33 Pages Complete
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------------------------
X Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
_____________ to _______________
________________________________
Commission file number 1-5684
I.R.S. Employer Identification Number 36-1150280
W.W. Grainger, Inc.
(an Illinois Corporation)
5500 W. Howard St.
Skokie, IL. 60077-2699
Telephone: (708) 982-9000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date: 50,856,218 shares of
the Company's Common Stock were outstanding as of October 31, 1995.
(1)
<PAGE>
Part I - FINANCIAL INFORMATION
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars except for per share amounts)
(Unaudited)
Three Months Ended Sept 30, Nine Months Ended Sept 30,
1995 1994 1995 1994
Net sales $849,963 $779,300 $2,470,308 $2,254,223
Cost of
merchandise sold 548,951 505,764 1,591,170 1,456,269
-------- -------- --------- ---------
Gross profit 301,012 273,536 879,138 797,954
Warehousing, marketing,
and administrative
expenses 216,896 199,482 649,517 581,838
Restructuring charges - 779 - 1,446
------- ------- ------- -------
Total operating
expenses 216,896 200,261 649,517 583,284
------- ------- ------- -------
Operating earnings 84,116 73,275 229,621 214,670
Other income or (deductions)
Interest income 1 - 158 14
Interest expense (1,564) (503) (2,727) (1,513)
Unclassified-net (387) (671) (483) (598)
------- ------- ------- --------
(1,950) (1,174) (3,052) (2,097)
------- ------- ------- --------
Earnings before
income taxes 82,166 72,101 226,569 212,573
Income taxes 33,031 29,056 91,081 85,666
------- ------- ------- -------
Net earnings $49,135 $43,045 $135,488 $126,907
======= ======= ======== ========
Net earnings per common
and common equivalent
share $0.96 $0.84 $2.65 $2.48
===== ===== ===== =====
Average number of common
and common equivalent
shares outstanding 51,225,001 51,269,001 51,220,289 51,253,260
========== ========== ========== ==========
Cash dividends paid
per share $0.23 $0.20 $0.66 $0.58
===== ===== ===== =====
The accompanying notes are an integral part of these financial statements.
(2)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
ASSETS Sept 30, 1995 Dec 31, 1994
CURRENT ASSETS
Cash and cash equivalents $ 22,885 $ 15,292
Accounts receivable, less allowance for doubtful
accounts of $17,816 in 1995 and $15,333 in 1994 394,374 345,793
Inventories 597,869 519,966
Prepaid expenses 15,280 14,233
Deferred income tax benefits 68,243 68,362
-------- ---------
Total current assets 1,098,651 963,646
PROPERTY, BUILDINGS, AND EQUIPMENT 869,653 810,217
Less accumulated depreciation and amortization 365,987 341,075
--------- ---------
Property, buildings, and equipment-net 503,666 469,142
OTHER ASSETS 92,253 101,963
--------- ---------
TOTAL ASSETS $1,694,570 $1,534,751
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 105,315 $ 11,134
Current maturities of long-term debt 28,109 26,449
Trade accounts payable 208,866 226,459
Accrued liabilities 150,729 172,359
Income taxes 21,994 22,650
---------- ----------
Total current liabilities 515,013 459,051
LONG-TERM DEBT (less current maturities) 4,405 1,023
DEFERRED INCOME TAXES 9,096 15,177
ACCRUED EMPLOYMENT RELATED BENEFITS COSTS 29,858 26,695
SHAREHOLDERS' EQUITY
Cumulative Preferred Stock - $5.00
par value - authorized 6,000,000 shares,
issued and outstanding, none - -
Common Stock - $0.50 par value - authorized
150,000,000 shares, issued and outstanding,
50,836,421 shares in 1995 and 50,749,681 shares
in 1994 25,418 25,375
Additional contributed capital 83,155 81,796
Unearned restricted stock compensation (28) (61)
Retained earnings 1,027,653 925,695
--------- -------
Total shareholders' equity 1,136,198 1,032,805
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,694,570 $1,534,751
========== ==========
The accompanying notes are an integral part of these financial statements.
(3)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Nine Months Ended Sept 30,
1995 1994
Cash flows from operations:
Net earnings $135,488 $126,907
Provision for losses on accounts receivable 8,862 7,410
Depreciation and amortization:
Property, buildings, and equipment 43,868 39,613
Intangibles and goodwill 10,481 12,988
Restructuring charges - non-cash - 1,266
Change in operating assets and liabilities
net of effect of restructuring charges:
(Increase) in accounts receivable (57,443) (65,033)
(Increase) in inventories (77,903) (61,756)
(Increase) in prepaid expenses (1,047) (5,640)
(Decrease) increase in trade
accounts payable (17,593) 56,983
(Decrease) increase in other current liabilities (21,630) 1,818
(Decrease) in current income taxes payable (656) (6,711)
Increase in accrued employment related
benefits costs 3,163 3,078
(Decrease) in deferred income taxes (5,962) (6,504)
Other-net (53) (51)
------- -------
Net cash provided by operating activities 19,575 104,368
------- -------
Cash flows from investing activities:
Additions to property, buildings, and
equipment - net of dispositions (78,925) (71,830)
Other - net (153) 78
------- -------
Net cash (used in) investing activities (79,078) (71,752)
------- --------
Cash flows from financing activities:
Net proceeds from short-term debt 94,181 5,596
Proceeds from long-term debt 5,303 -
Long-term debt payments (260) (356)
Stock incentive plan 1,402 1,070
Cash dividends paid (33,530) (29,420)
------- -------
Net cash provided by (used in)
financing activities 67,096 (23,110)
------- -------
Net increase in cash and cash equivalents 7,593 9,506
Cash and cash equivalents at beginning of year 15,292 2,572
------- -------
Cash and cash equivalents at end of period $ 22,885 $ 12,078
======== ========
The accompanying notes are an integral part of these financial statements.
