<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended July 25, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period from . . . . . . . . to . . . . . . . .
Commission file number 1-8978
LONGS DRUG STORES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland 68-0048627
- ----------------------------------------- --------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
141 North Civic Drive
Walnut Creek, California 94596
- ---------------------------------------- --------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (510) 937-1170
--------------
- --------------------------------------------------------------------------------
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
----- -----
There were 19,517,055 shares of common stock outstanding as of August 23, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
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STATEMENTS OF CONSOLIDATED INCOME
For the For the Two
Quarters Ended Quarters Ended
JULY 25 July 27 JULY 25 July 27
1996 1995 1996 1995
--------- --------- ---------- ----------
--------(Thousands Except Per Share)---------
SALES $ 681,503 $ 646,359 $1,346,911 $1,286,160
COSTS AND EXPENSES:
Cost of merchandise sold 499,784 475,347 984,361 945,916
Operating and administrative 122,898 115,574 245,436 230,051
Occupancy 36,409 34,652 71,254 67,303
--------- --------- ---------- ----------
INCOME BEFORE TAXES ON INCOME 22,412 20,786 45,860 42,890
TAXES ON INCOME 8,900 8,300 18,300 17,100
--------- --------- ---------- ----------
NET INCOME $ 13,512 $ 12,486 $ 27,560 $ 25,790
--------- --------- ---------- ----------
--------- --------- ---------- ----------
PER COMMON SHARE:
NET INCOME $ .69 $ .62 $ 1.39 $ 1.26
--------- --------- ---------- ----------
--------- --------- ---------- ----------
DIVIDENDS $ .28 $ .28 $ .56 $ .56
--------- --------- ---------- ----------
--------- --------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 19,711 20,274 19,790 20,450
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 25 July 27 January 25
1996 1995 1996
---------- ---------- ----------
---------------(Thousands)--------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 52,596 $ 39,376 $ 49,314
Pharmacy and other receivables 49,114 45,607 54,388
Merchandise inventories 313,488 296,878 316,497
Deferred income taxes 25,088 17,059 23,640
Other 1,174 1,093 2,687
--------- --------- ---------
Total current assets 441,460 400,013 446,526
--------- --------- ---------
PROPERTY:
Land 78,160 78,006 79,998
Buildings and leasehold improvements 318,279 307,445 313,766
Equipment and fixtures 258,900 246,384 247,831
Beverage licenses 7,212 7,145 7,163
--------- --------- ---------
Total property--at cost 662,551 638,980 648,758
Less accumulated depreciation 268,618 243,362 253,461
--------- --------- ---------
Property--net 393,933 395,618 395,297
--------- --------- ---------
OTHER NON-CURRENT ASSETS 11,054 12,318 11,734
--------- --------- ---------
TOTAL $846,447 $807,949 $853,557
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $147,644 $145,182 $148,428
Employee compensation and benefits 59,771 56,055 59,843
Taxes payable 28,867 22,813 37,808
Current portion of guarantee 2,991 2,753 2,174
Other 41,218 22,538 39,094
--------- --------- ---------
Total current liabilities 280,491 249,341 287,347
--------- --------- ---------
GUARANTEE OF PROFIT SHARING PLAN DEBT 6,784 9,775 8,311
--------- --------- ---------
DEFERRED INCOME TAXES 34,882 34,647 35,132
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Common stock (19,553,000, 20,014,000,
and 19,816,000 shares outstanding) 9,776 10,007 9,908
Additional capital 111,227 110,596 107,608
Common stock contribution to Profit Sharing Plan ---- ---- 4,550
Guarantee of Profit Sharing Plan debt (9,775) (12,528) (10,485)
Retained earnings 413,062 406,111 411,186
--------- --------- ---------
Total stockholders' equity 524,290 514,186 522,767
--------- --------- ---------
TOTAL $846,447 $807,949 $853,557
--------- --------- ---------
--------- --------- ---------
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS For the Two Quarters Ended
JULY 25 July 27
1996 1995
--------------------------
-------(Thousands)--------
<S> <C> <C>
OPERATING ACTIVITIES:
Receipts from customers $ 1,351,361 $ 1,293,221
Payments for merchandise (982,136) (951,506)
Payments for operating, administrative, and occupancy expenses (293,495) (276,782)
Income tax payments (26,082) (19,385)
--------- ---------
Net cash provided by operating activities 49,648 45,548
--------- ---------
INVESTING ACTIVITIES:
Payments for property additions and other assets (23,745) (27,098)
Receipts from property dispositions 4,452 560
--------- ---------
Net cash used in investing activities (19,293) (26,538)
--------- ---------
FINANCING ACTIVITIES:
Repurchase of common stock (17,954) (27,628)
Dividend payments (11,119) (11,524)
Proceeds from sale of common stock to Profit Sharing Plan 2,000 2,000
--------- ---------
Net cash used in financing activities (27,073) (37,152)
--------- ---------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 3,282 (18,142)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 49,314 57,518
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 52,596 $ 39,376
--------- ---------
--------- ---------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 27,560 $ 25,790
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,337 19,897
Deferred income taxes (1,698) 293
Restricted stock awards 773 731
Tax benefits credited to stockholders' equity 48 66
Changes in assets and liabilities:
Pharmacy and other receivables 5,274 8,297
Merchandise inventories 3,009 (1,532)
Other current assets 1,513 1,641
Current liabilities (8,168) (9,635)
--------- ---------
Net cash provided by operating activities $ 49,648 $ 45,548
--------- ---------
--------- ---------
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
For the Year Ended January 25, 1996 and Two Quarters Ended July 25, 1996
<TABLE>
<CAPTION>
PROFIT GUARANTEE
COMMON STOCK SHARING OF PROFIT TOTAL
---------------- ADDITIONAL PLAN SHARING RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL CONTRIBUTIONS PLAN DEBT EARNINGS EQUITY
(Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
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BALANCE AT JANUARY 26, 1995 20,560 $10,280 $107,216 $5,515 ($13,181) $414,268 $524,098
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME 46,228 46,228
DIVIDENDS ($1.12 PER SHARE) (22,697) (22,697)
PROFIT SHARING PLAN:
ISSUANCE OF STOCK FOR FY95 CONTRIBUTIONS 176 88 5,427 (5,515) 0
STOCK PORTION OF FY96 CONTRIBUTION 4,550 4,550
SALE OF STOCK TO PLAN 59 29 1,988 2,017
PURCHASE OF STOCK FROM PLAN (114) (57) (2,644) (2,701)
REDUCTION OF PLAN DEBT 2,696 2,696
RESTRICTED STOCK AWARDS 30 15 1,463 1,478
TAX BENEFITS RELATED TO EMPLOYEE STOCK PLANS 127 127
REPURCHASE OF COMMON STOCK (895) (447) (5,842) (26,740) (33,029)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 25, 1996 19,816 $9,908 $107,608 $4,550 ($10,485) $411,186 $522,767
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NET INCOME 27,560 27,560
DIVIDENDS ($.56 PER SHARE) (11,119) (11,119)
PROFIT SHARING PLAN:
ISSUANCE OF STOCK FOR FY96 CONTRIBUTIONS 91 45 4,010 (4,055) 0
CONTRIBUTED IN CASH (495) (495)
SALE OF STOCK TO PLAN 45 22 1,978 2,000
PURCHASE OF STOCK FROM PLAN (27) (13) (1,196) (1,209)
REDUCTION OF PLAN DEBT 710 710
RESTRICTED STOCK AWARDS 18 9 764 773
TAX BENEFITS RELATED TO EMPLOYEE STOCK PLANS 48 48
REPURCHASE OF COMMON STOCK (390) (195) (1,937) (14,613) (16,745)
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BALANCE AT JULY 25, 1996 19,553 $9,776 $111,227 $ 0 ($9,775) $413,062 $524,290
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include Longs Drug Stores Corporation
(Company) and Longs Drug Stores California, Inc., its wholly-owned
subsidiary. All intercompany accounts and transactions have been
eliminated. The statements have been prepared on a basis consistent with
the accounting policies described in the Annual Report of the Company
previously filed with the Commission on Form 10-K for the year ended
January 25, 1996, and reflect all adjustments and eliminations which are,
in management's opinion, necessary for a fair statement of the results for
the periods. The financial statements for the periods ended July 25, 1996
and July 27, 1995 are unaudited. The Balance Sheet at January 25, 1996,
and Statement of Stockholders' Equity for the year then ended, presented
herein, have been prepared from the audited financial statements of the
Company.
