resolution
of 3/7/59.
Footnote 78 <F78>
"two thousand (2,000)" substituted for figure "500" by directors'
resolution of 3/7/59.
Footnote 79 <F79>
"two hundred (200)" substituted for "fifty (50)" by directors' resolution
of 3/7/59.
Footnote 80 <F80>
Figure "70" substituted for figure "30" by directors' resolution of 3/7/59.
Footnote 81 <F81>
Words "two times" substituted for word "one-half" by directors' resolution
of 3/7/59.
Footnote 82 <F82>
Last sentence of subdivision (iv) inserted by directors' resolution of
3/7/59.
Footnote 83 <F83>
"Two hundred (200)" substituted for figure "50" by directors' resolution of
3/7/59.
Footnote 84 <F84>
"Twenty (20)" substituted for word "ten" by directors' resolution of
3/7/59.
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<PAGE>126
Footnote 85 <F85>
Words "and the Chairman of the Board," inserted by directors' resolution of
12/5/59.
Footnote 86 <F86>
Words "a Chairman of the Board," inserted by directors' resolution of
12/5/59.
Footnote 87 <F87>
Words "Chairman of the Board and the President may be the same person, the"
inserted by directors' resolution of 12/5/59.
Footnote 88 <F88>
Words "Chairman of the Board, a" inserted by directors' resolution of
12/5/59.
Footnote 89 <F89>
Paragraph 2 inserted by directors' resolution of 12/5/59.
Footnote 90 <F90>
Renumbered as shown by directors' resolution of 12/5/59. Previously
numbered 2.
Footnote 91 <F91>
Words "preside at all meetings of the stockholders and directors; to"
deleted by directors' resolution of 12/5/59.
Footnote 92 <F92>
Renumbered as shown by directors' resolution of 4/17/64. Originally
numbered 3; then renumbered 4 by directors' resolution of 12/5/59.
Footnote 93 <F93>
Renumbered as shown by directors' resolution of 4/17/64. Originally
numbered 4; then renumbered 5 by directors' resolution of 12/5/59.
Footnote 94 <F94>
Renumbered as shown by directors' resolution of 4/17/64. Originally
numbered 5; then renumbered 6 by directors' resolution of 12/5/59.
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<PAGE>127
Footnote 95 <F95>
Renumbered as shown by directors' resolution of 4/17/64. Originally
numbered 6; then renumbered 7 by directors' resolution of 12/5/59.
Footnote 96 <F96>
Renumbered as shown by directors' resolution of 6/11/75. Originally
numbered 7; renumbered 8 by directors' resolution of 12/5/59; renumbered 9 by
directors' resolution of 4/17/64.
Footnote 97 <F97>
Designation "(a)" added by directors' resolution of 2/9/63.
Footnote 98 <F98>
Sub-paragraph (b) inserted by directors' resolution of 2/9/63.
Footnote 99 <F99>
Words "the Chairman of the Board," inserted by directors' resolution of
4/17/64.
Footnote 100 <F100>
Words "The Chairman of the Board," inserted by directors' resolution of
4/17/64.
Footnote 101 <F101>
Last sentence of sub-paragraph (b) inserted by directors' resolution of
4/17/64.
Footnote 102 <F102>
Paragraph 2 as amended by directors' resolution of 4/17/64. Originally read
as follows:
"2. Chairman of the Board
The Chairman of the Board shall preside at all meetings of the stockholders
and the Board of Directors, and shall perform such other functions and duties as
may be prescribed by the Board of Directors. In the absence of disability of the
Chairman of the Board, or when such office is vacant, the foregoing functions
shall be performed by the President.<F89>"
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<PAGE>128
Footnote 103 <F103>
Paragraph 3 as amended by directors' resolution of 4/17/64. Previously read
as follows:
"3.<F90> President
(a) The President shall be the Chief Executive Officer of the Corporation.
It shall be his duty to<F91> have general and active management of the business
of the Corporation; and to see that all orders and resolutions of the Board of
Directors are carried into effect.
"(b) He shall execute all contracts, agreements, deeds, bonds, mortgages,
and other obligations and instruments in the name of the Corporation; shall keep
in safe custody the deal of the Corporation and, when authorized by the Board of
Directors, shall affix the same to any instrument requiring it; and when so
affixed the seal shall be attested by the signature of the Secretary or the
Treasurer.
"(c) He shall have the general supervision and direction of the other
officers of the Corporation and shall see that their duties are properly
performed.
"(d) He shall submit a report of the operations of the Corporation for the
year to the directors at their meeting next preceding the annual meeting of the
stock holders and to the stockholders at their annual meeting."
Footnote 104 <F104>
Paragraph 4 inserted by directors' resolution of 4/17/64.
Footnote 105 <F105>
Words "both the President and the Chairman of the Board" substituted for
"the President" by directors' resolution of 4/17/64.
Footnote 106 <F106>
Words ", and shall perform such other duties as may be assigned to him by
the Board of Directors or the President, under whose supervision he shall be"
deleted by directors' resolution of 4/17/64.
Footnote 107 <F107>
Sub-paragraphs (d) and (e) inserted by directors' resolution of 4/17/64.
76
<PAGE>129
Footnote 108 <F108>
Sub-paragraph (b) as amended by directors' resolution of 4/17/64.
Originally read as follows:
"(b) He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors or the President, taking proper vouchers for such
disbursements, and shall render to the President and directors at the regular
annual meeting of stockholders, or whenever the President or directors may
require it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. At the regular meeting of the Board of Directors
next preceding the annual stockholders meeting, he shall render a like report
for the preceding year: PROVIDED, That in 1947 such report may cover only such
portion of the current year as may be feasible."
Footnote 109 <F109>
Sentence "He shall perform such other duties as the Board of Directors may
from time to time prescribe or require." deleted by directors' resolution of
4/17/64.
Footnote 110 <F110>
Sub-paragraph (d) inserted by directors' resolution of 4/17/64.
Footnote 111 <F111>
Numerals "45" substituted for numerals "30" by directors' resolution of
11/7/64.
Footnote 112 <F112>
Words "one week" substituted for words "two weeks" by directors' resolution
of 8/4/65.
Footnote 113 <F113>
Sentence "In the event that the Board shall elect two or more
Vice-Presidents, it shall designate one of them as Senior Vice-President."
inserted by directors' resolution of 12/4/65.
Footnote 114 <F114>
Words "Senior Vice-President" substituted for words "Chairman of the Board"
by directors' resolution of 12/4/65.
Footnote 115 <F115>
Sub-paragraph (f) inserted by directors' resolution of 12/4/65.
77
<PAGE>130
Footnote 116 <F116>
Words "Senior Vice-President" substituted for words "Vice-President or
Vice-Presidents (in the order designated by the Board of Directors) by
directors' resolution of 12/4/65.
Footnote 117 <F117>
Last sentence of Paragraph 5 as amended by directors' resolution of
12/4/65. Originally read as follows: "The Vice-President or Vice-Presidents
shall also perform such other duties as may be prescribed by the Board of
Directors."
Footnote 118 <F118>
Words "or the Assistant Treasurer" inserted by directors' resolution of
12/4/65.
Footnote 119 <F119>
Phrase ", as the Board may designate" inserted by directors' resolution of
12/4/65.
Footnote 120 <F120>
Last sentence, previously designated as subdivision (i) made a part of
sub-paragraph (g), and subdivision (ii) deleted by directors' resolution of
12/4/65. Subdivision (ii) read as follows: "(ii) The dates on which such stock
shall be made available shall be the effective dates on which the price of the
stock is set. Announcement of the number of shares made available shall be at
least two weeks in advance of the effective date."
