<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to_________________
Commission File Number 0-17506
UST Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1193986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-1100
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether 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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
Number of Common shares ($.50 par value) outstanding at September 30, 1998
185,960,836
<PAGE> 2
UST Inc.
(Registrant)
INDEX
Page No.
--------
Part I. Financial Information:
Condensed Consolidated Statement of Financial Position -
September 30, 1998 and December 31, 1997 2
Condensed Consolidated Statement of Earnings -
Three and nine months ended September 30, 1998 and 1997 3
Condensed Consolidated Statement of Cash Flows -
Nine months ended September 30, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Operations and
Financial Condition 8
Part II. Other Information:
Item 5. Other Events 11
Item 6. Exhibits and Reports on Form 8-K
3.2 By-Laws, as amended
27. Financial Data Schedule
Signature 12
(1)
<PAGE> 3
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 121,132 $ 6,927
Accounts receivable 63,088 67,702
Inventories:
Leaf tobacco 170,194 152,869
Products in process and finished goods 144,953 148,720
Other materials and supplies 16,882 18,077
----------- -----------
332,029 319,666
Prepaid expenses and other current assets 54,518 31,753
Deferred income taxes 8,784 15,796
----------- -----------
Total current assets 579,551 441,844
Property, plant and equipment, net 332,817 326,709
Other assets 63,325 57,025
----------- -----------
Total assets $ 975,693 $ 825,578
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term obligations $ -- $ 10,000
Accounts payable and accrued expenses 113,759 119,345
Income taxes 46,648 37,174
----------- -----------
Total current liabilities 160,407 166,519
Long-term debt 100,000 100,000
Postretirement benefits other than pensions 77,274 73,868
Other liabilities 60,974 48,396
Contingencies (see note) -- --
----------- -----------
Total liabilities 398,655 388,783
Stockholders' equity
Preferred stock - par value $.10 per share:
Authorized - 10 million shares; issued - none
Common stock - par value $.50 per share:
Authorized - 600 million shares;
issued 207,785,836 shares in 1998,
and 206,614,236 shares in 1997 103,893 103,307
Additional paid-in capital 498,791 474,661
Retained earnings 659,206 536,014
Accumulated other comprehensive loss (16,297) (8,632)
----------- -----------
1,245,593 1,105,350
Less cost of shares in treasury - 21,825,000 shares 668,555 668,555
----------- -----------
Total stockholders' equity 577,038 436,795
----------- -----------
Total liabilities and stockholders' equity $ 975,693 $ 825,578
=========== ===========
</TABLE>
Note: The statement of financial position at December 31, 1997 has been derived
from the audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
(2)
<PAGE> 4
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 354,146 $ 360,582 $ 1,051,700 $ 1,050,962
Costs and expenses
Cost of products sold 62,400 67,058 186,837 190,628
Excise taxes 6,433 7,516 18,969 20,394
Selling, advertising and administrative 96,648 101,367 283,695 300,730
Interest, net (1,303) 1,495 (578) 6,544
----------- ----------- ----------- -----------
Total costs and expenses 164,178 177,436 488,923 518,296
----------- ----------- ----------- -----------
Earnings before income taxes 189,968 183,146 562,777 532,666
Income taxes 72,215 68,924 213,907 200,349
----------- ----------- ----------- -----------
Net earnings $ 117,753 $ 114,222 $ 348,870 $ 332,317
=========== =========== =========== ===========
Net earnings per share
Basic $ .63 $ .62 $ 1.88 $ 1.81
Diluted $ .63 $ .62 $ 1.87 $ 1.79
Dividends per share $.40 1/2 $.40 1/2 $1.21 1/2 $1.21 1/2
Average number of shares
Basic 185,919 184,025 185,630 183,752
Diluted 186,674 185,573 186,873 185,522
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(3)
<PAGE> 5
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 327,151 $ 297,708
INVESTING ACTIVITIES
Purchases of property, plant and equipment (41,349) (37,960)
Dispositions of property, plant and equipment 19,213 1,914
Proceeds from the sale of a business 20,152 --
Proceeds received from prepayment of royalties -- 25,732
--------- ---------
Net cash used in investing activities (1,984) (10,314)
--------- ---------
FINANCING ACTIVITIES
Repayment of borrowings (10,000) (104,000)
Proceeds from the issuance of common stock 24,716 42,524
Dividends paid (225,678) (223,310)
Stock repurchased -- (45,719)
--------- ---------
Net cash used in financing activities (210,962) (330,505)
--------- ---------
Increase (decrease) in cash and cash equivalents 114,205 (43,111)
Cash and cash equivalents at beginning of year 6,927 54,452
--------- ---------
Cash and cash equivalents at end of period $ 121,132 $ 11,341
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes $ 191,315 $ 209,774
Interest 4,243 6,911
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(4)
<PAGE> 6
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited condensed 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 three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer to
the consolidated financial statements and footnotes thereto included in
Registrant's annual report on Form 10-K for the year ended December 31, 1997.
