<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 April 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7685
AVERY DENNISON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-1492269
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
150 North Orange Grove Boulevard, Pasadena, California 91103
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (626) 304-2000
Indicate by a check X 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
----- -----
Number of shares of $1 par value common stock outstanding as of April 30,
1999: 113,718,746
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
INDEX TO FORM 10-Q
------------------
<TABLE>
<CAPTION>
Page No.
--------
Part I. Financial Information (Unaudited):
Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheet
April 3, 1999 and January 2, 1999 3
Consolidated Statement of Income
Quarters Ended April 3, 1999 and March 28, 1998 4
Condensed Consolidated Statement of Cash Flows
Quarters Ended April 3, 1999 and March 28, 1998 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Results of Operations
and Financial Condition 11
Quantitative and Qualitative Disclosures About Market Risk 15
Part II. Other Information:
Submission of Matters to a Vote of Security Holders,
Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
<PAGE>
PART I. ITEM 1. FINANCIAL INFORMATION
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
April 3, 1999 January 2, 1999
------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10.5 $ 18.5
Trade accounts receivable, net 504.8 454.8
Inventories, net 252.6 230.6
Prepaid expenses 19.8 19.0
Deferred tax assets 77.7 55.1
Other current assets 23.4 24.0
------------ -----------
Total current assets 888.8 802.0
Property, plant and equipment, at cost 1,893.2 1,932.6
Accumulated depreciation 887.2 897.0
------------ -----------
1,006.0 1,035.6
Intangibles resulting from business acquisitions, net 258.5 145.1
Other assets 161.0 159.9
------------ -----------
$2,314.3 $2,142.6
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 43.5 $ 71.3
Accounts payable 278.3 269.8
Other current liabilities 421.1 323.2
------------ -----------
Total current liabilities 742.9 664.3
Long-term debt 548.6 465.9
Deferred taxes and other long-term liabilities 175.7 179.1
Long-term obligation 88.6 -
Shareholders' equity:
Common stock - $1 par value, authorized - 400,000,000
shares; issued - 124,126,624 shares at April 3, 1999
and January 2, 1999 124.1 124.1
Capital in excess of par value 769.9 587.5
Retained earnings 1,176.2 1,185.1
Cost of unallocated ESOP shares (18.3) (18.3)
Employee stock benefit trust, 14,580,431 shares (844.7) (677.6)
at April 3, 1999 and 15,036,525 shares at
January 2, 1999
Treasury stock at cost, 10,312,839 shares at April 3, (415.8) (359.4)
1999 and 9,060,617 shares at January 2, 1999
Accumulated other comprehensive loss (32.9) (8.1)
------------ -----------
Total shareholders' equity 758.5 833.3
------------ -----------
$2,314.3 $2,142.6
============ ===========
See Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------
April 3, 1999 March 28, 1998
------------- ---------------
<S> <C> <C>
Net sales $933.9 $843.6
Cost of products sold 622.0 563.1
--------- --------
Gross profit 311.9 280.5
Marketing, general and 208.3 190.1
administrative expense
Restructuring charge 65.0 -
Interest expense 10.4 8.1
--------- --------
Income before taxes 28.2 82.3
Taxes on income 9.8 28.1
--------- --------
Net income $ 18.4 $ 54.2
========= ========
Per share amounts:
Net income per common share $ .19 $ .53
Net income per common share, assuming dilution .18 .52
Dividends .24 .21
Average shares outstanding:
Common shares 99.4 102.2
Common shares, assuming dilution 101.5 105.0
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------
April 3, 1999 March 28, 1998
------------- --------------
<S> <C> <C>
Operating Activities:
- --------------------
Net income $ 18.4 $ 54.2
Adjustments to reconcile net income to net cash provided
by operating activities:
Restructuring charge 65.0 -
Depreciation 31.7 27.1
Amortization 4.8 2.9
Deferred taxes (22.2) (.7)
Changes in assets and liabilities, net of the effect of (29.8) (35.2)
foreign currency translation, business divestitures,
acquisitions and restructuring charge
----------- ---------------
Net cash provided by operating activities 67.9 48.3
----------- ---------------
Investing Activities:
- --------------------
Purchase of property, plant and equipment (23.9) (36.8)
Payments for acquisitions (35.1) (2.7)
Other (6.8) 1.3
----------- ---------------
Net cash used in investing activities (65.8) (38.2)
----------- ---------------
Financing Activities:
- --------------------
Net increase in short-term debt 57.2 70.0
Net decrease in long-term debt (.2) (5.4)
Dividends paid (27.3) (24.8)
Purchase of treasury stock (56.4) (58.0)
Proceeds from exercise of stock options 7.9 10.5
Other 9.3 (2.1)
----------- ---------------
Net cash used in financing activities (9.5) (9.8)
----------- ---------------
Effect of foreign currency translation on cash balances (.6) -
----------- ---------------
(Decrease) increase in cash and cash equivalents (8.0) .3
----------- ---------------
Cash and cash equivalents, beginning of period 18.5 3.3
----------- ---------------
Cash and cash equivalents, end of period $ 10.5 $ 3.6
=========== ===============
See Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying unaudited consolidated financial statements include normal
recurring adjustments necessary for a fair presentation of the Company's
interim results. Certain prior year amounts have been reclassified to conform
with current year presentation. The condensed financial statements and notes
in this Form 10-Q are presented as permitted by Regulation S-X, and as such,
they do not contain certain information included in the Company's 1998 annual
financial statements and notes.
The first quarters of 1999 and 1998 consisted of thirteen-week periods ending
April 3, 1999 and March 28, 1998, respectively. The interim results of
operations are not necessarily indicative of future financial results.
2. Restructuring
In the first quarter of 1999, the Company announced a major realignment of
its cost structure designed to increase operating efficiencies and improve
profitability. The realignment resulted in a one-time pre-tax restructuring
charge of $65 million, or $.42 per diluted share on an after-tax basis, in
the first quarter of 1999.
The restructuring involves the consolidation of manufacturing and
distribution capacity in both of the Company's operating segments. The $65
million charge reflects the costs to close eight manufacturing and
distribution facilities, the elimination of approximately 1,500 positions
(principally in manufacturing), and other initiatives to exit activities.
The significant components of the restructuring charge and the accrual
balance as of April 3, 1999 (included within "Other current liabilities")
were as follows:
<TABLE>
<CAPTION>
(In millions) Charge Amounts Utilized Liability Balance
------ ---------------- -----------------
<S> <C> <C> <C>
Severance and related costs $35.1 $5.6 $29.5
Asset write-downs 29.9 0.4 29.5
-------- ------- --------
$65.0 $6.0 $59.0
======== ======= ========
</TABLE>
Severance and related costs represent cash to be paid to employees being
terminated under the program. Asset write-downs identified as part of the
restructuring program, principally related to equipment, represent non-cash
charges required to reduce the carrying value of the assets to be disposed of
to net realizable value.
