41
Page 1
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 quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________________ TO
________________________
Commission file number 1-44
ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-0129150
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4666 Faries Parkway Box 1470 Decatur, Illinois 62525
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code217-424-5200
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
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, no par value - 602,161,597 shares
(April 28, 2000)
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PART I - FINANCIAL INFORMATION
ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
(In thousands,
except
per share amounts)
<S> <C> <C>
Net sales and other operating income $3,111,80 $3,378,12
9 6
Cost of products sold and other operating 2,776,833 3,139,203
costs
_________ _________
_ _
Gross Profit 334,976 238,923
Selling, general and administrative expenses 184,850 173,753
_________ _________
_ _
Earnings From Operations 150,126 65,170
Other income (expense) 4,805 (47,244)
_________ _________
_ _
Earnings Before Income Taxes 154,931 17,926
Income taxes 51,902 6,184
_________ _________
_ _
Net Earnings $ $
103,029 11,742
Average number of shares outstanding 606,003 619,896
Basic and diluted earnings per common share $.17 $.02
Dividends per common share $.05 $.048
</TABLE>
See notes to consolidated financial statements.
2
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
2000 1999
(In thousands,
except
per share amounts)
<S> <C> <C>
Net sales and other operating income $9,753,13 $11,091,0
5 86
Cost of products sold and other operating 8,739,566 10,137,19
costs 7
_________ _________
_ _
Gross Profit 1,013,569 953,889
Selling, general and administrative expenses 555,061 522,815
_________ _________
_ _
Earnings From Operations 458,508 431,074
Other expense (95,628) (64,851)
_________ _________
_ _
Earnings Before Income Taxes and 362,880 366,223
Extraordinary Loss
Income taxes 121,564 127,192
_________ _________
_ _
Earnings Before Extraordinary Loss 241,316 239,031
Extraordinary loss, net of tax, on debt - (15,324)
repurchase
_________ _________
_ _
Net Earnings $ $
241,316 223,707
Average number of shares outstanding 608,668 623,415
Basic and diluted earnings per common share
Before extraordinary loss $.40 $.38
Extraordinary loss on debt repurchase - (.02)
___ ___
After Extraordinary Loss $.40 $.36
Dividends per common share $.148 $.142
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
<S> (In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ $
494,952 681,378
Marketable securities 372,751 222,191
Receivables 2,103,485 1,922,163
Inventories 3,080,818 2,732,694
Prepaid expenses 214,164 231,162
__________ __________
Total Current Assets 6,266,170 5,789,588
Investments and Other Assets
Investments in and advances to 1,849,477 1,484,980
affiliates
Long-term marketable securities 587,941 779,916
Other assets 481,558 408,236
__________ __________
2,918,976 2,673,132
Property, Plant and Equipment
Land 167,111 163,607
Buildings 2,070,053 1,949,211
Machinery and equipment 8,694,409 8,384,865
Construction in progress 508,540 675,870
Less allowances for depreciation (5,996,561) (5,606,392
)
__________ __________
5,443,552 5,567,161
__________ __________
$14,628,698 $14,029,88
1
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, JUNE 30,
2000 1999
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 1,755,491 $
1,241,369
Accounts payable 2,052,147 2,004,396
Accrued expenses 730,923 567,593
Current maturities of long-term debt 35,654 26,907
__________ __________
Total Current Liabilities 4,574,215 3,840,265
Long-term Debt 3,270,674 3,191,883
Deferred Credits
Income taxes 576,639 619,752
Other 140,764 137,341
__________ __________
717,403 757,093
Shareholders' Equity
Common stock 4,958,126 5,081,320
Reinvested earnings 1,570,315 1,419,321
Accumulated other comprehensive (462,035) (260,001)
income (loss)
__________ __________
6,066,406 6,240,640
__________ __________
$14,628,698 $14,029,88
1
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
NINE MONTHS ENDED
MARCH 31,
2000 1999
(In thousands)
Operating Activities
Net earnings $ 241,316 $ 223,707
Adjustments to reconcile to net cash
provided by operations
Depreciation and amortization 455,128 434,811
Deferred income taxes 1,304 27,149
Amortization of long-term debt 31,955 27,182
discount
(Gain) loss on marketable securities (12,677) (101,465)
transactions
Extraordinary loss on debt repurchase - 15,324
Other 29,668 130,528
Changes in operating assets and
liabilities
Receivables (210,876) 133,582
Inventories (378,705) (342,484)
Prepaid expenses 16,625 15,585
Accounts payable and accrued 215,922 186,267
expenses
_________ _________
Total Operating Activities 389,660 750,186
Investing Activities
Purchases of property, plant and (342,552) (552,185)
equipment
Net assets of businesses acquired (22,726) (61,326)
Investments in and advances to (320,545) (121,461)
affiliates, net
Purchases of marketable securities (873,072) (546,089)
Proceeds from sales of marketable 738,545 1,001,631
securities
Increase in other assets (50,000) -
_________ _________
Total Investing Activities (870,350) (279,430)
Financing Activities
Long-term debt borrowings 108,477 84,127
Long-term debt payments (48,961) (77,710)
Net borrowings (payments) under line of 521,136 68,987
credit agreements
Purchases of treasury stock (196,070) (233,998)
Cash dividends and other (90,318) (84,509)
_________ _________
Total Financing Activities 294,264 (243,103)
_________ _________
Increase (Decrease) in Cash and Cash (186,426) 227,653
Equivalents
Cash and Cash Equivalents Beginning of 681,378 346,325
Period
_________ _________
Cash and Cash Equivalents End of Period $ 494,952 $ 573,978
</TABLE>
See notes to consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of
management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for
the quarter and nine months ended March 31, 2000 are not
necessarily indicative of the results that may be
expected for the year ending June 30, 2000. For further
information, refer to the consolidated financial
statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended
June 30, 1999.
Note 2. New Accounting Standards
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards Number
133 (SFAS 133) "Accounting for Derivative Instruments and
Hedging Activities." This statement, which is required to
be adopted for annual periods beginning after June 15,
2000, establishes standards for recognition and
measurement of derivatives and hedging activities. The
Company is currently assessing the financial statement
impact of SFAS 133.
Note 3. Per Share Data
All references to share and per share information have
been adjusted for the 5 percent stock dividend paid
September 20, 1999.
Note 4.Comprehensive Income (Loss)
Comprehensive income (loss) was $(22) million and $(169)
million for the quarter ended March 31, 2000 and 1999,
respectively. Comprehensive income was $39 million and
$20 million for the nine months ended March 31, 2000 and
1999, respectively.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Note 5.Other Income (Expense)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
<S> <C> <C>
2000 1999 2000 1999
(In thousands) (In thousands)
Investment income $ 35,109 $ 26,922 $ 97,193 $ 83,333
Interest expense (94,421) (86,230) (279,379) (250,769)
Net gain (loss) on
marketable - (546) 12,677 101,139
securities
transactions
Equity in earnings of 61,544 13,741 67,018 2,551
affiliates
Other 2,573 (1,131) 6,863 (1,105)
-------- -------- -------- ---------
--- ---- ----- ----
$ $(47,244 $ $
4,805 ) (95,628) (64,851)
</TABLE>
Note 6.Antitrust Investigation and Related Litigation
Federal grand juries in the Northern Districts of
Illinois, California and Georgia, under the direction of
the United States Department of Justice ("DOJ"), have
been investigating possible violations by the Company and
others with respect to the sale of lysine, citric acid
and high fructose corn syrup, respectively. In connection
with an agreement with the DOJ in fiscal 1997, the
Company paid the United States fines of $100 million.
This agreement constitutes a global resolution of all
matters between the DOJ and the Company and brings to a
close all DOJ investigations of the Company. The federal
grand juries in the Northern Districts of Illinois
(lysine) and Georgia (high fructose corn syrup) have been
closed.
The Company, along with other domestic and foreign
companies, was named as a defendant in a number of
putative class action antitrust suits and other
proceedings involving the sale of lysine, citric acid,
sodium gluconate, monosodium glutamate and high fructose
corn syrup. These actions and proceedings generally
involve claims for unspecified compensatory damages,
fines, costs, expenses and unspecified relief. The
Company intends to vigorously defend these actions and
proceedings unless they can be settled on terms deemed
acceptable by the parties. These matters have resulted
and could result in the Company being subject to monetary
damages, other sanctions and expenses.
The Company has made provisions of $21 million in fiscal
1999, $48 million in fiscal 1998 and $200 million in
fiscal 1997 to cover the fines, litigation settlements
related to the federal lysine class action, federal
securities class action, the federal citric class action,
the federal sodium gluconate class action, and certain
state actions filed by indirect purchasers of lysine,
certain actions filed by parties that opted out of the
class action settlements, certain other proceedings and
the related costs and expenses associated with the
litigation described above.
Because of the early stage of other putative class
actions and proceedings, including those related to high
fructose corn syrup, the ultimate outcome and materiality
of these matters cannot presently be determined.
Accordingly, no provision for any liability that may
result therefrom has been made in the unaudited
consolidated financial statements.