COMPREHENSIVE INCOME
In the first quarter Registrant adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," which establishes
standards for the reporting of comprehensive income. The main components of
comprehensive income that directly relate to Registrant are net earnings,
foreign currency translation adjustments (SFAS No. 52) and additional minimum
pension liability adjustments (SFAS No. 87). Prior to adoption, the pension
adjustment was included in stockholders' equity and the translation adjustment
was included in other assets. The December 31, 1997 Statement of Financial
Position has been reclassified to conform to the requirements of SFAS No. 130.
For the third quarter of 1998 and 1997, total comprehensive income, net of
taxes, amounted to $117,587,000 and $114,038,000, respectively. For the first
nine months of 1998 and 1997 total comprehensive income, net of taxes, was
$341,205,000 and $331,994,000, respectively.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 requires Registrant to provide additional disclosures and is effective
for year end reporting beginning in 1998 and additionally on an interim basis
thereafter. In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132 will
revise Registrant's disclosures for year end reporting beginning in 1998.
Registrant expects no material impact upon adoption of these two pronouncements.
(5)
<PAGE> 7
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
EARNINGS PER SHARE
(In thousands, except per share amounts)
The following table presents the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net earnings $117,753 $114,222 $348,870 $332,317
Denominator:
Denominator for basic earnings per share -
weighted-average shares 185,919 184,025 185,630 183,752
Dilutive effect of employee stock options 755 1,548 1,243 1,770
-------- -------- -------- --------
Denominator for diluted earnings per share 186,674 185,573 186,873 185,522
Basic earnings per share $ .63 $ .62 $ 1.88 $ 1.81
Diluted earnings per share $ .63 $ .62 $ 1.87 $ 1.79
</TABLE>
CONTINGENCIES
Registrant has been named in certain health care cost reimbursement/third party
recoupment/class action litigation against the major domestic cigarette
companies and others seeking damages and other relief. The complaints in these
cases on their face predominantly relate to the usage of cigarettes; within that
context, certain complaints contain a few allegations relating specifically to
smokeless tobacco products. These actions are in varying stages of pretrial
activities.
Registrant has had only limited involvement with cigarettes and Registrant's
current percentage of total tobacco industry sales is relatively small. Prior to
1986, Registrant manufactured some cigarette products which had a de minimis
market share. From May 1, 1982 to August 1, 1994, Registrant distributed a small
volume of imported cigarettes and is indemnified against claims relating to
those products.
In October 1998, Registrant was dismissed from the health care cost
reimbursement litigation brought by the state of Washington. Registrant has
agreed to certain non-economic undertakings similar to those in Florida and
Texas and to pay $2 million in legal costs (to be paid on an installment basis).
Registrant has been named in three actions brought by individual plaintiffs, all
of whom are represented by the same Louisiana attorney, against a number of
smokeless tobacco manufacturers, cigarette manufacturers and certain other
organizations seeking damages and other relief in connection with injuries
allegedly sustained as a result of tobacco usage, including smokeless tobacco
products.
Registrant is also named in an action in Illinois seeking damages and other
relief brought by an individual plaintiff and purporting to state a class action
"on behalf of himself and all other persons similarly situated" alleging that
his use of Registrant's smokeless tobacco products "resulted in his addiction to
nicotine, increased use of Defendants' products and gum deterioration."
(6)
<PAGE> 8
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Registrant is also named in an action in San Francisco, California along with
five other smokeless tobacco manufacturers seeking damages and other relief
brought by the City and County of San Francisco and the Environmental Law
Foundation purportedly on behalf of "the residents of San Francisco County and
the general public" alleging violation of The Safe Drinking Water and Toxic
Enforcement Act of 1986, Health and Safety Code Section 25249.6, et seq.
("Proposition 65") and the California Unfair Competition Act, Business and
Professions Code Section 17200, et seq. The action alleges, among other
things, that the defendants sold smokeless tobacco products in California
without providing a ". . . 'clear and reasonable' warning that their use results
in multiple exposures to substances known to the State of California to cause
cancer, birth defects and reproductive harm."
Registrant believes, and has been so advised by counsel handling these cases,
that it has a number of meritorious defenses to all such pending litigation.
Except as to Registrant's willingness to consider alternative solutions for
resolving certain regulatory and litigation issues, all such cases are, and will
continue to be, vigorously defended. Registrant believes that the ultimate
outcome of all such pending litigation will not have a material adverse effect
on the consolidated financial position of Registrant, but may have a material
impact on Registrant's consolidated financial results for a particular
reporting period in which resolved.
Registrant is named in an action in Kentucky seeking more than $400 million in
"actual damages" before trebling, punitive damages and injunctive relief brought
by one of Registrant's competitors alleging that certain actions and practices
of Registrant violate federal antitrust and advertising laws in connection with
the marketing and sale of its moist snuff brands and also alleges various
violations of tort and state law. Registrant believes that this action is
without merit and intends to defend itself vigorously, and also believes that
the ultimate outcome of this action will not have a material adverse effect on
its consolidated financial statements.