(4)
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be
read in conjunction with the consolidated financial statements and related
notes for the year ended December 31, 1994, included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions are
eliminated from the consolidated financial statements.
Inventories are valued at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method.
The unaudited financial information reflects all adjustments which are, in
the opinion of management, necessary for a fair presentation of the
statements contained herein.
Checks outstanding of $43,233,000 and $37,088,000 were included in trade
accounts payable at September 30, 1995 and December 31, 1994,
respectively.
2. DIVIDEND
On October 25, 1995, the Board of Directors declared a quarterly dividend
of 23 cents per share, payable December 1, 1995 to shareholders of record
on November 6, 1995.
(5)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1994:
Net Sales
Net sales of $849,963,000 in the 1995 third quarter increased 9.1% from
net sales of $779,300,000 for the comparable 1994 period. There were 63
sales days in the 1995 third quarter compared with 64 sales days in the
1994 third quarter. The year 1995 will have one less sales day than did
the year 1994 (254 versus 255).
The sales increase for the 1995 third quarter compared with the 1994 third
quarter was principally volume related. The volume increase primarily
represented the continuing effects of the Company's market initiatives and
an increase in sales of seasonal products. The market initiatives
included new product additions, the expansion of branch facilities, adding
Zone Distribution Centers (ZDCs), and the National Accounts program.
Daily sales to National Account customers within the Company's core
branch-based business increased about 23%, on a comparable basis, over the
1994 third quarter. Daily sales of seasonal products within the core
business increased about 24% over the 1994 third quarter. The core
business experienced selling price increases of about 1.9% when comparing
the third quarters of 1995 and 1994.
(6)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings
Net earnings of $49,135,000 in the 1995 third quarter, increased 12.9%,
when compared with 1994 third quarter net earnings of $43,514,000 which
excluded the effect of after tax restructuring charges of $469,000. When
considering the effect of the restructuring charges, net earnings for the
1995 third quarter increased 14.1%. The net earnings increase of 12.9%
was higher than the increase in net sales primarily due to slightly higher
gross profit margins and to operating expenses increasing at a slower rate
than net sales.
The Company's gross profit margin increased by 0.31 percentage point for
the third quarter of 1995 as compared with the same 1994 period. This
change was primarily related to the following 2 factors:
1. A favorable product mix effect in non-seasonal product categories,
partially offset by increased sales of seasonal products. The sales of
seasonal products historically have had lower than average gross profit
margins.
2. Partially offsetting the above effect was an unfavorable change in
selling price category mix which primarily resulted from the growth in
sales to National Accounts.
Warehousing, marketing, and administrative (operating) expenses increased
8.7% in the third quarter of 1995 when compared with the same period in
1994, excluding the effect of restructuring charges of $779,000 in 1994.
This increase was slightly lower than the increase in net sales.
Contributing to this favorable comparison were the following factors:
1. The increase in the rate of growth in net sales allowed the Company to
leverage its payroll costs.
2. Travel related expenses were lower in the 1995 period as compared with
the same 1994 period.
3. The Company experienced lower amortization of goodwill and other
acquisition related expenses associated with acquired and start-up
businesses.
(7)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings (continued)
Partially offsetting these favorable comparisons were higher payroll
related benefits costs and the Company's continuing investment in the
business infrastructure needed to support its market initiatives. Of note
were the following factors relating to infrastructure investments:
1. Increased data processing expenses related to the ongoing significant
upgrade and replacement of the branch order entry, order processing, and
inventory management system. This initiative will continue throughout
1995.
2. Increased expenses related to Grainger Integrated Supply Operations,
whose role is managing transactions for the Company and its best-in-class
distribution partners.
3. Increased expenses related to the continuing enhancement and
reconfiguration of the Company's logistics network. The quarter included
expenses related to the ongoing ramp-up of three additional ZDCs. Also
included were expenses associated with converting the Niles, Illinois
Regional Distribution Center to a National Distribution Center.
The Company's effective income tax rate for the third quarter of 1995 was
40.2% versus 40.3% in the comparable 1994 period.
(8)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1994:
Net Sales
Net sales of $2,470,308,000 in the first nine months of 1995 increased
9.6% from net sales of $2,254,223,000 in the same 1994 period. There were
191 sales days in the 1995 nine month period versus 192 sales days in the
comparable 1994 period. The year 1995 will have one less sales day than
did the year 1994 (254 versus 255).
The sales increase for the first nine months of 1995 when compared with
the same 1994 period was principally volume related. The volume increase
can be explained primarily by the Company's market initiatives and the
growth in the national economy. Daily sales to National Account customers
within the core business increased about 23%, on a comparable basis, over
the same 1994 period. The core business experienced selling price
increases of about 1.3% when comparing the first nine month period for
each year.
