FORM 10-K/A.--- ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1998
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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 Identification No.)
incorporation or organization)
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, 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, 1999 was $109,908,570 . 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,
1999 was $145,890,090, and $10,157,806 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, 1999 was 3,506,625 Class A common shares, 4,414,594
Class B common shares, and 298,759 Class C common shares.
Page 1 of 168
<PAGE>2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement, filed with the SEC on
March 26, 1999, 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, 1998
PART I.
Item 1. Business..............................................Page No. 3
Item 2. Properties.................................................... 12
Item 3. Legal Proceedings............................................. 12
Item 4. Submission of Matters to a Vote of Security Holders........... 13
Item X. Executive Officers of the Registrant.......................... 13
PART II.
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters........................................... 15
Item 6. Selected Financial Data....................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 17
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.... 21
Item 8. Financial Statements and Supplementary Data................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................. 44
PART III.
Item 10. Directors and Executive Officers of Registrant................ 44
Item 11. Executive Compensation........................................ 44
Item 12. Security Ownership of Beneficial Owners and Management........ 44
Item 13. Certain Relationships and Related Transactions................ 44
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Report on
Form 8-K.................................................. 45
SIGNATURES.............................................................. 47
EXHIBIT INDEX........................................................... 48
<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 legal and regulatory information. 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., Pike & Fischer, Inc.,
and Institute of Management Administration, Inc. (IOMA), are engaged in
providing legal and regulatory and general business advisory information in
labor, economic, tax, health care, environment and safety and other markets to
business, professional, and academic users. They prepare, publish, and market
subscription information products 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
mostly in the United States.
Online products are marketed through database vendors such as LEXIS/NEXIS, West
Publishing Company, Dialog, and Legislate. Since 1996, the Company has provided
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. 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 BNA's agent outside of North America for sale of its
U.S. products and also engages in independent publishing activity.
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 48 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.
Continued
<PAGE>4
Review Of Operations
BNA's financial results for 1998 reflected ongoing business growth, as revenues
advanced at a double-digit rate. The company was able to absorb significant
expenses, including Year 2000 costs and an adverse judgment in a civil lawsuit,
yet still show an increase in operating profit over 1997. 1998 earnings per
share rose to $2.34, a 4.5 percent increase over 1997, and 70 percent higher
than just three years ago.
Consolidated revenues increased 10.1 percent to nearly $269 million. The
acquisition of the Institute of Management and Administration, Inc. (IOMA), a
newsletter publisher, accounted for 5.2 percent of the increase. Internal
revenue growth was 4.9 percent, led by the strong advances of Tax Management,
BNA Software, and The McArdle Printing Co., Inc.
Year 2000 costs, the adverse judgment, acquisition-related amortization
expenses, and an otherwise modest increase in operating expenses resulted in the
consolidated operating profit increasing only 2.7 percent. All business units
achieved higher operating profits and margins, however, except for the parent
company, which bore the brunt of the Year 2000 costs and the adverse judgment,
and BNA Communications, which suffered from declining revenues.
Investment income grew 13.2 percent. However, interest expenses on the IOMA
purchase loan, as well as equipment write-offs, resulted in non-operating income
being $.6 million lower than in 1997, a year in which non-operating income
included a gain from the sale of a publication.
Net income of $19.6 million was unchanged from the prior year. Earnings per
share rose 4.5 percent, however, because there were fewer shares outstanding.
The 1998 earnings margin of 7.3 percent and the return on equity of 26.6
percent, although down slightly from the decade highs achieved in 1997,
nevertheless remain historically impressive.
Cash and investment balances increased slightly to $145.8 million, despite a
higher-than-usual expenditure of cash funds for capital expenditures, including
the internally-financed portion of the IOMA acquisition. Stock repurchases,
primarily mandatory redemptions from the estates of Class B shareholders and
from Class C shareholders, continued at a high level. Cash flows from operations
constituted the primary source of funds needed for the capital expenditures and
stock repurchases, and for dividends paid to shareholders.
BNA's financial strength and liquidity, in addition to providing current
investment income, ensures that the Company has the resources to respond to
business challenges and opportunities, to make the investments needed to
maintain continued future growth, and to meet the stock repurchase obligations
inherent in an employee-owned company.
A review of the 1998 operations of the parent company and each subsidiary
follows.
(Continued)
<PAGE>5
Parent Company
Successful new products -- both traditional and non-traditional -- and a big
boost from the Web versions of our established services helped grow parent
revenues in 1998. This growth in turn helped fund aggressive technology
investments that position us well for future growth.
The magnitude of the investments needed to bolster our electronic infrastructure
and remedy Year 2000 problems, support and improve existing products and create
new ones, and develop a whole new generation of products for the Web, proved to
be great, however, and led to a decline in the parent's operating profit. An
adverse judgment in a civil lawsuit also had a negative impact on operating
profit.
The investments began to bear fruit in 1998. Our new Medicare/Medicaid
Compliance Library, a CD product designed to go head-to-head with
well-established competitive products, was launched in July and easily surpassed
initial sales projections. The heart of this product is an innovative legal
research tool, Roadmaps(TM) Researcher. This tool guides researchers through
lengthy and complex laws, regulations, and administrative materials to get to
the answers they need. The early market success of this product shows that, even
in a world where government information is widely available, there remains a
critical need for what BNA does best: organize and analyze. The Roadmaps(TM)
Researcher will be an important part of future electronic reference services.
BNA launched its first Web reference products, Human Resources Library on the
Web and Export Reference Guide on the Web, in 1998. Both products garnered
Information Industry Association Hotshot Awards for being the best new Web
products in their class. A number of other major reference products will be
launched in a Web format in the first half of 1999.
The Web is a great delivery platform for BNA's notification services. The
ability to get BNA information on a daily or weekly basis without having to wait
for the print copy to arrive and be routed has proven to be popular. Product
enhancements, such as e-mail summaries that link directly into the stories they
describe, along with innovative selling techniques and creative pricing
policies, have made these Web products the fastest growing part of the parent
company.
Three new notification services were launched in 1998. Responding to a
resurgence in corporate merger activity, BNA launched Mergers & Acquisitions Law
Report in March. That same month saw the start of BNA's Year 2000 Law Report.
The subject matters struck a chord; both products were among the year's
best-selling products. The third notification service, Business Law Adviser, was
introduced in September. This biweekly is designed for attorneys who need
notification, as well as practice-oriented information to advise business
clients, but who do not need the depth and frequency of more specialized BNA
services.
To meet the needs of in-house counsel, BNA introduced two related products,
Corporate Governance Manual and Corporate Governance Library on CD. The manual
is a one-binder service that provides practical, expert guidance on shareholder
meetings, boards of directors, and other corporate governance matters. The
Corporate Governance Library on CD, in addition to the manual, features the full
text of federal and state court decisions and statutes.
(Continued)
<PAGE>6
Investments in the functionality and editorial quality of BNA's Human Resources
Library on CD helped maintain BNA's position as the premier publisher in this
area. New sales of that product increased for the third straight year.
Contributing to this momentum were two significant additions to the HR product
line. February saw the launch of HR Practitioners Guide, a service designed for
HR managers whose information needs do not match the comprehensive scope of
HRCD. The end of the year saw the launch of Human Resources Library -- Lawyers
Edition. By providing the full text of judicial decisions cited in HRCD, the
lawyers edition meets the specialized information needs of attorneys.
Much work was done in 1998 on a Web version of our environment and safety CD
products. A first generation of the Environment & Safety Library on the Web was
released to select customers last year. An improved version with considerably
enhanced functionality will be released in 1999.
The emergence of the Web product platform, increasing demands from our biggest
customers for more specialized service and support, and the ability to provide
enterprise-wide information solutions led to the evolution of a new kind of
field sales representative--the National Account Manager. These account
executive-like positions helped solidify and expand the business we do with our
largest customers. Later in the year, some of the same considerations led to the
creation of Regional Account Development Managers, who are trained to work with
traditional sales reps to offer specialized solutions to specific information
needs. These new resources played a significant role in quickly establishing the
Web as a major revenue source for BNA.
Electronic products and new ways of doing business placed unprecedented demands
on the Information Technology Department. That, along with the need to prepare
BNA for the Year 2000, necessitated big investments in both people and equipment
in 1998. While the challenges were great, the successes were many. A record
number of electronic products were launched, good progress was made on the Year
2000 front, and much new talent was brought into the organization. BNA is well
on its way to having the IT Department it needs to compete in this
technology-intensive industry.
Great progress also was made on BNA's multi-year effort to implement a single
publishing system to create all of BNA's diverse product line. That system,
PS2000, is now used by four out of every five of BNA's reporters and editors.
All notification and newsletter publications of the parent company, as well as
most reference publications, are published from PS2000. The implementation of
PS2000 means that BNA's most vital commodity, its information, is now stored and
uniformly coded, ready to be delivered to subscribers by any means desired. The
system provides the flexibility needed to respond to marketplace demands for
multiple product types.
Once again BNA ended the year by being named one of Fortune magazine's "100 Best
Companies to Work for in America." BNA also made, for the ninth straight year,
Working Mother magazine's list of the "100 Best Companies for Working Mothers."
The fact that we received these honors in the past does not make their continued
receipt any less of an accomplishment. In fact, it's an important reminder from
an outside perspective that, because we are employee-owned, "shareholder value"
means more than simply business success.
(Continued)
<PAGE>7
BNA Books
For the fifth year in a row, BNA Books produced record profits. Revenues grew
over 9 percent to $7.9 million in 1998.
Supplements to Employment Discrimination Law and Developing Labor Law,
co-published with the ABA Section of Labor and Employment Law, contributed
heavily to the division's success in 1998. Sales of Covenants Not to Compete,
Employee Duty of Loyalty, and Trade Secrets, also co-published with the ABA,
continued to do well. The division's biannual Equal Employment Law Update has
become a steady best seller.