Footnote 121 <F121>
Paragraph 1 as amended by directors' resolution of 3/4/67. Originally read
as follows:
"1. Place of Meeting
All meetings of stockholders shall be held at the main office of the
Corporation in the City of Washington, District of Columbia."
Footnote 122 <F122>
Paragraph 2(b)(i) as amended by directors' resolution of 9/6/67. Previously
read as follows:
"(i) The shares of Class B stock shall be issued only in exchange
for Class A stock (A) to officers and employees of the Corporation after
retirement because of age or disability, or (B) after the death of officers or
employees of the Corporation, to the estates of such officers or employees, to
the dependents of such officers or employees, or to persons who are the natural
78
<PAGE>131
objects of the bounty of such officers or employees: Provided, That death occurs
while the officers or employees are in the service of the Corporation or on
military or disability leave, or within three years less 30 days after
retirement because of age or disability of officers or employees who executed an
Optional Agreement pursuant to the By-Laws of the Corporation for the transfer
of stock upon termination of employment, or within 60 days after retirement
because of age or disability of officers or employees who did not execute such
an Optional Agreement."
Footnote 123 <F123>
Paragraph 2(b)(iii) (A) and (B) as amended by directors' resolution of
9/6/67. Previously read as follows:
"(A) In the case of an officer or employee of the Corporation
entitled to exchange Class A stock for Class B stock upon retirement, and in the
case of anyone entitled to exchange Class A stock for Class B stock upon the
death of a retired officer or employee, within sixty (60) days after the
retirement of the officer or employee, or, in the event such officer or employee
has executed an Optional Agreement pursuant to the By-Laws of the Corporation
for the transfer of stock upon termination of employment, within three (3) years
less thirty (30) days after retirement of the officer or employee;
"(B) In the case of anyone entitled to exchange Class A stock for
Class B stock upon the death of an officer or employee of the Corporation while
in the service of the Corporation or on military or disability leave, within
sixty (60) days after such death, or, in the event such officer or employee has
executed an Optional Agreement pursuant to the By-Laws of the Corporation for
the transfer of stock upon termination of employment, within three (3) years
less thirty (30) days after the death of such officer or employee."
Footnote 124 <F124>
Words "ninety (90) day and one hundred and eighty (180) day periods"
substituted for words "sixty (60) day periods" by directors' resolution of
9/6/67.
Footnote 125 <F125>
Subdivision (iv) inserted by directors' resolution of 9/6/67.
Footnote 126 <F126>
Paragraph 4 as amended by directors' resolution of 9/6/67. Previously read
as follows:
79
<PAGE>132
"4. Rate of Exchange of Class B Stock
The exchange of Class A stock for Class B stock shall be on a share for
share basis: Provided, however, that after eight hundred (800)<F77> shares of
Class A stock have been exchanged for a like number of shares of Class B stock
by (a) any one retired officer or employee of the Corporation, or (b) any or all
persons who received the Class A stock from any one deceased officer or
employee, such person or persons may thereafter have Class B stock exchanged
only in an amount equal to one-third of the remaining Class A stock held by such
person or persons; and provided, further, that no more than two thousand (2,000)
<F78> shares of Class B stock shall be issued in exchange for Class A stock
to any one retired officer or employee of the Corporation or to any or all
persons who have received the Class A stock from any one deceased officer or
employee.<F63>"
Footnote 127 <F127>
Words "by written notice sent to the stockholder or his representative at
the address of the stockholder as it appears on the stock books of the
Corporation and by written notice to the distributee at his address as it
appears on the records of the Administrative Committee established under the
stock bonus plan" inserted by directors' resolution of 9/6/67.
Footnote 128 <F128>
First two sentences of Paragraph 8 substituted by directors' resolution of
9/6/67 for the following: "The Corporation shall have the right at any time
after the expiration of eight (8) years from the date of (a) retirement of an
officer or employee, or (b) death of an officer or employee while in the service
of the Corporation or on military or disability leave, to redeem from the holder
thereof all or any part of the outstanding shares of Class B stock issued in
exchange for Class A stock to such officer or employee or to the estate,
dependents, or persons who are the natural objects of the bounty of such officer
or employee."
Footnote 129 <F129>
Paragraph 9(b)(i)(A) and (B) as amended by directors' resolution of 9/6/67.
Previously read as follows:
"(A) The price in effect for purchase and sale of shares of Class
A stock of the Corporation under the Stock Purchase and Transfer Plan of the
Corporation, if tender is made within eight years after the date of the
retirement or death which gave rise to the right to obtain Class B stock, or
"(B) The price determined for the purchase of Class A stock in
accordance with the provisions of sub-paragraph (a) of Paragraph 9 hereof, if
tender is made eight or more years after the retirement or death which gave rise
to the right to obtain Class B stock."
80
<PAGE>133
Footnote 130 <F130>
Paragraph 9(b)(ii)(A) and (B) as amended by directors' resolution of
9/6/67. Previously read as follows:
"(A) The price in effect for the purchase and sale of shares of
Class A stock of the Corporation under the Stock Purchase and Transfer Plan of
the Corporation, if the stock is presented for transfer within eight years after
the retirement or death which gave rise to the right to obtain Class B stock, or
"(B) The price determined for the purchase of Class A stock in
accordance with the provisions of sub-paragraph (a) of Paragraph 9 hereof, if
the stock is presented for transfer at eight or more years after the date of the
retirement or death which gave rise to the right to obtain Class B stock.
Footnote 131 <F131>
Words "to the time at which the Corporation shall first have the right
under Paragraph 8 hereof to redeem such Class B stock from the holder thereof"
substituted for words "to the expiration of the eight-year period after the date
of the retirement or death which gave rise to the right to obtain Class B stock"
by directors' resolution of 9/6/67.
Footnote 132 <F132>
Figure "10" substituted for figure "20" by directors' resolution of
12/2/67.
Footnote 133 <F133>
Words and figure "seven hundred thousand (700,000)" substituted for words
and figure "one hundred forty thousand (140,000)" by directors' resolution of
1/24/68.
Footnote 134 <F134>
Words and figure " six hundred thousand (600,000)" substituted for words
and figure "one hundred twenty thousand (120,000)" by directors' resolution of
1/24/68.
Footnote 135 <F135>
Words and figure "one hundred thousand (100,000)" substituted for words and
figure "twenty thousand (20,000)" by directors' resolution of 1/24/68.
81
<PAGE>134
Footnote 136 <F136>
Paragraph 2(a)(i) as amended by directors' resolution of 1/24/68.
Previously read as follows: "(i) The shares of Class A stock shall be issued
only to person who are officers or employees of the Corporation and who possess
such other qualifications as the Board of Directors shall from time to time
prescribe by resolution, or to trustee designated or appointed under a stock
bonus plan of the Corporation.<F76>"
Footnote 137 <F137>
Words "officers and" inserted by directors' resolution of 1/24/68.
Footnote 138 <F138>
Words "officer or" inserted by directors' resolution of 1/24/68.
Footnote 139 <F139>
Proviso as amended by directors' resolution of 1/24/68. Originally read as
follows: "Provided, however, that the Trustee may designate an agent with powers
to perform his duties herein prescribed by filing with the Secretary of the
Corporation a statement delegating such powers."