2. Certain reclassifications have been made to prior year financial statements
in order to conform to current financial statement presentation.
3. The financial statements have been prepared using the LIFO method of
accounting for inventories. The excess of specific cost inventory over
LIFO valuation was $132.5 million at July 25, 1996, $126.6 million at July
27, 1995, and $129.8 million at January 25, 1996. A final valuation of
inventory under the LIFO method can be made only after year-end based on
ending inventory levels and inflation rates for the year. Interim LIFO
calculations are based on management's estimates of year-end inventory
levels and inflation rates for the year.
4. During the first two quarters of 1997, the Company repurchased 417,000
shares of its common stock at a cost of $18.0 million in accordance with a
stock repurchase plan adopted by the Board of Directors in November 1994.
Included is the repurchase of 27,000 shares from the Profit Sharing Plan at
market values totaling $1.2 million. The Company sold 45,000 shares of
common stock to the Profit Sharing Plan during second quarter at market
values totaling $2.0 million.
5. The legal settlement, as described in the 1996 Annual Report on page 18,
remains subject to the completion of a definitive settlement agreement and
court approval, in respect of which plaintiffs have agreed to give their
unconditional support. The Company has reflected the obligation as a
current liability.
6. In August 1996, the Board of Directors adopted a Shareholder Rights Plan in
which preferred stock purchase rights will be distributed as a dividend to
holders of common shares held as of the close of business on September 16,
1996. The plan replaces an existing plan adopted in 1986 that expires
September 16, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Second quarter sales grew 5.4% to $681.5 million. Sales for the two quarters
increased 4.7% to $1.35 billion. The sales growth can be attributed to same
store sales which grew 5.2% for the quarter and 3.9% year-to-date. Same store
sales for comparable periods last year were flat. Mainland same store sales
benefited from efforts in category management and other marketing initiatives
enabling the Company to take advantage of the improving California economy,
particularly in Southern California. In Hawaii six stores acquired in the first
quarter of last year contributed to improved same store sales this year.
Pharmacy sales increased 9.7% for the quarter and 8.6% year-to-date, primarily
due to increased script volume, helped by a lingering allergy season, and
increased average script price. Pharmacy sales for the quarter represented
33.3% of total sales, up from 32.0% of total sales last year. Sales to
customers of third party health care plans were 78.6% of pharmacy sales in
second quarter compared to 74.5% for the same period last year.
Gross margin for second quarter was 26.7% compared to 26.5% a year ago and 26.9%
compared to 26.5% year-to-date. Improvement in margin is primarily the result
of marketing initiatives. These initiatives include "category management" which
results in improved merchandise selection and product adjacencies and "market
pricing" which provides greater control over competitive pricing of products.
In addition, utilization of automatic reordering systems helped to decrease
purchasing costs.
The Company uses the LIFO method of inventory valuation. The LIFO provision
included in cost of merchandise sold for the two quarters of fiscal 1997 was
$2.7 million compared to $1.6 million last year. The increase is primarily due
to inflation of pharmacy merchandise and food.
Operating, administrative, and occupancy expenses as a percent of sales
increased to 23.4% from 23.2% in the second quarter last year. Year-to-date
operating, administrative, and occupancy expenses rose to 23.5% from 23.1% last
year. Increased operating and administrative costs were in line with our
expectations and represent an increased corporate level investment in technology
and marketing to support defined strategies. Occupancy cost increases reflect
costs associated with the 8 new stores opened since second quarter a year ago.
Net income for the quarter increased 8.2% to $13.5 million compared to $12.5
million last year, and earnings per share increased 11.3% to $.69 per share
compared to $.62 last year. Net income for the two quarters increased 6.9% to
$27.6 million. Earnings per share for the two quarters increased 10.3% to $1.39
per share compared to $1.26 last year. Earnings per share increased at a rate
greater than net income due to share repurchases.
The retail drug store business is seasonal, peaking in the fourth quarter due to
the Thanksgiving and Christmas holidays and the cold and flu season. The
Company's fiscal year ends the last Thursday in January. As a result, the
current fiscal year and the fourth quarter will have one additional week when
compared to the prior year. Sales and operations will benefit as a result,
offset somewhat by fewer holiday shopping days between Thanksgiving and
Christmas.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $52.6 million from $39.4 million a year
ago. Cash from operations year-to-date improved over last year due to increased
earnings and slightly lower payments for merchandise inventory. Stock
repurchases were $18.0 million for the two quarters compared to $27.6 last year.
Stock repurchases are at the discretion of the Board under an authorization
approved in November 1994 and are impacted by stock price and available cash.
Net expenditures for property additions totaled $23.7 million compared to $27.0
million a year ago which included the acquisition of six stores in Hawaii. The
total number of stores in operation as of July 25, 1996 was 329. Several stores
and a new warehouse are currently under construction, and other new stores are
in various stages of planning.