At the end of the quarter, four plant closures had commenced and
approximately 300 employees had left the Company. The Company expects to
complete the restructuring program in the year 2000.
6
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Net Income Per Share
Net income per common share amounts were computed as follows:
(In millions, except per share amounts)
<TABLE>
<CAPTION>
April 3, 1999 March 28, 1998
<S> <C> <C>
(A) Net income available to common shareholders $ 18.4 $ 54.2
=========================== =========================
(B) Weighted average number of common shares
outstanding 99.4 102.2
Additional common shares issuable
under employee stock options using the
treasury stock method 2.1 2.8
--------------------------- -------------------------
(C) Weighted average number of common shares
outstanding assuming the exercise
of stock options 101.5 105.0
=========================== =========================
Net income per common share (A) / (B) $ .19 $ .53
=========================== =========================
Net income per common share,
assuming dilution (A) / (C) .18 .52
=========================== =========================
</TABLE>
4. Comprehensive Income
Comprehensive income includes net income and foreign currency translation
adjustments that is currently presented as a component of shareholders'
equity. The Company's total comprehensive (loss) income for the three months
ended April 3, 1999 and March 28, 1998 was $(6.4) million and $44 million,
respectively.
5. Foreign Currency Translation
Beginning in 1999, Mexico was no longer treated as being in a
hyperinflationary economy for accounting purposes. Transactions in foreign
currencies and translation of financial statements operating in a
hyperinflationary economy (Mexican operations) had no impact on net income
for the first quarter of 1999 and resulted in a loss of $1 million for the
first quarter of 1998.
7
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Financial Instruments
The Company enters into foreign exchange forward, option and swap contracts
and interest rate contracts to manage exposure to fluctuations in foreign
currency exchange and interest rates. The Company does not hold or purchase
any foreign currency or interest rate contracts for trading purposes.
Foreign exchange forward, option and swap contracts that hedge existing
assets, liabilities or firm commitments are measured at fair value and the
related gains and losses on these contracts are recognized in net income
currently. Foreign exchange forward and option contracts that hedge
forecasted transactions are measured at fair value, and the related gains
and losses on these contracts are deferred and subsequently recognized in
net income in the period in which the underlying transaction is
consummated. In the event that an anticipated transaction is no longer
likely to occur, the Company recognizes the change in fair value of the
instrument in net income currently.
Gains and losses resulting from foreign exchange forward, option and swap
contracts are recorded in the same category as the related item being
hedged. Cash flows from the use of financial instruments are reported in
the same category as the hedged item in the Condensed Consolidated
Statement of Cash Flows. Gains and losses on contracts used to hedge the
value of investments in certain foreign subsidiaries are included in a
component of other comprehensive income.
The net amounts paid or received on interest rate agreements are recognized
as adjustments to interest expense over the terms of the agreements.
Contract premiums paid, if any, are amortized to interest expense over the
terms of the underlying instruments.
<TABLE>
<CAPTION>
<S> <C>
7. Inventories
</TABLE>
Inventories consisted of (in millions):
<TABLE>
<CAPTION>
April 3, 1999 January 2, 1999
------------- ---------------
<S> <C> <C>
Raw materials $ 74.9 $ 69.2
Work-in-progress 73.8 66.6
Finished goods 130.5 121.4
LIFO adjustment (26.6) (26.6)
------ ------
$252.6 $230.6
====== ======
</TABLE>
8. Intangibles Resulting From Business Acquisitions
Accumulated amortization of intangible assets at April 3, 1999 and January
2, 1999 was $56.5 million and $55.6 million, respectively.
9. Research and Development
Research and development expense for the first quarters of 1999 and 1998
was $15.6 million and $16.2 million, respectively.
8
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Contingencies
The Company has been designated by the U.S. Environmental Protection Agency
(EPA) and/or other responsible state agencies as a potentially responsible
party (PRP) at 16 waste disposal or waste recycling sites which are the
subject of separate investigations or proceedings concerning alleged soil
and/or groundwater contamination and for which no settlement of the
Company's liability has been agreed upon. Litigation has been initiated by
a governmental authority with respect to two of these sites, but the
Company does not believe that any such proceedings will result in the
imposition of monetary sanctions. The Company is participating with other
PRPs at all such sites, and anticipates that its share of cleanup costs
will be determined pursuant to remedial agreements entered into in the
normal course of negotiations with the EPA or other governmental
authorities.
The Company has accrued liabilities for all sites, including sites in which
governmental agencies have designated the Company as a PRP, where it is
probable that a loss will be incurred and the minimum cost or amount of
loss can be reasonably estimated. However, because of the uncertainties
associated with environmental assessment and remediation activities, future
expense to remediate the currently identified sites, and sites which could
be identified in the future for cleanup, could be higher than the liability
currently accrued. Based on current site assessments, management believes
that the potential liability over the amounts currently accrued would not
materially affect the Company.
The Company and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the
business. In the opinion of management, the resolution of these matters
will not materially affect the Company.
9
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Segment Information
Financial information by reportable operating segment is set forth below:
<TABLE>
<CAPTION>
(In millions) April 3, 1999 March 28, 1998
---------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales:
Pressure-sensitive Adhesives and Materials $498.3 $464.1
Consumer and Converted Products 476.4 421.6
Intersector (40.8) (42.1)
------------------------------------------------------------------------------------------
Net sales $933.9 $843.6
==========================================================================================
Income (loss) from operations before interest and taxes:
Pressure-sensitive Adhesives and Materials $ 26.7 $ 46.4
Consumer and Converted Products 23.0 50.8
Corporate administrative and research and (11.1) (6.8)
development expenses
------------------------------------------------------------------------------------------
$ 38.6 $ 90.4
Interest expense (10.4) (8.1)
------------------------------------------------------------------------------------------
Income before taxes $ 28.2 $ 82.3
==========================================================================================
</TABLE>
First quarter 1999 results include a one-time pretax restructuring charge
of $65 million, which affected segment reporting as follows: $25.1 million
to the Pressure-sensitive Adhesives and Materials segment, $37.6 million to
the Consumer and Converted Products segment, and $2.3 million to Corporate.
See Note 2 for additional information regarding the Company's first quarter
1999 restructuring charge.
12. Future Accounting Requirements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This
Statement requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives
will be recorded each period in current earnings or other comprehensive
income. The new rules will be effective the first quarter of 2000. The
Company is in the process of determining the impact of this new standard
and, based on current market conditions, anticipates that this standard
will not have a material impact on the Company's financial results when
effective.
10
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations: For the Quarter
- --------------------------------------
Quarterly sales increased to $933.9 million, a 10.7 percent increase over first
quarter 1998 sales of $843.6 million. Excluding sales growth due to recent
acquisitions, the Zweckform venture in Germany, and a small benefit from the
impact of currency, sales grew 5.5 percent
Gross profit margin increased to 33.4 percent for the quarter compared to 33.3
percent for the first quarter of 1998. The improvement was primarily due to raw
material and manufacturing cost reductions.