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ARCHER DANIELS MIDLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
The Company is in one business segment - procuring, transporting,
storing, processing and merchandising agricultural commodities
and products. A summary of net sales and other operating income
by classes of products and services is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
(in millions) (in millions)
Oilseed products $1,779 $
$1,997 $5,479 6,636
Corn products 473 429
1,453 1,417
Wheat and other milled 314 330
products 1,034 1,044
Other products and 546
services 622 1,787 1,994
$3,112
$3,378 $9,753 $11,091
</TABLE>
Net sales and other operating income decreased 8 percent to $3.1
billion for the quarter and decreased 12 percent to $9.8 billion
for the nine months due principally to decreases in average
selling prices of 9 percent and 13 percent, respectively. Sales
of oilseed products decreased 11 percent to $1.8 billion for the
quarter and decreased 17 percent to $5.5 billion for the nine
months due primarily to lower average selling prices reflecting
the lower cost of raw materials. Sales of corn products
increased 10 percent for the quarter due principally to an
increase in sales volume of the Company's fuel alcohol as there
was good demand from existing sales markets and expansion into
new markets due to higher gasoline prices and relative ethanol
pricing. Sales of corn products for the quarter also increased
due to increases in sales volumes of the Company's sweetener,
amino acid and citric acid products and due to higher average
selling prices of amino acid products. Sales of corn products
increased 3 percent for the nine months as increased sales
volumes of the Company's alcohol products more than offset
decreased sales volumes in the Company's amino acid and citric
acid products. Sales of wheat and other milled products
decreased 5 percent to $314 million for the quarter and decreased
1 percent to $1 billion for the nine months due principally to
lower average selling prices reflecting the lower cost of raw
materials. These decreases were partially offset by sales
attributable to recently acquired operations in the United
Kingdom. The decreases in sales of other products and services
for both the quarter and nine months were due principally to
decreased sales volumes of the Company's cocoa and formula feed
products and to lower average selling prices of cocoa products.
These decreases were partially offset by increased grain
merchandising revenues.
Cost of products sold and other operating costs decreased $362
million to $2.8 billion for the quarter and decreased $1.4
billion to $8.7 billion for the nine months due primarily to
lower average raw material costs arising from an abundant world-
wide supply of agricultural commodities.
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Gross profit increased $96 million to $335 million for the
quarter as sales prices decreased to a lesser extent than the
decrease in average raw material costs. Gross profit increased
$60 million to $1 billion for the nine months due primarily to
gross profit attributable to increased grain merchandising and
transportation margins.
Selling, general and administrative expenses increased $11
million for the quarter to $185 million due primarily to
increased bad debt expense and to expenses attributable to
recently acquired operations. Selling, general and administrative
expenses increased $32 million for the nine months to $555
million due primarily to increased salary-related costs
associated with facility closures and consolidations, increased
bad debt expense and expenses attributable to recently acquired
operations. For both the quarter and nine months, these
increases were partially offset by decreased advertising
expenses.
Other income (expense) increased $52 million for the quarter to
$5 million due principally to increased equity in earnings of
unconsolidated affiliates resulting primarily from higher
valuations of the Company's private equity funds. Other income
(expense) decreased $31 million for the nine months to $(96)
million due principally to decreased gains on marketable
securities transactions partially offset by the increased equity
in earnings of unconsolidated affiliates.
The increase in income taxes for the quarter resulted primarily
from higher pretax earnings. The decrease in income taxes for the
nine months was due principally to a lower effective income tax
rate. The Company's effective income tax rate for the quarter
and nine months was 33.5% compared to an effective rate of 34.5%
and 34.7% for the quarter and nine month periods of a year ago,
respectively.
During the second quarter of fiscal 1999, the Company incurred an
extraordinary charge, net of tax, of $15 million resulting from
the repurchase of a portion of its outstanding 7% debentures due
May 2011.
Liquidity and Capital Resources
At March 31, 2000, the Company continued to show substantial
liquidity with working capital of $1.7 billion. Capital resources
remained strong as reflected in the Company's net worth of $6.1
billion. The Company's ratio of long-term debt to total capital
at March 31, 2000 is approximately 33%.
As described in Note 6 to the unaudited consolidated financial
statements, various grand juries under the direction of the
United States Department of Justice ("DOJ") have been
investigating possible violations by the Company and others with
respect to the sale of lysine, citric acid and high fructose corn
syrup. In connection with an agreement with the DOJ in fiscal
1997, the Company paid the United States fines of $100 million.
This agreement constitutes a global resolution of all matters
between the DOJ and the Company and brings to a close all DOJ
investigations of the Company. In addition, related civil class
actions and other proceedings have been filed against the Company
which could result in the Company being subject to monetary
damages, other sanctions and expenses. As also described in Note
6 to the unaudited consolidated financial statements, the Company
has settled certain civil federal class action suits involving
lysine, citric acid, sodium gluconate, and securities, and
certain state actions filed by indirect purchasers of lysine. The
Company has made provisions of $21 million in fiscal 1999, $48
million in fiscal 1998 and $200 million in fiscal 1997 to cover
the fines, litigation settlements related to the federal lysine
class action, federal securities class action, the federal citric
class action, and certain state actions filed by indirect
purchasers of lysine, certain actions filed by parties that opted
out of the class action settlements, certain other proceedings
and the related costs and expenses associated with the litigation
described above. Because of the early stage of other putative
class actions and proceedings, including those related to high
fructose corn syrup, the ultimate outcome and materiality of
these matters cannot presently be determined. Accordingly, no
provision for any liability that may result therefrom has been
made in the unaudited consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
There were no material changes during the quarter ended
March 31, 2000.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
In 1993, the State of Illinois Environmental Protection
Agency ("Illinois EPA") brought administrative enforcement
proceedings arising out of the Company's alleged failure to
obtain proper permits for certain pollution control
equipment at one of the Company's processing facilities in
Illinois. The Company and Illinois EPA executed a
settlement agreement which is currently before the Illinois
Pollution Control Board for approval. However, in June
1999,the United States Environmental Protection Agency (U.S.
EPA) issued a Notice of Violation involving some of the
matters covered under the pending State settlement and in
January 2000 the United States Department of Justice ("DOJ")
issued a Notice of Proposed Civil Enforcement Action against
the Company regarding these same matters. Further, in 1998,
the Illinois EPA filed an administrative enforcement
proceeding arising out of certain alleged permit exceedances
relating to the same facility. Also in 1998, the Company
voluntarily reported to the Illinois EPA certain other
permit exceedances and in 1999 Illinois EPA issued a Notice
of Violation relating to those exceedances from another
process at that same facility. The Company understands that
all pending and threatened enforcement actions at the
facility will be consolidated into two proceedings, one to
be brought by the State which will subsume the settlement
presently pending before the Board and another to be brought
by the Department of Justice. Also in 1998, the State of
Illinois filed a civil administrative action alleging
violations of the Illinois Environmental Protection Act, and
regulations promulgated thereunder, arising from a one time
release of denatured ethanol at one of its Illinois
distribution facilities. In January 2000 U.S. EPA issued a
Notice of Violation to the Company for another Illinois
facility regarding alleged emissions violations and the
failure to obtain proper permits for various equipment at
that facility. In management's opinion the settlements and
the remaining proceedings, all seeking compliance with
applicable environmental permits and regulations, will not,
either individually or in the aggregate, have a material
adverse affect on the Company's financial condition or
results of operations.
The Company is involved in approximately 30 administrative
and judicial proceedings in which it has been identified as
a potentially responsible party (PRP) under the federal
Superfund law and its state analogs for the study and clean-
up of sites contaminated by material discharged into the
environment. In all of these matters, there are numerous
PRPs. Due to various factors such as the required level of
remediation and participation in the clean-up effort by
others, the Company's future clean-up costs at these sites
cannot be reasonably estimated. However, in management's
opinion, these proceedings will not, either individually or
in the aggregate, have a material adverse affect on the
Company's financial condition or results of operations.
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LITIGATION REGARDING ALLEGED ANTICOMPETITIVE PRACTICES
The Company is currently a defendant in various lawsuits
related to alleged anticompetitive practices by the Company
as described in more detail below. The Company intends to
vigorously defend the actions unless they can be settled on
terms deemed acceptable to the parties.
GOVERNMENTAL INVESTIGATIONS
Federal grand juries in the Northern Districts of Illinois,
California and Georgia, under the direction of the DOJ, have
been investigating possible violations by the Company and
others with respect to the sale of lysine, citric acid and
high fructose corn syrup, respectively. In connection with
an agreement with the DOJ in fiscal 1997, the Company paid
the United States fines of $100 million. This agreement
constitutes a global resolution of all matters between the
DOJ and the Company and brought to a close all DOJ
investigations of the Company. The federal grand juries in
the Northern Districts of Illinois (lysine) and Georgia
(high fructose corn syrup) have been closed.