<PAGE>
Expenditures for capital projects, dividends, and stock repurchases have been,
and are expected to continue to be, funded from operations and cash reserves.
To maintain desired working capital, the Company may periodically use short-term
lines of credit. Available lines of credit were not utilized in the current
quarter.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On May 21, 1996, the Annual Meeting of Shareholders of the
Company was held in Walnut Creek, California.
(b) The following directors were elected:
Votes in Favor Votes Withheld
-------------- --------------
R. M. Brooks 17,688,797 309,410
W. G. Combs 17,689,931 308,276
D. G. DeSchane 17,619,189 379,018
G. H. Saito 17,689,810 308,397
D. L. Sorby, Ph.D. 17,677,609 320,598
There were no abstentions and no broker non-votes.
(c) Other directors whose term of office as a director continued
after the Annual Meeting:
R. M. Long M. S. Metz, Ph.D.
R. A. Plomgren S. D. Roath
F. E. Trotter T. R. Sweeney
H. R. Somerset E. E. Johnston
(d) Two amendments to the Company's Amended Articles of Incorporation
were approved. The amendments were intended to simplify the
Charter, delete certain provisions considered unnecessary, and
resolve an existing ambiguity between the provisions of the
Charter and the Bylaws.
Amendment One was ratified with 17,438,487 votes in favor,
210,097 votes against, 349,623 abstentions, and no broker non-
votes.
Amendment Two was ratified with 17,024,503 votes in favor,
646,024 votes against, 327,680 abstentions, and no broker non-
votes.
(e) The proposal involving the manner in which non-employee Directors
would be compensated was not ratified with 2,986,571 votes in
favor, 13,659,476 votes against, 371,829 abstentions, and 980,331
broker non-votes.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3)(i) A copy of the Amended Articles of Incorporation,
amended May 22, 1996, is incorporated herein as Exhibit
1 to Form 10-Q
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LONGS DRUG STORES CORPORATION
----------------------------------------
(REGISTRANT)
Date September 6, 1996 /s/ G. L. White
---------------------- ----------------------------------------
G. L. White
Vice President -- Controller
(PRINCIPAL ACCOUNTING OFFICER)
/s/ R. A. Plomgren
----------------------------------------
R. A. Plomgren
Senior Vice President -- Development
(CHIEF FINANCIAL OFFICER)
<PAGE>
LONGS DRUG STORES CORPORATION
ARTICLES OF AMENDMENT
LONGS DRUG STORES CORPORATION, a Maryland corporation having its principal
office in Maryland in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by amending
Article TENTH, Paragraph (10) of the Charter in its entirety to read as follows
(10) The Corporation reserves the right from time to time to make any
amendments of its Charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights,
as expressly set forth in its Charter, of any of its outstanding stock
by classification, reclassification, or otherwise, but no such
amendment which changes such terms or contract rights of any of its
outstanding stock shall be valid unless such amendment shall have been
authorized by not less than a majority of the aggregate number of the
votes entitled to be cast by shares outstanding and entitled thereon.
Notwithstanding any provision of the law requiring any amendment of
the Charter to be authorized by the vote of any designated proportion
of the Common Stock or of each class of other stock, or otherwise to
be taken or authorized by vote of the stockholders, such action shall
be effective and valid if taken or authorized by the affirmative vote
of not less than a majority of the aggregate number of votes entitled
to and be cast by shares outstanding and entitled to vote thereon,
except that the amendment of Articles NINTH and ELEVENTH hereof and
Paragraphs (6), (8), (9), and (10) of this Article TENTH shall require
the affirmative vote of the holders of not less than two-thirds of the
aggregate number of votes entitled to be cast by shares outstanding
and entitled to vote thereon and an amendment of Article TWELFTH or
any Article or Paragraph of the Corporation's Charter which expressly
sets
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<PAGE>
forth a requirement for amendment thereof shall require the
affirmative vote required thereby, and except that this provision
shall not apply where the law of Maryland does not permit the Charter
to reduce or vary the vote required for a particular matter.
SECOND: The foregoing amendment does not increase the authorized capital
stock of the Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, Longs Drug Stores Corporation has caused these presents
to be signed in its name and on its behalf by its president, and witnessed by
its secretary, on June 22, 1987.
WITNESS: LONGS DRUG STORES CORPORATION
/s/ O. D. Jones BY: /s/ R. M. Long
- --------------------------------- ---------------------------------
O. D. Jones, Secretary R. M. Long, President
THE UNDERSIGNED, President of Longs Drug Stores Corporation, who executed
on behalf of the Corporation the foregoing Articles of Amendment of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Amendment to be the corporate act of
said Corporation and hereby , certifies that to the best of his knowledge,
information and belief the matters and facts set forth herein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
/s/ R. M. Long
--------------------------------
R. M. Long, President
-2-
<PAGE>
LONGS DRUG STORES CORPORATION
ARTICLES OF AMENDMENT
LONGS DRUG STORES CORPORATION, a Maryland corporation, having its principal
office in Walnut Creek, California (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Charter of the corporation is hereby amended as follows:
A new Paragraph (11) of Article Tenth of the Charter is added to read as
follows:
"(11) To the fullest extent permitted by Maryland statutory of decisional
law, as amended or interpreted, no director or officer of this Corporation
shall be personally liable to the Corporation or its stockholders for money
damages. No amendment of the Charter of the Corporation or repeal of any
of its provisions shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal."
SECOND: The amendment does not increase the authorized
stock of the Corporation.
THIRD: The amendment of the Charter of the Corporation
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, LONGS DRUG STORES CORPORATION has caused these presents
to be signed in its name and on its behalf by its President and Chief Executive
Officer, and its corporate seal to be hereunto affixed and attested by its
Secretary on June 1, 1988.
ATTEST LONGS DRUG STORES CORPORATION
BY: /s/ O. D. Jones BY: /s/ R. M. Long
----------------------------- ---------------------------------
Orlo D. Jones, Secretary R.M. Long, President and
Chief Executive Officer Chief Executive Officer
<PAGE>
THE UNDERSIGNED, President and chief Executive Officer of Longs Drug Stores
Corporation, who executed on behalf of the Corporation the foregoing Articles of
Amendment of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation the foregoing Articles of Amendment to be
the corporate act of said Corporation and hereby certifies that to the best of
his knowledge, information, and belief the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ R. M. Long
--------------------------------------
R.M. Long, President and
Chief Executive Officer
<PAGE>
LONGS DRUG STORES CORPORATION
ARTICLES OF AMENDMENT
LONGS DRUG STORES CORPORATION, a Maryland corporation, having its principal
office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended as follows:
(a) Article THIRD of the Charter is hereby amended in its entirety to
read as follows:
THIRD: (a) The purposes for which and any of which the Corporation
is formed and the business and objects to be carried on and promoted by it
are:
(1) To own and operate drug and general merchandise stores.