Marketing, general and administrative expense, as a percent of sales, improved
to 22.3 percent from 22.5 percent for the first quarter of 1998, primarily due
to the benefit from cost reduction actions taken in the second half of 1998, as
well as ongoing tight cost controls.
In the first quarter of 1999, the Company announced a major realignment of its
cost structure designed to increase operating efficiencies and improve
profitability. The realignment resulted in a one-time pre-tax restructuring
charge of $65 million, or $.42 per diluted share on an after-tax basis, in the
first quarter of 1999. The restructuring involves the consolidation of
manufacturing and distribution capacity in both of the Company's operating
segments. The $65 million charge reflects the costs to close eight manufacturing
and distribution facilities, the elimination of approximately 1,500 positions
(principally in manufacturing), and other initiatives to exit activities. The
restructuring charge includes severance and related costs for approximately
1,500 positions ($35.1 million), and asset write-downs ($29.9 million).
Severance and related costs represent cash to be paid to employees being
terminated under the program. Asset write-downs identified as part of the
restructuring program, principally related to equipment, represent non-cash
charges required to reduce the carrying value of the assets to be disposed of to
net realizable value. At the end of the first quarter, 1999, four plant closures
had commenced and approximately 300 employees had left the Company. In addition,
approximately $5.6 million had been paid for severance and related costs and $.4
million had been utilized in asset write-downs. The Company expects to complete
the restructuring program in the year 2000. The Company expects 1999 and 2000
pretax savings in the range of $15 million to $18 million and $38 million to $40
million, respectively. When fully implemented, the Company estimates annual
savings of approximately $58 million to $62 million.
Interest expense increased to $10.4 million for the quarter compared to $8.1
million a year ago, primarily reflecting increased debt to fund share
repurchase, acquisitions and capital expenditures. In addition, the Company
recorded lower capitalized interest due to the decrease in capital spending
compared to the same period last year. Income before taxes, as a percent of
sales, was 3 percent compared to 9.8 percent a year ago, reflecting the $65
million restructuring charge. Excluding the restructuring charge, income before
taxes, as a percent of sales increased to 10 percent. The effective tax rate was
34.8 percent for the first quarter of 1999 compared to 34.1 percent for the
first quarter of 1998, primarily due to a different geographic mix of income.
The Company estimates that the effective tax rate for 1999 will be 34.5 to 35
percent.
11
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations: For the Quarter (continued)
- --------------------------------------------------
Net income totaled $18.4 million compared to $54.2 million in the first quarter
of 1998. Excluding the restructuring charge in the first quarter of 1999, net
income increased 12.4 percent to $60.9 million. Net income, as a percent of
sales, was 2 percent for the first quarter of 1999 and 6.4 percent for the same
period last year. Excluding the restructuring charge, net income, as a percent
of sales increased to 6.5 percent.
Net income per common share for the quarter was $.19 compared to $.53 in the
first quarter of 1998. Excluding the restructuring charge, net income per common
share for the quarter increased 15.1 percent to $.61 compared to the same period
last year. Net income per common share, assuming dilution, was $.18 for the
first quarter of 1999 and $.52 for the first quarter of 1998. Excluding the
restructuring charge, net income per common share, assuming dilution, was $.60
for the first quarter of 1999, a 15.4 percent increase year over year.
Results of Operations by Reportable Operating Segment
Pressure-sensitive Adhesives and Materials:
<TABLE>
<CAPTION>
(In millions) April 3, 1999 March 28, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $498.3 $464.1
Income from operations before interest and taxes 26.7 46.4
- ---------------------------------------------------------------------------------------
</TABLE>
The Pressure-sensitive Adhesives and Materials segment reported increased sales
for the first quarter of 1999 compared to the same period last year. The
segment's income results include a pretax restructuring charge of $25.1 million
($15.4 million in the U.S. operations and $9.7 million in the international
operations). Excluding this charge, segment income increased compared to the
first quarter of 1998. Sales increased in the U.S. operations primarily due to
strong unit volume growth in the core U.S. roll materials business, particularly
in sales of film and specialty products. Income from the U.S. operations,
excluding the first quarter 1999 restructuring charge, improved primarily due to
sales growth and margin improvement in the U.S. materials business attributed to
cost reduction actions taken in the prior year and early benefits of the Six
Sigma program (Six Sigma is a program designed to reduce the number of defects
which will improve productivity and quality, while reducing costs). Total
international operations in the segment reported increased sales, reflecting
unit volume growth in Europe and the roll materials business in Asia. Excluding
the restructuring charge, income from the international operations increased
primarily due to improved profitability in the Asian and Latin American
businesses.
12
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations: For the Quarter (continued)
- --------------------------------------------------
Consumer and Converted Products:
<TABLE>
<CAPTION>
(In millions) April 3, 1999 March 28, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $476.4 $421.6
Income from operations before interest and taxes 23.0 50.8
- ------------------------------------------------------------------------------------------
</TABLE>
The Consumer and Converted Products segment reported increased sales for the
first quarter of 1999 compared to the same period last year. The segment's
income results include a pretax restructuring charge of $37.6 million ($24.3
million in the U.S. operations and $13.3 million in the international
operations). Excluding this charge, segment income increased compared to first
quarter 1998. Increased sales in the U.S. operations were primarily led by
recent acquisitions. Excluding the restructuring charge, income in the U.S.
operations improved primarily due to the increase in profitability of Avery-
brand products. The international operations reported increased sales primarily
due to the recent Zweckform venture and the worldwide ticketing business. Income
for the international operations, excluding the restructuring charge, improved
primarily due to the worldwide European office products business and the
worldwide ticketing business.
Financial Condition
- -------------------
Average working capital, excluding short-term debt, as a percentage of sales,
decreased to 5.1 percent from 7.3 percent a year ago. The decrease was primarily
due to increased sales, reduced days sales outstanding in accounts receivable
and accruals recorded for the restructuring charge. The average number of days
sales outstanding in accounts receivable decreased to 49 days compared to 52
days a year ago; average inventory turnover for the first quarters of 1999 and
1998 was 9.8 turns.
Net cash flows provided by operating activities totaled $67.9 million for the
first quarter of 1999 compared to $48.3 million for the first quarter of 1998.
The improvement in net cash flows provided by operating activities was primarily
due to higher net income (before the restructuring charge) and reductions in
working capital requirements.
Capital spending for the quarter was $23.9 million compared to $36.8 million
for the first quarter of 1998. This decrease was primarily due to the high
spending requirements for certain geographic expansions last year. Total capital
spending for 1999 is expected to be approximately $150 million. In addition to
cash flows from operations, the Company has more than adequate financing
arrangements to conduct its operations.
During the first quarter of 1999, total debt increased $54.9 million to $592.1
million from year end 1998. Total debt to total capital was 43.8 percent as of
the end of the first quarter of 1999 and 39.2 percent at year end 1998. During
the fourth quarter of 1996, the Company registered with the Securities and
Exchange Commission, $150 million in principal amount of uncollaterized medium-
term notes, of which $110 million in notes had been issued as of year end 1998.