(9)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings
Net earnings for the 1995 first nine months increased 5.6% to $135,488,000
when compared with 1994 net earnings of $128,288,000, which excluded the
effect of after tax restructuring charges of $1,381,000. When considering
the effect of the restructuring charges, net earnings for the 1995 first
nine months increased 6.8%. The net earnings increase of 5.6% was less
than the net sales increase primarily due to operating expenses increasing
at a faster rate than net sales, partially offset by slightly higher gross
profit margins.
The Company's gross profit margin increased by 0.15 percentage point for
the first nine months of 1995 as compared with the same 1994 period,
excluding the effect of restructuring charges of $847,000 in 1994. This
change in gross profit margin was primarily the result of the factors
discussed for the third quarter (see Third Quarter Net Earnings
discussion) with the following exception. The sales of seasonal products
had a positive effect on this nine month comparison. During the 1995 nine
month period, the sales of seasonal products grew at a slower rate than
all other products.
Warehousing, marketing, and administrative (operating) expenses for the
Company increased 11.6% for the first nine months of 1995 as compared with
the same 1994 period, excluding the effect of restructuring charges of
$1,446,000 in 1994. This increase was greater than the increase in net
sales primarily due to the following factors:
1. The Company's continuing investment in the business infrastructure to
support its market initiatives discussed for the third quarter (see Third
Quarter Net Earnings discussion).
2. Increased freight-out expenses resulting from several factors
including:
a. Proportionally more shipments qualifying for prepaid freight.
b. Proportionally more orders being transferred within the ZDC/branch
network. This resulted in orders being shipped longer distances.
These incremental expenses, by policy, were not billed to
customers.
Partially offsetting these unfavorable comparisons were payroll and
related benefits costs increasing somewhat slower than the rate of sales
growth and decreased amortization of goodwill and other acquisition
related costs associated with acquired and start-up businesses.
The Company's effective income tax rate for the nine months of 1995 was
40.2% versus 40.3% in the comparable 1994 period. The Company's effective
income tax rate for the full year 1994 would have been 40.4% without the
effects of the restructuring charges recorded during 1994.
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1995, working capital increased
$79,043,000. The ratio of current assets to current liabilities was 2.1
at September 30, 1995 and 2.1 at December 31, 1994. The Consolidated
Statements of Cash Flows, included in this report, detail the sources and
uses of cash and cash equivalents.
The Company continues to maintain a low debt ratio and a strong liquidity
position, which provide flexibility in funding working capital needs and
long-term cash requirements. Total debt as a percent of shareholders'
equity was 12.1% at September 30, 1995 and 3.7% at December 31, 1994. For
the first nine months of 1995, $33,222,000 was expended for land,
buildings, and facilities improvements, and $45,854,000 for data
processing, office, and other equipment; for a total of $79,076,000.
(11)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
PART II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 not applicable
EXHIBIT INDEX
Item 6 Exhibits and Reports on Form 8-K (numbered in
accordance with Item 601 of regulation S-K).
(a) Exhibits
(3)(ii) By-Laws, as amended October 25, 1995 14
(11) Computation of Earnings per Common and
Common Equivalent Share 32
(27) Financial Data Schedule 33
(b) Reports on Form 8-K - None.
(12)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W.W. Grainger, Inc.
----------------------------------
(Registrant)
Date: November 9, 1995 By: /s/ J. D. Fluno
----------------------------------
J. D. Fluno, Vice Chairman
Date: November 9, 1995 By: /s/ P. O. Loux
----------------------------------
P. O. Loux, Vice President, Finance
Date: November 9, 1995 By: /s/ R. D. Pappano
-----------------------------------
R. D. Pappano, Vice President,
Financial Reporting and Investor
Relations
(13)
Exhibit 3(ii)
As Amended October 25, 1995
BY-LAWS
-------
OF
--
W.W. GRAINGER, INC.
-------------------
ARTICLE I
---------
OFFICES
-----------
The principal office of the corporation shall be located in the State of
Illinois. The corporation may have such other offices, either within or
without the State of Illinois, as the business of the corporation may
require from time to time.
The registered office of the corporation required by the Illinois Business
Corporation Act to be maintained in the State of Illinois may be, but need
not be, identical with the principal office in the State of Illinois, and
the address of the registered office may be changed from time to time by
the board of directors.
ARTICLE II
----------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. (a) The annual meeting of the shareholders
shall be held on the last Wednesday of April, in each year, or at such
time as may be determined by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may
properly come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday, such meeting shall be held on the next
succeeding business day. If the election of the directors shall not be
held on the day designated herein for any annual meeting or adjournment
thereof, the board of directors shall cause the election to be held at a
meeting of the shareholders as soon thereafter as conveniently may be.