The Company has received notice that certain foreign
governmental entities were commencing investigations to
determine whether anticompetitive practices occurred in
their jurisdictions. Except for the investigations being
conducted by the Commission of the European Communities, the
Mexican Federal Competition Commission and the Brazilian
Department of Protection and Economic Defense as described
below, all such matters have been resolved as previously
reported. In June 1997, the Company and several of its
European subsidiaries were notified that the Commission of
the European Communities had initiated an investigation as
to possible anticompetitive practices in the amino acid
markets, in particular the lysine market, in the European
Union. On October 29, 1998, the Commission of the European
Communities initiated formal proceedings against the Company
and others and adopted a Statement of Objections. The reply
of the Company was filed on February 1, 1999 and the hearing
was held on March 1, 1999. On August 8, 1999, the
Commission of the European Communities adopted a
supplementary Statement of Objections expanding the period
of involvement as to certain other companies. In September
1997, the Company received a request for information from
the Commission of the European Communities with respect to
an investigation being conducted by that Commission into the
possible existence of certain agreements and/or concerted
practices in the citric acid market in the European Union.
On March 28, 2000, the Commission of European Communities
initiated formal proceedings against the Company and others
and adopted a Statement of Objections. In November 1998, a
European subsidiary of the Company received a request for
information from the Commission of the European Communities
with respect to an investigation being conducted by that
Commission into the possible existence of certain agreements
and/or concerted practices in the sodium gluconate market in
the European Union. On February 11, 1999 a Mexican
subsidiary of the Company was notified that the Mexican
Federal Competition Commission had initiated an
investigation as to possible anticompetitive practices in
the citric acid market in Mexico. On May 8, 2000, a
Brazilian subsidiary of the Company was notified of the
commencement of an administrative proceeding by the
Department of Protection and Economic Defense relative to
possible
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anticompetitive practices in the lysine market in Brazil.
The ultimate outcome and materiality of the proceedings of
the Commission of the European Communities cannot presently
be determined. The Company may become the subject of similar
antitrust investigations conducted by the applicable
regulatory authorities of other countries.
HIGH FRUCTOSE CORN SYRUP ACTIONS
The Company, along with other companies, has been named as
a defendant in thirty-one antitrust suits involving the
sale of high fructose corn syrup. Thirty of these actions
have been brought as putative class actions.
FEDERAL ACTIONS. Twenty-two of these putative class
actions allege violations of federal antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup, and seek injunctions
against continued alleged illegal conduct, treble damages
of an unspecified amount, attorneys fees and costs, and
other unspecified relief. The putative classes in these
cases comprise certain direct purchasers of high fructose
corn syrup during certain periods in the 1990s. These
twenty-two actions have been transferred to the United
States District Court for the Central District of Illinois
and consolidated under the caption In Re High Fructose Corn
Syrup Antitrust Litigation, MDL No. 1087 and Master File
No. 95-1477. The parties are currently appealing certain
discovery rulings to the United States Court of Appeals for
the Seventh Circuit.
On January 14, 1997, the Company, along with other
companies, was named a defendant in a non-class action
antitrust suit involving the sale of high fructose corn
syrup and corn syrup. This action which is encaptioned Gray
& Co. v. Archer Daniels Midland Co., et al, No. 97-69-AS,
and was filed in federal court in Oregon, alleges
violations of federal antitrust laws and Oregon and
Michigan state antitrust laws, including allegations that
defendants conspired to fix, raise, maintain and stabilize
the price of corn syrup and high fructose corn syrup, and
seeks treble damages, attorneys' fees and costs of an
unspecified amount. This action was transferred for
pretrial proceedings to the United States District Court
for the Central District of Illinois.
STATE ACTIONS. The Company, along with other companies,
also has been named as a defendant in seven putative class
action antitrust suits filed in California state court
involving the sale of high fructose corn syrup. These
California actions allege violations of the California
antitrust and unfair competition laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of high
fructose corn syrup, and seek treble damages of an
unspecified amount, attorneys fees and costs, restitution
and other unspecified relief. One of the California
putative classes comprises certain direct purchasers of
high fructose corn syrup in the State of California during
certain periods in the 1990s. This action was filed on
October 17, 1995 in Superior Court for the County of
Stanislaus, California and encaptioned Kagome Foods, Inc. v
Archer-Daniels-Midland Co. et al., Civil Action No. 37236.
This action has been removed to federal court and
consolidated with
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the federal class action litigation pending in the Central
District of Illinois referred to above. The other six
California putative classes comprise certain indirect
purchasers of high fructose corn syrup and dextrose in the
State of California during certain periods in the 1990s.
One such action was filed on July 21, 1995 in the Superior
Court of the County of Los Angeles, California and is
encaptioned Borgeson v. Archer-Daniels-Midland Co., et al.,
Civil Action No. BC131940. This action and four other
indirect purchaser actions have been coordinated before a
single court in Stanislaus County, California under the
caption, Food Additives (HFCS) cases, Master File No.
39693. The other four actions are encaptioned, Goings v.
Archer Daniels Midland Co., et al., Civil Action No. 750276
(Filed on July 21, 1995, Orange County Superior Court);
Rainbow Acres v. Archer Daniels Midland Co., et al., Civil
Action No. 974271 (Filed on November 22, 1995, San
Francisco County Superior Court); Patane v. Archer Daniels
Midland Co., et al., Civil Action No. 212610 (Filed on
January 17, 1996, Sonoma County Superior Court); and St.
Stan's Brewing Co. v. Archer Daniels Midland Co., et al.,
Civil Action No. 37237 (Filed on October 17, 1995,
Stanislaus County Superior Court). On October 8, 1997,
Varni Brothers Corp. filed a complaint in intervention with
respect to the coordinated action pending in Stanislaus
County Superior Court, asserting the same claims as those
advanced in the consolidated class action.
The Company, along with other companies, also has been
named a defendant in a putative class action antitrust suit
filed in Alabama state court. The Alabama action alleges
violations of the Alabama, Michigan and Minnesota antitrust
laws, including allegations that defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup, and seeks an injunction
against continued illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative class in the Alabama
action comprises certain indirect purchasers in Alabama,
Michigan and Minnesota during the period March 18, 1994 to
March 18, 1996. This action was filed on March 18, 1996 in
the Circuit Court of Coosa County, Alabama, and is
encaptioned Caldwell v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 96-17. On April 23, 1997, the court
granted the defendants' motion to sever and dismiss the non-
Alabama claims. On March 27, 2000, defendants moved for
summary judgment in light of a recent Alabama Supreme Court
case holding that the Alabama antitrust laws apply only to
intrastate commerce. That matter is currently pending.
LYSINE ACTIONS
The Company, along with other companies, had been named as a
defendant in twenty-three putative class action antitrust
suits involving the sale of lysine. Except for the actions
specifically described below, all such suits have been
settled, dismissed or withdrawn.
CANADIAN ACTIONS. The Company, along with other companies,
has been named as a defendant in one putative class action
antitrust suit filed in Ontario Court (General Division) in
which the plaintiffs allege the defendants reached
agreements with one another as to the price at which each of
them would sell lysine to customers in Ontario and as to the
total volume of
14
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lysine that each company would supply in Ontario in
violation of Sections 45 (1)(c) and 61(1)(b)of the
Competition Act. The putative class is comprised of certain
indirect purchasers in Ontario during the period from June
1, 1992 to June 27, 1995. The plaintiffs seek C$25 million
for violations of the Competition Act, C$10 million in
punitive, exemplary and aggravated damages, interest and
costs of the action. This action was served upon the
Company on June 11, 1999 and is encaptioned Rein Minnema and
Minnema Farms Ltd. v. Archer-Daniels-Midland Company, et
al., Court File No. G23495-99. The Company, along with
other companies, has been named as a respondent in a motion
seeking authorization to institute a class action filed in
Superior Court in the Province of Quebec, District of
Montreal, in which the applicants allege the respondents
conspired, combined, agreed or arranged to prevent or
lessen, unduly, competition with respect to the sale of
lysine in Canada in violation of Section 45(1)(c) of the
Competition Act. The putative class is comprised of certain
indirect purchasers in Quebec after June, 1992. The
applicants seek at least C$4,460,000, costs of
investigation, attorneys' fees and interest. This motion is
encaptioned Option Consommateurs, et al v. Archer-Daniels-
Midland Company, et al., Court No. 500-06-000089-991.
STATE ACTION. The Company has been named as a defendant,
along with other companies, in one putative class action
antitrust suit alleging violations of the Alabama antitrust
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels the
prices of lysine, and seeking an injunction against
continued alleged illegal conduct, damages of an
unspecified amount, attorneys fees and costs, and other
unspecified relief. The putative class in this action
comprises certain indirect purchasers of lysine in the
State of Alabama during certain periods in the 1990s. This
action was filed on August 17, 1995 in the Circuit Court of
DeKalb County, Alabama, and is encaptioned Ashley v. Archer-
Daniels-Midland Co., et al., Civil Action No. 95-336. On
March 13, 1998, the court denied plaintiff's motion for
class certification. Subsequently, the plaintiff amended
his complaint to add approximately 300 individual
plaintiffs. On March 23, 2000, defendants filed a motion
for summary judgment in light of a recent Alabama Supreme
Court case holding that the Alabama antitrust laws apply
only to intrastate commerce. That motion is currently
pending.