No notes were issued in the first quarter of 1999. Proceeds from the medium-term
notes have been used to refinance short-term debt and for other general
corporate purposes.
13
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Financial Condition (continued)
- ------------------- -----------
On January 12, 1999, the Company completed a transaction with Steinbeis Holding
GmbH to combine substantially all of the Company's office products businesses in
Europe with Zweckform Buro-Produkte GmbH (Zweckform), a German office products
supplier. The Company's aggregate cost basis in this venture was financed
through available cash resources of approximately $23 million and the assumption
of an obligation as reported in the "Long-term obligation" line on the Condensed
Consolidated Balance Sheet. The entire obligation is scheduled to be paid in
2004. The excess of the cost-basis over the fair value of net assets acquired
was approximately $105.3 million at the end of first quarter 1999.
Shareholders' equity decreased to $758.5 million from $833.3 million at year end
1998. During the first quarter of 1999, the Company purchased 1.25 million
shares of common stock at a cost of $56.4 million. The market value of shares
held in the employee stock benefit trust, after the issuance of shares under the
Company's stock and incentive plans, increased during the quarter by $167.1
million to $844.7 million from year end 1998.
Future Accounting Requirements
- ------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives will be recorded each
period in current earnings or other comprehensive income. The new rules will be
effective the first quarter of 2000. The Company is in the process of
determining the impact of this new standard and, based on current market
conditions, anticipates that it will not have a material impact on the Company's
financial results when effective.
Year 2000
- ---------
The Year 2000 (Y2K) issue is the result of computer programs being written for,
or microprocessors using, two digits (rather than four) to define the applicable
year. Company computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000, which could result
in system failures or miscalculations. The Company is currently working to
mitigate the Y2K issue and has established processes for assessing the risks and
associated costs.
The Company categorizes its Y2K efforts as follows: hardware, software, embedded
processors, vendors and customers. Progress in assessing and remediating
information technology systems (hardware and software) and non-information
technology systems (embedded processors) continues to be tracked in phases
including assessment, identification of non-compliant systems, remediation,
testing and verification. Hardware, software and embedded processors have been
assessed and remediation is in progress. The Company's Y2K project is
progressing and a large portion of its internal remediation work was completed
at the end of first quarter 1999. The Company is using internal and external
resources to remediate and test its systems.
The Company has initiated communications with significant vendors and customers
to coordinate the Y2K issue, and is in the process of determining the Company's
vulnerability if these companies fail to remediate their Y2K issues. There can
be no guarantee that the systems of other companies will be remediated on a
timely basis, or that other companies' failure to remediate Y2K issues would not
have a material adverse effect on the Company. The Company continues to develop
contingency plans to mitigate risks associated with the Y2K issue.
14
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Year 2000 (continued)
- ---------------------
Costs incurred to date in addressing the Y2K issue have been expensed as
incurred and are not material. Based on current information, the total cost to
remediate and test the Company's systems is not expected to be material.
The Company presently believes that, with remediation, Y2K risks can be
mitigated. Although the Company is not currently aware of any material internal
operational or financial Y2K related issues, the Company cannot provide
assurances that the computer systems, products, services or other systems upon
which the Company depends will be Y2K compliant on schedule, that the costs of
its Y2K program will not become material, or that the Company's contingency
plans will be adequate. The Company is currently unable to evaluate accurately
the magnitude, if any, of the Y2K related issues arising from the Company's
vendors and customers. If any such risks (either with respect to the Company or
its vendors or customers) materialize, the Company could experience serious
consequences to its business which could have material adverse effects on the
Company's financial condition, results of operations and liquidity.
Safe Harbor Statement
- ---------------------
Except for historical information contained herein, the matters discussed in the
Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this Form 10-Q contain "forward-looking
statements" within the meaning of the Private Securities Reform Act of 1995.
These statements, which are not statements of historical fact, may contain
estimates, assumptions, projections and/or expectations regarding future events.
Such forward-looking statements, and financial or other business targets, are
subject to certain risks and uncertainties which could cause actual results to
differ materially from any future results, performance or achievements of the
Company expressed or implied by such forward-looking statements. Certain of such
risks and uncertainties are discussed in more detail in the Company's Annual
Report on Form 10-K for the year ended January 2, 1999 and include, but are not
limited to, risks and uncertainties relating to investment in new production
facilities, timely development and successful marketing of new products, impact
of competitive products and pricing, customer and supplier and manufacturing
concentrations, changes in customer order patterns and inventory levels,
increased competition, loss of significant customer(s), impact of Year 2000
issues and the euro conversion, legal proceedings, fluctuations in foreign
exchange rates or other risks associated with foreign operations, changes in
economic or political conditions, and other factors.
Any forward looking statements should be considered in light of the factors
detailed in Exhibit 99 in the Company's Annual Report on Form 10-K for the year
ended January 2, 1999.
The Company's forward-looking statements represent its judgment only on the
dates such statements were made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed or unanticipated
events or circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------
There are no material changes in the information provided in Item 7A of the
Company's Form 10-K for the fiscal year ended January 2, 1999.
15
<PAGE>
PART II. OTHER INFORMATION
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
ITEMS 1, 2 AND 3. Not applicable.
- ----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
The registrant held its annual stockholders' meeting on April 29, 1999. The
stockholders voted to reelect four directors to the Board of Directors as
follows:
<TABLE>
<CAPTION>
Number of Shares Votes/1/
-------------------------------
For Withheld
---------- ------------
<S> <C> <C>
Charles D. Miller 101,911,899 1,263,848
Richard M. Ferry 101,953,534 1,222,213
Dwight L. Allison, Jr. 101,936,335 1,239,412
Kent Kresa 100,993,187 2,182,560
</TABLE>
/1/There were no abstentions or shares otherwise not voted by brokers.
The results of the voting on the following additional items were as follows:
<TABLE>
<CAPTION>
Broker
For Against Abstained Non-Votes
------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C>
Reapproval of the Senior Executive Leadership 96,946,710 4,563,101 1,665,936 -
Compensation Plan
Reapproval of the Executive Long-Term 96,201,024 5,205,275 1,769,448 -
Incentive Plan
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits: 3(ii) Bylaws of Avery Dennison Corporation - amended and
restated April 29, 1999
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
b. Reports on Form 8-K: Registrant filed a current report on Form 8-K on January
26, 1999, with respect to fourth quarter and year end results, and a
restructuring charge in the first quarter of 1999.
16
<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.
AVERY DENNISON CORPORATION
--------------------------
(Registrant)
s/ Robert M. Calerdoni
----------------------
Robert M. Calderoni
Senior Vice President, Finance, and
Chief Financial Officer
(Principal Financial Officer)
s/ Thomas E. Miller
-------------------
Thomas E. Miller
Vice President and Controller
(Chief Accounting Officer)
May 18, 1999
17
<PAGE>
Exhibit 3.11
BYLAWS
OF
AVERY DENNISON CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office.