(2) To engage in any one or more businesses or transactions, or
to acquire all or any portion of any entity engaged in any one or more
businesses or transactions which the Board of Directors may from time
to time authorize or approve, whether or not related to the business
described elsewhere in this Article or to any other business at the
time or theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no
way limited or restricted by reference to, or inference from, the
terms of any other clause of this or any other Article of the Charter
of the Corporation, and each shall be regarded as independent; and
they are intended to be and shall be construed as powers as well as
purposes and objects of the Corporation and shall be in addition to
and not in limitation of the general powers of corporations under the
General Laws of the State of Maryland.
(b) Article TENTH of the Charter is hereby amended to delete the
provisions of subparagraphs (3), (4) and (5) thereof, to renumber existing
subparagraphs (6), (7), (8), (9), (10) and (11) thereof as subparagraphs
(3), (4), (5), (6), (7) and (8), respectively, and to amended newly
numbered subparagraph (3) of Article TENTH to read as follows:
(3) The By-laws of the Corporation may be adopted, amended or
repealed by the affirmative vote of two-thirds (2/3) of the votes
entitled to be cast by the outstanding shares of voting stock of the
Corporation voting together as a single voting group. The Bylaws may
also be adopted, amended
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<PAGE>
or repealed by the affirmative vote of a majority of the members of
the Board of Directors.
SECOND: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, Longs Drug Stores Corporation has caused these presents
to be signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on May 22, 1996.
WITNESS: LONGS DRUG STORES CORPORATION
/s/ O. D. Jones By /s/ R. M. Long
- ------------------------------- -----------------------------------
Secretary Chairman of the Board
THE UNDERSIGNED, Chairman of the Board of Longs Drug Stores Corporation,
who executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ R. M. Long
---------------------------------------
Chairman of the Board
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<PAGE>
LONGS DRUG STORES CORPORATION
AMENDED ARTICLES OF INCORPORATION
THE UNDERSIGNED, being the incorporator for Longs Drug Stores Corporation,
who executed the Articles of Incorporation dated December 20, 1984, hereby
certifies that no organizational meeting of the Board of Directors of Longs Drug
Stores Corporation has been held on or before this date, and hereby amends and
restates the Articles of incorporation of Longs Drug Stores Corporation in their
entirety as follows:
FIRST: THE UNDERSIGNED, R.W. Smith, Jr., whose address is 1100 Charles
Center South, 36 South Charles Street, Baltimore, Maryland 21201, being at least
eighteen years of age, as incorporator, does hereby form a corporation under and
by virtue of the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
Longs Drug Stores Corporation
THIRD: The purposes for which and any of which the Corporation is formed
and the business and objects to be carried on and promoted by it are:
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<PAGE>
(1) To own and operate drug and general merchandise stores.
(2) To carry on the drug and general merchandise business in all its
phases; to manufacture and compound drugs, chemicals and medicines and to fill
prescriptions therefor; to manufacture and deal, at wholesale and retail, in
drugs, chemicals, medicines, instruments, appliances and apparatus, physicians
and hospital supplies, liquors, food, candies, tobacco, perfumes, toilet
articles, toys, sporting goods, sundries and all goods, wares and merchandise of
whatever kind; to conduct a photograph and picture business in all its phases;
to manufacture, fabricate, repair and maintain fixtures and equipment, and
generally to carry on any other business incidental to or which can be
conveniently carried on in connection with any of the foregoing.
(3) To engage in any one or more businesses or transactions, or to acquire
all or any portion of the securities of any entity engaged in any one or more
businesses or transactions which the Board of Directors of the Corporation may
from time to time authorize or approve, whether or not related to the business
described elsewhere in this Article or to any other business at the time or
theretofore engaged in by the Corporation.
(4) To purchase, lease, hire or otherwise acquire, hold, own, construct,
develop, erect, improve, manage, operate and in any manner dispose of, and to
aid and subscribe toward the acquisition, construction or improvement of, land,
buildings, machinery,
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equipment and facilities, and any other property or appliances which may
appertain to or be useful in the conduct of any of the businesses of the
Corporation, its subsidiaries, affiliates or any other entity in which the
Corporation may have an interest; and to contract for, for terms of years or
otherwise, procure or make use of, personal services of officers, employees,
agents or contractors, and of services of any firm, association or corporation.
(5) To acquire the whole or any part of the good will, rights, property,
franchise and business of any corporation, joint stock company, syndicate,
association, firm, trust, partnership, joint venture or person heretofore or
hereafter engaged in any business; and to hold, utilize, enjoy and in any manner
dispose of, the whole or any part of the good will, rights, property, franchise
and business so acquired, and to assume in connection therewith any liabilities
of any such corporation, joint stock company, syndicate, association, firm,
trust, partnership, joint venture or person.
(6) To acquire by purchase, subscription or otherwise, and to receive,
hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or
otherwise dispose of or deal in and with any of the shares of capital stock, or
any voting trust certificates or depository receipts in respect of the shares of
capital stock, scrip, warrants, rights, options, bonds, debentures, notes, trust
receipts, and other securities, obligations, choses in action and evidences of
indebtedness or other rights in or interests issued or created by any
corporation, joint stock
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company, syndicate, association, firm, trust, partnership, joint venture or
person, public or private, or by the government of the United States of America,
or by any foreign government, or by any state, territory, province, municipality
or other political subdivision, or by any governmental agency, or by any other
entity, and to issue in exchange therefor or in payment thereof its own capital
stock, bonds or other obligations or securities, or otherwise pay therefor in
money or other property; to possess and exercise as owner thereof all the
rights, powers and privileges of ownership including the right to execute
consents and vote thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement and enhancement in value
thereof.
(7) To cause to be organized, under the laws of the United States of
America, or any foreign government, or any state, territory, province,
municipality or other political entity, a corporation, joint stock company,
syndicate, association, firm, trust, partnership, or joint venture, for the
purpose of accomplishing any or all of the objects and purposes of the
Corporation and to dissolve, wind up, liquidate, merge or consolidate any such
corporation, joint stock company, syndicate, association, firm, trust,
partnership, or joint venture or cause the same to be dissolved, terminated,
wound up, liquidated, merged or consolidated.