On August 28, 1996, the Food and Drug Administration (FDA) published regulations
asserting unprecedented jurisdiction over nicotine in tobacco as a "drug" and
purporting to regulate smokeless tobacco products as a "medical device."
Registrant and other smokeless tobacco manufacturers filed suit against the FDA
seeking a judicial declaration that the FDA has no authority to regulate
smokeless tobacco products. On April 25, 1997, a federal district court ruled
that the FDA, as a matter of law, is not precluded from regulating cigarettes
and smokeless tobacco as "medical devices" and implementing certain labeling and
access restrictions.
The court, granting Registrant's motion for summary judgment, also ruled that
the FDA has no authority to implement restrictions on the advertising and
promotion of smokeless tobacco products. The court issued an injunction to
prohibit most of the restrictions (labeling, access and advertising/promotion)
set for August 28, 1997 from taking effect, pending resolution of any appeals
and subsequent proceedings; the court also certified the ruling for
interlocutory appeal on the grounds that it involves "controlling questions of
law as to which there is substantial ground for difference of opinion." On
August 14, 1998, the Fourth Circuit of Appeals ruled in favor of Registrant and
other tobacco product manufacturers stating that the FDA lacks jurisdiction to
regulate tobacco products and that all of the FDA's August 28, 1996 regulations
are invalid. FDA is seeking a rehearing en banc.
(7)
<PAGE> 9
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
Results of Operations
Third quarter and nine months of 1998 compared
with the corresponding periods of 1997
Net sales for the third quarter of 1998 decreased 2 percent to $354.1 million,
while net sales for the nine month period of 1998 were $1,052 million which
approximated the nine month period of 1997. Sales for the Tobacco segment
increased for both 1998 periods, while sales for Wine and Other segments
declined. The Tobacco segment increases in both periods were primarily
attributable to higher selling prices, partially offset by lower net unit volume
for moist smokeless tobacco products and the absence of sales for a divested
product line. Unit volume for moist smokeless tobacco, net of returned goods,
decreased 1.8% in the third quarter and 0.2% in the nine month period as
compared with the corresponding 1997 periods. The returned goods comparison for
the third quarter of 1998 versus 1997 stabilized. For the nine month period
returned goods as a percentage of sales increased significantly due to
Registrant's emphasis on increasing product freshness at retail, which began
during the second half of 1997, and promotional units sold in prior periods.
Registrant expects that the returned goods comparison will improve slightly in
the fourth quarter. The decrease in Wine segment sales for both 1998 periods was
due to a decline in premium case volume as a result of competitive pricing in
the marketplace. Registrant has since adjusted wine selling prices in an effort
to increase case sales for the remainder of 1998. The decrease in Other segment
sales for both periods were primarily due to the continued weakness in the
domestic premium cigar business and the absence of sales for a divested
business.
Cost of products sold and excise taxes decreased 8% in the third quarter and 2%
for the nine months. The decrease in both periods was primarily due to the
absence of costs for businesses divested and volume declines for wine and
domestic premium cigars. Both periods were partially offset by higher unit costs
for moist smokeless tobacco and wine. The overall gross margin percentage
increased slightly in both periods primarily due to higher selling prices
coupled with the absence of lower margins from a discontinued business,
partially offset by higher unit costs for moist smokeless tobacco.
Selling, advertising and administrative costs decreased 5% for the third quarter
and 6% for the nine month period. Both 1998 periods included increased costs for
the Tobacco and Wine segments and lower costs for the Other segment. Selling and
advertising expenses increased for the Tobacco segment primarily due to
increased marketing and sales initiatives, and a new moist product introduction
during the third quarter. Administrative and other expenses for 1998 and 1997
for the Tobacco segment included settlement charges for the states of
Washington, Texas and Florida, in connection with Registrant's health care cost
reimbursement litigation. The charges were for the funding of pilot programs,
primarily to reduce youth access to tobacco products, and related expenses. Both
the third quarter and nine month periods of 1998 included settlement charges of
$3.1 million for Washington and Florida, while both 1997 periods included $3.0
million for Florida. The nine month period of 1998 also included a $4.6 million
settlement charge for Texas. In addition, administrative expenses for the
Tobacco segment for both 1998 periods were favorably affected by lower
spending, primarily legal professional fees. Increased spending in the Wine
segment was in support of premium varietal wines. Other segment expenses were
lower for both periods primarily due to the absence of expenses for the video
entertainment subsidiary, which was sold in the first quarter of 1998, and
lower spending in international markets.
(8)
<PAGE> 10
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
The decrease in the nine month period also included gains recorded on the sale
of certain commercial agricultural properties and the video entertainment
subsidiary, which amounted to $10.7 million. Corporate administrative and
other expenses decreased in both periods primarily due to lower overall
spending. The decrease in the nine month period was also attributable to the
absence of a 1997 charge ($6.6 million) related to recording the present value
of future obligations arising under employment contracts with two former
officers.