Other successful titles in 1998 included Patents in the Federal Circuit, 4th
Edition; BNA's Directory of State and Federal Courts; Patent, Trademark, and
Copyright Laws and Regulations; and ERISA: The Law and the Code.
Finally, at year's end, the division completed its transition to a new Year
2000-compliant book fulfillment system. The new system is much more flexible and
efficient, enabling us to provide our customers with greatly improved service.
Subsidiary Companies
Tax Management Inc.
Tax Management had another banner year in 1998 as revenues, including those of
BNA Software, rose more than 12 percent to a new record of $61.8 million.
Operating revenues for the print and CD-ROM services increased nearly 11
percent, with slightly more than half of the subscribers relying on electronic
delivery. The fall introduction of a beta version of the Portfolios on the Web
was well received by customers and won positive industry reviews. A greatly
enhanced version is rolling out during the first half of 1999.
Tax Practice Series continues to grow in industry acceptance, and circulation
reached new highs in 1998. The major product enhancement for this service and
for Tax Management Multistate was the addition of state tax codes and
regulations in the final quarter of the year. There has been a great deal of
enthusiasm for these new combinations and we look forward to greater market
penetration.
New advertising campaigns, an effective field sales effort, creative packaging,
and increased market presence helped continue the strong new sales trend of
recent years, while renewal sales were encouraged through a significant increase
in client relations activity and training sessions.
A new Editorial Technology Division was created to fulfill an ambitious product
development plan that includes migrating the TM services to PS2000, enhancing
TM's Web publishing capability, ensuring Year 2000 compliance, and increasing
CD-ROM publishing activities.
(Continued)
<PAGE>8
BNA Software
BNA Software again posted strong double-digit growth in sales and profits.
Revenues were up 16 percent and total value of existing subscriptions expanded a
healthy 13 percent for the year.
New sales reached a new high, with the Fixed Asset and Tax Planning products
finishing among the top ten best sellers for all of BNA. The Sales Tax segment
also continued to post positive growth.
Late in the year, the Enterprise Edition of the BNA Fixed Assets Next Dimension
product was introduced to reach a higher-end customer group with more demanding
needs. Early signs of customer acceptance have been positive. Customers are also
positive about the fee-based training curriculum introduced earlier this year
for the Fixed Asset product line.
Also contributing to the division's success in 1998 was the introduction of a
new per-user licensing program. This new licensing approach gives customers the
flexibility to license just the number of users they need at more affordable
rates. Looking forward to 1999, we expect favorable overall results and
increased emphasis on new product development to ensure long-term growth.
BNA International Inc.
BNAI experienced record growth in 1998. Revenues increased by 19 percent.
Revenues from BNAI services were 16 percent higher than the previous year due to
continuing growth from established products and the launch of new ones such as
Asia-Pacific Focus, International Securities Law, and World Telecom Law Report.
Sales of BNA and Tax Management services were at the highest level ever
recorded.
The continuous refinement of direct marketing techniques resulted in high sales
of Tax Planning International and several other products, and the strategy of
developing loose-leaf reference services, like International Licensing, related
to existing services, resulted in a very good return for every marketing dollar
spent.
The drive to develop new products as one means of growth continued in 1998. The
International Securities Law loose-leaf was introduced mid-year and extensive
market research resulted in three new publications which were launched in
January 1998. BNAI's international tax offering will be significantly enhanced
by the quarterly European Union Focus and monthly Tax Planning International's
e-commerce. The new World Licensing Law Report has been introduced to capitalize
on the success of International Licensing.
The acquisition of three newsletters from FT Finance in August generated
additional revenues. FT World Tax Report was merged with Tax Planning
International and added 18 percent to its circulation. Emerging European Markets
and East European Business Law were merged with Eastern Europe Reporter,
doubling the circulation of that service. Efforts will continue to identify
suitable acquisition targets.
BNAI will continue to focus on growth of its own product line and of
international sales of parent company and Tax Management products while
maintaining a solid profit base.
(Continued)
<PAGE>9
Pike & Fischer, Inc.
1998 was a year of transition for Pike & Fischer, with the biggest change being
the company's relocation from Bethesda to nearby Silver Spring, MD. Moving to
Silver Spring promised more reasonably priced space with little disruption to
the commuting patterns of employees.
That wasn't the only change. Pike & Fischer launched three new subscription
services in 1998 and set in motion major new product development initiatives. UT
Digest is a biweekly newsletter covering electric and gas utilities' strategic
repositioning of their businesses. Telecom Land Management Law Report is a
single-binder reference-plus-notification service covering the contentious
intersection of zoning law and telecommunications regulation. FR Today is a
daily e-mail alert providing subscriber-selected portions of the daily Federal
Register. It is Pike & Fischer's first electronic-only publication and reflects
the company's decision to accelerate its commitment to Web publishing. The
company also published two books on the subject of alternative dispute
resolution: Mediation Practice Guide and Court-Annexed Mediation.
Even with the additional expenses associated with both relocation and product
development, Pike & Fischer posted an increase in operating profit, the result
of nearly 12 percent revenue growth in 1998. This growth came from an increase
in royalty payments and the first full year of revenues from the food safety
publications acquired in late 1997.
With the move completed, Pike & Fischer looks forward in 1999 to continuing to
build new revenue sources from new products and new types of products. This will
ensure that it continues to be an important contributor to BNA's bottom line.
Institute of Management and Administration, Inc.
IOMA finished its first year as a BNA company with record new product launches,
revenues, and profits. The first year was also characterized by the development
of new publishing strategies linked to BNA's editorial and market strengths.
Foremost among the year's accomplishments was the launch of ten new subscription
newsletters, with titles ranging from Managing HR Information Systems to
Security Director's Report to Managing Logistics. IOMA published 31 newsletters
at the beginning of the year, and 41 at the end. In addition to subscription
newsletters, IOMA launched six Yearbooks and over a dozen special reports, and
test-marketed 24 newsletter product ideas.
IOMA's telemarketing-based product test department added a series of tests to
develop new information services in the mid-price business-to-business market.
In addition to traditional IOMA products, this new line will capitalize on BNA
and IOMA editorial talent, while taking advantage of IOMA's mail and telephone
sales capabilities.
IOMA added nearly $12.6 million in revenues to BNA's consolidated total in 1998.
Despite heavy expenses related to its aggressive, growth-oriented marketing
plan, IOMA also improved its operating profit. Strong growth in IOMA revenues
and profits are projected for 1999.
Much effort this year also went into developing synergies with the parent
company. These efforts included marketing select TM lists late in 1998, working
with BNA's Business Development staff to identify and evaluate a number of
high-quality acquisition opportunities, cooperative marketing efforts, and
developing programs to enable IOMA to achieve the strategic goal of leveraging
BNA's strengths.
(Continued)
<PAGE>10
BNA Washington Inc.
BNAW, BNA's real estate subsidiary, had another successful year. Revenues from
outside tenants were $1.8 million again in 1998, and total operating expenses
for all facilities were virtually the same as the prior year. Most importantly,
BNAW continued to provide the facilities and support services to accommodate
BNA's operations, growth, and changing business requirements.
During June, the Accounting & Finance and Human Resources Departments were moved
to new offices in the 23rd Street building (BNA 4). Included in the new space
are greatly expanded training facilities. This relocation was a major step in
BNA's long-range facilities goal of providing editorial and support services
growth space in the 25th Street buildings for the next several years.
A long-range facilities plan was completed in 1998. It will be an invaluable
planning tool in effectively anticipating and meeting office space requirements
in future years. Also completed was a comprehensive evaluation of the operating
systems (mechanical, electrical, and plumbing) of the aging North and South
Buildings. The resulting plan will serve as a guideline for timely and
economical replacement or overhaul of equipment over the next four to five
years.
The company is well positioned to handle foreseeable space needs in the future.
The McArdle Printing Co., Inc.
In 1998, McArdle achieved a significant increase in commercial sales and a
rebound in profitability. For the first time in its history as a BNA company,
over half of McArdle's revenues came from non-BNA work.
Total revenues increased to $31.6 million. Commercial sales continued to grow
strongly, up 25 percent in 1998 after a 24 percent increase in 1997. Total 1998
sales to BNA and Tax Management for printing, binding, and mailing services
declined 7.4 percent in 1998 reflecting the migration to electronic products.
Total sales to BNA, Tax Management, and IOMA, a new McArdle customer, made up 48
percent of total revenues.
McArdle continued investing in new equipment to expand the capacity, capability,
and scope of the printing operation to meet customer needs and provide
opportunities for revenue growth. New equipment purchased during the year
significantly enhanced McArdle's electronic pre-press and bindery operations.
With an excellent facility, modern equipment, and knowledgeable and productive
employees, McArdle's growth and profitability is expected to continue to advance
in 1999. In 1998, McArdle ranked 196 in the top U.S. printing companies, making
it one of the largest printers on the East Coast. Its commitment to produce
competitively priced, superior quality products and services to BNA and to the
commercial markets it serves will ensure continued success.
(Continued)
<PAGE>11
BNA Communications Inc.
BNAC spent 1998 repositioning itself in the Human Resource market from a
producer of video-based training programs to a provider of full-service training
and consulting solutions. Though the company continued to build its image and
profile in the Human Resource market, the effort presented numerous challenges.
The loss of a seasoned product development manager in late 1997 resulted in
significant delays in new product launches. As a result, no new products were
released on the Human Resources side of the business in 1998. The year also saw
the loss of some top-producing sales reps whose talent and experience were
difficult to replace.
New product delays, transitions in strategic direction, and personnel turnover
resulted in declining revenues for the first part of 1998 and a net loss for the
year. The repositioning efforts began to pay off in the second half of the year
when the company was solidly profitable.
BNAC begins 1999 with three major new Human Resource products ready for market.
Jack Cade's Nightmare III: Caught in the Crossfire and Roadmap to Success build
on BNAC's successful line of management development programs with a legal
emphasis. Diverse Communications: Investing in Relationships is a groundbreaking
training program that unites diversity and communications skills to help build
more productive work relationships.