CITRIC ACID ACTIONS
The Company, along with other companies, had been named as a
defendant in fourteen putative class action antitrust suits
and two non-class action antitrust suits involving the sale
of citric acid. Except for the action specifically described
below, all such suits have been settled or dismissed.
CITRIC
CANADIAN ACTIONS. The Company, along with other companies,
has been named as a defendant in three actions filed
pursuant to the Class Proceedings Act, 1992, in which the
plaintiffs allege that the defendants violated the
Competition Act with respect to the sale of citric acid in
Canada. One of these actions was filed in the Superior
Court of Justice, in Newmarket,
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Ontario, and encaptioned Ashworth v. Archer-Daniels-Midland
Company, et al., Court file No. 53510/99. The putative
class is comprised of certain indirect purchasers in
Ontario during the period from July 1, 1991 to June 27,
1995. The plaintiffs in this action seek general damages
in the amount of C$30 million and punitive and exemplary
damages in the amount of C$30 million, interest, costs and
fees. The second action was filed in the Superior Court of
Justice in London, Ontario, and encaptioned Fairlee Fruit
Juice Limited v. Archer-Daniels-Midland Company, et al.,
Court File No. 32562/99. The plaintiffs in this action
seek general damages in the amount of C$300 million,
punitive and exemplary damages in the amount of C$20
million, interest, costs and fees. The Company has become
aware of, but has not yet been formally served with, a
third action commenced in Barrie, Ontario in the (Ontario)
Superior Court of Justice under the Class Proceedings Act.
In that action, encaptioned E. D. Smith & Sons, Limited v.
Archer Daniels Midland Company et al., Court File No. 99-
B673, the putative class is persons or corporations who
were resident or carried on business in Ontario and who
were direct and indirect purchasers of citric acid between
July 1, 1991 and July 27, 1995. The action claims damages
in the amount of $C24,000,000 for breach of the Competition
Act, conspiracy and infliction of economic injury, plus
$C10,000,000 for punitive, exemplary and aggravated
damages, plus interest and costs. All three Ontario
actions referred to above have now been transferred to
Toronto, Ontario. The Company, along with other companies,
has been named as a respondent in a motion seeking
authorization to institute a class action filed in Superior
Court in the Province of Quebec, District of Montreal, in
which the applicants allege the respondents comprised,
combined, agreed or arranged to prevent or lessen, unduly,
competition with respect to the sale of citric acid in
Canada in violation of Section 45(1)(c) of the Competition
Act. The putative class is comprised of certain indirect
purchasers in Quebec since July, 1991. The applicants seek
C$3,115,000, the costs of investigation, attorneys' fees
and interest. This motion is encaptioned Option
Consommateurs, et al. v. Archer-Daniels-Midland-Company, et
al., Court No.500-06-000094-991.
HIGH FRUCTOSE CORN SYRUP/CITRIC ACID STATE CLASS ACTIONS
The Company, along with other companies, has been named as
a defendant in five putative class action antitrust suits
involving the sale of both high fructose corn syrup and
citric acid. Two of these actions allege violations of the
California antitrust and unfair competition laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the prices of high
fructose corn syrup and citric acid, and seek treble
damages of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. The putative
class in one of these California cases comprises certain
direct purchasers of high fructose corn syrup and citric
acid in the State of California during the period January
1, 1992 until at least October 1995. This action was filed
on October 11, 1995 in the Superior Court of Stanislaus
County, California and is entitled Gangi Bros. Packing Co.
v. Archer-Daniels-Midland Co., et al., Civil Action No.
37217. The putative class in the other California case
comprises certain indirect purchasers of high fructose corn
syrup and citric acid in the state of California
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during the period October 12, 1991 until November 20, 1995.
This action was filed on November 20, 1995 in the Superior
Court of San Francisco County and is encaptioned MCFH, Inc.
v. Archer-Daniels-Midland Co., et al., Civil Action No.
974120. The California Judicial Council has bifurcated the
citric acid and high fructose corn syrup claims in these
actions and coordinated them with other actions in San
Francisco County Superior Court and Stanislaus County
Superior Court. As noted in prior filings, the Company
accepted a settlement agreement with counsel for the citric
acid plaintiff class. This settlement received final court
approval and the case was dismissed on September 30, 1998.
The Company, along with other companies, also has been
named as a defendant in at least one putative class action
antitrust suit filed in West Virginia state court involving
the sale of high fructose corn syrup and citric acid. This
action also alleges violations of the West Virginia
antitrust laws, including allegations that the defendants
agreed to fix, stabilize and maintain at artificially high
levels the prices of high fructose corn syrup and citric
acid, and seeks treble damages of an unspecified amount,
attorneys fees and costs, and other unspecified relief. The
putative class in the West Virginia action comprises
certain entities within the State of West Virginia that
purchased products containing high fructose corn syrup
and/or citric acid for resale from at least 1992 until
1994. This action was filed on October 26, 1995, in the
Circuit Court for Boone County, West Virginia, and is
encaptioned Freda's v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 95-C-125. The Company, along with other
companies, also has been named as a defendant in a putative
class action antitrust suit filed in the Superior Court for
the District of Columbia involving the sale of high
fructose corn syrup and citric acid. This action alleges
violations of the District of Columbia antitrust laws,
including allegations that the defendants agreed to fix,
stabilize and maintain at artificially high levels the
prices of high fructose corn syrup and citric acid, and
seeks treble damages of an unspecified amount, attorneys
fees and costs, and other unspecified relief. The putative
class in the District of Columbia action comprises certain
persons within the District of Columbia that purchased
products containing high fructose corn syrup and/or citric
acid during the period January 1, 1992 through December 31,
1994. This action was filed on April 12, 1996 in the
Superior Court for the District of Columbia, and is
encaptioned Holder v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 96-2975. On November 13, 1998, plaintiff's
motion for class certification was granted. The Company,
along with other companies, has been named as a defendant
in a putative class action antitrust suit filed in Kansas
state court involving the sale of high fructose corn syrup
and citric acid. This action alleges violations of the
Kansas antitrust laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup and citric acid, and seeks treble damages of an
unspecified amount, court costs and other unspecified
relief. The putative class in the Kansas action comprises
certain persons within the State of Kansas that purchased
products containing high fructose corn syrup and/or citric
acid during at least the period January 1, 1992 through
December 31, 1994. This action was filed on May 7, 1996 in
the District Court of Wyandotte County, Kansas and is
encaptioned Waugh v. Archer-Daniels-Midland Co., et al.,
Case No. 96-C-2029. Plaintiff's motion for class
certification is currently pending.
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HIGH FRUCTOSE CORN SYRUP/CITRIC ACID/LYSINE STATE CLASS
ACTIONS
The Company, along with other companies, has been named as
a defendant in six putative class action antitrust suits
filed in California state court involving the sale of high
fructose corn syrup, citric acid and/or lysine. These
actions allege violations of the California antitrust and
unfair competition laws, including allegations that the
defendants agreed to fix, stabilize and maintain at
artificially high levels the prices of high fructose corn
syrup, citric acid and/or lysine, and seek treble damages
of an unspecified amount, attorneys fees and costs,
restitution and other unspecified relief. One of the
putative classes comprises certain direct purchasers of
high fructose corn syrup, citric acid and/or lysine in the
State of California during a certain period in the 1990s.
This action was filed on December 18, 1995 in the Superior
Court for Stanislaus County, California and is encaptioned
Nu Laid Foods, Inc. v. Archer-Daniels-Midland Co., et al.,
Civil Action No. 39693. The other five putative classes
comprise certain indirect purchasers of high fructose corn
syrup, citric acid and/or lysine in the State of California
during certain periods in the 1990s. One such action was
filed on December 14, 1995 in the Superior Court for
Stanislaus County, California and is encaptioned Batson v.
Archer-Daniels-Midland Co., et al., Civil Action No. 39680.
The other actions are encaptioned Nu Laid Foods, Inc. v.
Archer Daniels Midland Co., et al., No 39693 (Filed on
December 18, 1995, Stanislaus County Superior Court);
Abbott v. Archer Daniels Midland Co., et al., No. 41014
(Filed on December 21, 1995, Stanislaus County Superior
Court); Noldin v. Archer Daniels Midland Co., et al., No.
41015 (Filed on December 21, 1995, Stanislaus County
Superior Court); Guzman v. Archer Daniels Midland Co., et
al., No. 41013 (Filed on December 21, 1995, Stanislaus
County Superior Court) and Ricci v. Archer Daniels Midland
Co., et al., No. 96-AS-00383 (Filed on February 6, 1996,
Sacramento County Superior Court). As noted in prior
filings, the plaintiffs in these actions and the lysine
defendants have executed a settlement agreement that has
been approved by the court and the California Judicial
Council has bifurcated the citric acid and high fructose
corn syrup claims and coordinated them with other actions
in San Francisco County Superior Court and Stanislaus
County Superior Court.
MONOSODIUM GLUTAMATE ACTIONS
The Company, along with other companies, has been named as
a defendant in eleven putative class action antitrust suits
involving the sale of monosodium glutamate and/or other
food flavor enhancers.