Interest, net, decreased significantly in both periods as compared to the
corresponding periods in the prior year due to higher income on cash equivalent
investments, resulting from an increase in the level of funds invested, and
lower average levels of debt outstanding.
Net earnings increased 3 percent to $117.8 million for the third quarter and
increased 5% to $348.9 million for the nine month period, as compared to the
corresponding 1997 periods. Basic and diluted earnings per share increased 2% to
63 cents for the third quarter. Basic and diluted earnings per share both
increased 4%, to $1.88 and $1.87, respectively, for the nine month period as
compared to the corresponding period in the prior year.
Liquidity and Sources of Capital
Changes in Financial Condition Since December 31, 1997
Net cash provided by operating activities represents net income adjusted for the
non-cash items included in the determination of net income as well as changes in
operating assets and liabilities. The increase in net cash provided by operating
activities as compared to the similar period in the prior year was primarily due
to higher net income and changes in certain operating account balances such as
taxes payable, inventories and prepaid expenses. Primary uses of cash in
operations were for raw material inventories, principally seasonal purchases of
leaf tobacco for moist smokeless tobacco, leaf tobacco purchases for cigars and
seasonal grape purchases for the wine operations. Registrant anticipates that
overall raw material inventory purchases in 1998 will approximate amounts
expended in 1997.
Net cash provided by investing activities resulted from the proceeds from the
sale of Registrant's video entertainment subsidiary and the disposition of
property, plant and equipment, primarily the sale of certain commercial
agricultural properties, partially offset by the purchases of property, plant
and equipment. Registrant expects the 1998 capital program to approximate $63
million.
Net cash used in financing activities were amounts expended for dividends and
the repayment of borrowings, partially offset by proceeds from the issuance of
common stock. Registrant had suspended its stock repurchase program in 1997 and
did not increase its 1998 quarterly dividend rate as a result of regulatory and
litigation issues affecting the tobacco industry. (See Contingencies Note.)
Registrant will continue to have significant cash requirements for the remainder
of 1998, primarily for dividends. Registrant expects to meet these requirements
with internally generated funds.
(9)
<PAGE> 11
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
Year 2000
Registrant has developed plans to address the year 2000 issue and is currently
modifying or replacing critical computer systems to become year 2000 compliant.
Registrant has performed a risk assessment and developed and coordinated
corrective measures to address the year 2000 issue. Registrant's year 2000 plan
includes both information technology (IT) systems, non-IT systems and a risk
assessment of our major vendors and customers. Major vendors and customers were
surveyed to determine their state of readiness and the potential implications
they may have on Registrant's business. Site visits will be planned for critical
vendors and customers. Remediation and testing of critical business IT systems
are currently in process and are expected to be year 2000 compliant by June 30,
1999. Remediation and testing of non-IT systems will also continue, as
necessary, during the first half of 1999.
Based on current information available, Registrant estimates, that the cost to
become year 2000 compliant will be approximately $15 million to $20 million, of
which $8 million has been expended through September 30, 1998. Costs associated
with the replacement of IT systems and computer hardware will be capitalized
where appropriate.
Incomplete or untimely resolution of the year 2000 issue by Registrant or
critically important customers or vendors could cause delays in Registrant's
ability to manufacture and ship its products, process transactions or engage in
similar normal business activities, which would have a material financial impact
on Registrant's operations. With the implementation of its year 2000 plan,
Registrant believes the year 2000 issue should not pose any significant
operational problems.
Registrant is developing contingency plans in order to minimize the potential
disruption of business operations that may result if Registrant, its vendors or
customers fail to become year 2000 compliant. The contingency plans may include
stockpiling or securing alternate sources of manufacturing supplies.
Forward-Looking and Cautionary Statements
Reference is made to the section captioned "Cautionary Statement Regarding
Forward-Looking Information" which was filed as part of Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Registrant's 1997 Form 10-K and first and second quarters' Form 10-Q regarding
important factors that could cause actual results to differ materially from
those contained in any forward-looking statement made by Registrant, including
forward-looking statements contained in this report.
(10)
<PAGE> 12
UST Inc.
PART II - OTHER INFORMATION
Item 5. Other Events
On October 22, 1998, Registrant's Board of Directors
authorized amendments to the By-Laws which will require that
stockholders intending to present matters or nominate
directors at an Annual Meeting of Stockholders provide
Registrant with advance written notice of such stockholder's
intention on or prior to the date which is 90 days prior to
the anniversary date of the prior year's Annual Meeting.
Accordingly, for a stockholder proposal to be presented at the
1999 Annual Meeting and for such proposal to be timely under
the By-Laws and Rule 14a-4(c) promulgated under the Securities
Exchange Act of 1934, Registrant must receive notice of any
such intention no later than February 4, 1999. A copy of the
Registrant's By-Laws, as amended, is filed as Exhibit 3.2
hereto and is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.2 By-Laws, as amended
27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
September 30, 1998.