Footnote 140 <F140>
Words "officers and employees eligible to participate shall be person (1)
who are officers or employees of the Corporation or of a subsidiary corporation
eighty (80) percent or more of whose stock is owned by the Corporation and (2)
who possess such other qualifications as the Board of Directors shall from time
to time prescribe by resolution (all such officers and employees being
hereinafter in this Section X referred to as 'officers and employees')"
substituted for words "employees eligible to participate shall be 'eligible
stockholders' as defined in Section IX, Paragraph 2(a)(i) of these By-Laws " by
directors' resolution of 1/24/68.
Footnote 141 <F141>
Words "prior to April 7, 1968," inserted by directors' resolution of
1/24/68.
Footnote 142 <F142>
Words "and on and after April 7, 1968, be not in excess of forty-five
dollars ($45) per week and not less than one dollar ($1.00) per week" inserted
by directors' resolution of 1/24/68.
82
<PAGE>135
Footnote 143 <F143>
Sentence "Effective April 7, 1968, the words and figures 'twenty (20)
shares' wherever they appear in this subdivision (vii) shall read 'forty (40)
shares'." inserted by directors' resolution of 1/24/68.
Footnote 144 <F144>
Words "officer and" inserted by directors' resolution of 1/24/68.
Footnote 145 <F145>
Words "employee of, and" deleted by directors' resolution of 1/24/68.
Footnote 146 <F146>
Words "(herein called the Corporation) or by a subsidiary eighty (80)
percent or more of whose stock is owned by the Corporation" inserted by
directors' resolution of 1/24/68.
Footnote 147 <F147>
Title of Section changed from "DEFINITION OF STOCKHOLDER" to "DEFINITIONS"
by directors' resolution of 1/24/68.
Footnote 148 <F148>
Second paragraph of Section XV inserted by directors' resolution of
1/24/68.
Footnote 149 <F149>
Word and number "thirteen (13)" substituted for word and number "eleven
(11)" by directors' resolution of 2/10/68.
Footnote 150 <F150>
Words "at the regular annual meeting of stockholders" inserted and sentence
"The first election or elections shall be held at one or more special meetings
of stockholders until all eleven (11) directors are elected, and thereafter
directors shall be elected at the regular annual meeting of stockholders."
deleted by directors' resolution of 2/10/68.
Footnote 151 <F151>
Word and number "twelve (12)" substituted for word and number "thirteen
(13)<F149>" by directors' resolution of 12/7/68.
83
<PAGE>136
Footnote 152 <F152>
Subdivision (ii) as amended by directors' resolution of 4/5/69. Previously
read as follows: "(ii) When Deductions Begin. Deductions from payroll for the
purposes of this sub-paragraph shall begin with salary for the third full week
after receipt of the authorization, except that at the beginning of any six
months' period of the Plan, authorized payroll deductions shall begin with
salary for the first full week of the new six months' period.<F45>"
Footnote 153 <F153>
Second sentence of subdivision (iii) as amended by directors' resolution of
4/5/69. Previously read as follows: "Such notice shall take effect with salary
for the third full week after submission of notice.<F46>"
Footnote 154 <F154>
Word "twenty-eight" substituted for word "fourteenth" by directors'
resolution of 4/5/69.
Footnote 155 <F155>
Subdivision (i) as amended by directors' resolution of 8/6/69. Previously
read as follows:
"(i) Limitations on Amount
Deductions from salary for such purpose shall prior to April 7,
1968,<F141>, be not in excess of two times<F81> the current price per share and
not less than one dollar ($1.00) per week<F44> and on and after April 7, 1968,
be not in excess of forty-five dollars ($45) per week and not less than one
dollar ($1.00) per week.<F142>"
Footnote 156 <F156>
Words "first full pay period" substituted for words "third full week" by
directors' resolution of 8/6/69.
Footnote 157 <F157>
Second sentence of subdivision (iii) inserted by directors' resolution of
8/67/69.
Footnote 158 <F158>
Words "OFFICERS AND" deleted by directors' resolution of 12/17/69.
84
<PAGE>137
Footnote 159 <F159>
Section VII as amended by directors' resolution of 12/17/69. Previously
read as follows:
"Officers other than the President<F58> and the Chairman of the Board,<F85>
directors, and members of committees shall not receive any salary or fee for
their services as such, but by resolution of the Board they shall be allowed
reimbursement for their traveling and other reasonably necessary expenses for
attendance at any regular or special meeting: PROVIDED, That nothing herein
contained shall preclude any officer, director, or member of a committee from
serving the Corporation in any other capacity upon a compensated basis."
Footnote 160 <F160>
Words "and a Vice Chairman" inserted by directors' resolution of 12/17/69.
Footnote 161 >F161>
Words "Vice Chairman of the Board" substituted for word "either" by
directors' resolution of 12/17/69.
Footnote 162 <F162>
Words "and Vice Chairman" inserted by directors' resolution of 12/17/69.
Footnote 163 <F163>
Words "Vice Chairman of the Board" substituted for word "President" by
directors' resolution of 12/17/69.
Footnote 164 <F164>
Last sentence of sub-paragraph (f) inserted by directors' resolution of
12/17/69.
Footnote 165 <F165>
Words "who are on the payroll of the Corporation or of one of its
subsidiary corporations" inserted by directors' resolution of 1/10/70.
Footnote 166 <F166>
Words "or of one of its subsidiary corporations" inserted by directors'
resolution of 2/7/70.
85
<PAGE>138
Footnote 167 <F167>
Words "and members of committees" and words "who are on the payroll of the
Corporation or of one of its subsidiary corporations" transposed by directors'
resolution of 2/7/70.
Footnote 168 <F168>
Words and figure "five hundred fifty thousand (550,000)" substituted for
words and figure "six hundred thousand (600,000)" by directors' resolution of
4/18/70.
Footnote 169 <F169>
Words and figure "one hundred fifty thousand (150,000)" substituted for
words and figure "one hundred thousand (100,000)" by directors' resolution of
4/18/70.
Footnote 170 <F170>
Sentence "One nominee shall be neither a stockholder of the Corporation nor
an active or retired officer or employee of the Corporation or of one of its
subsidiary corporations." inserted by directors' resolution of 6/9/71.
Footnote 171 <F171>
Paragraph 1 as amended by directors' resolution of 6/9/71. Previously read
as follows:
"1. Eligibility
No person shall be elected or appointed as a director unless he is a holder
of Class A or Class B stock and, in addition, is an active or retired officer or
employee of the Corporation or one of its subsidiary corporations,<F166> and any
director who ceases to fulfill these requirements shall be disqualified to
exercise any of the powers or duties of director and shall be deemed to have
resigned from such position.<F57>"
Footnote 172 <F172>
Word and number "thirteen (13)" substituted for word and number "twelve
(12)<F151>" by directors' resolution of 6/9/71.
Footnote 173 <F173>
Second sentence of Paragraph 3 inserted by directors' resolution of 6/9/71.
86
<PAGE>139
Footnote 174 <F174>
First sentence of sub-paragraph (b) as amended by directors' resolution of
9/8/71. Originally read as follows: "Regular meetings of the Board of Directors
shall be held on the first Saturday in each month at the main office of the
Corporation in Washington, District of Columbia, and/or at such other times and
places as may be fixed by resolution of the Board or by written waiver of all
its members."
Footnote 175 <F175>
Words "one or more Assistant Treasurers" substituted for words "an
Assistant Treasurer" by directors' resolution of 1/5/72.
Footnote 176 <F176>
Words "an" substituted for word "the" by directors' resolution of 1/5/73.