(8) To carry out all or any part of the foregoing objects as principal, or
otherwise, either alone or through or in conjunction with, as partner, joint
venturer or otherwise, any
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corporation, joint stock company, syndicate, association, firm, trust,
partnership, joint venture or person; and, in carrying on its business and for
the purpose of attaining or furthering any of its objects and purposes, to make
and perform any contracts and do any acts and things, and to exercise any powers
suitable, convenient or proper for the accomplishment of any of the objects and
purposes herein enumerated or incidental to the powers herein specified, or
which at any time appear conducive to or expedient for the accomplishment of any
of such objects and purposes.
(9) To purchase or otherwise acquire, and to hold, sell or otherwise
dispose of, and to retire and reissue, shares of its own stock of any class and
any other securities issued by it in any manner now or hereafter authorized or
permitted by law.
(10) To make contracts and guarantees, incur liabilities and borrow money;
to sell, mortgage, lease, pledge, exchange, convey, transfer, and otherwise
dispose of all or any part of the property and assets of the Corporation; and to
issue bonds, notes and other obligations and secure the same by mortgage or deed
of trust of all or any apart of the property, franchises and income of the
Corporation.
(11) To aid in any manner any corporation, joint stock company, syndicate,
association, firm, trust, partnership, joint venture or person of which the
shares of capital stock, or voting trust certificates or depository receipts in
respect of the shares of capital stock, scrip, warrants, rights, options, bonds,
debentures, notes, trust receipts, and other securities,
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obligations, choses in action and evidences of indebtedness or other rights in
or interest issued or created by are held by or for the Corporation, or in the
welfare of which the Corporation shall have any interest, direct or indirect;
and to do any acts or things designed to protect, preserve, improve and enhance
the value of any such property or interest, or any other property of the
Corporation.
(12) To guarantee the payment of dividends or distributions upon any shares
of capital stock, interests in or other securities of, or the performance of any
contract by, any other corporation, joint stock company, syndicate, association,
firm, trust, partnership, joint venture or person in which, or in the welfare of
which, the Corporation has any interest, direct, or indirect; and to endorse or
otherwise guarantee the payment of the principal and interest, or either, on any
bonds, debentures, notes or other securities, obligations and evidences of
indebtedness created or issued by any of the same.
(13) To carry out all or any part of the objects and purposes of the
Corporation and to conduct its business in all or any of its branches, in any or
all states, territories, districts and possessions of the United States of
America and in foreign countries; and to maintain offices and agencies in any or
all states, territories, districts and possessions of the United States of
America and in foreign countries.
The foregoing enumerated purposes and objects shall be in no way limited or
restricted by reference to, or inference from, the
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terms of any other clause of this or any other Article of the Charter of the
Corporation, and each shall be regarded as independent; and they are intended to
be and shall be construed as powers as well as purposes and objects of the
Corporation and shall be in addition to and not in limitation of the general
powers of corporations under the General Laws of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation in
this State is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
FIFTH: The name and address of the resident agent of the Corporation are
The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
Said resident agent is a Maryland corporation.
SIXTH: The total number of shares of stock of all classes which the
Corporation has authority to issue is 150,000,000 shares, having an aggregate
par value of $75,000,000 of which 120,000,000 shares of the par value of $.50
per share amounting in aggregate par value of $60,000,000 shall be Common Stock,
and 30,000,000 shares of the par value of $.50 per share amounting in aggregate
par value to $15,000,000 shall be Preferred Stock.
SEVENTH: The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock and
the Preferred Stock of the Corporation.
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COMMON STOCK
(1) The Common Stock shall not be subject to classification or
reclassification by the Board of Directors, and shall have the rights and terms
hereinafter specified, subject to the terms of any other stock provided in the
Charter pursuant to classification or reclassification by the Board of Directors
or otherwise in accordance with law.
(2) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any Preferred Stock, the exclusive voting power
for all purposes shall be vested in the holders of the Common Stock.
(3) Subject to the provisions of law and any preferences of any Preferred
Stock, dividends may be paid on the Common Stock of the Corporation at such time
and in such amounts as the Board of Directors may deem advisable.
(4) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common Stock
shall be entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation and the amount to which the holders of any
Preferred Stock shall be entitled, to share ratably in the remaining net assets
of the Corporation.
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PREFERRED STOCK
(5) The Board of Directors shall have authority to classify and reclassify
any unissued shares of the Preferred Stock from time to time by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the Preferred Stock;
provided, that the Board of Directors shall not classify or reclassify any of
such shares into shares of the Common Stock, or into any class or series of
stock (i) which is not prior to the Common Stock either as to dividends or upon
liquidation and (ii) which is not limited in some respect either as to dividends
or upon liquidation. Subject to the foregoing, the power of the Board of
Directors to classify and reclassify any of the shares,of Preferred Stock shall
include, without limitation, subject to the provisions of the Charter, authority
to classify or reclassify any unissued shares of such stock into a class or
classes of preferred stock, preference stock, special stock or other stock, and
to divide and classify shares of any class into one or more series of such
class, by determining, fixing or altering one or more of the following.
(a) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such class or series or any other
class or series, the number of shares of any class or series may be
decreased by the Board of Directors in connection with any classification
or reclassification of unissued shares and
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the number of shares of such class or series may be increased by the Board
of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased, otherwise acquired or converted into shares of Common
Stock or any other class or series shall remain part of the authorized
Preferred Stock and be subject to classification and reclassification as
provided in this Section.
(b) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior or junior to
or on a parity with the dividends payable on any other class or series of
Preferred Stock, and the status of any such dividends as cumulative,
cumulative to a limited extent or non-cumulative and as participating or
non-participating.
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.
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(e) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase account in
respect thereof, and if so, the terms thereof.
(f) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of Preferred Stock.
(g) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
Section, and, if so, the terms and conditions thereof.
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(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.
(6) For the purposes hereof and of any articles supplementary to the
Charter providing for the classification or reclassification of any shares of
Preferred Stock or of any other Charter document of the Corporation (unless
stated otherwise in any such articles or document), any class or series of stock
of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority to
holders of such other class or series;
(b) on a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment
dates, or redemption or liquidation price per share thereof be different
from those of such other class or series, if the holders of such class or
series of stock shall be entitled to receipt of dividends or amounts
distributable upon liquidation, dissolution or winding up, as the case may
be, in proportion to their respective dividend rates or redemption or
liquidation
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prices, without preference or priority over the holders of such other class
or series; and
(c) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.
EIGHTH: The number of directors of the Corporation shall be three, which
number may be increased or decreased pursuant to the By-Laws of the Corporation,
but shall never be less than the minimum number permitted by the General Laws of
the State of Maryland now or hereafter in force. The names of the directors who
will serve until the first annual meeting and until their successors are elected
and qualify are as follows:
R.M. Long
O.D. Jones
W.G. Combs
NINTH: Beginning with the election of directors in 1985, the Board of
Directors shall be divided into three classes, Class I, Class II and Class III.