FEDERAL ACTIONS. Eight of these putative class actions
allege violations of federal antitrust laws, including
allegations that the defendants agreed to fix, stabilize
and maintain at artificially high levels the price of
monosodium glutamate, disodium inosinate and disodium
guanylate, and seek various relief, including treble
damages of an unspecified amount, attorneys fees and costs,
and other unspecified relief. The putative classes in
these cases comprise certain direct purchasers of
monosodium glutamate, disodium inosinate and/or disodium
guanylate during certain periods in the 1990's to the
present. The Company has never produced or sold disodium
inosinate or disodium guanylate. One such action was filed
18
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on October 27, 1999 in the United States District Court for
the Northern District of California and is encaptioned
Thorp, Inc. v. Archer-Daniels-Midland Company, et al.,
NoC99 4752 (VRW). The second action was filed on October
27, 1999 in the United States District Court for the
Northern District of California and is encaptioned Premium
Ingredients, Ltd. v. Archer-Daniels-Midland Co., et al.,
No. C 99 4742(MJJ). The third action was filed on October
28, 1999 in the United States District Court for the
Northern District of California and is encaptioned Felbro
Food Products v. Archer-Daniels-Midland Company, et al.,
No.C99 4761(MJJ). The fourth action was filed on November
17, 1999 in the United States District Court for the
Northern District of California and is encaptioned First
Spice Mixing Co., Inc. v. Archer Daniels Midland Co., et
al., No. C 99 4977 (PJH). The fifth action was filed on
November 23, 1999 in the United States District Court for
the District of New Jersey and is encaptioned Diversified
Foods and Seasonings, Inc. v. Archer Daniels Midland Co.,
Inc. et al., No. 99 CV 5501. The sixth action was filed on
December 16, 1999 in the United States District Court for
the Eastern District of New York and is encaptioned M. Phil
Yen, Inc. v. Ajinomoto Co. Inc., et al., No. 99 Div 06514
(EK). The seventh action was filed on January 27, 2000 in
the Northern District of California and is encaptioned
Chicago Ingredients, Inc. v. Archer-Daniels-Midland Co., et
al., No. C 00 0308 (JL). The eighth action was filed on
April 12, 2000 in the Eastern District of Pennsylvania and
is encaptioned Heller Seasonings & Ingredients, Inc. v.
Ajinomoto U.S.A., Inc., et al., No. 00-CV-1905. The
Judicial Panel on Multidistrict Litigation has consolidated
these actions for coordinated pretrial discovery in the
United States District Court of the District of Minnesota.
STATE ACTION. The Company, along with at least one other
company, also has been named as a defendant in three
putative class action antitrust suits filed in California
state court involving the sale of monosodium glutamate
and/or other food flavor enhancers. These actions allege
violations of California antitrust and unfair competition
laws, including allegations that the defendants agreed to
fix, stabilize and maintain at artificially high levels the
price of monosodium glutamate and/or other food flavor
enhancers, and seek treble damages of an unspecified
amount, restitution, attorneys' fees and costs, and other
unspecified relief. The putative classes in these actions
comprise certain indirect purchasers of monosodium
glutamate and/or other food flavor enhancers in the State
of California during certain periods in the 1990's. The
first action originally was filed on June 25, 1999 in the
Superior Court of San Francisco County and in encaptioned
Fu's Garden Restaurant v. Archer-Daniels-Midland Company,
et al., Civil Action No. 304471. The second action was
filed on January 14, 2000 in the Superior Court of San
Francisco County and is encaptioned JMN Restaurant
Management, Inc. v. Ajinomoto Co., Inc., et al., Civil
Action No. 309236. The third action was filed on May 2,
2000 in the Superior Court of San Francisco County and is
encaptioned Tanuki Restaurant and Lilly Zapanta v. Archer
Daniels Midland Co., et al, Civil Action No. 311871.
OTHER
The Company has made provisions to cover certain legal
proceedings and related costs and expenses as described in
the notes to the unaudited consolidated financial statements
and management's discussion of operations
19
Page 20
and financial condition. However, because of the early stage
of other putative class actions and proceedings described
above, including those related to high fructose corn syrup,
the ultimate outcome and materiality of these matters cannot
presently be determined. Accordingly, no provision for any
liability that may result therefrom has been made in the
unaudited consolidated financial statements.
20
Page 21
Item 6. Exhibits and Reports on Form 8-K
a)Exhibits
(3)(i) Articles of Incorporation
Composite Certificate of Incorporation, as
amended, filed on September 22, 1999 as Exhibit
(3)(i) to Form 10K for the year ended June 30,
1999, is incorporated herein by reference.
(3)(ii)Bylaws, as amended and restated.
(27) Financial Data Schedules
b)A Form 8-K was not filed during the quarter ended March
31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ARCHER-DANIELS-MIDLAND COMPANY
/s/ D. J. Schmalz
D. J. Schmalz
Vice President
and Chief Financial Officer
/s/ D. J. Smith
D. J. Smith
Vice President, Secretary and
General Counsel
Dated: May 12, 2000
21
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Exhibit 3 (ii)
BYLAWS
OF
ARCHER-DANIELS-MIDLAND COMPANY
(Giving Effects to All Amendments through April 28, 2000)
ARTICLE I.
MEETINGS OF STOCKHOLDERS.
Section 1.1. Annual Meeting. The annual meeting of
stockholders shall be held at such date, time and place, either
within or without the State of Delaware, as may be designated by
resolution of the Board of Directors from time to time. At the
annual meeting, directors shall be elected and such other
business transacted as shall have been properly brought before
the meeting.
Section 1.2. Special Meeting. Special meetings of
stockholders for any purpose or purposes may be called by the
Chairman of the Board, the President, a majority of the Board of
Directors, or a majority of the Executive Committee, and shall be
called by the Secretary upon the request, in writing, of the
stockholders owning a majority of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote at
such meeting. A stockholder request for a special meeting shall
be signed, dated and delivered to the Secretary, shall state the
purpose of the proposed meeting, and shall provide the
information required by Section 1.4(c) hereof. The Board of
Directors or, in the absence of action by the Board of Directors,
the Chairman of the Board, shall have the sole power to determine
the date, time and place for any special meeting of stockholders
and to set a record date for the determination of stockholders
entitled to vote at such meeting pursuant to Section 1.11 hereof.
Following such determination, it shall be the duty of the
Secretary to cause notice to be given to the stockholders
entitled to vote at such meeting, in the manner set forth in
Section 1.3 hereof, that a meeting will be held at the place,
time and date and in accordance with the record date determined
by the Board of Directors or the Chairman of the Board. The
stockholders requesting the special meeting shall not have the
power to give notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written
notice of the meeting shall be given that shall state the place,
date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the Certificate of
Incorporation or these By-laws, the written notice of any meeting
shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled
to vote at such meeting. If mailed, such notice shall be deemed
given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the
records of the Corporation.
Section 1.4. Advance Notice Requirements for Stockholder
Proposals. The following procedures shall govern all cases in
which a stockholder seeks to propose business to be addressed at
a meeting of stockholders or to nominate persons to stand for
election as directors of the Corporation (a "Stockholder
Proposal"). No business shall be transacted at a meeting of
stockholders except in accordance with the following procedures.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the
Corporation. Notwithstanding any language in these by-laws to
the contrary, this section shall not apply to any right of
holders of preferred shares of the Corporation to nominate and
elect a specified number of directors in certain circumstances to
the extent such procedures are set forth in the Certificate of
Incorporation.
(a) Annual Meetings of Stockholders.
22
Page 23
(1) A Stockholder Proposal may be brought before an
annual meeting of stockholders only (i) pursuant to the
Corporation's notice of meeting delivered pursuant to Section 1.3
hereof (or any supplement thereto), (ii) by or at the direction
of the Board of Directors (or any duly authorized committee
thereof) or the Chairman of the Board or (iii) by any stockholder
of the Corporation who was a stockholder of record of the
Corporation at the time the notice provided for in this Section
1.4 is delivered to the Secretary of the Corporation, who is
entitled to vote at the meeting and who complies with the notice
procedures set forth in subparagraphs (2) and (3) of this
paragraph (a) in this Section 1.4.
(2) For a Stockholder Proposal to be properly brought
before an annual meeting by a stockholder pursuant to clause
(iii) of paragraph (a)(1) of this Section 1.4, the stockholder
must have given timely notice thereof in writing to the Secretary
of the Corporation and the subject of the Stockholder Proposal
must otherwise be a proper matter for stockholder action as
determined by the Board of Directors. The stockholder's notice
shall contain, at a minimum, the information set forth in Section
1.4(c). To be timely, a stockholder's notice shall be delivered
to the Secretary at the principal executive offices of the
Corporation not less than sixty (60) nor more than ninety (90)
days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that is not
within thirty (30) days before or after such anniversary date,
the stockholder's notice in order to be timely must be so
received not later than the close of business on the tenth (10th)
day following the day on which such notice of the date of the
annual meeting was mailed or public disclosure of the date of the
annual meeting was made, whichever first occurs. In no event
shall the public announcement of an adjournment or postponement
of an annual meeting of stockholders commence a new time period
(or extend any time period) for the giving of a stockholder's
notice as described above.