Footnote 177 <F177>
Words and figure "five hundred thousand (500,000)" substituted for words
and figure "five hundred fifty thousand (550,000)<F134><F168>" by directors'
resolution of 4/21/73.
Footnote 178 <F178>
Words and figure "two hundred thousand (200,000)" substituted for words and
figure "one hundred fifty thousand (150,000)<F135><F169>" by directors'
resolution of 4/21/73.
Footnote 179 <F179>
Paragraph 1 as amended by directors' resolution of 5/14/75. Previously read
as follows:
"1. Amount
The total number of shares of stock which the Corporation is authorized to
issue is seven hundred thousand (700,000)<F133> shares divided into two classes:
one class designated as Class A common shares shall consist of five hundred
thousand (500,000)<F177> shares without par value and with voting rights, and
the other class designated as Class B common shares shall consist of two hundred
thousand (200,000)<F178> shares without par value per share and without voting
rights.<F75> "
Footnote 180 <F180>
Sentence "Effective September 22, 1975, the words and figures 'two hundred
(200)' wherever they appear in this subdivision (bb) shall read 'eight hundred
(800)'." inserted by directors' resolution of 5/14/75.
87
<PAGE>140
Footnote 181 F<181>
Subdivision (i) as amended by directors' resolution of 5/14/75. Previously
read as follows:
"(i) Limitations on Amount
Deductions from salary for such purchase shall prior to October 5, 1969, be
not in excess of forty-five dollars ($45) per week and not less than one dollar
($1.00) per week and on and after October 5, 1969, be not in excess of five
times the current price per share and not less than one dollar ($1.00) per
week.<F155>"
Footnote 182 <F182>
Subdivision (iv) as amended by directors' resolution of 5/14/75. Previously
read as follows:
"(iv) Limitations on Amount
'Offers to buy' may be satisfied by the Trustee, if stock is available, for
each eligible officer or<F138> employee without limitation in amount: Provided,
however, that shares made available to the Trustee from unissued or treasury
stock may not be sold to any one individual in excess of that amount necessary
to permit such individual to purchase a total of two hundred (200)<F83> shares
of stock through 'offers to buy' in any period of six months.<F54>
Footnote 183 <F183>
Subdivision (iv) as amended by directors' resolution of 5/14/75. Previously
read as follows:
"(vii) Fulfillment
'Offers to buy shall be satisfied in order of priority based on the date
when the 'offer to buy' is listed according to the following system:
"When the Trustee has available shares for sale to makers of 'offers to
buy,' he shall allot to each 'live' listing number in numerical sequence twenty
(20)<F84> shares, or the full amount of the 'offer to buy' if the 'offer' is for
fewer than twenty (20)<F84> shares, until all listing numbers have received
their allotments or until all the available shares have been allotted. If
additional shares for allotment remain, they shall be allocated in the same
manner, twenty (20)<F84> or fewer (if the unfulfilled 'offer to buy' is less
than twenty (20))<F84> shares being allotted to each number in rotation until
all available shares are sold. Effective April 7, 1968, the words and figures
'twenty (20) shares' wherever they appear in this subdivision (vii) shall read
'forty (40) shares'.<F143> After each such allotment the 'live' listing shall be
88
<PAGE>141
reconstituted, beginning with the first 'offer to buy' that was not satisfied in
the previous allotment, and the same procedure followed on subsequent
allotments."
Footnote 184 <F184>
Paragraph 8 as amended by directors' resolution of 6/11/75. Previously read
as follows:
"8.<F95> Treasurer
(a) The Treasurer shall have custody of the funds and securities of the
Corporation, shall keep full and accurate accounts of the 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.
"(b) The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors and either the Chief Executive Officer or the
President, in relation to their functions, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the
directors, whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and at the meeting
of the Board of Directors next preceding the annual meeting of stockholders he
shall make a like report for the preceding fiscal year.<F108>
"(c) He shall give the Corporation a bond, if required to do so by the
Board of Directors, in such sum and in form and with security satisfactory to
the Board, for the faithful performance of the duties of his office and the
restoration to the Corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind belonging to the Corporation in his possession or under his
control.<F109>
"(d) He shall perform such other functions as the Board of Directors or the
Chief Executive Officer may prescribe.<F110>"
Footnote 185 <F185>
Paragraphs 9 and 10 inserted by directors' resolution of 6/11/75.
Footnote 186 <F186>
Word "Thursday" substituted for word "Wednesday" by directors' resolution
of 9/10/75.
89
<PAGE>142
Footnote 187 <F187>
Words and figure "one million eighty hundred thousand (1,800,000)"
substituted for words and figure "two million (2,000,000)" by directors'
resolution of 4/16/77.
Footnote 188 <F188>
Words and figure "one million (1,000,000)" substituted for words and figure
"eight hundred thousand (800,000)" by directors' resolution of 4/16/77.
Footnote 189 <F189>
Words and figure "thirty (30)" substituted for words and figure
"twenty-five (25)" by directors' resolution of 1/12/78.
Footnote 190 <F190>
Sentence "Each additional nomination made pursuant to this sub-paragraph
shall be accompanied by the nominee's written acceptance of his or her
nomination." inserted by directors' resolution of 1/12/78.
Footnote 191 <F191>
Words and figure "twenty-two (22)" substituted for word and figure "fifteen
(15)" by directors' resolution of 1/12/78.
Footnote 192 <F192>
Period substituted for colon and proviso deleted by directors' resolution
of 1/12/78. Proviso read as follows: "PROVIDED, however, that each nominee on
such list shall have filed with the Nominating Committee a written acceptance of
his nomination not less than twenty (20) days prior to the meeting; nominations
which are not so accepted shall be deemed withdrawn.<F10>"
Footnote 193 <F193>
Words "may" substituted for word "shall" by directors' resolution of
11/8/79.
Footnote 194 <F194>
Sub-paragraph (c) inserted by directors' resolution of 5/8/80.
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<PAGE>143
Footnote 195 <F195)
Sub-paragraph renumbered as shown by directors' resolution of 5/8/80.
Previously numbered (c).
Footnote 196 <F196>
Paragraph 7 inserted by directors' resolution of 6/12/80.
Footnote 197 <F197>
Paragraph 8 inserted by directors' resolution of 6/12/80.
Footnote 198 <F198>
Sub-paragraph (a) as amended by directors' resolution of 11/6/80.
Previously read as follows:
"(a) Operation by Trustee
The Plan shall be operated in accordance with the provisions of this
Section by a Trustee, who shall be the Treasurer or an<F176> Assistant
Treasurer<F118> of the Corporation, as the Board may designate:<F119> Provided,
however, that the Trustee may designate an agent or agents, including an
Assistant Trustee at the place of business of a subsidiary whose stock is at
least eighty (80) percent owned by the Corporation, with powers to perform any
of his duties herein prescribed by filing with the Secretary of the Corporation
a statement delegating such powers.<F139>"
Footnote 199 <F199>
Paragraph 1 as amended by directors' resolution of 7/12/84. Previously read
as follows:
"1. Amount.