The registered office of Avery Dennison Corporation (hereinafter called the
"corporation") in the State of Delaware shall be at 1013 Centre Road, City of
Wilmington, County of New Castle, and the name of the registered agent at that
address shall be United States Corporation Company.
Section 2. Principal Office.
The principal executive office for the transaction of the business of the
corporation is hereby fixed and located in Los Angeles County, California. The
board of directors is hereby granted full power and authority to change said
principal executive office from one location to another within or without the
State of California.
Section 3. Other Offices.
The corporation may also have offices at such other places within or
without the State of Delaware as the board of directors may from time to time
determine, or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings.
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
Section 2. Annual Meetings of Stockholders.
The annual meeting of stockholders shall be held on the last Thursday in
April of each year at 1:30 p.m. of said day, or on such other day, which shall
not be a legal holiday, as shall be determined by the board of directors. Any
previously scheduled annual meeting of stockholders may be postponed by
resolution of the board of directors upon public notice given prior to the date
previously scheduled for such annual meeting of stockholders.
Section 3. Special Meetings.
A special meeting of the stockholders may be called at any time by the
board of directors, or by a majority of the directors or by a committee
authorized by the board to do so. Any previously scheduled special meeting of
the stockholders may be postponed by resolution of the board of directors upon
public notice given prior to the date previously scheduled for such special
meeting of the stockholders.
Exhibit 3(ii)
Page 1 of 17
<PAGE>
Section 4. Notice of Stockholders' Meetings.
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten (10) nor more
than sixty (60) days before the date of the meeting being noticed. The notice
shall specify the place, date and hour of the meeting and (i) in case of a
special meeting, the general nature of the business to be transacted, or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, management intends to present for election.
Section 5. Manner of Giving Notice; Affidavit of Notice.
Notice of any meeting of stockholders shall be given either personally or
by mail or telegraphic or other written communication, charges prepaid,
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation or given by the stockholder to the corporation for the
purpose of notice. If no such address appears on the corporation's books or has
been so given, notice shall be deemed to have been given if sent by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where such office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed and
maintained in the minute book of the corporation.
Section 6. Quorum.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting of stockholders shall constitute a quorum
for the transaction of business. The stockholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section 7. Adjourned Meeting and Notice Thereof.
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the Chairman of the meeting, but
in the absence of a quorum, no other business may be transacted at such meeting,
except as provided in Section 6 of this Article II.
When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at a meeting at which the adjournment is
taken, unless a new record date for the adjourned meeting is fixed, or unless
the adjournment is for more than thirty (30) days from the date set for the
original meeting. Notice of any such adjourned meeting, if required, shall be
given to each stockholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
Section 8. Voting.
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 11 of this Article II.
Such vote may be by voice vote or by ballot, at the discretion of the Chairman
of the meeting. Any stockholder entitled to vote on any matter (other than the
election of directors) may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or vote them against the proposal; but,
if the stockholder fails to specify the number of shares such stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares such stockholder is entitled to
vote. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter shall be
the act of the stockholders, unless the vote
Exhibit 3(ii)
Page 2 of 17
<PAGE>
of a greater number or voting by classes is required by the Delaware General
Corporation Law or the certificate of incorporation or the certificate of
determination of preferences as to any preferred stock.
At a stockholders' meeting involving the election of directors, no
stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the number of the stockholder's
shares). The candidates receiving the highest number of votes, up to the number
of directors to be elected, shall be elected.
Section 9. Waiver of Notice or Consent by Absent Stockholders.
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
person entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting, or an approval of
the minutes thereof. The waiver of notice or consent need not specify either
the business to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.
Section 10. No Stockholder Action by Written Consent Without a Meeting.
Stockholders may take action only at a regular or special meeting of
stockholders.
Section 11. Record Date for Stockholder Notice and Voting.
For purposes of determining the holders entitled to notice of any meeting
or to vote, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days prior to the
date of any such meeting, and in such case only stockholders of record on the
date so fixed are entitled to notice and to vote, notwithstanding any transfer
of any shares on the books of the corporation after the record date fixed as
aforesaid, except as otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
Section 12. Proxies.
Every person entitled to vote for directors or on any other matter shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the stockholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the stockholder or the stockholder's attorney in fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
prior to the vote pursuant thereto, by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy, or (ii) written notice of the death or incapacity of the maker of such
proxy is received by the corporation before the vote pursuant thereto is
counted; provided, however, that no such proxy shall be valid after the
expiration of eleven (11) months from the date of such proxy, unless otherwise
provided in the proxy.
Section 13. Inspectors of Election; Opening and Closing the Polls.
The board of directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the corporation
in other capacities, including, without limitation, as officers, employees,
agents or
Exhibit 3(ii)
Page 3 of 17
<PAGE>
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of stockholders, the chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by law.
The chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.
Section 14. Nomination and Stockholder Business Bylaw.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the board of directors of
the corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the corporation's notice of meeting, (b) by or at
the direction of the board of directors or (c) by any stockholder
of the corporation who was a stockholder of record at the time of
giving of notice provided for in this Bylaw, who is entitled to
vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph
(A) (1) of this Bylaw, the stockholder must have given timely
notice thereof in writing to the secretary of the corporation and
such other business must otherwise be a proper matter for
stockholder action. To be timely, a stockholder's notice shall be
delivered to the secretary at the principal executive offices of
the corporation not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to
the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day
prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of
the date of such meeting is first made by the corporation. In no
event shall the public announcement of an adjournment of an annual
meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in
an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the corporation's
books, and of such beneficial owner and (ii) the class and number
of shares of the corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2)
of this Bylaw to the contrary, in the event that the number of
directors to be elected to the board of directors of the
corporation is increased and there is no public announcement by the
corporation naming all of the nominees for director or specifying
the size of the increased board of directors at least 70 days prior
to the first anniversary of the preceding
Exhibit 3(ii)
Page 4 of 17
<PAGE>
year's annual meeting, a stockholder's notice required by this
Bylaw shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive
offices of the corporation not later than the close of business on
the 10th day following the day on which such public announcement is
first made by the corporation.
(B) Special Meetings of Stockholders. Only such business shall be conducted at
a special meeting of stockholders as shall have been brought before the
meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the board of directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to
the corporation's notice of meeting (a) by or at the direction of the board
of directors or (b) provided that the board of directors has determined
that directors shall be elected at such meeting, by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting
and who complies with the notice procedures set forth in this Bylaw. In the
event the corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the board of directors, any
such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by paragraph (A) (2) of this
Bylaw shall be delivered to the secretary at the principal executive
offices of the corporation not earlier than the close of business on the
90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the board
of directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time
period for the giving of a stockholder's notice as described above.