(b) At any annual meeting or adjournment thereof only such business shall
be conducted as shall have been brought before the meeting (i) by or at
the direction of the board of directors or (ii) by any shareholder (x) who
is entitled to vote at the time of giving notice provided for in this
Section 1(b) and remains such until the meeting and (y) who complies with
the procedures set forth in this Section 1(b). For business to be
properly brought before an annual meeting or adjournment thereof by a
shareholder, the shareholder must have given timely notice thereof in
proper written form to the secretary. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal office
of the corporation no less than thirty days nor more than sixty days prior
to the meeting; provided, however, that in the event that less than forty
days' notice or prior public disclosure of the date of the meeting is
(14)
<PAGE>
given or made to shareholders, notice by the shareholder to be timely must
be received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made. To be in proper written
form, a shareholder's notice to the secretary shall set forth in writing
as to each matter the shareholder proposes to bring before the meeting (i)
a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (ii)
the name and address, as they appear on the corporation's books, of the
shareholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the shareholder and
(iv) any material interest of the shareholder in such business.
Notwithstanding anything in these by-laws to the contrary, no business
shall be conducted at any annual meeting or adjournment thereof except in
accordance with the procedures set forth in this Section 1(b). The
officer or other person presiding shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before
the meeting in accordance with the procedures set forth in this Section
1(b), and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the chairman of the board, the vice chairman, the
president and chief executive officer, the board of directors or by the
holders of not less than one-fifth of all the outstanding shares of the
corporation, for the purpose or purposes for which the meeting is called.
Unless otherwise stated in the notice of special meeting, no other
business may be transacted at any such meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the State of Illinois, as the place of
meeting for any annual meeting or for any special meeting called by the
board of directors. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal office of
the corporation in the State of Illinois.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than
ten nor more than sixty days before the date of the meeting, or in the
case of a merger, consolidation, share exchange, dissolution or sale,
lease or exchange of assets, not less than twenty days nor more than sixty
days before the date of the meeting, either personally or by mail, by or
at the direction of the chairman of the board or the secretary, or the
officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the records of the
corporation, with postage thereon prepaid.
(15)
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors of the corporation may fix in advance a
date as the record date for any such determination of shareholders, such
date in any case to be not more than sixty days and, in case of a meeting
of shareholders, not less than ten days, or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty days, prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is fixed for the determination of shareholders
entitled to notice of or entitled to vote at a meeting of shareholders, or
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided above, such determination shall
apply to any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make within twenty days
after the record date for a meeting of shareholders, or ten days before
such meeting of shareholders, whichever is earlier, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical
order, with the address of and the number of shares held by each, which
list, for a period of ten days prior to such meeting, shall be kept on
file at the principal office of the corporation in the State of Illinois
and shall be subject to inspection by any shareholder at any time during
usual business hours and to copying at the shareholder's expense. Such
list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original share ledger or transfer
book, or a duplicate thereof kept in the State, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or
share ledger, or transfer book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation, entitled to vote on a matter, represented in person or by
proxy, shall constitute a quorum at any meeting of shareholders; provided,
that if less than a majority of the outstanding shares are represented at
said meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact . Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
(16)
<PAGE>
SECTION 9. VOTING OF SHARES. Subject to the provisions of Section 11 of
this Article, each outstanding share, regardless of class, shall be
entitled to one vote upon each matter submitted to vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such
officer, agent, or proxy as the by-laws of such corporation may prescribe,
or, in the absence of such provision, as the board of directors of such
corporation may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing
in the name of a guardian, conservator, or trustee may be voted by such
fiduciary, either in person or by proxy, but no guardian, conservator, or
trustee shall be entitled, as such fiduciary, to vote shares held by him
without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares
so transferred.
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but
shares of its own stock held by it in a fiduciary capacity may be voted
and shall be counted in determining the total number of outstanding shares
at any given time.
SECTION 11. CUMULATIVE VOTING. In all elections for directors, every
shareholder shall have the right to vote, in person or by proxy, the
number of shares owned by him, for as many persons as there are directors
to be elected, or to cumulate said shares, and give one candidate as many
votes as the number of directors multiplied by the number of his shares
shall equal, or to distribute them on the same principle among as many
candidates as he shall see fit.
SECTION 12. VOTING BY BALLOT. Voting on any question or in any election
may be by voice, unless the officer or other person presiding over the
meeting shall order or any shareholder shall demand that voting be by
ballot.
(17)
<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed under the direction of its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be not less than seven nor more than twelve. The
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the directors or the shareholders without amending
these by-laws. Each director shall hold office until the next annual
meeting of shareholders or until his successor shall have been elected and
qualified. Directors need not be residents of Illinois or shareholders of
the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this by-law, immediately after the
annual meeting of shareholders. The board of directors may provide by
resolution, the time and place, either within or without the State of
Illinois, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board or any two
directors. The person or persons authorized to call special meetings of
the board of directors may fix any place, either within or without the
State of Illinois, as the place for holding any special meeting of the
board of directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
two days previously thereto by written notice delivered personally or
mailed to each director at his business address, or by telegram. If
mailed, such notice shall be deemed to be delivered 24 hours after
deposited in the United States mail, next-day delivery guaranteed, so
addressed with postage thereon prepaid. If notice to be given by telegram,
such notice shall be deemed to be delivered 24 hours after the telegram is
delivered to the telegraph company. Any director may waive notice of any
meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the board of directors shall constitute
a quorum for transaction of business at any meeting of the board of
directors, provided, that if less than a majority of the directors are
present at said meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice.
(18)
<PAGE>
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors.