The total number of shares of stock which the Corporation is authorized to
issue is two million eight hundred thousand (2,800,000) shares divided into two
classes: one class designated as Class A common shares shall consist of one
million eight hundred thousand (1,800,000)<F187> shares without par value and
with voting rights, and the other class designated as Class B common shares
shall consist of one million (1,000,000)<F188> shares without par value and
without voting rights.<F179>"
91
<PAGE>144
Footnote 200 <F200>
Subdivision (vii) as amended by directors' resolution of 9/6/84. Previously
read as follows:
"(vii) Fulfillment
'Offers to buy' shall be satisfied in order of priority based on the date
when the 'offer to buy' is listed according to the following system:
"When the Trustee has available shares for sale to makers of 'offers to
buy,' he shall allot to each 'live' listing number in numerical sequence forty
(40) shares, or the full amount of the 'offer to buy' if the 'offer' is for
fewer than forty (40) shares, until all listing numbers have received their
allotments or until all the available shares have been allotted. If additional
shares for allotment remain, they shall be allocated in the same manner, forty
(40) or fewer (if the unfulfilled 'offer to buy' is less than forty (40) shares
being allotted to each number in rotation until all available shares are sold.
Effective September 22, 1975, the word and figures 'forty (40)' wherever they
appear in this subdivision (vii) shall read 'one hundred sixty (160)'. After
each such allotment the 'live' listing shall be reconstituted, beginning with
the first 'offer to buy' that was not satisfied in the previous allotment, and
the same procedure followed on subsequent allotments.<F183>"
Footnote 201 <F201>
Words "or his designees" inserted by directors' amendment of 2/7/85.
Footnote 202 <F202>
Word "forty-two" substituted for word "twenty-eight" by directors'
resolution of 3/7/85.
Footnote 203 <F203>
Section IX, Paragraph 1 as amended by directors' resolution of 6/12/86.
Previously read as follows:
"1. Amount
The total number of shares of stock which the Corporation is authorized to
issue is three million (3,000,000) shares divided into two classes: one class
designated as Class A common shares shall consist of one million eight hundred
thousand (1,800,000) shares without par value and with voting rights, and the
other class designated as Class B common shares shall consist of one million two
hundred (1,200,000) shares without par value and without voting
rights.<F199>"
92
<PAGE>145
Footnote 204 <F204>
Sub-paragraph (c) added by directors' resolution of 6/12/86.
Footnote 205 <F205>
Comma added after word "stock" and phrase amended by directors' resolution
of 6/12/86. Previously read as follows: "and Class B stock shall be entitled to
participate ratably, share for share, and without preference of either Class
over the other.<F71>
Footnote 206 <F206>
Comma added after word "stock" and phrase amended by directors' resolution
of 6/12/86. Previously read as follows: "and Class B stock shall be entitled to
participate ratably, share for share, and without preference of either Class
over the other in all dividends when and as declared by the Board of
Directors.<F73>
Footnote 207 <F207>
The words "or Class C" added by directors' resolution of 6/12/86.
Footnote 208 <F208>
Section IX, Paragraph 1 as amended by directors' resolution of 9/10/87.
Previously read as follows:
"1. Amount
The total number of shares of stock which the Corporation is authorized to
issue is three million two hundred and fifty thousand (3,250,000) shares divided
into three classes: one class designated as Class A common shares shall consist
of one million eight hundred thousand (1,800,000) shares without par value and
with voting rights, another class designated as Class B common shares shall
consist of one million two hundred thousand (1,200,000) shares without par value
and without voting rights, and another class designated as Class C common shares
shall consist of two hundred and fifty thousand (250,000) shares without par
value and without voting rights.<F203>"
Footnote 209 <F209>
Section X, Paragraph 2(e)(ii)(bb) as amended by directors' resolution of
9/10/87. Previously read as follows:
"(bb) All other stock offered to the Fund for purchase in the chronological
order in which such offers have been received in writing by the Trustee:
PROVIDED, however, that, whenever the Trustee has unsatisfied offers of stock
from two or more stockholders, not more than two hundred (200)<F79> shares
93
<PAGE>146
may be purchased from a stockholder having a higher priority until two hundred
(200)<F79> shares (or all shares offered, if less than two hundred (200)<F79>
have been purchased from each such stockholder having a lower priority.
Effective September 22, 1975, the words and figures 'two hundred (200)' wherever
they appear in this subdivision (bb) shall read 'eight hundred (800)'.<F180>
Where two or more offers of stock are received simultaneously by the Trustee,
the order shall be determined by lot."
Footnote 210 <F210>
Section X, Paragraph 1(i)(i) as amended by directors' resolution of
9/10/87. Previously read as follows:
"(i) Limitation on Amount
Deductions from salary for such purchase shall prior to September 22, 1975,
be not in excess of five times the current price per share and not less than one
dollar ($1.00) per week and on and after September 20, 1975, be not in excess of
twenty times the current price per share and not less than one dollar ($1.00)
per week.<F181>"
Footnote 211 <F211>
Section X, Paragraph 2(j)(iv) as amended by directors' resolution of
9/10/87. Previously read as follows:
"(iv) Limitation on Amount
'Offers to buy' may be satisfied by the Trustee, if stock is available, for
each eligible officer or employee without limitation in amount: Provided,
however, that shares made available to the Trustee from unissued or treasury
stock prior to September 22, 1975, may not be sold to any one individual in
excess of that amount necessary to permit such individual to purchase a total of
two hundred (200) shares of stock through 'offers to buy' in any period of six
months; and provided, further, that shares made available to the Trustee from
unissued or treasury stock on and after September 22, 1975, may not be sold to
any one individual in excess of that amount necessary to permit such individual
to purchase a total of eight hundred (800) shares of stock through 'offers to
buy' in any period of six months.<F184>"
94
<PAGE>147
Footnote 212 <F212>
Section X, Paragraph 2(j)(vii) as amended by directors' resolution of
9/10/87. Previously read as follows:
"(vii) Fulfillment
'Offers to buy shall be satisfied in order of priority based on the date
when the 'offer to buy' is listed according to the following system:
"When the Trustee has available shares for sale to makers of 'offers to
buy,' he shall allot to each 'live' listing number in numerical sequence forty
(40) shares, or the full amount of the 'offer to buy' if the 'offer' is for
fewer than forty (40) shares, until all listing numbers have received their
allotments or until all the available shares have been allotted. If additional
shares for allotment remain, they shall be allocated in the same manner, forty
(40) or fewer (if the unfulfilled 'offer to buy' is less than forty (40) shares
being allotted to each number in rotation until all available shares are sold.
After each such allotment the 'live' listing shall be reconstituted, beginning
with the first 'offer to buy' that was not satisfied in the previous allotment,
and the same procedure followed on subsequent allotments."
Footnote 213 <F213>
Section V, Paragraph 4(b) as amended by directors' resolution of 4/15/89.
Previously read as follows:
"(b) Regular meetings of the Board of Directors shall be held at 8:30 a.m.
on the first Thursday after the first Saturday in each month at the main office
of the Corporation in Washington, District of Columbia, and/or at such other
times and places as may be fixed by resolution of the Board or by written waiver
of all its members. No other notice of any regular meeting shall be required."
Footnote 214 <F214>
Section V, Paragraph 3 as amended by directors' resolution of 4/21/90.
Previously read as follows:
"3. Number; Election; Term
The Board of Directors shall consist of thirteen (13 members who shall be
elected by the Class A stockholders at the regular annual meeting of
stockholders. The Board of Directors so elected shall be composed of (i) the
nominee eligible only under sub-paragraph (a) of Paragraph 1 hereof who shall
have received the highest number of votes among the nominees eligible only under
that provision, and (ii) the twelve (12) nominees eligible only under sub-
95
<PAGE>148
paragraph (b) of Paragraph 1 hereof who shall have received the highest number
of votes among the nominees eligible only under that provision. Each director
shall hold office until the succeeding annual election and until his successor
shall have been elected and shall have duly qualified: PROVIDED, That if there
be a vacancy in the Board by reason of death, resignation, or otherwise, such
vacancy shall be filled for the unexpired term by majority vote of all the
remaining directors, although less than a quorum."