(3) Notwithstanding anything in paragraph (a)(2) of
this Section 1.4 to the contrary, in the event that the
Stockholder Proposal relates to the nomination of candidates for
director and the number of directors to be elected to the Board
of Directors of the Corporation at an annual meeting is increased
and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the
increased Board of Directors at least one hundred days prior to
the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 1.4 shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made
by the Corporation.
(b) Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall
have been described in the Corporation's notice of meeting given
pursuant to Section 1.3 hereof. To the extent such business
includes the election of directors, a Stockholder Proposal
nominating persons to stand for election as directors may be made
at a special meeting of stockholders only (i) by or at the
direction of the Board of Directors (or any duly authorized
committee thereof) or the Chairman of the Board, or (ii) by any
stockholder of the Corporation who is a stockholder of record at
the time the notice provided for in this Section 1.4(b) is
delivered to the Secretary of the Corporation, who is entitled to
vote at the special meeting and who gives timely notice in
writing by the Secretary of the Corporation. The stockholder's
notice shall contain, at a minimum, the information set forth in
Section 1.4(c). To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of
the Corporation not later than the close of business on the tenth
day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed
by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment or
postponement of a special meeting commence a new time period (or
extend any time period) for the giving of a stockholder's notice
as described above.
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Page 24
(c) Contents of Stockholder's Notice. Any stockholder's
notice required by this Section 1.4 shall set forth the following
information: As to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the Stockholder
Proposal is made, the stockholder's notice shall set forth (i)
the name and address of such stockholder and of such beneficial
owner, as they appear on the Corporation's books, (ii) the class
and number of shares of capital stock of the Corporation which
are owned beneficially and of record by such stockholder and such
beneficial owner and (iii) a representation that such stockholder
intends to appear in person or by proxy at the stockholder
meeting. For any Stockholder Proposal that seeks to nominate
persons to stand for election as directors of the Corporation,
the stockholder's notice also shall include (i) a description of
all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made,
(ii) a representation whether the stockholders or the beneficial
owners, if any, intend or are part of a group which intends to
(1) deliver a proxy statement and/or form of proxy to holders of
at least the percentage of the Corporation's outstanding capital
stock required to elect the nominee and/or (2) otherwise solicit
proxies from stockholders in support of such nomination, and
(iii) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations promulgated thereunder. For any
Stockholder Proposal that seeks to nominate persons to stand for
election as directors of the Corporation, the stockholder's
notice also shall state, as to each person whom the stockholders
propose to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the
person, (ii) the principal occupation and employment of the
person, (iii) the written consent of each proposed nominee to
being named as a nominee and to serve as a director if elected.,
(iv) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the
person and (v) any other information relating to the person that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Exchange Act, and the rules and regulations promulgated
thereunder. The Corporation may require any proposed nominee to
furnish such other information as it may reasonably require to
determine the eligibility of such proposed nominee to serve as a
director of the Corporation. For any Stockholder Proposal that
seeks to propose matters to be considered at a stockholder
meeting other than the nomination of persons to stand for
election as directors of the Corporation, the stockholder's
notice shall set forth for each item of business proposed for
consideration (i) a description of the item of business, (ii) the
text of the proposal or business (including the text of any
resolutions proposed for consideration and in the event that such
business includes a proposal to amend the by-laws of the
Corporation, the language of the proposed amendment), (iii) the
reasons for conducting such business at the stockholder meeting,
(iv) and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
Stockholder Proposal is made, and (v) any other information
relating to the stockholder, the beneficial owner, or the
proposed business that would be required to be disclosed in a
proxy statement or other filings in connection with solicitations
of proxies relating to the proposed item of business pursuant to
Section 14 of the Exchange Act, and the rules and regulations
promulgated thereunder.
(d) Only Stockholder Proposals made in accordance with the
procedures set forth in this Section 1.4 shall be considered at
an annual or special meeting of stockholders of the Corporation.
Except as otherwise provided by law, the chair of the meeting
shall have the power and duty to (i) determine whether a
Stockholder Proposal was made in accordance with the procedures
set forth in this Section 1.4 and (ii) if any Stockholder
Proposal is not in compliance with this Section 1.4, including
whether the stockholder or beneficial owner, if any, on whose
behalf the Stockholder Proposal is made solicits (or is part of a
group which solicits) or fails to so solicit (as the case may be)
proxies in support of the Stockholder Proposal in compliance with
such stockholder's representation as required by Section (c) of
this Section 1.4, to declare that such Stockholder Proposal shall
be disregarded.
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(e) For purposes of this Section 1.4, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(f) Notwithstanding the foregoing provisions of this
Section 1.4, a stockholder also shall comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section
1.4. Nothing in this Section 1.4 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 1.5. Postponement and Cancellation of Meeting. Any
previously scheduled annual or special meeting of the
stockholders may be postponed and any previously scheduled annual
or special meeting of the stockholders called by the Chairman of
the Board, the President, a majority of the Board of Directors,
or a majority of the Executive Committee may be canceled by
resolution of the Board of Directors upon public notice given
prior to the time previously scheduled for such meeting of
stockholders.
Section 1.6 Quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, at each
meeting of stockholders the presence in person or by proxy of the
holders of a majority in voting power of the outstanding shares
of stock entitled to vote at the meeting shall be necessary and
sufficient to constitute a quorum. In the absence of a quorum,
the chair of the meeting may adjourn the meeting from time to
time in the manner provided in Section 1.10 hereof until a quorum
shall attend. Shares of the Corporation's own stock belonging to
the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for
quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation or any subsidiary of the
Corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity. The chair of the
meeting shall have the power and the duty to determine whether a
quorum is present at any meeting of stockholders.
Section 1.7. Officers for Meeting of Stockholders.
Meetings of stockholders shall be presided over by the Chairman
of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the
foregoing persons by a chair designated by the Board of
Directors, or in the absence of such designation by a chair
chosen at the meeting by a plurality vote. The Secretary shall
act as secretary of the meeting, but in his absence the chair of
the meeting may appoint any person to act as secretary of the
meeting.
Section 1.8. Conduct of Meetings. Every meeting of
stockholders shall be presided over by the chair of the meeting
selected pursuant to Section 1.7, hereof. The date and time of
the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting shall be determined
by the chair of the meeting and announced at the meeting. The
Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it
shall deem appropriate. Except to the extent inconsistent with
such rules and regulations as adopted by the Board of Directors,
the chair of the meeting shall have the exclusive right and
authority to prescribe such rules, regulations and procedures and
to do all such acts as, in the judgment of the chair, are
appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of
Directors or prescribed by the chair of the meeting, may include,
without limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of
those present; (iii) limitations on attendance at or
participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or
such other persons as the chair of the meeting shall determine;
(iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on or the
elimination of time allotted to questions or comments by
participants. Unless and to the extent determined by the Board
of Directors or the chair of the meeting, meetings of
stockholders shall not be required to be held in accordance with
the rules of parliamentary procedure.
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Section 1.9. Voting; Proxies. Except as otherwise provided
by or pursuant to the provisions of the Certificate of
Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of
stock held by such stockholder which has voting power upon the
matter in question. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy,
but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A
proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance
with applicable law bearing a later date to the Secretary of the
Corporation. Voting at meetings of stockholders need not be by
written ballot. At all meetings of stockholders, a plurality of
the votes cast shall be sufficient to elect directors. All other
elections and questions shall, unless otherwise provided by the
Certificate of Incorporation, these by-laws, the rules or
regulations of any stock exchange applicable to the Corporation,
or applicable law or pursuant to any regulation applicable to the
Corporation or its securities, be decided by the affirmative vote
of the holders of a majority in voting power of the shares of
stock of the Corporation which are present in person or by proxy
and entitled to vote thereon.
Section 1.10. Adjournment of Meeting. Any meeting of
stockholders, annual or special, may be adjourned solely by the
chair of the meeting from time to time to reconvene at the same
or some other time, date and place. The stockholders present at
a meeting shall not have authority to adjourn the meeting.
Notice need not be given of any such adjourned meeting if the
time, date and place thereof are announced at the meeting at
which the adjournment is taken. If the time, date and place of
the adjourned meeting are not announced at the meeting at which
the adjournment is taken, then the Secretary of the Corporation
shall give written notice of the time, date and place of the
adjourned meeting not less than ten (10) days prior to the date
of the adjourned meeting. Notice of the adjourned meeting also
shall be given if the meeting is adjourned in a single
adjournment to a date more than 30 days or in successive
adjournments to a date more than 120 days after the original date
fixed for the meeting.
At an adjourned meeting at which a quorum is present, the
stockholders may transact any business which might have been
transacted at the original meeting. Once a share is represented
for any purpose at a meeting, it shall be present for quorum
purposes for the remainder of the meeting and for any adjournment
of that meeting unless a new record date is or must be set for
the adjourned meeting. A new record date shall be set if the
meeting is adjourned in a single or successive adjournments to a
date more than 120 days after the original date fixed for the
meeting. If after the adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
adjourned meeting consistent with the new record date.