Each such class shall consist, as nearly as possible, of one-third of the total
number of directors, and any remaining directors shall be included within such
class or classes as the Board of Directors shall designate. At the annual
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meeting of stockholders in 1985, Class I directors shall be elected for a one-
year term, Class II directors for a two-year term, and Class III directors for a
three-year term. At each succeeding annual meeting of stockholders beginning in
1986, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible.
A director shall hold office, subject to any removal, death, resignation, or
retirement until the annual meeting for the year in which his term expires and
until his successor shall be elected and qualify.
To the extent that any holders of any class or series of stock other than
Common Stock issued by the Corporation shall have the separate right, voting as
a class or series, to elect directors, the directors elected by such class or
series shall be deemed to constitute an additional class of directors and shall
have a term of office for one year or such other period as may be designated by
the provisions of such class or series providing such separate voting rights to
the holders of such class or series of stock, and any such class of directors
shall be in addition to the classes designated above.
TENTH: The following provisions are hereby adopted for the purposes of
defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders:
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(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized, for such
consideration as may be deemed advisable by the Board of Directors and without
any action by the stockholders.
(2) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the Corporation
other than such, if any, as the Board of Directors, in its sole discretion, may
determine and at such price or prices and upon such other terms as the Board of
Directors, in its sole discretion, may fix; and any stock or other securities
which the Board of Directors may determine to offer for subscription may, as the
Board of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at the time
outstanding to the exclusion of the holders of any or all other classes, series
or types of stock or other securities at the time outstanding.
(3) The Board of Directors of the Corporation shall have power from time
to time and in its sole discretion to determine in accordance with sound
accounting practice, what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to fix and vary from time to time
the amount to be reserved as working capital, or determine that retained
earnings or surplus shall remain in the hands of the Corporation; to set apart
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out of any funds of the Corporation such reserve or reserves in such amount or
amounts and for such proper purpose or purposes as it shall determine and to
abolish any such reserve or any part thereof; to distribute and pay
distributions or dividends in stock, cash or other securities or property, out
of surplus or any other funds or amounts legally available therefor, at such
times and to the stockholders of record on such dates as it may, from time to
time, determine; and to determine whether and to what extent and at what times
and places and under what conditions and regulations the books, accounts and
documents of the Corporation, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statute or by the By-Laws, and,
except as so provided, no stockholder shall have any right to inspect any book,
account, personnel record, or document of or maintained by the Corporation
unless authorized so to do by resolution of the Board of Directors.
(4) A contract or other transaction between the Corporation and any of its
directors or between the Corporation and any other Corporation, firm or other
entity in which any of its directors is a director or has a material financial
interest is not void or voidable solely because of any one or more of the
following: the common directorship or interest; the presence of the director at
the meeting of the Board of Directors which authorizes, approves, or ratifies
the contract or transaction; or the counting of the vote of the director for the
authorization, approval, or ratification of the contract or transaction. This
Section applies if:
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(a) the fact of the common directorship or interest is disclosed or
known to: The Board of Directors and the Board authorizes, approves, or
ratifies the contract or transaction by the affirmative vote of a majority
of disinterested directors, even if the disinterested directors constitute
less than a quorum; or the stockholders entitled to vote, and the contract
or transaction is authorized, approved, or ratified by a majority of the
votes cast by the stockholders entitled to vote other than the votes of
shares owned of record or beneficially by the interested director or
Corporation, firm, or other entity; or
(b) the contract or transaction is fair and reasonable to the
Corporation.
Common or interested directors or the stock, owned by them or by an
interested Corporation, firm, or other entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or at a meeting of
the stockholders, as the case may be, at which the contract or transaction is
authorized, approved, or ratified. If a contract or transaction is not
authorized, approved, or ratified in one of the ways provided for in clause (a)
of the second sentence of this Section, the person asserting the validity of the
contract or transaction bears the burden of proving that the contract or
transaction was fair and reasonable to the Corporation at the time it was
authorized, approved, or ratified. The procedures in this Section do not apply
to the fixing by the Board of Directors of reasonable compensation for a
director, whether as a director or in any other capacity.
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(5) Except for contracts, transactions, or acts required to be approved
under the provisions of Section (4) of this Article, any contract, transaction,
or act of the Corporation or of the Board of Directors which shall be ratified
by a majority of a quorum of the stockholders having voting powers at any annual
meeting, or at any special meeting called for such purpose, shall so far as
permitted by law be as valid and as binding as though ratified by every
stockholder of the Corporation.
(6) The By-laws of the Corporation may be adopted, amended or repealed by
the affirmative vote of two-thirds (2/3) of the votes entitled to be cast by the
outstanding shares of voting stock of the Corporation, voting together as a
single voting group. By-laws may also be adopted, amended or repealed by the
Board of Directors as provided or permitted by the By-laws.
(7) Unless the By-Laws otherwise provide, any officer or employee of the
Corporation (other than a director) may be removed at any time with or without
cause by the Board of Directors or by any committee or superior officer upon
whom such power of removal may be conferred by the By-Laws or by authority of
the Board of Directors.
(8) Any director of the Corporation may be removed with cause by the
affirmative vote of a majority of all the votes entitled to be cast for the
election of directors, but no director may be removed by the stockholders
without cause.
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(9) The Corporation shall indemnify (a) its directors to the full extent
provided by the general laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures provided by such laws;
(b) its officers to the same extent it shall indemnify its directors; and (c)
its officers who are not directors to such further extent as shall be authorized
by the Board of Directors and be consistent with law. The foregoing shall not
limit the authority of the Corporation to indemnify other employees and agents
consistent with law.
(10) The Corporation reserves the right from time to time to make any
amendments of its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its Charter, of any of its outstanding stock by classification,
reclassification or otherwise but no such amendment which changes such terms or
contract rights of any of its outstanding stock shall be valid unless such
amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon, by a vote at a
meeting or in writing with or without a meeting.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
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upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
ELEVENTH: The Board of Directors shall base the response of the
Corporation to any "Acquisition Proposal" on the Board of Directors' evaluation
of what is in the best interest of the Corporation. In evaluating what is in
the best interest of the Corporation, the Board of Directors shall consider:
(1) The best interest of the stockholders. For this purpose, the Board
shall consider, among other factors, not only the consideration offered in the
Acquisition Proposal, in relation to the then current market price of the
Corporation's stock, but also in relation to the current value of the
Corporation in a freely negotiated transaction and in relation to the Board of
Directors' then estimate of the future value of the Corporation as an
independent entity; and
(2) Such other factors as the Board of Directors determines to be
relevant, including, among other factors, the social, legal and economic effects
upon employees, suppliers, customers and the business of the Corporation and its
subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located.