<PAGE>12
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 professional publishing and the printing industries. Publishing
operations consist of the production and marketing of information products in
print and electronic form. Printing operations consist of printing services to
internal and outside customers.
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 professional publishing 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, continue to compete successfully in their markets.
The number of employees of BNA and its subsidiaries was 2,055 at December 31,
1998.
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 for its use 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 1010 Wayne Avenue, Silver Spring,
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. IOMA conducts its operations from leased offices at 29 West 35th
Street, New York, New York.
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.
(Continued)
<PAGE>13
PART I
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, 1998.
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons were executive officers of The Bureau of National Affairs,
Inc., at December 31, 1998. 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 69 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 49 Vice President for Human Resources
Elected to Vice President in 1994.
Previously was Director of Labor and
Employee Relations since 1987. Joined
BNA in 1984.
Eunice L. Bumgardner 38 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 52 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 43 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>14
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
Name Age Present position and prior experience
- ---------------------- --- ----------------------------------------
Gilbert S. Lavine 47 Treasurer
Elected to present position in 1998.
Joined BNA in 1985.
George J. Korphage 52 Vice President and Chief Financial
Officer
Elected Vice President in 1988 and
Chief Financial Officer in 1989. Joined
BNA in 1972.
Mary Patricia Swords 53 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 51 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 50 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>15
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, 1999, there were 1,584 Class A shareholders, 246 Class B
shareholders, and 26 Class C shareholders. The company repurchased 235,766
shares of Class B stock and 104,654 shares of Class C stock from retired
employees or their estates in the 12 months ending March 1, 1999.
Established stock price and dividends declared during 1998 and 1997 were as
follows:
Stock Price
January 1, 1997 - March 23, 1997 27.00
March 24, 1997 - September 21, 1997 28.50
September 22, 1997 - March 22, 1998 29.75
March 23, 1998 - September 27, 1998 32.50
September 28, 1998 - December 31, 1998 34.00
Record Date and Dividend Amount
March 22, 1997 $ .55
September 20, 1997 .55
March 21, 1998 .60
September 26, 1998 .60
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>16
PART II
Item 6. Selected Financial Data
The Bureau of National Affairs, Inc.
Consolidated Operating and Financial Summary: 1998-1994
(Dollar amounts in thousands, except per share data)
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Operating Revenues ............ $268,829 $244,061 $232,632 $226,497 $215,491
Operating Expenses ............ 248,229 223,999 218,074 218,628 204,507
-------- -------- -------- -------- --------
Operating Profit .............. 20,600 20,062 14,558 7,869 10,984
Non-operating Income :
Investment Income, net ...... 8,178 7,957 6,989 6,452 4,614
Other Income ................ (432) 427 82 3,257 459
-------- -------- -------- -------- --------
Income from Operations Before
Income Taxes ................ 28,346 28,446 21,629 17,578 16,057
Income Taxes .................. 8,753 8,885 7,041 5,487 4,397
-------- -------- -------- -------- --------
Net Income .................... $ 19,593 $ 19,561 $ 14,588 $ 12,091 $ 11,660
======== ======== ======== ======== ========
Profit Ratios (b):
% of Operating Revenues ..... 7.3 8.0 6.3 5.3 5.4
% of Average Stockholders'
Equity ................. 26.6 26.9 20.9 19.8 21.7
-------- -------- -------- -------- --------
Total Earnings Per Share ...... 2.34 2.24 1.65 1.38 1.36
Dividends Per Share ........... 1.20 1.10 1.00 0.94 0.90
======== ======== ======== ======== ========
Balance Sheet Data:
Total Assets ................ $324,449 $300,900 $299,311 $278,752 $270,599
Long-Term Debt .............. 14,000 -- -- -- 107
======== ======== ======== ======== ========
Employee Data:
Number of Employees ......... 2,055 1,893 1,915 1,863 1,854
Total Employment Costs ...... $137,386 $128,095 $124,322 $119,488 $120,599
======== ======== ======== ======== ========
Stockholder Data at Year-End:
Book Value Per Share ........ $ 9.00 $ 8.65 $ 8.15 $ 7.59 $ 6.36
Number of Stockholders ...... 1,791 1,752 1,741 1,717 1,627
Common Shares Outstanding
(In thousands) 8,228 8,500 8,848 8,858 8,652
======== ======== ======== ======== ========
<PAGE>17
PART II
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1998 VS. 1997
CONSOLIDATED revenues of $269 million were up 10.1 percent over the prior year.
Operating expenses increased 10.8 percent, and operating profit increased 2.7
percent to $20.6 million. Net income was $19.6 million, essentially unchanged
from 1997. On January 13th, 1998, BNA acquired Institute of Management and
Administration, Inc. (IOMA). IOMA accounted for 5.2 percent of the revenue
growth and their expenses, along with purchase-price amortization, added 6
percent to the expense growth.
Non-operating income declined 7.6 percent in 1998. Investment income increased
$1.1 million, or 13.2 percent in 1998, due to higher portfolio balances and
gains on sales. Interest expense increased $.8 million, mainly related to the
new borrowing for IOMA's acquisition. Other non-operating income decreased $.9
million, reflecting the absence of last year's gain on the sale of a publication
and a write-off of furniture, fixtures, and equipment in 1998.
The consolidated federal, state, and local effective income tax rate was 30.9
percent in 1998 compared to 31.2 percent in 1997. Earnings per share were $2.34,
up 4.5 percent over 1997.
PROFESSIONAL PUBLISHING operating segment (including the Parent, Tax Management
Inc., IOMA, Pike & Fischer, Inc., BNA International Inc., and BNA Washington
Inc.) revenues amounted to 92.1 percent of consolidated revenues, and increased
9.8 percent over 1997. Excluding IOMA, publishing revenues were up 4.2 percent,
reflecting new products and price increases. Operating expenses increased 10.7
percent, but excluding IOMA, operating expenses were up 4.2 percent, mainly due
to salary increases, higher employee benefit expenses, increased system-related
costs, and an adverse judgement in a civil lawsuit (see note 11 of the
consolidated financial statements). Twenty-seven new products were launched in
1998. Development expenses for new products and improvements on existing
products were $6 million compared to $4.6 million in 1997. Operating expenses in
1998 also include an identifiable $8.3 million for developing improved business
and publishing systems and Year 2000-related systems expenses, compared to 5.1
million in 1997. Operating profit in 1998 was even with 1997.
PRINTING operating segment (includes The McArdle Printing Company, Inc.)
revenues increased 7.9 percent, reflecting a 24.9 percent increase in revenues
from external customers and a 6.1 percent decrease in intersegment revenues.
Sales to external customers have improved over the last two years due to
increased capacity and an expansion of the sales force. Intersegment revenues
are expected to continue to decline as the mix of Professional Publishing
products migrates from print to electronic format products. Operating expenses
increased 5.3 percent due to higher operating expenses related to increased
volume. Printing operating profit increased 76.4 percent.
(Continued)
<PAGE>18
1997 VS. 1996
CONSOLIDATED revenues increased 4.9 percent over the prior year to $244 million.
Operating profit of $20.1 million in 1997 was significantly higher than in 1996.
Net income, at $19.6 million, was a record high for the fourth straight year.
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,
a 35.8 percent increase over 1996.
PROFESSIONAL PUBLISHING revenues increased 3.9 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.
Publishing revenues were 92.4 percent of consolidated revenues in 1997 and 93.4
percent in 1996.
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. Overall,
operating expenses were only 1.3 percent higher in 1997 than in 1996, as direct
expenses (editorial, production and distribution) were essentially unchanged.
PRINTING revenues increased 11.5 percent, reflecting a 23.8 percent increase in
revenues from external customers and a 3 percent increase in intersegment
revenues. Printing operating profit decreased 42.9 percent due to higher
operating expenses related to increasing plant capacity, higher volume, and an
expansion of the sales force.
(Continued)
<PAGE>19
DEFERRED TAX ASSETS
The Company has recorded $23.4 million of net deferred tax assets as of year-end
1998. The ultimate realization of deferred tax assets is dependent upon future
taxable income during the periods in which those temporary differences become
deductible. The Company has consistently achieved profitability and taxable
income. In the opinion of management, this trend will continue, and it is more
likely than not that the recorded deferred tax assets will be fully realized 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 declined 13 percent in 1998, reflecting a 7 percent
increase in collections, but a 10.3 percent increase in expenditures. Excluding
IOMA, collections increased 1.9 percent compared to 1997, which had increased
6.2 percent over 1996, and expenditures increased 4.8 percent.
Cash outlays for investing activities netted to $29.6 million, reflecting $18.3
million for the acquisition of a business, other capital expenditures of $4.4
million, and $6.9 million reinvested in the Company's investment portfolio.
Capital expenditures for 1999 are budgeted to be over $6 million.
Cash used for financing activities netted to $5.1 million. The Company borrowed
$15 million to partially finance the IOMA acquisition and repaid $1 million of
that debt during 1998. Sales of Class A capital stock to employees totaled $5.7
million. Capital stock repurchases amounted to $14.7 million, most of which were
mandatory redemptions. In addition, the Company paid cash dividends of $10.1
million in 1998. During 1999, the Company will redeem over $3 million of capital
stock.
With $145.8 million in cash and investment portfolios, 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, debt
repayments, most capital expenditures, 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 to finance the acquisition of IOMA.
(Continued)
<PAGE>20
YEAR 2000 READINESS
The Year 2000 (Y2K) readiness issue concerns the inability of 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 result in miscalculations,
system failures, or other business disruptions. The Company has projects
underway to address Y2K readiness of its products and internal systems, and with
material third parties.
The Company has inventoried and assessed all major categories of information
technology systems (i.e. electronic products and publishing and business
systems) and non-information technology systems (i.e., equipment with embedded
microprocessors such as elevators, phones and copiers) in use by the Company.