(C) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Bylaw. Except as
otherwise provided by law, the Certificate of Incorporation or
these Bylaws, the chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to
be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Bylaw and,
if any proposed nomination or business is not in compliance with
this Bylaw, to declare that such defective proposal or nomination
shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in
a document publicly filed by the corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights (i) of stockholders to
request inclusion of proposals in the corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange Act or (ii) of the
holders of any series of Preferred Stock, if any, to elect
directors under certain circumstances.
Exhibit 3(ii)
Page 5 of 17
<PAGE>
ARTICLE III
DIRECTORS
Section 1. Powers.
Subject to the provisions of the Delaware General Corporation Law and any
limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have the
power and authority to:
(a) Select and remove all officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the certificate of incorporation or these bylaws,
fix their compensation, and require from them security for faithful
service.
(b) Change the principal executive office or the principal business office
in the State of California from one location to another; cause the
corporation to be qualified to do business in any other state, territory,
dependency, or foreign country and conduct business within or outside the
State of California; designate any place within or without the State of
California for the holding of any stockholders' meeting or meetings,
including annual meetings; adopt, make and use a corporate seal, and
prescribe the forms of certificates of stock, and alter the form of such
seal and of such certificates from time to time as in their judgment they
may deem best, provided that such forms shall at all times comply with the
provisions of law.
(c) Authorize the issuance of shares of stock of the corporation from time
to time, upon such terms as may be lawful, in consideration of money paid,
labor done or services actually rendered, debts or securities canceled or
tangible or intangible property actually received.
(d) Borrow money and incur indebtedness for the purpose of the corporation,
and cause to be executed and delivered therefor, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, or other evidences of debt and securities therefor.
Section 2. Number and Qualification of Directors.
The number of directors of the corporation shall be eleven (11) until
changed by a bylaw amending this Section 2, duly adopted by the board of
directors or by the stockholders.
Section 3. Election and Term of Office of Directors.
Subject to Section 15 below, one class of the directors shall be elected at
each annual meeting of the stockholders, but if any such annual meeting is not
held or the directors are not elected thereat, the directors may be elected at
any special meeting of stockholders held for that purpose. All directors shall
hold office until their respective successors are elected. Irrespective of the
provisions of Section 15 of this Article III and of the preceding sentence, a
director shall automatically be retired on the date of the expiration of the
first annual meeting following his 72nd birthday.
Section 4. Vacancies.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director elected to fill a vacancy shall hold office for the remainder of
the term of the person whom he succeeds, and until a successor has been elected
and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
in the case of the death, retirement, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who
Exhibit 3(ii)
Page 6 of 17
<PAGE>
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors be increased, or if the stockholders
fail at any meeting of stockholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
Any director may resign or voluntarily retire upon giving written notice to
the chairman of the board, the president, the secretary or the board of
directors. Such retirement or resignation shall be effective upon the giving of
the notice, unless the notice specifies a later time for its effectiveness. If
such retirement or resignation is effective at a future time, the board of
directors may elect a successor to take office when the retirement or
resignation becomes effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office. No
director may be removed during his term except for cause.
Section 5. Place of Meetings and Telephonic Meetings.
Regular meetings of the board of directors may be held at any place within
or without the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or without the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in such meeting can hear one another, and all such directors shall
be deemed to be present in person at such meeting.
Section 6. Annual Meetings.
Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of organization, any
desired election of officers and transaction of other business. Notice of this
meeting shall not be required.
Section 7. Other Regular Meetings.
Other regular meetings of the board of directors shall be held at such time
as shall from time to time be determined by the board of directors. Such
regular meetings may be held without notice provided that notice of any change
in the determination of time of such meeting shall be sent to all of the
directors. Notice of a change in the determination of the time shall be given
to each director in the same manner as for special meetings of the board of
directors.
Section 8. Special Meetings.
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board or the president or any vice
president or the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation. In case such notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally, or by
telephone or to the telegraph company at least forty-eight (48) hours prior to
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated to either the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
Section 9. Quorum.
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as hereinafter provided.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the board of directors. A meeting at which a quorum is
Exhibit 3(ii)
Page 7 of 17
<PAGE>
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 10. Waiver of Notice.
The transactions of any meeting of the board of directors, however called
and noticed or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum be present and if, either before
or after the meeting, each of the directors not present signs a written waiver
of notice, a consent to holding the meeting or an approval of the minutes
thereof. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any director who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director.
Section 11. Adjournment.
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
Section 12. Notice of Adjournment.
Notice of the time and place of an adjourned meeting need not be given,
unless the meeting is adjourned for more than twenty-four (24) hours, in which
case notice of such time and place shall be given prior to the time of the
adjourned meeting, in the manner specified in Section 8 of this Article III, to
the directors who were not present at the time of the adjournment.
Section 13. Action Without Meeting.
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, if all members of the board shall individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent or consents shall be filed with the minutes of
the proceedings of the board.
Section 14. Fees and Compensation of Directors.
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses, as may be fixed or
determined by resolution of the board of directors. Nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.
Section 15. Classification of Directors.
The board of directors shall be and is divided into three classes, Class I,
Class II and Class III. The number of directors in each class shall be the
whole number contained in the quotient arrived at by dividing the authorized
number of directors by three, and if a fraction is also contained in such
quotient then if such fraction is one-third (1/3) the extra director shall be a
member of Class III and if the fraction is two-thirds (2/3) one of the extra
directors shall be a member of Class III and the other shall be a member of
Class II. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected.
In the event of any increase or decrease in the authorized number of
directors, (a) each director then serving as such shall nevertheless continue as
a director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal, and (b) the newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the board of directors to such class or classes as
shall, so far as possible, bring the number of directors in the respective
classes into conformity with the formula in this Section 15, as applied to the
new authorized number of directors.
Exhibit 3(ii)
Page 8 of 17
<PAGE>
ARTICLE IV
COMMITTEES
Section 1. Committees of Directors.
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, including an
executive committee, each consisting of two or more directors, to serve at the
pleasure of the board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. Any such committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the General Corporation Law of
Delaware, also requires stockholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or
on any committee;
(d) the amendment or repeal of bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation, except at a rate
or in a periodic amount or within a price range determined by the board of
directors; or
(g) the appointment of any other committees of the board of directors or
the members thereof.
Section 2. Meetings and Action of Committees.
Meetings and action of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Sections 5
(place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9
(quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment)
and 13 (action without meetings), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings of
committees may be determined by resolution of the board of directors as well as
the committee, special meetings of committees may also be called by resolution
of the board of directors, and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
Section 1. Officers.
The officers of the corporation shall be the chairman of the board, the
president, a vice president, a secretary and a treasurer. The corporation may
also have, at the discretion of the board of directors, one or more additional
vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. Any number of offices may be held by
the same person.
Section 2. Election of Officers.