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors
and any directorship to be filled by reason of an increase in the number
of directors may be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose; provided,
however, vacancies arising between meetings of shareholders by reason of
an increase in the number of directors or otherwise may be filled by a
majority of the board of directors then remaining. A director elected by
the shareholders to fill a vacancy shall hold office for the balance of
the term for which elected. A director appointed by the directors to fill
a vacancy shall serve until the next meeting of shareholders at which
directors are to be elected.
SECTION 9. COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, for attendance at each
meeting of the board or of a committee thereof, and may be paid a fixed
sum for attendance at meetings and/or a stated retainer as directors. No
such payment shall preclude any director from serving the corporation in
any other capacity and receiving compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented
to the action taken unless his dissent shall be entered in the minutes of
the meeting or unless he shall file his written dissent to such action
with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to
the secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 11. COMMITTEES. Committees of the board of directors shall
consist of an audit committee, a compensation committee, a board affairs
and nominating committee, and such other committees as the board of
directors by resolution may create. Each committee shall have such number
of members and shall exercise such authority and carry out such duties as
are set forth in resolutions of the board of directors. Committee members
shall be elected annually but shall serve at the discretion of the board
of directors and may be removed by the board of directors. The board of
directors may increase or decrease the number of members of any committee
at any time and may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member or
members at any meeting of the committee. A majority of members of a
committee shall constitute a quorum and, unless otherwise set forth in
resolutions of the board of directors, a majority of those members present
at a meeting and not disqualified from voting shall constitute the acts of
the committee.
(19)
<PAGE>
SECTION 12. INFORMAL ACTION BY DIRECTORS. (a) Any action required to be
taken at a meeting of the board of directors of the corporation, or any
other action which may be taken at a meeting of the board of directors or
a committee thereof, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof, or
by all of the members of such committee, as the case may be.
(b) The consent shall be evidenced by one or more written approvals, each
of which sets forth the action taken and bears the signature of one or
more directors. All the approvals evidencing the consent shall be
delivered to the secretary to be filed in the corporate records. The
action taken shall be effective when all the directors have approved the
consent unless the consent specifies a different effective date.
(c) Any such consent signed by all the directors or all the members of a
committee shall have the same effect as a unanimous vote, and may be
stated as such in any document filed with the Secretary of State.
SECTION 13. TELEPHONE ATTENDANCE. (a) Members of the board of directors
or of any committee of the board of directors may participate in and act
at any meeting of such board or committee through the use of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such
meeting shall constitute attendance and presence in person at the meeting
of the person or persons so participating.
(b) The board of directors or any committee may, at its option, provide
for a tape recording of any such conference telephone portion of a meeting
but the lack thereof shall not affect the validity of any actions taken at
such meeting.
SECTION 14. REMOVAL OF DIRECTORS. One or more of the directors may be
removed, with or without cause, at a meeting of shareholders by the
affirmative vote of the holders of a majority of the outstanding shares
then entitled to vote at an election of directors, except that:
(1) No director shall be removed at a meeting of shareholders unless the
notice of such meeting shall state that a purpose of the meeting is to
vote upon the removal of one or more directors named in the notice. Only
the named director or directors may be removed at such meeting;
(2) If less than the entire board is to be removed, no director may be
removed, with or without cause, if the votes cast against his removal
would be sufficient to elect him, if then cumulatively voted at an
election of the entire board of directors; and
(3) If a director is elected by a class or series of shares, he may be
removed only by the shareholders of that class or series.
(20)
<PAGE>
SECTION 15. DIRECTOR CONFLICT OF INTEREST. If a transaction is fair to
the corporation at the time it is authorized, approved or ratified, the
fact that a director of the corporation is directly or indirectly a party
to the transaction shall not be grounds for invalidating the transaction.
SECTION 16. NOMINATIONS OF DIRECTORS. (a) Except for directors elected to
fill vacancies pursuant to these by-laws, nominations for election for the
board of directors may be made by the board of directors, or by the
nominating committee of the board of directors and approved by the board
of directors. Such nominations shall be submitted to a vote of the
shareholders at the next annual meeting of shareholders or at a special
meeting of shareholders called for such purpose.
(b) Nominations for election to the board of directors may be made by any
shareholder of any outstanding class of stock of the corporation entitled
to vote for the election of directors provided that; (i) any such
shareholder nominating a director shall, not later than the date with
respect to submission of shareholders' proposals for the next annual
meeting as set forth in the corporation's proxy statement for the
preceding annual meeting of shareholders, notify the chairman of the board
of the corporation in writing of the intent to so nominate one or more
persons and shall further set forth in such notice the names of all such
nominees together with, with respect to each such nominee, his principal
occupation, age, holdings of equity securities of the corporation and such
other information as would be required under applicable laws, including
the various securities laws, to be set forth by the corporation in its
proxy statement and related materials if such person were a nominee of the
board of directors; (ii) such shareholder so proposing to nominate a
person remains a shareholder of the corporation through the date of the
annual meeting at which such shareholder, or such shareholder's proxy,
nominates such person for election as a director; and (iii) such
shareholder delivers the consent of each such nominee to serve as
director, or states in the notice that each such nominee, if elected, has
consented to serve as director.