With respect to its information technology systems, the Company has been
replacing its business and publishing systems for the last several years. The
various business systems are either in the process of being renovated (replaced
or remediated through code changes); or have completed renovation and are in the
Y2K validation testing phase. Most of the publishing systems have been renovated
and are in the validation phase. In addition, the Company has many products that
are delivered in an electronic format, such as CD-ROM, diskette, e-mail, or via
the worldwide Web, representing over one-third of consolidated revenues. The
Company believes that its products, and the third-party software used to create,
use, and/or deliver those products, are Y2K ready, and is currently devising
plans to validate each product. With respect to its non-information technology
systems, the Company is in the validation testing phase. Validation of all areas
as to the integrity of the Company's Y2K readiness is expected to be completed
by late 1999. The Company expects to have all products and all internal
mission-critical information technology and non-information technology systems
Y2K ready by late 1999.
The Company has initiated communications with its key suppliers, including
financial institutions and other data interface sources, to assess the potential
impact on the Company's operations if those third parties fail to become Y2K
compliant in a timely manner. Risk assessments, action steps and contingency
plans related to significant third party relationships are in process and are
expected to be completed by late 1999.
Based on updated estimates, the cost in 1999 to replace business systems with
Y2K ready systems, and for testing to ensure that the publishing systems and
products are also ready, is expected to be $2.4 million. Of this amount, an
estimated $1.5 million for software will be capitalized. The cost to remediate
other business systems is expected to be $3 million. In 1998, Y2K readiness
efforts cost $4.3 million, of which $360,000 was capitalized.
(Continued)
<PAGE>21
The Company's readiness projects also include the development of contingency
plans to protect its business and operations from Y2K-related interruptions.
These plans are in process and should be complete by September 1999 and, by way
of examples, may include back-up procedures, identification of alternate supp-
liers, where practical, and increases in inventory levels. Based upon the Comp-
any's current assessment of its non-information technology systems, the Company
does not believe it necessary to develop an extensive contingency plan for those
systems. There can be no assurances, however, that all of the Company's conting-
ency plans will be sufficient to handle all problems or issues that may arise.
The Company believes that it is taking reasonable steps to identify and address
those matters that could cause serious interruptions in its business and
operations due to Y2K issues. However, delays in the implementation of new
systems, a failure to fully identify all computations which are year dependent
in the Company's systems or in the systems of its material suppliers, a failure
of such suppliers to adequately address their respective Y2K issues, or a
failure of a contingency plan, could have a material adverse effect on the
Company's business, financial condition and results of its operations. The
Company believes the most reasonably likely worst case scenario may be that the
failure of a supplier, including an energy supplier, to be Y2K ready could lead
to the temporary disruption in the production of some of the Company's products,
resulting in lost revenues and profits.
ITEM 7a. Quantitative And Qualitative Disclosures About Market Risk
The Company is exposed to interest rate risks in its investment portfolio and
its term debt liability. A hypothetical 10 percent adverse change in market
interest rates would result in higher interest expense on its term debt, but the
increase would be immaterial.
The maturity dates and average interest yields for fixed-income securities debt
held in the Company's investment portfolio as of December 31, 1998 was as
follows:
Expected Maturity Date ($ thousands)
--------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter
-------- -------- -------- -------- -------- ------------
Municipal Bonds $17,399 $1,130 $582 $4,469 $4,383 $68,321
Average Interest
Rate 5.3% 5.4% 5.0% 5.2% 5.6% 5.1%
Corporate Debt $8,316 --- $1,510 $2,004 --- ---
Average Interest
Rate 5.0% 5.7% 5.6%
The Company manages interest rate risk in its investment portfolio by
diversifying the maturities of its fixed-income investments. Approximately 24
percent of these instruments at year-end 1998 mature within one year, and 36
percent mature within five years. Shorter-term maturity investments reduce the
risk that any decline in their fair value will have a permanent adverse effect
on the Company's financial position. The Company does not hold securities for
trading purposes, or use derivative financial instruments.
<PAGE>22
PART II
Item 8. Financial Statements and Supplementary Data
THE BUREAU OF NATIONAL AFFAIRS, INC.
Consolidated Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>23
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. and subsidiaries 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 consolidated financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the 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. and subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998 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 LLP
-----------
KPMG LLP
Washington, D.C.
February 19, 1999
<PAGE>24
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands of dollars)
ASSETS
December 31,
------------------------
1998 1997
-------- --------
CURRENT ASSETS:
Cash and cash equivalents (Note 5) ............. $ 15,259 $ 19,421
Short-term investments (Note 5) ................ 25,715 9,013
Receivables (Note 9) ........................... 43,934 41,307
Inventories (Note 9) ........................... 4,999 5,440
Prepaid expenses ............................... 3,447 3,368
Deferred selling expenses (Note 3) ............. 21,586 23,244
-------- --------
Total current assets ........................... 114,940 101,793
MARKETABLE SECURITIES (Note 5) ................. 104,838 115,809
PROPERTY AND EQUIPMENT (Note 9) ................ 44,791 47,852
DEFERRED INCOME TAXES (Note 8) ................. 25,019 22,296
GOODWILL (Note 7) .............................. 28,702 8,924
OTHER ASSETS (Note 9) .......................... 6,159 4,226
-------- --------
Total assets ................................... $324,449 $300,900
======== ========
(Continued)
<PAGE>25
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
-----------------------------
1998 1997
---------- ----------
CURRENT LIABILITIES:
Payables and accrued liabilities (Note 9) $ 33,901 $ 33,529
Deferred income taxes (Note 8) 1,577 3,120
Deferred subscription revenue (Note 3) 127,592 121,934
---------- ----------
Total current liabilities 163,070 158,583
LONG-TERM DEBT (Note 10) 14,000 ---
POSTRETIREMENT BENEFITS, less current portion
(Note 4) 69,230 65,410
OTHER LIABILITIES 4,128 3,356
---------- ----------
Total liabilities 250,428 227,349
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 11 & 12)
STOCKHOLDERS' EQUITY (Notes 5 & 12):
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 C - 506,336 shares 506 506
Additional paid-in capital 39,782 35,668
Retained earnings 69,734 60,242
Treasury stock, at cost (50,418) (37,329)
Elements of other comprehensive income:
Net unrealized gain on marketable securities 3,081 3,126
Foreign currency translation adjustment (70) (68)
---------- ----------
Total stockholders' equity 74,021 73,551
---------- ----------
Total liabilities and stockholders' equity $ 324,449 $ 300,900
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>26
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(In thousands of dollars)
Percent of
Operating Revenue
--------------------
1998 1997 1996 1998 1997 1996
--------- --------- --------- ------ ------ ------
OPERATING REVENUES (Notes
1 and 3) $ 268,829 $ 244,061 $ 232,632 100.0% 100.0% 100.0%
--------- --------- --------- ------ ------ ------
OPERATING EXPENSES (Notes
1,3,4,7,9 and 11):
Editorial, production,
and distribution 143,989 134,179 131,295 53.5 55.0 56.4
Selling 59,626 51,362 50,828 22.2 21.0 21.9
General and administrative 42,646 36,371 34,681 15.9 14.9 14.9
Profit sharing 1,968 2,087 1,270 0.7 0.9 0.5
--------- --------- --------- ------ ------ ------
248,229 223,999 218,074 92.3 91.8 93.7
--------- --------- --------- ------ ------ ------
OPERATING PROFIT 20,600 20,062 14,558 7.7 8.2 6.3
--------- --------- --------- ------ ------ ------
NON-OPERATING INCOME:
Investment income (Note 5) 9,077 8,016 7,012 3.4 3.2 3.0
Interest expense (Note 10) (899) (59) (23) (0.3) 0.0 0.0
Other income(expense)
(Note 6) (432) 427 82 (0.2) 0.2 0.0
--------- --------- --------- ------ ------ ------
TOTAL NON-OPERATING INCOME 7,746 8,384 7,071 2.9 3.4 3.0
--------- --------- --------- ------ ------ ------
INCOME BEFORE PROVISION FOR
INCOME TAXES 28,346 28,446 21,629 10.6 11.6 9.3
PROVISION FOR INCOME TAXES
(Note 8) 8,753 8,885 7,041 3.3 3.6 3.0
--------- --------- --------- ------ ------ ------
NET INCOME $ 19,593 $ 19,561 $ 14,588 % 7.3 % 8.0 % 6.3
========= ========= ========= ====== ====== ======
EARNINGS PER SHARE (Note 12) $ 2.34 $ 2.24 $ 1.65
========= ========= =========
See accompanying notes to consolidated financial statements.
<PAGE>27
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(In thousands of dollars)
1998 1997 1996
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,593 $ 19,561 $ 14,588
Items with different cash requirements
than that reflected in net income
Depreciation and amortization 10,533 8,798 8,887
(Gain) on sales of securities (1,423) (948) (542)
(Gain)/loss on sales of assets 432 (427) (82)
Others 48 197 233
Changes in operating assets and liabilities
Receivables (1,806) 3,947 (1,970)
Deferred subscription revenue (349) 2,445 2,295
Payables and accrued liabilities 1,663 642 2,643
Postretirement benefits 3,786 2,133 7,357
Deferred income taxes (4,275) (1,530) (4,110)
Deferred selling expenses 1,658 465 1,385
Inventories 441 (47) 871
Other assets and liabilities--net 240 (111) (1,800)
---------- ---------- ----------
Net cash provided from operating activities 30,541 35,125 29,755
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Acquisition of a business (net of $750
cash acquired) (18,289) --- ---
Purchases of equipment and furnishings (4,272) (5,670) (4,002)
Building improvements (170) (256) (132)
Proceeds from the sales of property 71 17 37
Proceeds from sales of publishing assets 25 184 17
Purchase of publishing assets (132) (185) ---
--------- ---------- ----------
Net cash used for capital expenditures (22,767) (5,910) (4,080)
--------- ---------- ----------
(Continued)
<PAGE>28
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(In thousands of dollars)
1998 1997 1996
--------- --------- ---------
Securities investments
Proceeds from sales and maturities 75,267 58,075 75,250
Purchases (82,127) (66,824) (90,587)
--------- --------- ---------
Net cash used for securities investments (6,860) (8,749) (15,337)
---------- --------- ---------
Net cash used for investing activities (29,627) (14,659) (19,417)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 15,000 --- ---
Repayment of borrowings (1,000) --- ---
Sales of capital stock to employees 5,727 5,313 5,306
Purchases of treasury stock (14,702) (15,568) (5,625)
Dividends paid (10,101) (9,688) (8,884)
---------- --------- ---------
Net cash used for financing activities (5,076) (19,943) (9,203)
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,162) 523 1,135
CASH AND CASH EQUIVALENTS, beginning of year 19,421 18,898 17,763
----------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 15,259 $ 19,421 $ 18,898
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 678 $ 41 $ 23
Income taxes paid 13,627 9,490 10,884
NONCASH INVESTING ACTIVITIES- Acquisition:
Fair value of assets acquired $ 26,628
Cash paid for capital stock (19,039)
===========
Liabilities assumed $ 7,589
===========
See accompanying notes to consolidated financial statements.