(11)
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UST Inc.
(Registrant)
Date November 10, 1998 /s/ Robert T. D'Alessandro
------------------------ -----------------------------------------
Robert T. D'Alessandro
Senior Vice President and Controller
(Principal Accounting Officer and
Principal Financial Officer)
(12)
<PAGE> 1
[UST LOGO]
BY-LAWS
ADOPTED ON DECEMBER 23, 1986
AMENDED AND RESTATED EFFECTIVE OCTOBER 22, 1998
<PAGE> 2
BY-LAWS
OF
UST INC.
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meetings. The Annual Meetings of stockholders shall be
held at two o'clock in the afternoon on the first Tuesday of May at the
principal office of the Corporation or on such business day and at such time and
at such place within or without the State of Delaware as may be designated by
the Board of Directors, for the purpose of electing directors in accordance with
Section 3 of Article II of these By-Laws and Article SIXTH of the Certificate of
Incorporation of the Corporation and for the transaction of only such other
business as is properly brought before the meeting in accordance with Section 4
of Article II of these By-Laws. Except as provided by Section 230 of the
Delaware General Corporation Law, as now or hereafter amended, written notice of
the Annual Meeting stating the place, date and hour of the meeting shall be
given to each stockholder entitled to vote at such meeting not less than ten nor
more than sixty days before the date of the meeting.
SECTION 3. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors of the Corporation. Nominations of persons for election as Directors
of the Corporation may be made at a meeting of stockholders only (i) by or at
the direction of the Board of Directors, (ii) by any nominating committee or
person appointed by the Board or (iii) by any stockholder of the Corporation
entitled to vote for the election of Directors at the meeting who complies with
the notice procedures set forth in this Section 3. Such nomination, other than
those made by or at the direction of the Board or by any nominating committee or
person appointed by the Board, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation, in the case of an Annual Meeting of stockholders,
not less than 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 30 days before or after
such anniversary date, notice by the stockholder in order to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the Annual Meeting was mailed or such
public disclosure of the date of the Annual Meeting was made, whichever first
occurs; and in the case of a Special Meeting of stockholders called for the
purpose of electing directors, not later than the close of business on the 15th
day following the day on which notice of the date of the Special Meeting was
mailed or public disclosure of the date of the Special Meeting was made,
whichever first occurs. Such stockholder's notice to the Secretary shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a Director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be
1
<PAGE> 3
disclosed in solicitations for proxies for election of Directors pursuant to
Rule 14a under the Securities Exchange Act of 1934, as now or hereafter amended;
and (b) as to the stockholder giving the notice (i) the name and record address
of such stockholder and (ii) the class and number of shares of capital stock of
the Corporation which are beneficially owned by such stockholder. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as Director of the Corporation. No person shall
be eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 4. Other Business. To be properly brought before the meeting,
business must be either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the Board, or (c)
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before an
Annual Meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 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 30 days before or after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the Annual Meeting was mailed or such public disclosure of
the date of the Annual Meeting was made, whichever first occurs. A stockholder's
notice to the Secretary shall set forth with respect to each matter the
stockholder proposes to bring before the Annual Meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the Annual Meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at the Annual Meeting except in accordance with the procedures set
forth in this Section 4, provided, however, that nothing in this Section 4 shall
be deemed to preclude discussion by any stockholder of any business properly
brought before the Annual Meeting.
The Chairman of an Annual Meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 4, and if he should so
determine, he shall so declare to the meeting, and any such business not
properly brought before the meeting shall not be transacted.
SECTION 5. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by (i) the Chairman of the Board, (ii) the Vice
Chairman, (iii) the President, or (iv) by order of the Board of Directors.
Written notice of a Special Meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
SECTION 6. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
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SECTION 7. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy. The Board of Directors, in its discretion, or
the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
SECTION 8. Conduct of Meeting. The Chairman of the Board, if present,
shall call to order and preside at all meetings of stockholders, and the
Secretary (or, in his absence, an Assistant Secretary) shall be secretary of
such meeting.
In the absence of the Chairman of the Board one of the following persons, in
this order of preference, shall call the meeting to order and act as presiding
officer:
(a) the Vice Chairman
(b) the President
(c) any person designated in writing by the Chairman of the Board
(d) any person designated in writing by the Board of Directors.
In the absence of the Secretary and Assistant Secretary, any person present may
be selected by the meeting to act as secretary of the meeting.
SECTION 9. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a compete 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 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 of the Corporation who is present.
SECTION 10. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. Number of Directors; Organization Meeting. The Board of
Directors shall consist of not less than seven nor more than fifteen members,
the exact number of which shall initially be fixed by the Incorporator and
thereafter from time to time by the Board of Directors. After each Annual
Meeting of stockholders, the Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may come
before the meeting. No notice of such meeting need be given if such meeting
shall be held following any Annual Meeting of stockholders. Otherwise, such
organization meeting may be held at any other time or place and in the same
manner as a special meeting, as provided for in Section 3 of this Article III.