ARTICLE IV
----------
OFFICERS
--------
SECTION 1. NUMBER. The officers of the corporation shall be a
chairman of the board, a vice chairman of the board, a president and chief
executive officer, one or more vice presidents or executive, group or
senior vice presidents, a treasurer, a secretary, and such other officers
and such assistant or administrative officers as may be elected or
appointed as hereinafter provided. Any two or more offices may be held by
the same person.
(21)
<PAGE>
SECTION 2. ELECTION, APPOINTMENT AND TERM OF OFFICE. Officers of the
corporation shall be elected or appointed annually by the board of
directors, although vacancies may be filled or new offices created and
filled at any meeting of the board of directors. Each officer elected or
appointed by the board of directors shall hold office until the next
annual election or appointment of officers by the board of directors, or
until his earlier death, resignation or removal. Officers and assistant
or administrative officers of the corporation, may also be appointed from
time to time by the chairman of the board, to serve as such at his
pleasure.
SECTION 3. REMOVAL. Any officer or assistant or administrative officer
of the corporation elected or appointed by the board of directors may be
removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby. Any officer or
assistant or administrative officer of the corporation appointed by the
chairman of the board may be removed by the chairman of the board whenever
in his judgment the best interests of the corporation would be served
thereby. Any removal provided for in this Section 3 shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or assistant or administrative
officer of the corporation shall not itself create contract rights.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall
preside at all meetings of the shareholders and of the board of directors,
or, from time to time, may delegate any part of such responsibilities to
the vice chairman of the board, the president and chief executive officer
or any other member of the board of directors. He may sign, with the
secretary or any other proper officer of the corporation, authorized by
the board of directors, certificates for shares of the corporation. He
may from time to time, to the extent not delegated by the board of
directors, delegate and re-delegate any part of any of the
responsibilities and authority set forth herein to the vice chairman of
the board, the president and chief executive officer, or both. He shall
perform such other duties as may be prescribed from time to time by the
board of directors. The chairman of the board must be a director of the
corporation.
SECTION 5. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board
shall perform such officer's duties as may from time to time be prescribed
by the board of directors or delegated to him by the chairman of the board
of directors or the president and chief executive officer, including the
presiding at meetings of the shareholders and of the board of directors.
He may sign, with the secretary or any other proper officer of the
corporation authorized by the board of directors, certificates for shares
of the corporation. The vice chairman of the board must be a director of
the corporation.
SECTION 6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The president shall be
the chief executive officer of the corporation and shall perform such
officer's duties as may from time to time be prescribed by the board of
directors or delegated to him by the chairman of the board of directors,
including the presiding at meetings of the shareholders and the board of
(22)
<PAGE>
directors. He may sign, with the secretary or any other proper officer of
the corporation authorized by the board of directors, certificates for
shares of the corporation. He shall be primarily responsible for
carrying out the policies established by and the directions of the board
of directors. The president and chief executive officer must be a
director of the corporation.
SECTION 7. OFFICE OF THE CHAIRMAN. The chairman of the board, vice
chairman of the board, and the president and chief executive officer shall
comprise the office of the chairman which shall act as the senior
management of the corporation. By agreement of the members of the office
of the chairman, any member or members thereof shall be authorized to act
as the office of the chairman.
Any member of the office of the chairman may sign deeds, mortgages, bonds,
contracts or other instruments which the board of directors has authorized
to be executed, except in cases where the signing and execution thereof
shall be expressly delegated by the board of directors or by these by-laws
to some other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed. The office of the chairman may
delegate signing authority to other persons within the corporation as it
deems necessary.
SECTION 8. VICE PRESIDENTS. Each of the vice presidents shall be
responsible for those activities and shall perform those duties as shall
from time to time may be assigned to him by the board of directors, the
chairman of the board, the vice chairman of the board or the president and
chief executive officer. The board of directors may designate one or more
of the vice presidents as executive, group or senior vice presidents.
SECTION 9. TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in
such sum and with such surety or sureties as the board of directors shall
determine. He shall (a) have charge and custody of and be responsible for
all funds and securities of the corporation, (b) receive and give receipts
for moneys due and payable to the corporation from any source whatsoever,
and deposit all such moneys in the name of the corporation in such banks,
trust companies or other depositaries as shall be selected in accordance
with the provisions of Article V of these by-laws and (c) in general
perform all the duties incident to the office of treasurer and such other
duties as from time to time may be assigned to him by the board of
directors, the chairman of the board, the vice chairman of the board or
the president and chief executive officer. The treasurer may be elected
or appointed by the board of directors or may be appointed as an
administrative officer by the chairman of the board pursuant to Article
IV, Section 2.
SECTION 10. SECRETARY. The secretary shall (a) keep the minutes of the
shareholders' and of the board of directors' meetings in one or more books
provided for that purpose, (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law, (c)
be custodian of the corporate records and of the seal of the corporation
and see that the seal of the corporation is affixed to all certificates
(23)
<PAGE>
for shares prior to the issue thereof and to all documents, the execution
of which on behalf of the corporation under its seal is duly authorized in
accordance with the provisions of these by-laws, (d) keep, or cause the
transfer agent to keep, a register of the post office address of each
shareholder which shall be furnished to the secretary by such shareholder,
(e) sign with the chairman of the board, the vice chairman of the board or
the president and chief executive officer, certificates for shares of the
corporation, the issue of which shall have been authorized by resolution
of the board of directors, (f) have general charge of the stock transfer
books of the corporation and (g) in general perform all duties incident to
the office of secretary and such other duties as from time to time may be
assigned to him by the board of directors, the chairman of the board, the
vice chairman of the board or the president and chief executive officer.