<PAGE>29
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(In thousands of dollars)
<CAPTION>
Comprehensive Capital Additional Accum. Other
Income Stock Paid-In Retained Treasury Comprehensive
(Note 13) Issued Capital Earnings Stock Income
------------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996 $ 11,912 $ 27,695 $ 44,665 $ (18,782) $ 1,708
Net Income $ 14,588 --- --- 14,588 --- ---
Other Comprehensive Income, net of tax:
Unrealized (loss) on marketable securities (408) --- --- --- --- (408)
Currency translation adjustment (50) --- --- --- --- (50)
=============
Comprehensive Income $ 14,130
=============
Sale of Class A treasury shares to employees --- 4,077 --- 1,229 ---
Repurchase of shares --- --- --- (5,625) ---
Cash dividends--$1.00 per share --- --- (8,884) --- ---
---------- --------- ---------- ---------- -----------
BALANCE, December 31, 1996 11,912 31,772 50,369 (23,178) 1,250
Net Income 19,561 --- --- 19,561 --- ---
Other Comprehensive Income, net of tax:
Unrealized gain on marketable securities 1,778 --- --- --- --- 1,778
Currency translation adjustment 30 --- --- --- --- 30
=============
Comprehensive Income $ 21,369
=============
Sale of Class A treasury shares to employees --- 3,896 --- 1,417 ---
Repurchase of shares --- --- --- (15,568) ---
Cash dividends--$1.10 per share --- --- (9,688) --- ---
---------- --------- ---------- ---------- -----------
BALANCE, December 31, 1997 11,912 35,668 60,242 (37,329) 3,058
Net Income 19,593 --- --- 19,593 --- ---
Other Comprehensive Income, net of tax:
Unrealized gain on marketable securities (45) --- --- --- --- (45)
Currency translation adjustment (2) --- --- --- --- (2)
============
Comprehensive Income $ 19,546
============
Sale of Class A treasury shares to employees --- 4,114 --- 1,613 ---
Repurchase of shares --- --- --- (14,702) ---
Cash dividends--$1.20 per share --- --- (10,101) --- ---
---------- --------- ---------- ----------- -----------
BALANCE, December 31, 1998 $ 11,912 $ 39,782 $ 69,734 $ (50,418) $ 3,011
========== ========= ========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>30
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(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). Material intercompany transactions and balances
have been eliminated. Certain prior year balances have been reclassified to
conform to current year presentation.
The carrying value of financial assets and liabilities reported in the financial
statements approximates fair value. The reported amounts of some assets and
liabilities, and the disclosures of contingent assets and liabilities, result
from management estimates and assumptions which are required to prepare
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(2) ACQUISITION
On January 13, 1998, the Company acquired all of the outstanding stock of
Institute of Management and Administration, Inc. (IOMA), a newsletter publisher.
The acquisition was accounted for as a purchase, and accordingly, IOMA's
financial results have been included with those of the Company since the
acquisition date. IOMA was acquired for $19 million in cash, partially financed
with a $15 million bank loan. A portion of the cost was assigned to subscription
lists, which are being amortized over three years. The majority of the cost was
assigned to goodwill, which is being amortized over 35 years. The recoverability
of these intangible assets will be evaluated periodically by comparing their
amortized balances to IOMA's expected cash flows.
The following unaudited pro forma information for 1997 and 1996 presents a
summary of consolidated results of operations of the Company and IOMA as if the
acquisition had occurred at the beginning of 1996. The pro forma information
includes adjustments for interest expense that would have been incurred to
finance the purchase, amortization of goodwill and customer lists, and certain
other adjustments, together with related income tax effects (in thousands,
except per share data).
Unaudited
------------------------------
1998 1997 1996
------------ ------------ ------------
Revenues $ 268,829 $ 255,920 $ 243,838
Net Income $ 19,593 $ 18,058 $ 12,977
Earnings Per Share $ 2.34 $ 2.07 $ 1.46
On a pro forma basis for 1997 and 1996, earnings per share would have decreased
by $.17 and $.19, respectively. However, these pro forma results may not be
indicative of the results of operations which would have resulted had IOMA and
the Company been a consolidated entity during 1996 and 1997 or of future results
of operations of the consolidated entities.
(Continued)
<PAGE>31
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) 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. Advertising
expenses, which are expensed as incurred, were $10,666,000 in 1998, $5,488,000
in 1997 and $5,302,000 in 1996.
(4) 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.
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):
1998 1997 1996
--------- --------- ---------
Service cost benefits earned during the year $ 4,415 $ 3,862 $ 4,131
Interest cost 6,249 5,769 5,437
Expected return on plan assets during the year (6,372) (5,651) (5,292)
Recognized net actuarial loss and amortization
of transition assets and prior service costs (50) (101) (117)
--------- --------- ---------
Net pension expense $ 4,242 $ 3,879 $ 4,159
========= ========= =========
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.
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):
1998 1997 1996
--------- --------- ----------
Service cost benefits earned during the year $ 1,927 $ 1,659 $ 1,980
Interest cost 2,800 2,609 2,636
Expected return on plan assets during the year (240) --- ---
Recognized net actuarial gain (655) (793) (451)
Amortization of prior service cost (55) (55) (55)
---------- --------- ----------
Other postretirement benefits expense $ 3,777 $ 3,420 $ 4,110
========== ========= ==========
(Continued)
<PAGE>32
The following table sets forth the changes in benefits obligations and assets,
the funded status of the plans, and the liabilities recognized in the Company's
Consolidated Balance Sheets as of December 31 (in thousands of dollars, except
percentages):
Other Postretirement
Pension Benefits Benefits
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Change in benefit obligation:
Benefit obligation--January 1 $ 84,426 $ 75,313 $ 40,785 $ 34,763
Service cost 4,415 3,862 1,927 1,659
Interest cost 6,249 5,769 2,800 2,609
Actuarial (gain)/loss 8,212 4,805 (373) 2,946
Plan amendment (1,364) --- --- ---
Benefits paid (6,444) (5,323) (1,131) (1,192)
--------- --------- --------- ---------
Benefit obligation--December 31 95,494 84,426 44,008 40,785
--------- --------- --------- ---------
Change in plan assets:
Fair value of plan assets--January 1 81,146 72,055 3,000 ---
Actual return on plan assets 9,921 13,437 378 ---
Employer contribution --- 872 3,000 3,000
Benefits paid (6,339) (5,218) --- ---
--------- --------- --------- ---------
Fair value of plan assets--December 31 84,728 81,146 6,378 3,000
--------- --------- --------- ---------
Projected benefit obligation in excess
of plan assets 10,766 3,280 37,630 37,785
Unrecognized transition asset 1,502 1,878 --- ---
Unrecognized net gain 6,994 11,594 13,264 13,408
Unrecognized prior service cost (137) (1,765) 464 517
--------- --------- --------- ---------
Accrued liability 19,125 14,987 51,358 51,710
Less current portion 129 105 1,124 1,182
--------- --------- --------- ---------
Long-term portion $ 18,996 $ 14,882 $ 50,234 $ 50,528
========= ========= ========= =========
Assumed discount rate 6.50% 6.75% 6.50% 6.75%
Assumed rate of compensation increase 5.0% 5.0% --- ---
Expected long term rate of return on
assets 8.0% 8.0% 8.0% 8.0%
Plan assets include equity securities, fixed income securities, and temporary
investments. Calculations of benefit obligations as of December 31, 1998 have
been estimated by an independent actuary and are subject to revision upon
completion of a detailed actuarial study.
(Continued)
<PAGE>33
The Company's funding practice with respect to pension benefits is to contribute
amounts which, at a minimum, satisfy ERISA requirements. No contributions were
allowed in 1998 or 1996 due to Internal Revenue Service funding limitations. The
Company contributed $872,000 in 1997. The Company's policy with respect to other
postretirement benefits is to fund these benefits as claims and premiums are
paid or through a Voluntary Employees' Beneficiary Association (VEBA) trust
established in 1997. The Company contributed $3 million to the VEBA in 1998 and
in 1997.
The December 31, 1998 postretirement benefit obligation was determined using an
assumed health care cost trend rate of 5 percent in 1999 and 2000, 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 change in the assumed health
care cost trend rate at December 31, 1998 would have resulted in a $7,594,000
increase or a $6,040,000 decrease in the postretirement benefit obligation and a
$1,057,000 increase or a $723,000 decrease in the 1998 postretirement benefit
expense.
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 $1,001,000 in 1998,
$946,000 in 1997, and $825,000 in 1996.
The Company also has a cash profit sharing plan based on operating profit, as
defined, covering employees of the Parent and certain subsidiaries. Profit
sharing expense was $1,968,000 in 1998, $2,087,000 in 1997, and $1,270,000 in
1996.