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 3 or
Exhibit 3(ii)
Page 9 of 17
<PAGE>
Section 5 of this Article V, shall be chosen annually by the board of directors,
and each shall hold his office until he shall resign or be removed or otherwise
disqualified to serve or his successor shall be elected and qualified.
Section 3. Subordinate Officers, etc.
The board of directors may appoint, and may empower the president and chief
executive officer to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the bylaws or as the
board of directors may from time to time determine.
Section 4. Removal and Resignation of Officers.
Any officer may be removed, either with or without cause, by the board of
directors, at any regular or special meeting thereof, or, except in case of an
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. Vacancies in Office.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to such office.
Section 6. Chairman of the Board.
The chairman of the board shall be an officer of the corporation and shall,
subject to the control of the board of directors, have general responsibility
for strategic growth initiatives, leadership development and other affairs as
assigned by the board of directors of the corporation.
Section 7. President.
The president shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have general
supervision, direction and control of the business and affairs of the
corporation.
Section 8. Vice Presidents.
In the absence or disability of the president, a vice president designated
by the board of directors shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors or the bylaws.
Section 9. Secretary.
The secretary shall keep or cause to be kept, at the principal executive
office or such other place as the board of directors may order, a book of
minutes of all meetings and actions of directors, committees of directors and
stockholders, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the board of directors, a stock register, or a
duplicate register, showing the names of all stockholders and their addresses,
the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required by the bylaws or by law
to be given, and he shall keep the seal of the corporation in safe custody, and
shall have such
Exhibit 3(ii)
Page 10 of 17
<PAGE>
other powers and perform such other duties as may be prescribed by the board of
directors or by the bylaws.
Section 10. Treasurer.
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall be open at all reasonable times to
inspection by any director.
The treasurer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and chief
executive officer and directors, whenever they request it, an account of all of
his transactions as treasurer and of the financial condition of the corporation,
and shall have other powers and perform such other duties as may be prescribed
by the board of directors or the bylaws.
Section 11. Assistant Secretaries and Assistant Treasurers.
Any assistant secretary may perform any act within the power of the
secretary, and any assistant treasurer may perform any act within the power of
the treasurer, subject to any limitations which may be imposed in these bylaws
or in board resolutions.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. Indemnification and Insurance.
(A) Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal representative is
or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans maintained or sponsored
by the Corporation, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee of agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (C) of this Bylaw, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors. The right to
indemnification conferred in this Bylaw shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including,
Exhibit 3(ii)
Page 11 of 17
<PAGE>
without limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
(B) To obtain indemnification under this Bylaw, a claimant shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to the claimant is reasonably
necessary to determine whether and to what extent the claimant is entitled to
indemnification. Upon written request by a claimant for indemnification pursuant
to the first sentence of this paragraph (B), a determination, if required by
applicable law, with respect to the claimant's entitlement thereto shall be made
as follows: (1) if requested by the claimant, by Independent Counsel (as
hereinafter defined), or (2) if no request is made by the claimant for a
determination by Independent Counsel, (i) by the Board of Directors by a
majority vote of a quorum consisting of Disinterested Directors (as hereinafter
defined), or (ii) if a quorum of the Board of Directors consisting of
Disinterested Directors is not obtained or even if obtainable, such quorum of
Disinterested Directors so directs, by Independent Counsel in a written opinion
to the Board of Directors, a copy of which shall be delivered to the claimant,
or (iii) if a quorum of Disinterested Directors so directs, by the stockholders
of the Corporation. In the event the determination of entitlement to
indemnification is to be made by Independent Counsel at the request of the
claimant, the Independent Counsel shall be selected by the Board of Directors
unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a "Change of Control" as defined in the 1996 Stock Incentive Plan, in
which case the Independent Counsel shall be selected by the claimant unless the
claimant shall request that such selection be made by the Board of Directors. If
it is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid in full by the
Corporation within 30 days after a written claim pursuant to paragraph (B) of
this Bylaw has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim, including attorney's
fees. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, Independent
Counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B) of this
Bylaw that the claimant is entitled to indemnification, the Corporation shall be
bound by such determination in any judicial proceeding commenced pursuant to
paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this Bylaw that the procedures
and presumptions of this Bylaw are not valid, binding and enforceable and shall
stipulate in such proceeding that the Corporation is bound by all the provisions
of this Bylaw.
(F) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
Exhibit 3(ii)
Page 12 of 17
<PAGE>
(G) The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware. To the extent that the
Corporation maintains any policy or policies providing such insurance, each such
director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this Bylaw,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time by the
Board of Directors or the Chief Executive Officer, grant rights to
indemnification, and rights to be paid by the Corporation the expenses incurred
in defending any proceeding in advance of its final disposition, to any employee
or agent of the Corporation to the fullest extent of the provisions of this
Bylaw with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
(I) If any provision or provisions of this Bylaw shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (1) the validity, legality
and enforceability of the remaining provisions of this Bylaw (including, without
limitation, each portion of any paragraph of this Bylaw containing any such
provisions held to be invalid, illegal or unenforceable, that is not itself held
to be invalid, illegal or unenforceable) shall not in any way be affected or
impaired thereby; and (2) to the fullest extent possible, the provisions of this
Bylaw (including, without limitation, each such portion of any paragraph of this
Bylaw containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable,
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the Corporation who is not
and was not a party to the matter in respect of which indemnification is sought
by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law firm, or an
independent practitioner, that is experienced in matters of corporation law and
shall include any person who, under the applicable standards of professional
conduct then prevailing, would not have a conflict of interest in representing
either the Corporation or the claimant in an action to determine the claimant's
rights under this Bylaw.
(K) Any notice, request or other communication required or permitted to be
given to the Corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
Section 2. Fiduciaries of Corporate Employee Benefit Plan.
This Article VI does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article VI. Nothing contained in
this Article VI shall limit any right to indemnification to which such a
trustee, investment manager or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by Section 410 of
the Employee Retirement Income Security Act of 1974, as amended, other than this
Article VI.
Exhibit 3(ii)
Page 13 of 17
<PAGE>
ARTICLE VII
RECORDS AND REPORTS
Section 1. Maintenance and Inspection of Stock Register.
The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed, and as
determined by resolution of the board of directors, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of shares held by each stockholder.
A stockholder or stockholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of stockholders' names and
addresses and stockholders during usual business hours upon five days prior
written demand upon the corporation, and/or (ii) obtain from the transfer agent
of the corporation, upon written demand and upon the tender of such transfer
agent's usual charges for such list, a list of the stockholders' names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings as of the most recent record date for which such list has been
compiled or as of a date specified by the stockholder subsequent to the date of
demand. Such list shall be made available to such stockholder or stockholders
by the transfer agent on or before the later of five (5) days after the demand
is received or the date specified therein as the date as of which the list is to
be compiled.
The record of stockholders shall be open to inspection upon the written
demand of any stockholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to such holder's
interests as a stockholder or as the holder of a voting trust certificate. Any
inspection and copying under this Section 1 may be made in person or by an agent
or attorney of the stockholder or holder of a voting trust certificate making
such demand.