"Acquisition Proposal" means any proposal for the consolidation or merger
of the Corporation with another corporation, any share exchange involving the
Corporation's outstanding capital stock, any liquidation or dissolution of the
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Corporation, any transfer of all or a material portion of the, assets of the
Corporation, and any tender offer or exchange offer for any of the Corporation's
outstanding stock.
TWELFTH: (1) In addition to any vote otherwise required by law or this
Charter, a business combination shall be recommended by the Board of Directors
and approved by the affirmative vote of at least:
(a) Eighty (80) percent of the votes entitled to be cast by
outstanding shares of voting stock of the Corporation, voting together as a
single voting group; and
(b) Two-thirds (2/3) of the votes entitled to be cast by holders of
voting stock other than voting stock held by the interested stockholder who
is (or whose affiliate is) a party to the business combination or an
affiliate or associate of the interested stockholder, voting together as a
single voting group.
(2) The following definitions shall apply to this Article:
(a) "Affiliate", including the term "affiliated person", means a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, a specified
person.
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(b) "Associate", when used to indicate a relationship with any
person, means:
(i) Any corporation or organization (other than the Corporation
or a subsidiary of the Corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity
securities;
(ii) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(iii) Any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a
director or officer of the Corporation or any of its affiliates.
(c) "Beneficial owner", when used with respect to any voting stock,
means a person:
(i) That, individually or with any of its affiliates or
associates, beneficially owns voting stock, directly or indirectly; or
(ii) That, individually or with any of its affiliates or
associates, has:
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(a) The right to acquire voting stock (whether such right
is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement, or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; or
(b) The right to vote voting stock pursuant to any
agreement, arrangement, or understanding; or
(iii) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of voting
stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or indirectly,
such shares of voting stock.
(d) "Business combination" means:
(i) Unless the merger, consolidation, or share exchange
does not alter the contract rights of the stock as expressly set
forth in the Charter or change or convert in whole or in part the
outstanding shares of stock of the Corporation, any merger,
consolidation, or share exchange of the Corporation or any
subsidiary with (a) any
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interested stockholder or (b) any other corporation (whether or
not itself an interested stockholder) which is, or after the
merger, consolidation, or share exchange would be, an affiliate
of an interested stockholder that was an interested stockholder
prior to the transaction;
(ii) Any sale, lease, transfer, or other disposition, other
than in the ordinary course of business, in one transaction or a
series of transaction in any 12-month period, to any interested
stockholder (other than the Corporation or any of its
subsidiaries) of any assets of the Corporation or any subsidiary
having, measured at the time the transaction or transactions are
approved by the Board of Directors of the Corporation, an
aggregate book value as of the end of the Corporation's most
recently ended fiscal quarter of 10 percent or more of the total
market value of the outstanding stock of the Corporation or of
its net worth as of the end of its most recently ended fiscal
quarter;
(iii) The issuance or transfer by the Corporation, or
any subsidiary, in one transaction or a series of transactions,
of any equity securities of the Corporation or
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any subsidiary which have an aggregate market value of 5 percent
or more of the total market value of the outstanding stock of the
Corporation to any interested stockholder or any affiliate of any
interested stockholder (other than the Corporation or any of its
subsidiaries) except pursuant to the exercise of warrants or
rights to purchase securities offered pro rata to all holders of
the Corporation's voting stock or any other method affording
substantially proportionate treatment to the holders of voting
stock;
(iv) The adoption of any plan or proposal for the
liquidation or dissolution of the Corporation in which anything
other than cash will be received by an interested stockholder or
any affiliate of any interested stockholder; or
(v) Any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or
any merger, consolidation, or share exchange of the Corporation
with any of its subsidiaries which has the effect, directly or
indirectly, in one transaction or a series of transactions, of
increasing by 5 percent or more of the total number of
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outstanding shares, the proportionate amount of the outstanding
shares of any class of equity securities of the Corporation or
any subsidiary which is directly or indirectly owned by any
interested stockholder or any affiliate of any interested
stockholder.
(e) "Control", including the terms "controlling", "controlled by" and
"under common control with", means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities,
by contract, or otherwise. The beneficial ownership of 10 percent or more
of the votes entitled to be cast by a corporation's voting stock creates a
presumption of control.
(f) "Equity security" means:
(i) Any stock or similar security, certificate of interest, or
participation in any profit sharing agreement, voting trust
certificate, or certificate of deposit for an equity security;
(ii) Any security convertible, with or without consideration,
into an equity security, or any warrant or other security carrying any
right to subscribe to or purchase an equity security; or
-26-
<PAGE>
(iii) Any put, call, straddle, or other option or privilege,
of buying an equity security from or selling an equity security to
another without being bound to do so.
(g) "Interested stockholder" means any person (other than (i) the
Corporation, (ii) or any Subsidiary, any profit sharing, employee stock
ownership or other employee ownership, savings, retirement or benefit plan
of the Corporation or any Subsidiary, (iii) the hereinafter designated
members of the Long family: J.M. Long, T.J. Long, V.M. Long and R.M. Long,
(iv) any of the said designated members of the Long family acting as
trustee, personal representative, attorney-in-fact, proxy-holder or other
representative or agent, or (v) any trustee, personal representative,
attorney-in-fact, proxy-holder or other representative or agent acting for
the person or the estate of one or more of the said designated members of
the Long family) that:
(i) (a) Is the beneficial owner, directly or indirectly, of 10
percent or more of the voting power of the outstanding voting stock of
the Corporation; or
(b) Is an affiliate of the Corporation at any time within
the 2-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 10
-27-
<PAGE>
percent or more of the voting power of the then outstanding voting
stock of the Corporation.
(ii) For the purpose of determining whether a person is an
interested stockholder, the number of shares of voting stock deemed to
be outstanding shall include shares deemed owned by the person as a
beneficial owner but may not include any other shares of voting stock
which may be issuable pursuant to any agreement, arrangement, or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(h) "Market Value" means:
(i) In the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question
of a share of such stock on the composite tape for New York Stock
Exchange-listed stocks, or, if such stock is not quoted on the
composite tape, on the New York Stock Exchange, or, if such stock
is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of
1934 on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding
the date in question on the
-28-
<PAGE>
National Association of Securities Dealers, Inc. automated quotations
system or any system then in use, or, if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined by the board of directors of the corporation
in good faith; and
(ii) In the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by
the board of directors of the corporation in good faith.