(5) INVESTMENTS AND INVESTMENT INCOME
Cash and investments were as follows (in thousands of dollars):
December 31,
-----------------------
1998 1997
-------- --------
Cash and cash equivalents $ 15,259 $ 19,421
Short-term investments .. 25,715 9,013
Marketable securities ... 104,838 115,809
-------- --------
Total ................... $145,812 $144,243
======== ========
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.
(Continued)
<PAGE>34
Investment income consisted of the following (in thousands of dollars):
1998 1997 1996
------ ------ ------
Interest income ............... $6,096 $5,380 $4,929
Dividend income ............... 1,558 1,688 1,541
Net gain on sales of securities 1,423 948 542
------ ------ ------
Total ......................... $9,077 $8,016 $7,012
====== ====== ======
Proceeds from the sales and maturities of securities were $75,267,000,
$58,075,000, and $75,250,000 in 1998, 1997, and 1996, respectively. Gross
realized gains and (losses) from these sales were $1,614,000 and $(191,000) in
1998, $1,096,000 and $(149,000) in 1997, and $713,000 and $(171,000) in 1996.
The specific identification method is used in computing realized gains and
losses.
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, 1998 Cost Gains Losses Value
- ----------------- ----------- ---------- ---------- -----------
Equity securities $ 19,927 $ 1,474 $ --- $ 21,401
Municipal bonds 93,035 3,411 (162) 96,284
Corporate debt 12,851 38 (21) 12,868
----------- ---------- ---------- -----------
Total $ 125,813 $ 4,923 $ (183) $ 130,553
=========== ========== ========== ===========
December 31, 1997
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
=========== ========== ========== ===========
The differences between amortized cost and fair value result in unrealized gains
or losses, which are reported, net of tax, as a component of Stockholders'
Equity.
(Continued)
<PAGE>35
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, 1998 were as follows (in thousands of
dollars):
Amortized Fair
Cost Value
---------- ----------
Within one year ...... $ 25,469 $ 25,715
One through five years 13,695 14,078
Five through ten years 21,365 22,283
Over ten years ....... 44,299 46,038
---------- ----------
Total ................ $ 104,828 $ 108,114
========== ==========
In addition, the Company held mutual bond fund investments (amortized cost;
$1,058,000, fair value; $1,038,000) with no single maturity date.
(6) OTHER INCOME (EXPENSE)
Other income (expense) was comprised of the following (in thousands of dollars):
1998 1997 1996
----- ----- -----
Gain on sales of publishing assets ....... $ --- $ 420 $ 58
Gain (loss) on disposals of other property
and equipment ......................... (432) 7 24
----- ----- -----
Total .................................... $(432) $ 427 $ 82
===== ===== =====
(7) 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 $5,090,000 in
1998 and $4,209,000 in 1997.
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, over periods not exceeding forty
years. Amortization expense was $881,000 for 1998, and $313,000 for 1997 and
1996.
The recoverability of goodwill is evaluated periodically to determine if an
impairment has occurred. The Company measures the potential impairment of
recorded goodwill by comparing the undiscounted value of expected future
operating cash flows to its book value, and records impairments when
appropriate. If any impairment has occurred, goodwill will be written down to
its most likely recoverable value
(Continued)
<PAGE>36
(8) INCOME TAXES
The total income tax expense (benefit) was allocated as follows (in thousands of
dollars):
1998 1997 1996
------- ------- -------
Income Statement-Provision for Income Taxes ..... $ 8,753 $ 8,885 $ 7,041
Stockholders' Equity--Change in:
Unrealized gain (loss) on marketable securities (24) 957 (220)
Foreign currency translation adjustment ....... (1) 16 (27)
------- ------- -------
Total ........................................... $ 8,728 $ 9,858 $ 6,794
======= ======= =======
The provision for income taxes consisted of the following (in thousands of
dollars):
1998 1997 1996
-------- -------- --------
Taxes currently payable:
Federal ............. $ 11,296 $ 9,158 $ 9,365
State and local ..... 1,732 1,257 1,786
-------- -------- --------
13,028 10,415 11,151
-------- -------- --------
Deferred tax provision:
Federal ............. (2,811) (927) (3,364)
State and local ..... (1,464) (603) (746)
-------- -------- --------
(4,275) (1,530) (4,110)
-------- -------- --------
Total .................. $ 8,753 $ 8,885 $ 7,041
======== ======== ========
Reconciliation of the U.S. statutory rate to the Company's consolidated
effective income tax rate was as follows:
Percent of Pretax Income
----------------------------
1998 1997 1996
------ ------ ------
Federal statutory rate ...................... 35.0% 35.0% 35.0%
State and local income taxes, net of
federal income tax benefit ................ 0.6 1.4 3.1
Goodwill amortization and other
nondeductible expenses .................... 2.0 1.2 1.5
Tax exempt interest exclusion ............... (5.3) (4.9) (5.3)
Dividends received exclusion ................ (1.4) (1.5) (1.7)
------ ------ ------
Total ....................................... 30.9% 31.2% 32.6%
====== ====== ======
(Continued)
<PAGE>37
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,
--------------------
1998 1997
--------- ---------
Deferred tax assets:
Other postretirement benefits ....................... $ 20,814 $ 20,828
Pension expense ..................................... 7,889 6,143
Inventories ......................................... 2,161 2,070
Annual leave ........................................ 1,867 1,871
Tax loss carryforwards .............................. 1,337 ---
Others .............................................. 3,402 2,308
--------- ---------
Total deferred tax assets .............................. 37,470 33,220
--------- ---------
Deferred tax liabilities:
Deferred selling expenses ........................... (8,584) (9,169)
Depreciation ........................................ (2,219) (2,859)
Others .............................................. (3,225) (2,016)
--------- ---------
Total deferred tax liabilities ......................... (14,028) (14,044)
--------- ---------
Net deferred tax assets ................................ $ 23,442 $ 19,176
========= =========
To the extent not utilized, the tax loss carryforwards expire in 2001 through
2012. In the opinion of management, based on expected future earnings and
available tax planning strategies, it is more likely than not that the deferred
tax assets will be realized in future years, and no valuation allowance is
necessary.
(9) OTHER BALANCE SHEET INFORMATION
Certain year-end balances consisted of the following (in thousands of dollars):
1998 1997
-------- --------
Receivables:
Customers ..................... $ 41,166 $ 37,958
Others ........................ 4,482 4,925
Allowance for doubtful accounts (1,714) (1,576)
-------- --------
Total ............................ $ 43,934 $ 41,307
======== ========
(Continued)
<PAGE>38
1998 1997
------ ------
Inventories:
Materials and supplies $3,251 $3,742
Work in process ...... 460 218
Finished goods ....... 1,288 1,480
------ ------
Total ................... $4,999 $5,440
====== ======
Inventories are valued at the lower of cost (principally average cost method) or
market.
1998 1997
-------- --------
Property and Equipment (at cost):
Land ............................ $ 4,250 $ 4,250
Buildings and improvements ...... 49,367 49,197
Furniture, fixtures and equipment 61,285 63,195
Accumulated depreciation ........ (70,111) (68,790)
-------- --------
Total .............................. $ 44,791 $ 47,852
======== ========
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 3 to 10 years for furniture, fixtures and equipment. Depreciation expense
was $7,657,000 in 1998, $7,358,000 in 1997, and $7,577,000 in 1996. Expenditures
for maintenance and repairs are expensed while major replacements and
improvements are capitalized.
1998 1997
------ ------
Other assets:
Amortizable assets--
Customer lists ........... $2,764 $ 620
Film production costs .... 739 498
Lease commissions ........ 253 307
State information database 1,000 1,000
Software ................. 1,109 1,299
Others ................... 32 197
------ ------
5,897 3,921
Notes and other receivables ... 262 305
------ ------
Total ......................... $6,159 $4,226
====== ======
(Continued)
<PAGE>39
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 $1,995,000
in 1998, $1,127,000 in 1997, and $997,000 in 1996. Accumulated amortization for
customer lists was $1,953,000 in 1998 and $789,000 in 1997.
1998 1997
------- -------
Payables and accrued liabilities:
Accounts payable ................. $18,300 $18,060
Employee compensation and benefits 13,826 13,216
Postretirement benefits .......... 1,253 1,287
Income taxes ..................... 522 966
------- -------
Total ............................... $33,901 $33,529
======= =======
(10) LONG-TERM DEBT
Long-term debt outstanding as of December 31, 1998 was $14 million. 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
effective rate for 1998 was 5.88%. The current rate, effective through April 12,
1999, is 5.26%.
The Company has a $1,500,000 unsecured line of credit. As of December 31, 1998,
$450,000 of the line had been used to secure a letter of credit.
(11) COMMITMENTS AND CONTINGENCIES
The Company has non-cancelable operating leases for office space, computing and
office equipment, and vehicles. Total rent expense was $5,671,000 in 1998,
$4,786,000 in 1997, and $3,944,000 in 1996.
As of December 31, 1998, future minimum lease payments under non-cancelable
operating leases were as follows: 1999 - $5,690,000; 2000 - $5,178,000; 2001 -
$4,499,000; 2002 - $4,392,000; 2003 - $4,383,000; thereafter - $13,006,000.
These amounts are net of sub-lease income of $402,000 in 1999, and $175,000 in
2000.
The Company has accrued $1.7 million for an adverse verdict in a civil lawsuit.
On February 10, 1999, a District of Columbia Superior Court jury awarded damages
to an employee who had claimed unspecified damages for alleged age
discrimination. The plaintiff was awarded $500,000 in compensatory damages, $1
million in punitive damages, and legal fees. The Company intends to vigorously
pursue all legal options to contest the case.
The Company is involved in certain other 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.