Footnote 215 <F215>
Section V, Paragraph 4(b) as amended by directors' resolution of 7/12/90.
Previously read as follows:
"(b) Regular meetings of the Board of Directors shall be held at 9:00 a.m.
on the Thursday after the first Saturday in each month at the main office of the
Corporation in Washington, District of Columbia, and/or at such other times and
places as may be fixed by resolution of the Board or by written waiver of all
its members. No other notice of any regular meeting shall be required."
Footnote 216 <F216>
Section III, Paragraph 8(a) as amended by stockholders' resolution of
4/21/90. Previously read as follows:
"(a) At least forty-five (45) days prior to any annual meeting of
stockholders a list of nominations for directors, prepared by a Nominating
Committee to be appointed by the Board of Directors, shall be mailed by the
Secretary to each Class A stockholder. The Committee shall make at least as many
nominations as there are directorships to be filled at the annual meeting, but
may nominate candidates in excess of such number. One nominee shall be neither a
stockholder of the Corporation nor an active or retired officer or employee of
the Corporation or of one of its subsidiary corporations. Said list shall also
state the total number of shares of Class A stock of the Corporation then
outstanding."
Footnote 217 <F217>
Section V, Paragraph 1 as amended by stockholders' resolution of 4/21/90.
Previously read as follows:
"(a) One person who is not a stockholder of the Corporation and not an
active or retired officer or employee of the Corporation or of one of its
subsidiary corporations shall be elected or appointed as a director.
"(b) Other than the person elected or appointed as director pursuant
to sub-paragraph a) above, no person shall be elected or appointed as a
director unless he is a holder of Class A or Class B stock and, in addition,
is an active or retired officer or employee of the Corporation or of one of its
96
<PAGE>149
subsidiary corporations, and any director elected or appointed pursuant to this
Paragraph who ceases to fulfill these requirements shall be disqualified
to exercise any of the powers or duties of director and shall be deemed to have
resigned from such position."
Footnote 218 <F218>
Section V, Paragraph 3 as amended by stockholders' resolution of 4/21/90.
Previously read as follows:
"The Board of Directors shall consist of fifteen (15) members who shall be
elected by the Class A stockholders at the regular annual meeting of
stockholders. The Board of Directors so elected shall be composed of (i) the
nominee eligible only under sub-paragraph (a) of Paragraph 1 hereof who shall
have received the highest number of votes among the nominees eligible only under
that provision, and (ii) the thirteen (13) nominees eligible only under
sub-paragraph (b) of Paragraph 1 hereof who shall have received the highest
number of votes among the nominees eligible only under that provision. Each
director shall hold office until the succeeding annual election and until his
successor shall have been elected and shall have duly qualified: Provided, That
if there be a vacancy in the Board by reason of death, resignation, or
otherwise, such vacancy shall be filled of the unexpired term by majority vote
of all the remaining directors, although less than a quorum."
Footnote 219 <F219>
Section IX, Paragraph 1 as amended by directors' resolution of 11/11/93.
Previously read as follows:
"The total number of shares of stock which the Corporation is authorized to
issue is thirteen million (13,000,000) shares divided into three classes: one
class designated as Class A common shares shall consist of seven million two
hundred thousand (7,200,000) shares, $1.00 par value per share and with voting
rights, another class designated as Class B common shares shall consist of four
million eight hundred thousand (4,800,000) shares, $1.00 par value per share and
without voting rights, and another class designated as Class C common shares
shall consist of one million (1,000,000) shares, $1.00 par value per share
without voting rights.<F208>"
Footnote 220 <F220>
Section VIII, Paragraph 1(a), as amended by directors' resolution of
5/8/97. Previously read as follows:
"The officers of the Corporation shall be a Chairman and a Vice Chairman
<F160> of the Board,<F86> a President, one or more Vice-Presidents, a Secretary,
and a Treasurer. The Chairman of the Board and the President may be the same
person, the<F87> Secretary and the Treasurer may be the same person, and a Vice-
President may hold at the same time the office of Vice Chairman of the
Board,<F161> Secretary, or Treasurer. The Chairman and Vice Chairman<F162> of
the Board<F100>, the President, and one Vice-President shall be chosen from
among the directors; the other officers may, but need not be, chosen from among
the directors. No person shall be an officer of the Corporation unless he is a
holder of Class A stock or Class B stock, and any officer who ceases to hold any
shares of stock in the Corporation shall be disqualified to exercise any of the
powers or duties of an officer and shall be deemed to have resigned from
office.<F59>
Footnote 221 <F221>
Sub-paragraph (d) added by directors' resolution of 10/09/97.
97
<PAGE>150
Footnote 222 <F222>
Sentence "For purposes of this Paragraph 6(b) and Article IV, Section 1A,
Paragraph 16 of the Corporation's Certificate of Incorporation, a transfer of
stock registered in TOD form that occurs upon the death of the holder thereof
shall be deemed to be made "by the person named in the certificate," provided
that the Corporation has received an affidavit of the personal representative of
the deceased owner's estate or such other proof of death of the deceased owner
as may be satisfactory to the Secretary of the Corporation." inserted by
directors' resolution of 10/09/97.
Footnote 223 <F223>
Section XI, as amended by directors' resolution of 11/06/97. Previously
read as follows:
The Corporation shall offer to all officer and<F144> employee holders of
Class A<F66> stock the option to execute the following agreement:
Agreement between The Bureau of National Affairs, Inc., party of the first
part, and ________________<F145>, holder of one or more shares of the Class
A<F66> stock of The Bureau of National Affairs, Inc., party of the second part:
In consideration of mutual advantages accruing therefrom, the parties
hereby covenant and agree as follows:
1. The party of the second part will, within not more than three (3) years
of his separation from employment by The Bureau of National Affairs, Inc.
(herein called the Corporation) or by a subsidiary eight (80) percent or more of
whose stock is owned by the Corporation,<F146> offer all Class A<F66> stock of
the Corporation held by him to be purchased under the Stock Purchase and
Transfer Plan set up pursuant to Section X of the By-Laws of the Corporation.
Such offer or offers may be made at any time within the said three (3) years for
any part or all of the Class A<F66> stock so held.
2. In the event that the Stock Purchase Fund, provided for in the said
Plan, is unable to purchase any or all of the shares offered, the party of the
second part may, at that time, at his option, accept Supplemental Bids, if any,
registered with the Trustee of the Plan. If such Supplemental Bids are not
accepted, the party of the second part may retain his shares for later offers
through the Stock Purchase and Transfer, including acceptance of Supplemental
Bids.
3. If at the end of three (3) years after termination of his employment,
the party of the second part still retains any Class A<F66> stock of the
Corporation, he shall offer it forthwith for purchase through the Stock Purchase
Fund. If the Stock Purchase Fund is unable to purchase any or all of the shares
so offered, the Trustee of the Plan shall so notify him and he may thereafter
98
<PAGE>151
retain such shares as have not been purchased or he may dispose of them by
accepting Supplemental Bids. Upon receipt of notification from the Trustee
that the Fund is able to purchase any part or all of the shares then held, the
party of the second part shall, within sixty (60) days from the mailing of such
notification, which shall state the number of shares the Fund can purchase from
the stockholder, present such shares to the Trustee for purchase by the Fund.
A like procedure shall be followed until all shares held by the party of the
second part have been purchased by the Fund.