Section 1.11 Fixing Date for Determination of Stockholders
of Record.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action other than stockholder action by written consent,
the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which
record date: (i) in the case of determination of stockholders
entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more
than sixty (60) nor less than ten (10) days before the original
date of such meeting, and (ii) in the case of any other lawful
action other than stockholder action by written consent, shall
not be more than sixty days prior to such other action. If no
record date is fixed by the Board of Directors: (i) the record
date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held, and (ii)
the record date for determining stockholders for any other
purpose (other than stockholder action by written consent)
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shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting and
shall fix a new record date for the adjourned meeting if the
meeting is adjourned in a single or successive adjournments to a
date more than 120 days after the original date fixed for the
meeting.
Section 1.12. Procedures for Stockholder Action by Consent.
1.12.1 Request for Record Date. The record date for
determining stockholders entitled to express consent to corporate
action in writing without a meeting shall be as fixed by the
Board of Directors or as otherwise established under this Section
1.12.1. Any person seeking to have the stockholders authorize or
take corporate action by written consent without a meeting shall,
by written notice addressed to the Secretary and delivered to the
Corporation and signed by a stockholder of record, request that a
record date be fixed for such purpose. The written notice shall
contain at a minimum the information required in Section 1.4(c)
for a Stockholder Proposal and shall state the reasons for
soliciting consents for such action. The Board of Directors
shall have ten (10) days following the date of receipt of the
notice to determine the validity of the request, including the
sufficiency of the information provided. During the ten (10) day
period, the Corporation may require the stockholder of record
and/or beneficial owner requesting a record date for proposed
stockholder action by consent to furnish such other information
as it may reasonably require to determine the validity of the
request for a record date. Following the determination of the
validity of the request, and no later than ten (10) days after
the date on which such request is received by the Corporation,
the Board of Directors may fix a record date for such purpose
which shall be no more than ten (10) days after the date upon
which the resolution fixing the record date is adopted by the
Board of Directors and shall not precede the date such resolution
is adopted. If the Board of Directors fails within ten (10) days
after the date the Corporation receives such notice to fix a
record date for such purpose, the record date shall be the day on
which the first written consent is delivered to the Corporation
in the manner described in Section 1.12.3 below unless prior
action by the Board of Directors is required by law, in which
event the record date shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking
such prior action.
1.12.2 Form of Consent. Every written consent purporting
to take or authorize the taking of corporate action and/or
related revocations (each such written consent and related
revocation is referred to in this Section 1.12 as a "Consent")
shall bear the date of signature of each stockholder who signs
the Consent, and no Consent shall be effective to take the
corporate action referred to therein unless, within 60 days of
the earliest dated Consent delivered in the manner required by
this Section 1.12, Consents signed by a sufficient number of
stockholders to take such action are so delivered to the
Corporation.
1.12.3 Delivery of Consent. A Consent shall be delivered
to the Corporation by delivery to its registered office in the
State of Delaware or to the Secretary of the Corporation at the
Corporation's principal place of business. Delivery to the
Corporation's registered office shall be made by hand or by
certified or registered mail, return receipt requested.
In the event of the delivery to the Corporation of a
Consent, the Secretary of the Corporation shall provide for the
safe-keeping of such Consent and shall promptly conduct such
ministerial review of the sufficiency of the Consents and of the
validity of the action to be taken by stockholder consent as the
Secretary deems necessary or appropriate, including, without
limitation, whether the holders of a number of shares having the
requisite voting power to authorize or take the action specified
in the Consent have given consent; provided, however, that if the
corporate action to which the Consent relates is the removal or
replacement of one or more members of the Board of Directors, the
Secretary of the Corporation shall promptly designate two
persons, who shall not be members of the Board of Directors, to
serve as Inspectors with respect to such Consent and such
Inspectors shall discharge the functions of the Secretary of the
Corporation under this Section 1.12.3. If after such
investigation the Secretary or the Inspectors (as the case may
be)
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shall determine that the Consent is valid and that the action
therein specified has been validly authorized, that fact shall
forthwith be certified on the records of the Corporation kept for
the purpose of recording the proceedings of meetings of
stockholders, and the Consent shall be filed in such records, at
which time the Consent shall become effective as stockholder
action. In conducting the investigation required by this Section
1.12.3, the Secretary or the Inspectors (as the case may be) may,
at the expense of the Corporation, retain special legal counsel
and any other necessary or appropriate professional advisors, and
such other personnel as they may deem necessary or appropriate to
assist them, and shall be fully protected in relying in good
faith upon the opinion of such counsel or advisors.
No action by written consent without a meeting shall be
effective until such date as the Secretary or the Inspectors (as
the case may be) certify to the Corporation that the Consents
delivered to the Corporation in accordance with Section 1.12.3
represent at least the minimum number of votes that would be
necessary to take the action.
Nothing contained in this Section 1.12.3 shall in any way be
construed to suggest or imply that the Board of Directors or any
stockholder shall not be entitled to contest the validity of any
Consent or revocation thereof, whether before or after such
certification by the Secretary or the Inspectors, or to take any
other action (including, without limitation, the commencement,
prosecution, or defense of any litigation with respect thereto,
and the seeking of injunctive relief in such litigation).
Section 1.13. Inspectors of Election. The Corporation may,
and shall if required by law, in advance of any meeting of
stockholders, appoint one or more inspectors of election, who may
be employees of the Corporation, to act at the meeting or any
adjournment thereof and to make a written report thereof. The
Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. In the
event that no inspector so appointed or designated is able to act
at a meeting of stockholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath to execute faithfully the
duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector or inspectors so
appointed or designated shall (i) ascertain the number of shares
of capital stock of the Corporation outstanding and the voting
power of each such share, (ii) determine the shares of capital
stock of the Corporation represented at the meeting and the
validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the
Corporation represented at the meeting and such inspectors' count
of all votes and ballots. Such certification and report shall
specify such other information as may be required by law. In
determining the validity and counting of proxies and ballots cast
at any meeting of stockholders of the Corporation, the inspectors
may consider such information as is permitted by applicable law.
No person who is a candidate for an office at an election may
serve as an inspector at such election.
Section 1.14 List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where
the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Upon the willful neglect or refusal of the directors to produce
such a list at any meeting for the election of directors, they
shall be ineligible for election to any office at such meeting.
Except as otherwise provided by law, the stock ledger shall be
the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books
of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
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ARTICLE II.
BOARD OF DIRECTORS.
Section 2.1 Number; Qualifications. The Board of Directors
shall consist of one or more members, the number thereof to be
determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
Section 2.2 Election; Resignation; Vacancies. At each
annual meeting, the stockholders shall elect directors each of
whom shall hold office for a term of one year or until his
successor is duly elected and qualified, subject to such
director's earlier death, resignation, disqualification or
removal. Any director may resign at any time upon written notice
to the Corporation. Such resignation need not be accepted to be
effective. Unless otherwise provided by law or the Certificate
of Incorporation, any newly created directorship or any vacancy
occurring on the Board of Directors for any cause may be filled
solely by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum, or by
the sole remaining director, and each director so elected shall
hold office until the expiration of the term of office of the
director so replaced or until the director's successor is elected
and qualified. The stockholders shall not have the power to
appoint directors to any newly created directorship or vacancy.
Section 2.3 Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without
the State of Delaware and at such times as the Board of Directors
may from time to time determine. It shall not be necessary to
give notice of regular meetings of the Board of Directors.
Section 2.4 Special Meetings. Special meetings of the
Board of Directors may be called by the Chairman of the Board,
the President, the Executive Committee, or by three (3) or more
directors. Notice of a special meeting of the Board of Directors
shall be given by the person or persons calling the meeting at
least twenty-four hours before the special meeting if such notice
is given personally or by telephone or sent by telegram,
telecopier or other electronic means. Notice of a special
meeting of the Board of Directors shall be given by the person or
persons calling the meeting at least three days before the
special meeting if given by regular mail. No notice of a special
meeting shall be necessary if the time and place of the special
meeting was set by resolution at a validly convened meeting of
the Board of Directors. The notice of a special meeting need not
state the purpose or purposes of the meeting.
Section 2.5 Telephonic Meetings Permitted. Members of the
Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting thereof by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this by-law
shall constitute presence in person at such meeting.
Section 2.6 Quorum; Vote Required for Action. At all
meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of
business. Except in cases in which the certificate of
incorporation, these by-laws or applicable law otherwise
provides, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the
Board of Directors.
Section 2.7. Officers for Board Meetings. Meetings of the
Board of Directors shall be presided over by the Chairman of the
Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in their
absence by a chairman chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in his absence the chair of
the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Independent Directors And Board Structure. A
majority of the Board of Directors shall be comprised of
independent directors. The Chief Executive Officer should be a
member of the Board of Directors. In order to ensure the greatest
number of independent directors on a board of manageable size,
other direct management representation should be kept to a
minimum and should in no event exceed two other management
directors.