(Continued)
<PAGE>40
(12) 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, 1998 and 1997,
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, 1998, the total market value of Class B and Class C stock known or
expected to be tendered in the future was as follows: 1999--$2,657,000,
2000--$32,000, 2001--none, 2002--$1,056,000, 2003--$250,000, and
2004--$8,837,000. 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, 1996 ............... 2,915,110 54,771 84,693
Sales of shares to employees ........... (204,932) --- ---
Repurchases of shares .................. 29,490 177,780 6,964
Conversions of Class A shares to Class
B shares ............................ 148,092 (148,092) ---
---------- ---------- ---------
Balance, December 31, 1996 ............. 2,887,760 84,459 91,657
Sales of shares to employees ........... (185,961) --- ---
Repurchases of shares .................. 114,189 408,999 11,266
Conversions of Class A shares to Class
B shares ............................ 143,773 (143,773) ---
----------- ---------- ---------
Balance, December 31, 1997 ............. 2,959,761 349,685 102,923
Sales of shares to employees ........... (174,405) --- ---
Repurchases of shares .................. 76,059 265,932 104,154
Conversions of Class A shares to Class
B shares ............................ 108,241 (108,241) ---
----------- ---------- ---------
Balance, December 31, 1998 ............. 2,969,656 507,376 207,077
=========== ========== =========
(Continued)
<PAGE>41
Earnings per share have been computed based on the aggregate weighted average
number of all outstanding shares of stock, which was 8,367,904 in 1998,
8,733,778 in 1997, and 8,859,586 in 1996.
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, as a
component of Stockholders' Equity.
(13) OTHER COMPREHENSIVE INCOME
During 1998, the Company adopted Financial Accounting Standard No. 130,
Reporting Comprehensive Income. This statement establishes standards for the
presentation of comprehensive income and its components. Comprehensive income
encompasses all changes in Stockholders' Equity except those arising from
transactions with shareholders, and includes net income, net unrealized gains or
losses on marketable securities and foreign currency translation adjustments.
This standard only requires additional information in the financial statements
and notes; it does not affect the Company's financial position or results of
operations.
Elements of other comprehensive income are shown below:
1998 1997 1996
------- ------- -------
Unrealized holding gains (losses) on securities
arising during the year ..................... $ 1,354 $ 3,683 $ (86)
Less reclassification adjustment for amounts
included in net income ...................... 1,423 948 542
------- ------- -------
(69) 2,735 (628)
Less income taxes ............................. (24) 957 (220)
------- ------- -------
Net unrealized gains(losses) .................. (45) 1,778 (408)
------- ------- -------
Currency translation adjustment ............... (3) 46 (77)
Less income taxes ............................. (1) 16 (27)
------- ------- -------
Net currency translation adjustment ........... (2) 30 (50)
------- ------- -------
Other comprehensive income .................... $ (47) $ 1,808 $ (458)
======= ======= =======
(Continued)
<PAGE>42
(14) SEGMENTS AND RELATED INFORMATION
During 1998, the Company adopted Financial Accounting Standard No. 131,
Disclosures about Segments of an Enterprise and Related Information. This
statement changes the requirements for disclosures about business segments from
an industry segment approach to an operating segment approach. Operating
segments are components of an enterprise whose separate financial information is
reviewed regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance. Operating segments may be
aggregated for presentation purposes if they have similar economic
characteristics.
The Company has two primary operating segments, Professional Publishing and
Printing. Professional Publishing operations consist primarily of the creation,
production and marketing of legal and regulatory and general business advisory
information, in print and electronic formats. Professional Publishing includes
the operations of the Parent and its publishing subsidiaries. Customers are
primarily lawyers, accountants, human resource professionals, business
executives, health care administrative professionals, trade associations,
educational institutions, government agencies, and libraries.
Printing includes the operations of The McArdle Printing Co., Inc. The All Other
segment includes the operations of BNA Communications Inc., a media-based
training enterprise. Intersegment revenues and transfers approximate current
market prices. 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.
Operating segment information is presented below:
Professional
Year Ended December 31, 1998 Publishing Printing All Other Total
- ---------------------------- -------- -------- --------- --------
Revenues from external customers .. $247,709 $ 16,523 $ 4,597 $268,829
Intersegment revenues ............. --- 15,073 --- 15,073
Investment income ................. 9,468 45 --- 9,513
Interest expense .................. 899 419 17 1,335
Depreciation and amortization ..... 9,107 1,053 373 10,533
Operating profit (loss) ........... 18,845 1,894 (139) 20,600
Income tax expense (benefit) ...... 8,245 559 (51) 8,753
Net income (loss) ................. 18,840 864 (111) 19,593
Assets ............................ 311,268 17,617 2,704 331,589
Expenditures for segment assets ... 28,237 439 563 29,239
Year Ended December 31, 1997
- ----------------------------
Revenues from external customers ... $225,561 $ 13,226 $ 5,274 $244,061
Intersegment revenues .............. --- 16,052 --- 16,052
Investment income .................. 8,427 28 --- 8,455
Interest expense ................... 59 408 31 498
Depreciation & amortization ........ 7,339 882 577 8,798
Operating profit ................... 18,844 1,074 144 20,062
Income tax expense ................. 8,595 284 6 8,885
Net income ...... .................. 19,044 410 107 19,561
Assets ............................. 288,106 18,230 2,741 309,077
Expenditures for segment assets .... 4,614 2,926 160 7,700
Year Ended December 31, 1996
- ----------------------------
Revenues from external customers ... $217,166 $ 10,680 $ 4,786 $232,632
Intersegment revenues .............. --- 15,585 --- 15,585
Investment income .................. 7,335 33 --- 7,368
Interest expense ................... 13 291 75 379
Depreciation & amortization ........ 7,480 872 535 8,887
Operating profit (loss)............. 13,036 1,882 (360) 14,558
Income tax expense (benefit) ....... 6,482 709 (150) 7,041
Net income (loss)................... 13,958 915 (285) 14,588
Assets ............................. 287,288 15,865 2,896 306,049
Expenditures for segment assets .... 3,669 526 310 4,505
(Continued)
<PAGE>43
Reconciliation of item differing from consolidated totals are shown below:
1998 1997 1996
-------- -------- --------
Total investment income for reportable segments $ 9,513 $ 8,455 $ 7,368
Elimination of intersegment investment income (436) (439) (356)
-------- -------- --------
Total consolidated investment income $ 9,077 $ 8,016 $ 7,012
======== ======== ========
Total interest expense for reportable segments $ 1,335 $ 498 $ 379
Elimination of intersegment interest expense (436) (439) (356)
-------- -------- --------
Total consolidated interest expense $ 899 $ 59 $ 23
======== ======== ========
Total assets for reportable segment $331,589 $309,077 $306,049
Elimination of intersegment assets (7,140) (8,177) (6,738)
-------- -------- --------
Consolidated total $324,449 $300,900 $299,311
======== ======== ========
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BUREAU OF NATIONAL AFFAIRS, INC.
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(In Thousands of Dollars)
- --------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------
Additions
--------------------
(1) (2)
--------------------
Charged Charged to
Balance at to Costs Other Balance
Beginning and Accounts-- Deductions-- at 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, 1998 $ 1,576 $876 $ 51(a,c) $ 834 (b) $ 1,714
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
Notes: (a) Charged to deferred subscription revenue; portion of allowance for
doubtful accounts receivable not included in revenues.
(b) Net accounts written off.
(c) Includes $30 acquired with IOMA.
<PAGE>44
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, 1998 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, 1998. 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>45
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: Page
Report of Independent Auditors 23
Consolidated Balance Sheets as of December 31, 24
1998 and 1997.
Consolidated Statements of Income, Consolidated 26
Statements of Cash Flows, and Consolidated
Statements of Changes in Stockholders' Equity
for each of the years ended December 31, 1998,
1997, and 1996
Notes to Consolidated Financial Statements 30
(2) Financial Statement Schedule:
Report of Independent Auditors as to the 23
financial statement schedule
V Valuation and Qualifying Accounts and Reserves 43
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
<PAGE>46
(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 1998 Consolidated Financial Statements in the Notes to
Consolidated Financial Statements, Note 12, "Stockholders'
Equity," at page 40 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 17, 1999**
28.2 Annual Report on Form 11-K related to the Company's Deferred
Stock Purchase Plan for the fiscal year ended December 31,
1998.*
* Filed herewith.
** Incorporated by reference to the Company's Definitive Proxy
Statement, to be filed with the SEC within 120 days of
December 31, 1998.
*** 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, 1998.
<PAGE>47
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 11, 1999
--------------
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 Financial
Officer Officer
Director (Chief Accounting Officer)
Director
Date: March 11, 1999 Date: March 11, 1999
-------------- --------------
By: s\William A. Beltz 3/11/99 By: s\Gregory C. McCaffery 3/11/99
------------------ ------- ---------------------- -------
William A. Beltz Date Gregory C. McCaffery Date
Chairman of the Board of Directors Director
By: s\Jacqueline M. Blanchard 3/11/99 By: s\Frederick A. Schenck 3/11/99
------------------------- ------- ---------------------- -------
Jacqueline M. Blanchard Date Frederick A. Schenck Date
Director Director
By: s\Richard H. Cornfield 3/11/99 By: s\Mary P. Swords 3/11/99
---------------------- ------- ---------------- -------
Richard H . Cornfield Date Mary P. Swords Date
Director Director
By: s\Sandra C. Degler 3/11/99 By: s\Daniel W. Toohey 3/11/99
------------------ ------- ------------------ -------
Sandra C. Degler Date Daniel W. Toohey Date
Director Director
By: s\Kathleen D. Gill 3/11/99 By: s\Loene Trubkin 3/11/99
------------------ ------- --------------- -------
Kathleen D. Gill Date Loene Trubkin Date
Director Director
By: s\John E. Jenc 3/11/99 By: s\Robert L. Velte 3/11/99
-------------- ------- ----------------- -------
John E. Jenc Date Robert L. Velte Date
Director Director
By: s\Eileen Z. Joseph 3/11/99
------------------ -------
Eileen Z. Joseph Date
Director
<PAGE>48
EXHIBIT INDEX
Sequential Page
Number Exhibit Description Number
3.1 Certificate of Incorporation, as amended **
3.2 By laws, as amended 49
11 Statement re: Computation of Per Share Earnings
is contained in the 1998 Consolidated Financial
Statements in the Notes to Consolidated Financial
Statements, Note 12, "Stockholders' Equity," 40
22 Subsidiaries of the Registrant 157
28.1 Proxy Statement for the Annual Meeting of
Stockholders to be held on April 17, 1999 *
28.2 Annual Report on Form 11-K related to the
Company's Deferred Stock Purchase Plan for
the fiscal year ended December 31, 1998. 158
* The Definitive Proxy Statement is expected to be filed with the SEC
within 120 days of December 31,1998.