SECTION 11. SALARIES. The salaries of the officers elected or appointed
by the board of directors shall be fixed from time to time by the board of
directors and no such officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
---------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation,
and such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the board of directors. Such
authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in
the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time
to time be determined by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in
such banks, trust companies, or other depositaries as the board of
directors may select.
<24>
<PAGE>
ARTICLE VI
----------
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
-----------------------
SECTION 1. CERTIFICATES FOR SHARES. The issued shares of the corporation
shall be represented by certificates, except as and to the extent
determined by, or pursuant to, resolution adopted by the board of
directors. Certificates representing shares of the corporation shall be
in such form as may be determined by the board of directors. Such
certificates shall be signed by the chairman of the board, the vice
chairman of the board or the president and chief executive officer, and by
the secretary or an assistant secretary and shall be sealed with the seal
of the corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the
shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the books of the corporation, as shall
similar information with respect to shares that are uncertificated. All
certificates surrendered to the corporation for transfer shall be
canceled. No new certificate shall be issued until the former certificate
for a like number of shares, unless the shares are uncertificated, shall
have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon
such terms and indemnity to the corporation as the board of directors may
prescribe.
SECTION 2. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be made either on the books of the corporation or on the books of
the duly authorized and appointed agent or agents of the corporation by
the holder of record thereof or by his legal representative, who shall
furnish proper evidence of authority to transfer, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
secretary of the corporation or proper officer of the transfer agent and,
unless such shares are uncertificated, on surrender for cancellation of
the certificate for such shares. The person in whose name shares stand on
the books of the corporation or its duly authorized and appointed transfer
agent or agents shall be deemed the owner thereof for all purposes as
regards the corporation.
ARTICLE VII
-----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day of January
in each year and end on the last day of December in each year.
(25)
<PAGE>
ARTICLE VIII
------------
DIVIDENDS
---------
The board of directors may from time to time, declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by law and its articles of incorporation.
ARTICLE IX
----------
SEAL
----
The board of directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
corporation and the words, "Corporate Seal, Illinois".
ARTICLE X
---------
WAIVER OF NOTICE
----------------
Whenever any notice whatever is required to be given under the provisions
of these by-laws or under the provisions of the articles of incorporation
or under the provisions of the Illinois Business Corporation Act, a waiver
thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein shall be deemed
equivalent to the giving of such notice.
ARTICLE XI
----------
AMENDMENTS
----------
These by-laws may be altered, amended or repealed and new by-laws may be
adopted at any meeting of the board of directors of the corporation by a
majority vote of the directors present at the meeting.
(26)
<PAGE>
ARTICLE XII
-----------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
SECTION 1. 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 is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was 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 reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
SECTION 2. 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 by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was
a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to the best interests of the
corporation, and except that no indemnification shall be made with respect
to any claim, issue or matter as to which such person has been finally
adjudged to have been liable to the corporation, unless, and only to the
extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses as the court shall
deem proper.
(27)
<PAGE>
SECTION 3. Any indemnification under Sections 1 or 2 (unless ordered by a
court) shall be made only as authorized in the specific case, upon a
determination that indemnification of the director or officer is proper in
the circumstances because he has met the applicable standard of conduct
set forth in Sections 1 or 2. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable (or, even if obtainable, a quorum of
disinterested directors so directs) by independent legal counsel in a
written opinion, or (3) by the shareholders. In any event, to the extent
that a director or officer of the corporation has been successful, on the
merits or otherwise, in the defense of any action, suit or proceeding
referred to in Sections 1 or 2 or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including reasonable
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
SECTION 4. (a) Reasonable expenses incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding, upon
receipt of (i) a statement signed by such director or officer to the
effect that such director or officer acted in good faith and in a manner
which he believed to be in, or not opposed to the best interests of the
corporation and (ii) an undertaking by or on behalf of the director or
officer to repay such amount, if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as authorized in this
Article.
(b) The board of directors may, by separate resolution adopted under and
referring to this Article of the by-laws, provide for securing the payment
of authorized advances by the creation of escrow accounts, the
establishment of letters of credit or such other means as the board deems
appropriate and with such restrictions, limitations and qualifications
with respect thereto as the board deems appropriate in the circumstances.
SECTION 5. (a) The indemnification and advancement of expenses provided
by or granted under other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote
of shareholders or disinterested directors, or otherwise, both as to
action in his 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 director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) The provisions of this ARTICLE XII shall be deemed to be a contract
between the corporation and each director and officer who serves in such
capacity at anytime while this ARTICLE XII is in effect and any
indemnification provided under this ARTICLE XII to a person shall continue
after such person ceases to be an officer, director, agent or employee of
the corporation as to all facts, circumstances and events occurring while
such person was such officer, director, agent or employee, and shall not
(28)
<PAGE>
be decreased or diminished in scope without such person's consent,
regardless of the repeal or modification of this Article or any repeal or
modification of the Illinois Business Corporation Act or any other
applicable law. If the scope of indemnity provided by this ARTICLE XII or
any replacement article, or pursuant to the Illinois Business Corporation
Act or any modification or replacement thereof is increased, then such
person shall be entitled to such increased indemnification as is in
existence at the time indemnity is provided to such person, it being the
intent, subject to Section 10 of this ARTICLE XII, to indemnify persons
under this ARTICLE XII to the fullest extent permitted by law.