Section 2. Maintenance and Inspection of Bylaws.
The corporation shall keep at its principal executive office the original
or a copy of the bylaws as amended to date, which shall be open to inspection by
the stockholders at all reasonable times during office hours.
Section 3. Maintenance and Inspection of Other Corporate Records.
The accounting books and records and minutes of proceedings of the
stockholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. Such minutes and
accounting books and records shall be open to inspection upon the written demand
of any stockholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a stockholder or as a holder of a voting trust
certificate. Such inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. The foregoing rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. Inspection by Directors.
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by agent or attorney and the
right of inspection includes the right to copy and make extracts.
Exhibit 3(ii)
Page 14 of 17
<PAGE>
Section 5. Annual Report to Stockholders.
The board of directors shall cause an annual report to be sent to the
stockholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days prior to the annual meeting of stockholders to be held during
the next fiscal year and in the manner specified in Section 5 of Article II of
these bylaws for giving notice to stockholders of the corporation. The annual
report shall contain a balance sheet and statement of changes in financial
position for such fiscal year, accompanied by any report thereon of independent
accountants.
Section 6. Financial Statements.
A copy of any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any accompanying
balance sheet for the corporation as of the end of each such period, that has
been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any stockholder
demanding an examination of any such statement or a copy shall be mailed to any
such stockholder.
If a stockholder or stockholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days prior to the date of the request, and a balance sheet
of the corporation as of the end of such period, the treasurer shall cause such
statement to be prepared, if not already prepared, and shall deliver personally
or mail such statement or statements to the person making the request within
thirty (30) days after the receipt of such request. If the corporation has not
sent to the stockholders its annual report for the last fiscal year, this report
shall likewise be delivered or mailed to such stockholder or stockholders within
thirty (30) days after such request.
The corporation also shall, upon the written request of any stockholder,
mail to the stockholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of such
period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the corporation, or the certificate of an authorized
officer of the corporation that such financial statements were prepared without
audit from the books and records of the corporation.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. Record Date for Purposes Other Than Notice and Voting.
For purposes of determining the stockholders 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 other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days prior to any such action, and in such case only stockholders of record
on the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.
If the board of directors does not so fix a record date, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the resolution relating thereto,
or the sixtieth (60th) day prior to the date of such action, whichever is later.
Exhibit 3(ii)
Page 15 of 17
<PAGE>
Section 2. Checks, Drafts, Evidences of Indebtedness.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the board of directors.
Section 3. Corporate Contracts and Instruments; How Executed.
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or to any amount.
Section 4. Stock Certificates.
A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each stockholder when any such shares are fully
paid. All certificates shall be signed in the name of the corporation by the
chairman of the board or the president or vice president and by the treasurer or
an assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the stockholder.
Any or all of the signatures on the certificate may be 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 such person were an officer,
transfer agent or registrar at the date of issue.
Section 5. Lost Certificates.
Except as hereinafter in this Section 5 provided, no new stock certificate
shall be issued in lieu of an old certificate unless the latter is surrendered
to the corporation and canceled at the same time. The board of directors may in
case any stock certificate or certificate for any other security is lost, stolen
or destroyed, authorize the issuance of a new certificate in lieu thereof, upon
such terms and conditions as the board of directors may require, including
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the issuance of such
new certificate.
Section 6. Representation of Stock of Other Corporations.
The chairman of the board, the president, or any vice president, or any
other person authorized by resolution of the board of directors by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all stock of any other corporation or corporations, foreign
or domestic, standing in the name of the corporation. The authority herein
granted to said officers to vote or represent on behalf of the corporation any
and all stock by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized to do so by
proxy duly executed by said officer.
Section 7. Construction and Definitions.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of the bylaws. Without limiting the generality of the
foregoing, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
Section 8. Fiscal Year.
The fiscal year of the corporation shall commence the first day of the
calendar year.
Exhibit 3(ii)
Page 16 of 17
<PAGE>
Section 9. Seal.
The seal of the corporation shall be round and shall bear the name of the
corporation and words and figures denoting its organization under the laws of
the State of Delaware and year thereof, and otherwise shall be in such form as
shall be approved from time to time by the board of directors.
ARTICLE IX
AMENDMENTS
Section 1. Amendment by Stockholders.
New bylaws may be adopted or these bylaws may be amended or repealed by the
vote of not less than 80% of the total voting power of all shares of stock of
the corporation entitled to vote in the election of directors, considered for
purposes of this Section 1 as one class.
Section 2. Amendment by Directors.
Subject to the rights of the stockholders as provided in Section 1 of this
Article IX, to adopt, amend or repeal bylaws, bylaws may be adopted, amended or
repealed by the board of directors.
Revised 4/29/99.
Exhibit 3(ii)
Page 17 of 17
<PAGE>
Exhibit 12
AVERY DENNISON CORPORATION
COMPUTATION OF RATIO OR EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
April 3, 1999 March 28, 1998
------------- --------------
<S> <C> <C>
Earnings:
Income before taxes $28.2 $82.3
Add: Fixed Charges* 14.4 12.9
Amortization of capitalized interest .4 .4
Less: Capitalized interest (.2) (1.1)
$42.8 $94.5
========= =========
*Fixed Charges:
Interest expense $10.4 $ 8.1
Capitalized interest .2 1.1
Amortization of debt issuance costs .1 .1
Interest portion of leases 3.7 3.6
$14.4 $12.9
Ratio of Earnings to Fixed Charges 3.0 7.3
========= =========
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, "earnings" consist of income before taxes plus
fixed charges (excluding capitalized interest), and "fixed charges" consist of
interest expense, capitalized interest, amortization of debt issuance costs and
the portion of rent expense (estimated to be 35%) on operating leases deemed
representative of interest.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> APR-03-1999
<CASH> 10,500
<SECURITIES> 0
<RECEIVABLES> 504,800<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 252,600
<CURRENT-ASSETS> 888,800
<PP&E> 1,893,200
<DEPRECIATION> 887,200
<TOTAL-ASSETS> 2,314,300
<CURRENT-LIABILITIES> 742,900
<BONDS> 548,600
0
0
<COMMON> 124,100
<OTHER-SE> 634,400
<TOTAL-LIABILITY-AND-EQUITY> 2,314,300
<SALES> 933,900
<TOTAL-REVENUES> 933,900
<CGS> 622,000
<TOTAL-COSTS> 622,000
<OTHER-EXPENSES> 273,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,400
<INCOME-PRETAX> 28,200
<INCOME-TAX> 9,800
<INCOME-CONTINUING> 18,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,400
<EPS-PRIMARY> .19<F2>
<EPS-DILUTED> .18
<FN>
<F1>ACCOUNTS RECEIVABLE ARE SHOWN NET OF ANY ALLOWANCES.
<F2>REPRESENTS EPS BASIC
</FN>
</TABLE>