SECTION 2. Regular Meetings. Regular meetings of the Board of Directors
shall be held at ten o'clock A.M. on the fourth Thursday of each month, except
that if such Thursday is a legal holiday, the meeting shall be held at ten
o'clock A.M. on the preceding business day that is not a legal holiday. Regular
meetings shall be held at the office of the Corporation, at 100 West
Putnam Avenue, Greenwich,
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Connecticut, or at such other place or places and at such other times as the
Chairman of the Board or the Board of Directors shall from time to time appoint.
No notice need be given of regular meetings.
SECTION 3. Special Meetings. Special meetings of the Board of Directors
may be held on the call of the Chairman of the Board or, in case the Chairman of
the Board is unavailable or refuses to call such meeting, upon the call of any
three Directors. Special meetings shall be held at the office of the Corporation
at 100 West Putnam Avenue, Greenwich, Connecticut, or at such other place or
places, and at such times as the person or persons calling such meeting may
designate. One day personal, telegraphic or telephonic notice given by the
Secretary, any Assistant Secretary or any other officer or assistant officer, or
by any three Directors, as the case may be, shall be sufficient notice of the
calling of a special meeting, provided that the person or persons calling a
special meeting may give shorter notice of such meeting if such person or
persons deem such shorter notice to be necessary or appropriate under the
circumstances. A waiver of notice in writing and signed by the person entitled
to notice, whether before or after the time of the meeting, shall be deemed
equivalent to notice.
SECTION 4. Conduct of Meetings. At any meeting of the Board of Directors,
whether regular or special, the Chairman of the Board shall act as presiding
officer. In the absence of the Chairman of the Board, the chair shall be taken
by the Vice Chairman if he is present or, if he is also absent, then the
President if he is present or, if he is also absent, then by the Director then
and there present with the longest tenure as a member of the Board.
SECTION 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, five Directors or all of the Directors, whichever is less,
shall constitute a quorum for the transaction of business and the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. If a quorum shall not be present at
any meeting of the Board of Directors, the Directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 6. Actions of Board. Unless otherwise provided 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 the members of the Board of Directors or
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
committee.
SECTION 7. Meetings by Means of Conference Telephone. Members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a 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 Section 7 shall constitute
presence in person at such meeting.
SECTION 8. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, 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 any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
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 the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, 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. Each committee shall
keep regular minutes and report to the Board of Directors when required.
SECTION 9. Compensation. The Directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the
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Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
SECTION 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its Directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
Directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
SECTION 1. Number and Qualification of Principal Officers. The officers
of the Corporation shall be elected by the Board of Directors. The principal
officers of the Corporation shall be a Chairman of the Board, a Vice Chairman, a
President, one or more Vice Presidents, a Secretary, a Treasurer, a Controller,
a General Counsel and such other officers as the Board of Directors shall from
time to time constitute as principal officers. The Chairman of the Board, the
Vice Chairman and the President shall be chosen from among the members of the
Board of Directors. The offices of Chairman of the Board and President may be
held by the same person. Any Vice President may also hold the office of
Secretary, Treasurer, Controller or General Counsel. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman and Vice Chairman of the Board of Directors and the President,
need such officers be Directors of the Corporation.
SECTION 2. Election and Tenure of Office. The principal officers of the
Corporation shall be elected annually at the organization meeting of Directors
held pursuant to Section 1 of Article III hereof, and shall hold office until
the next organization meeting of the Board of Directors for election of officers
and until their successors shall have been elected and qualified or until their
earlier resignation or removal. Any officer elected by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board of
Directors. If any vacancy shall occur among the principal officers of the
Corporation, whether by the creation of a new office by the Board of Directors,
removal or otherwise, such vacancy shall be filled by election by the Board of
Directors.
SECTION 3. Additional Officers. The Board of Directors may appoint such
assistants to the principal officers of the Corporation and such other officers,
managers and agents as the Board may deem desirable, granting them such powers
and duties as the Board may determine and for such terms as shall meet the
pleasure of the Board. They shall have no authority to sign checks, bills or
drafts of the Corporation or to make or sign any notes, contracts or obligations
for the Corporation or to advance, loan or borrow money, or to pledge the credit
of the Corporation except to the extent that they may be so specifically
authorized by the Board of Directors.
SECTION 4. Duties. Subject to the control of the Board of Directors, the
officers, agents and employees of the Corporation shall perform the duties and
exercise the powers provided in these By-Laws, such other powers and duties
usually incident to the positions held by them respectively and such other
duties and powers as may be assigned to them by the Board of Directors or the
Chairman of the Board.