4. If the party of the second part, or his heirs or legatees, offers any
or all of his shares for sale other than as herein specified, this agreement
shall become null and void.
5. This agreement shall be binding upon the heirs and legatees of the
party of the second part.
6. Nothing herein contained shall diminish the right of the party of the
second part to exchange Class A<F66> stock for Class B<F72> stock of the
Corporation pursuant to Paragraph 2(b) of Section IX of the By-Laws.
7. The provisions of Paragraph 7(b) of Section IX of the By-Laws shall
not apply to the party of the second part, his heirs, or legatees so long as
this agreement is in force and effect.
99
</FN>
</TABLE>
<PAGE>152
INDEX
Amending bylaws 58
Annual Meeting 2
Annual Report 11
Audit Committee 18
Board of Directors, see Directors
Bonding
- ---Of officers 27
Books and accounts 56
Budget 22
Chairman of the Board
- ---In general 21
- ---Absence or disability 22
Checks 57
Chief Executive Officer
- ---In general 23
- ---Absence or disability 24
Chief Financial Officer 26
Class A Stock 28
Class B Stock 29
Class C Stock 31
Committees
- ---Audit 18
- ---Executive 17
- ---Meetings 19
- ---Nominating 6
- ---Other 19
Compensation
- ---Of directors 19
Controller 26
Directors, Board of
- ---Committees 17
- ---Compensation 19
- ---Delegating powers of officers 27
- ---Electing officers 20
- ---Eligibility 8
- ---Nomination of 6
- ---Meetings 10
- ---Number, election, terms 9
- ---Outside directors 8
- ---Powers 8
- ---Quorum 11
- ---Setting price of stock 44
- ---Voting for 5
Dividends 57
Executive Committee 17
Indemnification 11
List of stockholders 3
Lost stock certificates 40
<PAGE>153
Meetings
- ---Annual meeting 2
- ---Board of Directors 10
- ---Special meeting of stockholders 3
Nominating Committee 6
Notice
- ---In general 58
- ---Board of Directors meetings 10
- ---Annual meeting 2
- ---Special meeting of stockholders 2
- ---Waiver 58
Offers to buy 47
Officers--See also specific offices
- ---Appointment and tenure 20, 21
- ---Absence or disability 27
- ---Bonding 27
- ---Chairman of the Board 20, 21
- ---Chief Executive Officer 21, 23
- ---Chief Financial Officer 26
- ---Controller 26
- ---Delegation of powers 27
- ---President 20, 22
- ---President pro tem 25
- ---Secretary 20, 25
- ---Senior Vice President 23, 24
- ---Term 21
- ---Treasurer 20, 26
- ---Vacancy 21
- ---Vice Chairman of the Board 20
- ---Vice Presidents 20, 24
Outside Directors 8
Optional agreements 52
Payroll deductions 45
President
- ---In general 22
- ---Absence or disability 23
President pro tem 25
Price of stock 44
Proxies 5
Quorum
- ---at stockholders' meetings 4
- ---at Board of Directors' meetings 11
Record Date 7
Reserves 57
Seal 1, 25
Secretary 20, 25
Senior Vice President 23, 24
Special meetings
- ---Of stockholders 3
<PAGE>154
Stock
- ---Amount 27
- ---Certificates
- -----In general 33
- -----Lost 40
- ---Class A 28
- ---Class B 29
- ---Class C 31
- ---Dividends 57
- ---Exchange of A for B 30, 33
- ---Fractional shares 40
- ---Price
- -----Purchase of Class A 34, 37
- -----Purchase of Class B 38
- -----Set under SPTP 44
- ---Purchase by corporation 34
- ---Redemption of Class B stock 37
- ---Stock Purchase and Transfer Plan 41
- ---Transfer 33
Stock Purchase and Transfer Plan
- ---In general 41
- ---Availability of treasury or unissued stock 45
- ---Eligibility 41
- ---Offers to buy 47
- ---Payroll deductions 45
- ---Priorities in purchase and sale of stock 43
- ---Sale of stock to corporation 51
- ---Supplemental bids 50
- ---Trustee 41
Stockholders
- ---Definition of 57
- ---Eligibility
- -----Class A 28
- -----Class B 29
- -----Class C 31
- ---List of 3
- ---Voting rights 4
- ---Record date 7
Supplemental bids 50
Transfer on Death 32, 34
Treasurer 20, 26
Two percent nominations 6
Vacancy
- ---Board 10
- ---Officer 21
Vice chairman of the Board 20
Vice presidents 20, 24
Voting
- ----Manner of 5
<PAGE>155
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
STATE OF
INCORPORATION RELATIONSHIP
BNA Communications Inc. Delaware 100% owned by Registrant
BNA International Inc. Delaware 100% owned by Registrant
BNA Washington Inc. Delaware 100% owned by Registrant
The McArdle Printing Co., Inc. Delaware 100% owned by Registrant
Pike & Fischer, Inc. Delaware 100% owned by Registrant
Tax Management Inc. (a) Delaware 100% owned by Registrant
BNA Holdings Inc. Delaware 100% owned by Registrant
(a) Tax Management Inc. owns 100% of TM Holding Company Inc., a Delaware
corporation.
<PAGE>156
EXHIBIT 28.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to _____________________
Commission file number 2-28286, as exhibit 28.2
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
THE BNA DEFERRED STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
The Bureau of National Affairs, Inc.
1231 25th Street, N. W.
Washington, D. C. 20037
Index to form 11-K:
Financial Statements -
Report of Independent Auditors 159
Statements of Net Assets Available for Benefits 160
December 31, 1997 and 1996
Statements of Changes in Net Assets Available 161
for Benefits - Years Ended December 31, 1997,
1996, and 1995
Notes to Financial Statements - December 31, 162
1997, 1996, and 1995
Financial Statement Schedules 165
<PAGE>157
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Deferred Stock Purchase Plan Administrative Committee has duly caused this
annual report to be signed by the undersigned thereunto duly authorized.
THE BNA DEFERRED STOCK PURCHASE PLAN
Date March 19, 1998
-------------
By s\John E. Jenc
--------------
John E. Jenc
Chairman of the Administrative Committee
<PAGE>158
THE BNA DEFERRED STOCK PURCHASE PLAN
Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>159
Independent Auditors' Report
The Administrative Committee of
The BNA Deferred Stock Purchase Plan:
We have audited the accompanying statements of net assets available for benefits
of The BNA Deferred Stock Purchase Plan (the Plan) as of December 31, 1997 and
1996, and the related statements of changes in net assets available for benefits
for each of the years in the three-year period ended December 31, 1997. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in net assets available for benefits
for each of the years in the three-year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of investments at fair
value and reportable transactions are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The Supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
s\ KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Washington, D.C.
February 13, 1998
<PAGE>160
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
1997 1996
----------- -----------
Investments, at fair value (Note 2)
(Cost of $26,776,601 in 1997 and
$23,251,129 in 1996) $42,231,999 $35,843,148
Cash and cash equivalents 310,679 244,079
Accrued Interest 1,234 --
----------- -----------
Net assets available for benefits $42,543,912 $36,087,227
=========== ===========
See accompanying notes to financial statements.