** Incorporated by reference to the Company's 1993 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>49
EXHIBIT 3.2
BYLAWS
OF
THE BUREAU OF NATIONAL AFFAIRS, INC.
<PAGE>50
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>51
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>52
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>53
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>54
Page Number
Section XVI - Notices 58
Form 58
Waiver 58
Section XVII - Amendments 58
Footnotes 59
<PAGE>55
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.
1
<PAGE>56
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.
2
<PAGE>57
(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.
3
<PAGE>58
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.
4
<PAGE>59
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
5
<PAGE>60
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) who is the record or
beneficial owner of 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>
6
<PAGE>61
(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.
7
<PAGE>62
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 or she is a record or beneficial owner 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.
8
<PAGE>63
(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
9
<PAGE>64
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.
10
<PAGE>65
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
11
<PAGE>66
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
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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<PAGE>70
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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<PAGE>72
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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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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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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(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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(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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(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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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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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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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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(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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(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
32
<PAGE>87
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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<PAGE>88
(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
34
<PAGE>89
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
35
<PAGE>90
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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<PAGE>91
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>92
(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>93
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>94
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>95
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>96
(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>97
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>98
(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>99
(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>100
(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>101
(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>102
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>
48
<PAGE>103
(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:
49
<PAGE>104
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>105
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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<PAGE>106
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:
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<PAGE>107
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>108
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>109
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>110
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.
57
<PAGE>112
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.
59
<PAGE>114
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.
60
<PAGE>115
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>116
"(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
62
<PAGE>117
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.
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<PAGE>118
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>119
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.
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<PAGE>120
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:
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<PAGE>121
"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."
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<PAGE>122
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>123
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>124
"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>125
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."
71
<PAGE>126
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
72
<PAGE>127
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.
73
<PAGE>128
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.
74
<PAGE>129
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>"
75
<PAGE>130
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>131
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>132
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>133
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>134
"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>135
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>136
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>137
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>138
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>139
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>140
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>141
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>142
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>143
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>144
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.
90
<PAGE>145
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>146
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>147
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>148
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>149
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>150
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>151
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>152
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>153
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.
Footnote 224 <F224>
As amended by directors' resolution of 2/11/99, to clarify that
"stockholders" include both record and beneficial owners of Class A shares.
Footnote 225 <F225>
As amended by directors' resolution of 2/11/99. Previously read, "Other
than the persons elected or appointed as directors pursuant to subparagraphj (a)
above, no person shall be elected or appointed as a director unless he is a
holder of Class A or Class B stock..."
99
</FN>
</TABLE>
<PAGE>154
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>155
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>156
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>157
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
Institute of Management
and Administration, Inc. New York 100% owned by Registrant
(a) Tax Management Inc. owns 100% of TM Holding Company Inc., a Delaware
corporation.
<PAGE>158
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, 1998
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 161
Statements of Net Assets Available for Benefits 162
December 31, 1998 and 1997
Statements of Changes in Net Assets Available 163
for Benefits - Years Ended December 31, 1998,
1997, and 1996
Notes to Financial Statements - December 31, 164
1998, 1997, and 1996
Financial Statement Schedules 167
<PAGE>159
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 18, 1999
- -------------------
By s\G. Christopher Cosby
- -------------------------
G. Christopher Cosby
Chairman of the Administrative Committee
<PAGE>160
THE BNA DEFERRED STOCK PURCHASE PLAN
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>161
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, 1998 and
1997, 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, 1998. 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, 1998 and 1997, and the changes in net assets available for benefits
for each of the years in the three-year period ended December 31, 1998 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 LLP
-----------
KPMG LLP
February 1, 1999
<PAGE>162
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
Investments, at fair value (Note 2)
(Cost of $ 30,451,554 in 1998 and
$26,776,601 in 1997) ...................... $50,851,964 $42,231,999
Cash and cash equivalents .................... 427,292 310,679
Accrued Interest ............................. --- 1,234
----------- -----------
Net assets available for benefits ........ $51,279,256 $42,543,912
=========== ===========
See accompanying notes to financial statements.
<PAGE>163
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
1998 1997 1996
----------- ----------- -----------
Additions to net assets attributed to:
Investment income
Dividends (Note 1) ................. $ 1,731,842 $ 1,515,099 $ 1,300,662
Interest ........................... 15,957 13,057 6,809
Unrealized appreciation of
investments (Note 2) ............. 6,116,389 3,782,258 2,922,045
----------- ----------- -----------
7,864,188 5,310,414 4,229,516
Contributions by participants
(Note 1) .......................... 4,100,333 3,939,638 3,645,888
----------- ----------- -----------
Total additions ..................... 11,964,521 9,250,052 7,875,404
----------- ----------- -----------
Deductions from net assets
attributed to:
Distributions to participants
(Note 1) ............................ 3,228,940 2,793,141 2,911,627
Administrative costs (Note 3) ........ 237 226 357
----------- ----------- -----------
Total deductions .................... 3,229,177 2,793,367 2,911,984
----------- ----------- -----------
Net increase ...................... 8,735,344 6,456,685 4,963,420
Net assets available for benefits:
Beginning of year ................. 42,543,912 36,087,227 31,123,807
----------- ----------- -----------
End of year ....................... $51,279,256 $42,543,912 $36,087,227
=========== =========== ===========
See accompanying notes to financial statements.
<PAGE>164
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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 $5,000, 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>165
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO THE FINANCIAL STATEMENTS
(2) INVESTMENTS
At December 31, 1998, the Trust held 1,370,268 shares of the Company's Class A
Common Stock and 125,378 shares of the Company's Class B Common Stock, each
valued at $34.00 per share, for 1,282 plan participants. 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.
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 1997 and 1998 involving the Company's Common Stock.
Number Fair
of Shares Value
---------- -------------
Balance, January 1, 1997 ....................... $ 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
------------ ------------
Acquired ....................................... 174,405 5,660,110
Distributed to participants .................... (98,322) (3,156,534)
Appreciation during the year in the market value
of shares of Company stock held at year end .... 6,116,389
------------ ------------
Balance, December 31, 1998 ..................... 1,495,646 $ 50,851,964
============ ============
The Company's Board of Directors have fixed the fair value of the stock at
$37.00 per share, effective March 29, 1999.
(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>166
(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.
(5) SUBSEQUENT EVENT
Effective January 1, 1999, the Plan was renamed to "The BNA 401(k) Plan", and
was amended and restated to include a number of new investment options. The Plan
will now permit investment in selected mutual funds and a money market fund in
addition to Company stock. A separate trust will be established for these new
mutual fund investments. Other changes include provisions for loans and for
rollovers, and employees will become eligible to participate after 30 days of
service. The Plan Sponsor will pay the additional trustee and record keeping
fees associated with these changes, except for fees charged for loans.
<PAGE>167
THE BUREAU OF NATIONAL AFFAIRS, INC.
THE BNA DEFERRED STOCK PURCHASE PLAN
Line 27a -- Schedule of Assets Held for Investment Purposes
December 31, 1998
Fair
Identity of Issue Description of Investment Cost Value
- ------------------- ------------------------- ------------ ------------
*Bureau of National
Affairs, Inc. 1,495,646 Sh Common Stock $ 30,451,554 $ 50,851,964
*Party-in-Interest to the Plan
<PAGE>168
THE BUREAU OF NATIONAL AFFAIRS, INC.
THE BNA DEFERRED STOCK PURCHASE PLAN
Line 27d -- Schedule of Reportable Transactions
For Year Ended December 31, 1998
Current
Value
Identity Of Asset on
Of Party Description Price Selling Cost of Transaction
Involved of Asset Purchase Price Asset Date Net Gain
- ----------- ------------ ---------- ---------- ---------- ----------- ----------
Bureau of 174,405 $5,660,110 --- $5,660,110 $5,660,110 ---
National Shares
Affairs, Common Stock
Inc.
Bureau of 98,322 --- $3,156,534 $1,985,157 $3,156,534 $1,171,377
National Shares
Affairs, Common Stock
Inc.
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, 1998,
($2,127,196) and are reportable under Section 2520.103.6 of Chapter XXV of the
Department of Labor Employee Retirement Income Security Act annual reporting
requirements.
<PAGE>
/TEXT>
<TABLE> <S> <C>
<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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 15,259
<SECURITIES> 25,715
<RECEIVABLES> 45,648
<ALLOWANCES> 1,714
<INVENTORY> 4,999
<CURRENT-ASSETS> 114,940
<PP&E> 114,902
<DEPRECIATION> 70,111
<TOTAL-ASSETS> 324,449
<CURRENT-LIABILITIES> 163,070
<BONDS> 14,000
0
0
<COMMON> 11,912
<OTHER-SE> 62,109
<TOTAL-LIABILITY-AND-EQUITY> 324,449
<SALES> 268,829
<TOTAL-REVENUES> 268,829
<CGS> 143,989
<TOTAL-COSTS> 143,989
<OTHER-EXPENSES> 104,240
<LOSS-PROVISION> 876
<INTEREST-EXPENSE> 899
<INCOME-PRETAX> 28,346
<INCOME-TAX> 8,753
<INCOME-CONTINUING> 19,593
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,593
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
</TABLE>