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SECTION 5. Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer. Subject to the control and direction of the Board of
Directors and to the conferring by it of plenary powers in particular
transactions upon any other officer of the Corporation, the Chairman shall have
primary control over the policies of the Corporation, the acquisition and
disposition of capital assets, and the times, methods and amounts of capital
financing. He shall preside at meetings of the stockholders and the Board of
Directors, when present.
SECTION 6. Vice Chairman. In the absence or disability of the Chairman of
the Board, the Vice Chairman shall have all the powers and perform all the
duties of the Chairman of the Board. He shall perform such other duties as may
be assigned to him by the Chairman of the Board or by the Board of Directors.
SECTION 7. President. The President shall supervise and manage the
conduct of the current business of the Corporation and may exercise any of the
powers of the Chairman that shall have been delegated to him by that officer or
conferred upon him by the Board of Directors. He shall act for and in behalf of
the Corporation on matters in which action by the President, as such, is
required by law. He shall do and perform all acts and things incident to the
position of President, other than such as are charged upon the Chairman, and
such other duties as may be assigned to him from time to time by the Chairman of
the Board, the Vice Chairman or by the Board of Directors.
SECTION 8. Vice Presidents. The Vice Presidents shall perform such duties
as may be assigned to each of them by the Chairman of the Board, by the Vice
Chairman, by the President or by the Board of Directors. One or more Vice
Presidents may be designated by the Board of Directors as Executive or Senior
Vice Presidents.
SECTION 9. Secretary. The Secretary shall record all votes and
proceedings of the stockholders and of the Board of Directors in books to be
kept for that purpose. He shall have charge of the seal of the Corporation and
shall have authority to affix such seal to all instruments where its use is
required. He shall have the custody of all valuable papers and documents of the
Corporation, and shall keep the Corporation's stock books, stock ledgers, and
stock transfer books, and shall prepare, issue, record, transfer, and cancel
certificates of stock as required by the proper transactions of the Corporation
and its stockholders unless these functions shall be performed by a duly
appointed and authorized transfer agent or registrar other than the Corporation,
in which event he shall review the performance of such transfer agent. He shall
serve as the liaison for the Corporation with the New York Stock Exchange, Inc.
and any other exchanges on which the capital stock of the Corporation may be
listed for trading. The Secretary shall give, or cause to be given, notice of
all meetings of the stockholders and special meetings of the Board of Directors.
If the Secretary shall be unable or shall refuse to cause to be given notice of
all meetings of the stockholders and special meetings of the Board of Directors,
and if there be no Assistant Secretary, then either the Board of Directors, the
Chairman of the Board, the Vice Chairman or the President may choose another
officer to cause such notice to be given. The Secretary shall have custody of
the seal of the Corporation and the Secretary or any Assistant Secretary, if
there be one, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by the signature of the Secretary or
by the signature of any such Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be. He shall serve as Secretary of each committee of the Board of Directors
unless another person shall be designated to so serve by the Board of Directors.
The Secretary need not be a member of any such committee. He shall have all
powers and shall perform all duties commonly incident to and vested in the
office of Secretary of a corporation. He shall also perform such other duties as
the Board of Directors, Chairman of the Board, Vice Chairman, President or other
authorized officer of the Corporation shall designate from time to time.
SECTION 10. Assistant Secretary. An Assistant Secretary shall perform the
duties and have the powers of the Secretary during the absence or disability of
the Secretary, and shall perform such other duties and have such other powers as
the Board of Directors, Chairman of the Board, Vice Chairman, President,
Secretary or other authorized officer of the Corporation shall designate from
time to time.
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SECTION 11. Treasurer. The Treasurer shall have authority to collect the
funds of the Corporation and to deposit the same in such depositories as the
Board of Directors may designate or as he may select pursuant to authority
conferred upon him by the Board of Directors. Subject to the general direction
and authority of the Board of Directors, Chairman of the Board, Vice Chairman,
President or Chief Financial Officer, he shall arrange for the borrowing of
funds from banks and other financial institutions and investors, as well as
arranging for the borrowing and lending of funds among the Corporation and its
subsidiary companies. He shall cause proper accounts to be kept under his
direction of all receipts and disbursements made by him for the Corporation and
render accounts of the same whenever required by the Board of Directors, the
Chairman of the Board, the Vice Chairman, the President, or other authorized
officer of the Corporation. All securities of the Corporation shall be kept in
custody of the Treasurer unless otherwise ordered by the Board of Directors.
SECTION 12. Assistant Treasurer. An Assistant Treasurer shall perform the
duties and have the powers of the Treasurer during the absence or disability of
the Treasurer, and shall perform such other duties and have such other powers as
the Board of Directors, Chairman of the Board, Vice Chairman, President,
Treasurer or other authorized officer of the Corporation shall designate from
time to time.
SECTION 13. Controller. The Controller shall exercise general supervision
of the bookkeeping methods of the Corporation and shall supervise and be
responsible for all matters pertaining to the auditing and accounting functions
of the Corporation. He shall render periodically such balance sheets, earnings
statements and other reports relating to the business of the Corporation as may
be required by the Board of Directors or the Chairman of the Board, Vice
Chairman, President or other authorized officer of the Corporation.