<PAGE>161
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
1997 1996 1995
----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Dividends (Note 1) $ 1,515,099 $ 1,300,662 $ 1,130,027
Interest 13,057 6,809 4,942
Unrealized appreciation of
investments (Note 2) 3,782,258 2,922,045 3,281,122
----------- ----------- -----------
5,310,414 4,229,516 4,416,091
Contributions by participants
(Note 1) 3,939,638 3,645,888 3,239,757
----------- ----------- -----------
Total additions 9,250,052 7,875,404 7,655,848
----------- ----------- -----------
Deductions from net assets attributed to:
Distributions to participants
(Note 1) 2,793,141 2,911,627 1,927,127
Administrative costs (Note 3) 226 357 393
----------- ----------- -----------
Total deductions 2,793,367 2,911,984 1,927,520
----------- ----------- -----------
Net increase 6,456,685 4,963,420 5,728,328
Net assets available for benefits:
Beginning of year 36,087,227 31,123,807 25,395,479
----------- ----------- -----------
End of year $42,543,912 $36,087,227 $31,123,807
=========== =========== ===========
See accompanying notes to financial statements.
<PAGE>162
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY DESCRIPTION OF PLAN
The BNA Deferred Stock Purchase Plan (the "Plan") is a contributory benefit plan
sponsored by The Bureau of National Affairs, Inc. (the "Company"), for the
benefit of employees of the Company and certain of its subsidiaries. The Plan
was established in 1982 with an effective date of January 1, 1983, and is
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). The Plan is designed to provide benefits to participants or their
beneficiaries, and encourages savings through investments in the Company's
Common Stock.
Employees are eligible to participate in the Plan upon completion of one full
year of service. To participate, eligible employees authorize the Company to
contribute, on their behalf, a salary reduction amount to a Trust (the "Trust")
established by the Plan. Such contributions may be between 1% and 15% of the
participant's compensation for each Plan year, subject to certain ceiling
limitations provided in the Plan, by tax laws, and by ERISA.
The Trust maintains separate accounts for each participant in the Plan. These
accounts are credited with the participants' salary reduction contributions and
dividend income. These cash balances are used to purchase shares of Company
Class A Common Stock, which are credited to the accounts of the individual
participants. Share and cash balances in the participants' accounts are fully
vested. Distributions of participants' equity can be made in the event of
retirement, death, qualifying hardships, or other severance of service. If upon
terminating employment, a participant's account value exceeds $3,500, the
participant may opt to delay distribution until reaching age 59 1/2.
The Company's Class A Common Stock, which is voting, may only be purchased by
employees. Former employees and, in some cases, their beneficiaries may hold
Class A Common Stock for up to three years. The Company's Class B Common Stock
is issued to employees in exchange for Class A Common Stock upon their
retirement. The Company's Class C Common Stock is issued in exchange for Class A
Common Stock to employees of any subsidiary, upon disposition of the subsidiary.
The Trust may convert Class A Common Stock for cash, or exchange it for Class B
or Class C Common Stock, if necessary to comply with the above ownership
restrictions. Proceeds from such transactions are held for the Plan participants
in their accounts. Dividends received from Class B and Class C Common Stock are
not reinvested in Company stock, but earn interest income.
An administrative committee appointed by the Company's Board of Directors acts
as administrator of the Plan. An officer of the Company serves as the Trustee.
(Continued)
<PAGE>163
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO THE FINANCIAL STATEMENTS
(2) INVESTMENTS
At December 31, 1997, the Trust held 1,328,349 shares of the Company's Class A
Common Stock and 91,214 shares of the Company's Class B Common Stock, each
valued at $29.75 per share, for 1,252 plan participants. At December 31, 1996,
the Trust held 1,240,077 shares of the Company's Class A Common Stock and 87,447
shares of the Company's Class B Common Stock, each valued at $27.00 per share,
for 1,206 plan participants.
The fair value of the stock is set by the Company's Board of Directors
semiannually for the Stock Purchase and Transfer Plan (SPTP). The Plan values
its investments in the Company's stock at the then most current price fixed for
the SPTP market.
The following information summarizes the Plan's investment and distribution
transactions during 1996 and 1997 involving the Company's Common Stock.
Number Fair
of Shares Value
---------- -------------
Balance, January 1, 1996 1,251,300 $ 30,969,675
Acquired 185,635 4,828,694
Distributed to participants (109,411) (2,877,266)
Appreciation during the year in the market
value of shares of Company stock held
at year end 2,922,045
----------- -------------
Balance, December 31, 1996 1,327,524 35,843,148
----------- -------------
Acquired 185,961 5,313,443
Distributed to participants (93,922) (2,706,850)
Appreciation during the year in the market
value of shares of Company stock held
at year end 3,782,258
----------- -------------
Balance, December 31, 1997 1,419,563 $ 42,231,999
=========== =============
The Company's Board of Directors have fixed the fair value of the stock at
$32.50 per share, effective March 23, 1998.
(3) ADMINISTRATIVE COSTS
The Company pays most of the administrative costs of the Plan. Such costs are
not reflected in the accompanying financial statements.
(Continued)
<PAGE>164
(4) INCOME TAXES
The Plan received its latest favorable determination letter from the Internal
Revenue Service on January 19, 1996 indicating that the Plan, as designed, is
qualified under the applicable requirements of the Internal Revenue Code and is
therefore exempt from federal income taxes. It is the intent of the Plan's
management that the Plan remain qualified and its underlying trust remain tax
exempt under the applicable provisions of the Internal Revenue Code.
<PAGE>165
Schedule 1
THE BUREAU OF NATIONAL AFFAIRS, INC.
THE BNA DEFERRED STOCK PURCHASE PLAN
INVESTMENTS AT FAIR VALUE
DECEMBER 31, 1997
Fair
Description Value Cost
- ------------------------------------------------- ------------ ------------
1,419,563 shares Bureau of National Affairs, Inc.
Common Stock $ 42,231,999 $ 26,776,601
<PAGE>166
Schedule 2
THE BUREAU OF NATIONAL AFFAIRS, INC.
THE BNA DEFERRED STOCK PURCHASE PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
Number of
Number Purchases Purchase
or Distri- Price or
of Shares Description butions Value Gain
- --------- ----------------------------- ---------- ---------- ----------
185,961 Purchases:
Bureau of National Affairs,
Inc., Common Stock 81 $5,313,443
93,922 Distributions:
Bureau of National Affairs
Inc., Common Stock 180 $2,706,850 $918,879
Note: The items listed above represent transactions or a series of transactions
which are in excess of 5% of the market value of Plan assets at January 1, 1997,
($1,804,361) and are reportable under Section 2520.103.6 of Chapter XXV of the
Department of Labor Employee Retirement Income Security Act annual reporting
requirements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from The Bureau of National
Affairs, Inc. consolidated balance sheet and consolidated statement of income
for the period ended December 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 19,421
<SECURITIES> 9,013
<RECEIVABLES> 42,883
<ALLOWANCES> 1,576
<INVENTORY> 5,440
<CURRENT-ASSETS> 101,793
<PP&E> 116,642
<DEPRECIATION> 68,790
<TOTAL-ASSETS> 300,900
<CURRENT-LIABILITIES> 158,583
<BONDS> 0
0
0
<COMMON> 11,912
<OTHER-SE> 61,639
<TOTAL-LIABILITY-AND-EQUITY> 300,900
<SALES> 244,061
<TOTAL-REVENUES> 244,061
<CGS> 134,179
<TOTAL-COSTS> 134,179
<OTHER-EXPENSES> 89,820
<LOSS-PROVISION> 841
<INTEREST-EXPENSE> 41
<INCOME-PRETAX> 28,446
<INCOME-TAX> 8,885
<INCOME-CONTINUING> 19,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,561
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.24
</TABLE>