(i) "Subsidiary" means any corporation of which voting stock having a
majority of the votes entitled to be cast is owned, directly or in
directly, by the Corporation.
(j) "Voting Stock" means shares of capital stock of a corporation
entitled to vote generally in the election of directors.
(3) (a) For purposes of Section (3) (b) of this Article:
(i) "Announcement date" means the first general public
announcement of the proposal or intention to make a proposal of the
business combination or its first communication generally to
-29-
<PAGE>
stockholders of the Corporation, whichever is earlier;
(ii) "Determination date" means the date on which an interested
stockholder first became an interested stockholder; and
(iii) "Valuation date" means:
(a) For a business combination voted upon by stockholders,
the later of the day prior to the date of the stockholders vote
or the day 20 days prior to the consummation of the business
combination; and
(b) For a business combination not voted upon by
stockholders, the date of the consummation of the business
combination.
(b) The vote required by Section (1) of this Article does not apply
to a business combination if each of the following conditions is met:
(i) The aggregate amount of the cash and the market value as of
the valuation date of consideration other than cash to be received per
share by holders of Common Stock in such business combination is at
least equal to the highest of the following:
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<PAGE>
(a) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
the interested stockholder for any shares of Common Stock of the
same class or series acquired by it:
1. Within the 2-year period immediately prior to the
announcement date of the proposal of the business combination; or
2. In the transaction in which it became an interested
stockholder, whichever is higher; or
(b) The market value per share of Common Stock of the same
class or series on the announcement date or on the determination
date, whichever is higher; or
(c) The price per share equal to the market value per share
of Common Stock of the same class or series determined pursuant
to subparagraph (b) of this paragraph, multiplied by the fraction
of:
1. The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees)
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<PAGE>
paid by the interested stockholder for any shares of Common Stock
of the same class or series acquired by it within the 2-year
period immediately prior to the announcement date, over
2. The market value per share of Common Stock of the same
class or series on the first day in such 2-year period on which
the interested stockholder acquired any shares of Common Stock.
(ii) The aggregate amount of the cash and the market value as of
the valuation date of consideration other than cash to be received per
share by holders of shares of any class or series of outstanding stock
other than Common Stock is at least equal to the highest of the
following (whether or not the interested stockholder has previously
acquired any shares of a particular class or series of stock):
(a) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by
the interested stockholder for any shares of such class of stock
acquired by it:
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<PAGE>
1. Within the 2-year period immediately prior to the
announcement date of the proposal of the business combination; or
2. In the transaction in which it became an interested
stockholder, whichever is higher; or
(b) The highest preferential amount per share to which the
holders of shares of such class of stock are entitled in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(c) The market value per share of such class of stock on
the announcement date or on the determination date, whichever is
higher; or
(d) The price per share equal to the market value per share
of such class of stock determined pursuant to subparagraph (c) of
this paragraph, multiplied by the fraction of:
1. The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees)
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<PAGE>
paid by the interested stockholder for any shares of any class of
voting stock acquired by it within the 2 year period immediately
prior to the announcement date, over
2. The market value per share of the same class of voting
stock on the first day in such 2-year period on which the
interested stockholder acquired any shares of the same class of
voting stock.
(iii) The consideration to be received by holders of any
class or series of outstanding stock is to be in cash or in the same
form as the interested stockholder has previously paid for shares of
the same class or series of stock. If the interested stockholder has
paid for shares of any class of stock with varying forms of
consideration, the form of consideration for such class of stock shall
be either cash or the form used to acquire the largest number of
shares of such class or series of stock previously acquired by it.
(iv) (a) After the interested stockholder has become an
interested stockholder and prior to the consummation of such business
combination:
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<PAGE>
1. There shall have been no failure to declare and pay at the
regular date therefor any full periodic dividends (whether or not
cumulative) on any outstanding Preferred Stock of the Corporation;
2. There shall have been:
A. No reduction in the annual rate of dividends paid on
any class or series of stock of the Corporation that is not
Preferred Stock (except as necessary to reflect any subdivision
of the stock); and
B. An increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of the stock; and
3. The interested stockholder did not become the beneficial
owner of any additional shares of stock of the Corporation except as
part of the transaction which resulted in such interested stockholder
becoming an interested stockholder or by virtue of proportionate stock
splits or stock dividends.
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<PAGE>
(b) The provisions of sub-subparagraphs 1. and 2. of
subparagraph (a) do not apply if no interested stockholder or an
affiliate or associate of the interested stockholder voted as a
director of the Corporation in a manner inconsistent with such sub-
subparagraphs and the interested stockholder, within 10 days after any act or
failure to act inconsistent with such sub-subparagraphs, notifies the Board of
Directors of the Corporation in writing that the interested stockholder
disapproves thereof and requests in good faith that the Board of Directors
rectify such act or failure to act.
(v) After the interested stockholder has become an interested
stockholder, the interested stockholder may not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation or any of its subsidiaries, whether in
anticipation of or in connection with such business combination or
otherwise.
(c) The requirements of Section (1) of this Article do not apply to
business combinations that specifically, generally, or generally by types,
as to specifically identified or unidentified existing or future interested
stockholders or their affiliates, have been
-36-
<PAGE>
approved or exempted therefrom by resolution of the Board of Directors of
the Corporation at any time prior to the time that the interested
stockholder first became an interested stockholder.
Unless by its terms a resolution adopted under this subsection is made
irrevocable, it may be altered or repealed by the Board of Directors, but
this shall not affect any business combinations that have been consummated,
or are the subject of an existing agreement entered into, prior to the
alteration or repeal.
Not withstanding any other provision of law, the provisions of this Article
Twelfth may be amended or repealed only by the affirmative vote of (a) eighty
percent (80%) of the votes entitled to be cast by outstanding shares of voting
stock of the Corporation, voting together as a single voting group; and (b) two-
thirds (2/3) of the votes entitled to be cast by holders of voting stock other
than voting stock held by interested stockholders or an affiliate or associate
of any interested stockholder, voting together as a single voting group.
The provisions of this Article Twelfth are in addition to (and not in lieu
of) any other requirements of law or this Charter.
THIRTEENTH: The duration of the Corporation shall be perpetual.
-37-
<PAGE>
IN WITNESS WHEREOF, I have signed these Amended Articles of Incorporation,
acknowledging the same to be my act, on this 14th day of March, 1985.
WITNESS:
/s/ Nancy J. Williams /s/ R. W. Smith, Jr.
- ------------------------------ -----------------------------------
R. W. Smith, Jr.,
Incorporator
-38-
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<PERIOD-START> JAN-26-1996
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0
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