SECTION 14. Assistant Controller. An Assistant Controller shall perform
the duties and have the powers of the Controller during the absence or
disability of the Controller, and shall perform such other duties and have such
other powers as the Board of Directors or Controller shall designate from time
to time.
SECTION 15. General Counsel. The General Counsel shall advise the Board
of Directors and the Corporation on legal matters relating to the business and
affairs of the Corporation. The General Counsel shall have all authority and
perform all duties normally incident to the office of general counsel and shall
perform such additional duties as may be assigned to him by the Board of
Directors, the Chairman of the Board, the Vice Chairman or the President.
SECTION 16. Assistant General Counsel. An Assistant General Counsel shall
perform the duties and have the powers of the General Counsel during the absence
or disability of the General Counsel, and shall perform such other duties and
have such other powers as the Board of Directors or General Counsel shall
designate from time to time.
SECTION 17. Salaries and Supervision of Officers and Agents. The elected
officers of the Corporation may be paid such salaries as the Board of Directors
shall from time to time determine. The appointed officers and agents of the
Corporation may be paid such salaries as determined in the manner from time to
time directed by the Board of Directors. The officers and agents of the
Corporation shall at all times be subject to the supervision, direction and
control of the Board of Directors.
SECTION 18. Power of Officers to Contract, Etc. Except as otherwise
provided in these By-Laws, or as directed and authorized by the Board of
Directors, all checks, notes and negotiable instruments of every description
shall be executed by at least two officers of the Corporation to be designated
by the Board of Directors. Except as provided in these By-Laws, no officers or
agents of the Corporation shall, either singly or together, have any power to
incur any debt or liability on behalf of the Corporation or to advance, loan or
borrow any money for or on account of the Corporation or to pledge its credit or
to sign its name to any note, draft or negotiable instrument whatsoever unless
thereunto authorized by the Board of Directors; provided, however, that bonds,
debentures or notes issued under a mortgage, indenture of trust or agreement
with a
bank or trust company as trustee, need be executed manually only by the
Treasurer or an Assistant Treasurer
and by the facsimile of the signature of any other officer to be designated by
the Board of Directors,
and coupons attached or appurtenant to any such bonds, debentures or notes need
be
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executed only by the facsimile of the signature of the Treasurer, and as so
executed, such bonds, debentures, notes and coupons shall be binding on the
Corporation.
SECTION 19. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Secretary, Assistant Secretary,
Treasurer, Assistant Treasurer or any other officer, and any such officer may,
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
ARTICLE V
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the Vice Chairman or the
President and (ii) the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
SECTION 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature 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 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, which affidavit shall be satisfactory in form and
substance to the Secretary, Assistant Secretary, Treasurer or Assistant
Treasurer. When authorizing such issue of a new certificate, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his
legal representative, to advertise the same in such manner as the Board of
Directors shall require and/or to give the Corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
SECTION 5. Record Date. Except as otherwise provided in the Certificate
of Incorporation, 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, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty days nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. 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.
SECTION 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and
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to hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VI
NOTICES
SECTION 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
SECTION 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of capital stock of
the Corporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
SECTION 3. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere
9
<PAGE> 11
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
SECTION 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
SECTION 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
10
<PAGE> 12
Notice of any application for indemnification pursuant to this Section 5 shall
be given to the Corporation promptly upon the filing of such application.
SECTION 6. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
SECTION 7. Non-exclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise.
SECTION 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against liability under the provisions of this Article VIII.
SECTION 9. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer. employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
SECTION 10. Continuation of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors as provided in the Certificate of Incorporation of the Corporation,
provided, however, that notice of such alteration, amendment, repeal or adoption
of new By-Laws be contained in the notice of such meeting of stockholders or
Board of Directors as the case may be.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Registrant's
condensed consolidated statement of financial position and condensed
consolidated statement of earnings and is qualified in its entirety by reference
to such financial statements. (In thousands, except per share amounts).
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 121,132
<SECURITIES> 0
<RECEIVABLES> 63,088
<ALLOWANCES> 0
<INVENTORY> 332,029
<CURRENT-ASSETS> 579,551
<PP&E> 581,732
<DEPRECIATION> 248,915
<TOTAL-ASSETS> 975,693
<CURRENT-LIABILITIES> 160,407
<BONDS> 100,000
0
0
<COMMON> 103,893
<OTHER-SE> 473,145
<TOTAL-LIABILITY-AND-EQUITY> 975,693
<SALES> 1,051,700
<TOTAL-REVENUES> 1,051,700
<CGS> 205,806
<TOTAL-COSTS> 205,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (578)
<INCOME-PRETAX> 562,777
<INCOME-TAX> 213,907
<INCOME-CONTINUING> 348,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 348,870
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.87
</TABLE>