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The Board of Directors shall make clear to Senior Management
of the Company that board membership is neither necessary to
their present positions nor a prerequisite to a higher management
position in the Company. Attendance of management staff at Board
Meetings should be at the discretion of the Chairman of the Board
but should be encouraged by the Board. The Board shall have full
and direct access to members of Senior Management and should be
encouraged to request reports directly to the Board by any member
of Senior Management. Board members should use judgment in
dealings with management so that they do not distract management
from the business operations of the Company.
Conflicts of Interest. A director's personal financial or
family relationships may occasionally give rise to that
director's material personal interest in a particular issue.
There will be times when a director's material personal interest
in an issue will limit that director's ability to vote on that
issue. The Governance Committee of the Board of Directors shall
determine whether such a conflict of interest exists on a case-by-
case basis, including the determination as to materiality under
items (c) and (g) of this Section 7. The Governance Committee
shall take appropriate steps to identify such potential conflicts
and to ensure that a majority of the directors voting on an issue
are both disinterested and independent with respect to that
issue. A determination by the Governance Committee on any issue
of independence or conflict of interest shall be final and not
subject to review.
For purposes of this Section, an "independent director"
means a director who: (a) is neither a current employee nor a
former member of Senior Management of the Company or an
Affiliate; (b) is not employed by a provider of professional
services to the Company; (c) does not have any business
relationship with the Company, either personally or through a
company of which the director is an officer or a controlling
shareholder, that is material to the Company or to the director;
(d) does not have a close family relationship, by blood, marriage
or otherwise with any member of Senior Management of the Company
or one of the Company's Affiliates; (e) is not an officer of a
company of which the Company's chairman or chief executive
officer is also a board member; (f) is not personally receiving
compensation from the Company in any capacity other than as a
director; or (g) does not personally receive or is not an
employee of a foundation, university, or other institution that
receives grants or endowments from the Company, that are material
to the Company or to either the recipient and/or the foundation,
university, or institution.
"Senior Management" includes the chief executive, chief
operating, chief financial, chief legal and chief accounting
officers, president, vice president(s), treasurer, secretary and
the controller of the Company.
"Affiliate" includes any person or entity which, alone or by
contractual obligation, owns or has the power to vote more than
twenty-five (25) percent of the equity interest in another,
unless some other person or entity acting alone or with another
by contractual obligation owns or has the power to vote a greater
percentage of the equity interest. A subsidiary is considered an
affiliate if it is at least eighty (80) percent owned by the
Company and accounts for at least twenty-five (25) percent of the
Company's consolidated sales or assets.
Section 2.9 Action by Written Consent of Directors. Unless
otherwise restricted by the certificate of incorporation or these
by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such
committee.
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Section 2.10 Committees. The Board of Directors may
designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the
absence or disqualification of a member of the committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent permitted
by law and to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it.
Section 2.11. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article II
hereof.
Section 2.12. Executive Committee. There shall be an
Executive Committee to consist of such number of directors of the
Board of Directors (the "Executive Committee") to consist of that
number of directors as the Board of Directors may from time to
time determine. The Board of Directors shall have power at any
time to change the number of the Executive Committee, except that
a reduction in the number of members of the Executive Committee
shall not affect any currently serving member. The Board of
Directors may remove any member of the Executive Committee at any
time with or without cause and may fill vacancies in the
Committee by election from the members of the Board of Directors.
When the Board of Directors is not in session, the Executive
Committee shall have and may exercise all the power and authority
of the Board of Directors in the management and direction of the
business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers
which may require it. All actions of the Executive Committee
shall be reported to the Board of Directors at the meeting next
succeeding such action, provided, however, that such report need
not be made to the Board of Directors if prior to such meeting
copies of the written minutes of the meetings of the Executive
Committee at which such action has been taken shall have been
mailed or delivered to all members of the Board of Directors.
ARTICLE III.
OFFICERS.
Section 3.1 Executive Officers; Election; Qualifications;
Term of Office; Resignation; Removal; Vacancies. The Board of
Directors shall elect a President and Secretary, and it may, if
it so determines, choose a Chairman of the Board and a Vice
Chairman of the Board from among its members. The Board of
Directors may also choose one or more Vice Presidents, one or
more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of
stockholders next succeeding his election, and until his
successor is elected and qualified or until his earlier
resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Such resignation need not be
accepted to be effective. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall
be without prejudice to the contractual rights of such officer,
if any, with the Corporation. Any number of offices may be held
by the same person. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board of
Directors.
31
Page 32
Section 3.2 Powers and Duties of Executive Officers. The
officers of the Corporation shall have such powers and duties in
the management of the Corporation as may be prescribed in a
resolution by the Board of Directors and, to the extent not so
provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give
security for the faithful performance of his duties.
ARTICLE IV.
SHARES OF STOCK.
Section 4.1 Certificates. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of
Directors, if any, or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, of the Corporation certifying the number of
shares owned by him in the Corporation. Any of or all the
signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before
such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue.
Section 4.2 Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft
or destruction of any such certificate or the issuance of such
new certificate.
ARTICLE V.
MISCELLANEOUS PROVISIONS.
Section 5.1 Fiscal Year. The fiscal year of the
Corporation shall be determined by resolution of the Board of
Directors.
Section 5.2 Seal. The corporate seal shall have the name
of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
Section 5.3. Signature of Checks, etc. All checks and
drafts on the bank accounts of the Corporation, and all bills of
exchange and promissory notes, and all acceptances, obligations
and other instruments for the payment of money shall be signed by
such officer or officers, or agent or agents, as shall be
thereunto authorized, from time to time, by the Board of
Directors or the Executive Committee.
Section 5.4 Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Any written waiver of notice, signed
by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the
meeting, 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 stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice.
Section 5.5 Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account, and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly
legible form within a reasonable time.
32
Page 33
Section 5.6 Amendment of By-laws. These by-laws may be
altered, amended or repealed, and new by-laws made, by the Board
of Directors, but the stockholders may make additional by-laws
and may alter and repeal any by-laws whether adopted by them or
otherwise.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS OR OTHER PERSONS.
Section 6.1 Right to Indemnification. The Corporation
shall indemnify and hold harmless, to the fullest extent
permitted by applicable law as it presently exists or may
hereafter be amended, any person (a "Covered Person") who was or
is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by
reason of the fact that he, or a person for whom he is the legal
representative, is or was a director or officer of the
Corporation or, while a director or officer of the Corporation,
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation or of
a partnership, joint venture, trust, enterprise or nonprofit
entity, including service with respect to employee benefit plans,
against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Covered Person.
Notwithstanding the preceding sentence, except as otherwise
provided in Section 6.3, the Corporation shall be required to
indemnify a Covered Person in connection with a proceeding (or
part thereof) commenced by such Covered Person only if the
commencement of such proceeding (or part thereof) by the Covered
Person was authorized by the Board of Directors of the
Corporation.
Section 6.2 Prepayment of Expenses. The Corporation shall
pay the expenses (including attorneys' fees) incurred by a
Covered Person in defending any proceeding in advance of its
final disposition, provided, however, that, to the extent
required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of
an undertaking by the Covered Person to repay all amounts
advanced if it should be ultimately determined that the Covered
Person is not entitled to be indemnified under this Article VI or
otherwise.
Section 6.3 Claims. If a claim for indemnification or
advancement of expenses under this Article VI is not paid in full
within thirty days after a written claim therefor by the Covered
Person has been received by the Corporation, the Covered Person
may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the
Corporation shall have the burden of proving that the Covered
Person is not entitled to the requested indemnification or
advancement of expenses under applicable law.
Section 6.4 Nonexclusivity of Rights. The rights conferred
on any Covered Person by this Article VI shall not be exclusive
of any other rights which such Covered Person may have or
hereafter acquire under any statute, provision of the certificate
of incorporation, these by-laws, agreement, vote of stockholders
or disinterested directors or otherwise.
Section 6.5 Other Sources. The Corporation's obligation,
if any, to indemnify or to advance expenses to any Covered Person
who was or is serving at its request as a director, officer,
employee or agent of another Corporation, partnership, joint
venture, trust, enterprise or nonprofit entity shall be reduced
by any amount such Covered Person may collect as indemnification
or advancement of expenses from such other Corporation,
partnership, joint venture, trust, enterprise or non-profit
enterprise.
Section 6.6 Amendment or Repeal. Any repeal or
modification of the foregoing provisions of this Article VI shall
not adversely affect any right or protection hereunder of any
Covered Person in respect of any act or omission occurring prior
to the time of such repeal or modification.
Section 6.7. The rights conferred on any Covered Person by
this Article VI are contract rights and shall continue as to a
person who has ceased to be a director or officer and shall inure
the benefit of the person's heirs, executors and administrators.
33
Page 34
Section 6.8. Other Indemnification and Prepayment of
Expenses. This Article VI shall not limit the right of the
Corporation, to the extent and in the manner permitted by law, to
indemnify and to advance expenses to persons other than Covered
Persons when and as authorized by appropriate corporate action.
34
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