SECTION 6. The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
SECTION 7. Subject to Section 10 of this Article, if a claim under this
Article is not promptly paid in full by the corporation after a written
claim has been received by the corporation or if expenses pursuant to
Section 4 of this Article have not been promptly advanced after a written
request for such advancement accompanied by the statement and undertaking
required by Section 4 of this Article has been received by the
corporation, the director or officer may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim or the
advancement of expenses. If successful, in whole or in part, in such
suit, such director or officer shall also be entitled to be paid the
reasonable expense thereof, including attorneys' fees. It shall be a
defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking has been tendered to the
corporation) that the director or officer has not met the standards of
conduct which make it permissible under the Illinois Business Corporation
Act for the corporation to indemnify the director or officer for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its
board of directors, independent legal counsel, or its shareholders) to
have made a determination, if required, prior to the commencement of such
action that indemnification of the director or officer is proper in the
circumstances because he or she has met the applicable standard of conduct
required under the Illinois Business Corporation Act, nor an actual
determination by the corporation (including its board of directors,
independent legal counsel, or its shareholders) that the director or
officer had not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the director or officer
had not met the applicable standard of conduct.
(29)
<PAGE>
SECTION 8. For purposes of this Article, references to "the corporation"
shall include, in addition to the surviving corporation, any merging
corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify its
directors, officers and employees or agents, so that any person who was a
director or officer of such merging corporation, or was serving at the
request of such merging corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Article with
respect to the surviving corporation as such person would have with
respect to such merging corporation if its separate existence had
continued.
SECTION 9. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or
agent of the corporation which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and references to
"officers" shall include elected and appointed officers. A person who
acted in good faith and in a manner he reasonably believed to be in the
best interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interest of the corporation" as referred to in this Article.
SECTION 10. Anything herein to the contrary notwithstanding, if the
corporation purchases insurance in accordance with Section 6 of this
ARTICLE XII, the corporation shall not be required to, but may (if the
board of directors so determines in accordance with this ARTICLE XII)
reimburse any party instituting any action, suit or proceeding if a result
of the institution thereof is the denial of or limitation of payment of
losses under such insurance when such losses would have been paid
thereunder if a non-insured third party had instituted such action, suit
or proceedings.
ARTICLE XIII
------------
INDEMNIFICATION OF EMPLOYEES AND AGENTS
---------------------------------------
The corporation may indemnify any agent or employee of the corporation who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (including, but not
limited to any such proceeding by or in the right of the corporation)
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was serving the corporation at its request and in the
course and scope of his duties and acting in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
(30)
<PAGE>
corporation, against expenses (including reasonable attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action, suit or proceeding. The standards of conduct,
the provisions for payment and advances, and the terms and conditions
contained in Article XII, Sections 1, 2, 3, 4, 5(a), 6, 8, 9 and 10 shall
apply to any indemnification hereunder.
(31)
Exhibit 11
W.W. Grainger, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
1995 1994
Nine months ended September 30: ------ ------
Average number of common shares outstanding
during the period 50,799,957 50,727,391
Common equivalent shares (a):
Shares issuable under outstanding options 1,225,419 1,465,984
Shares which could have been purchased based
upon the average market value for the period 813,606 946,921
---------- ---------
411,813 519,063
Dilutive effect of exercised options
prior to being exercised 8,519 6,806
---------- ---------
Shares for the portion of the period that
the options were outstanding 420,332 525,869
---------- ---------
Average number of common and common equivalent
shares outstanding during the period 51,220,289 51,253,260
========== ==========
Net earnings $135,488,000 $126,907,000
============ ============
Net earnings per common and common equivalent
share $2.65 $2.48
===== =====
Three months ended September 30:
Nine months ended September 30, from above $2.65 $2.48
Six months ended June 30, as previously reported 1.69 1.64
----- -----
Net earnings per common and common equivalent
share for the three months ended September 30 $0.96 $0.84
===== =====
(a) Does not include options which are not dilutive. Effect under fully
diluted computation is not material.
(32)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> 9-MOS
<CASH> 22885
<SECURITIES> 0
<RECEIVABLES> 412190
<ALLOWANCES> 17816
<INVENTORY> 597869
<CURRENT-ASSETS> 1098651
<PP&E> 869653
<DEPRECIATION> 365987
<TOTAL-ASSETS> 1694570
<CURRENT-LIABILITIES> 515013
<BONDS> 26215
0
0
<COMMON> 25418
<OTHER-SE> 1110780
<TOTAL-LIABILITY-AND-EQUITY> 1694570
<SALES> 2470308
<TOTAL-REVENUES> 2470308
<CGS> 1591170
<TOTAL-COSTS> 1591170
<OTHER-EXPENSES> 640980
<LOSS-PROVISION> 8862
<INTEREST-EXPENSE> 2727
<INCOME-PRETAX> 226569
<INCOME-TAX> 91081
<INCOME-CONTINUING> 135488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135488
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 0
</TABLE>
