SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
Commission File Number 1-6926
C. R. BARD, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1454160
(State of incorporation) (I.R.S. Employer Identification No.)
730 Central Avenue, Murray Hill, New Jersey 07974
(Address of principal executive offices)
Registrant's telephone number,
including area code: (908) 277-8000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1998
Common Stock - $.25 par value 53,602,785
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 1
Condensed Consolidated Statements of Income
and Retained Earnings For The Quarter and
Nine Months Ended September 30, 1998 and 1997 2
Condensed Consolidated Statements of
Cash Flows For The Nine Months Ended
September 30, 1998 and 1997 3
Notes to Condensed Consolidated Financial
Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II - OTHER INFORMATION 11
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 33,300 $ 60,700
Accounts receivable, net 248,800 240,600
Inventories 268,700 241,700
Other current assets 22,900 20,500
Total current assets 573,700 563,500
Property, plant and equipment, net 216,500 206,400
Intangible assets, net of
amortization 393,800 424,400
Other assets 73,700 85,000
$1,257,700 $1,279,300
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Short-term borrowings and current
maturities of long-term debt $ 266,000 $ 103,000
Accounts payable 56,100 60,400
Accrued expenses 148,500 128,800
Federal and foreign income taxes 22,200 18,400
Total current liabilities 492,800 310,600
Long-term debt 160,300 340,700
Other long-term liabilities 48,700 54,900
Shareholders' Investment:
Preferred stock, $1 par value,
authorized 5,000,000 shares;
none issued --- ---
Common stock, $.25 par value,
authorized 300,000,000 shares;
issued and outstanding 55,068,551
shares in 1998 and 56,784,551
shares in 1997 14,300 14,100
Capital in excess of par value 112,000 101,100
Retained earnings 484,400 506,700
Accumulated other comprehensive
income (43,500) (38,500)
Unamortized expenses under stock
plans (11,300) (10,300)
Total shareholders' investment 555,900 573,100
$1,257,700 $1,279,300
<FN
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
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<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(thousands except per share amounts)
(Unaudited)
<CAPTION>
For The Quarter Ended For Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $298,500 $297,500 $895,400 $902,200
Costs and expenses:
Cost of goods sold 144,900 139,300 430,400 426,200
Marketing, selling
and administrative 94,100 97,700 286,800 288,400
Research and
development 18,900 21,600 58,900 64,200
Interest Expense 7,600 8,200 22,900 24,900
Other (income)
expense, net (1,100) 35,700 (36,200) 27,900
Total costs and
expenses 264,400 302,500 762,800 831,600
Income before taxes 34,100 (5,000) 132,600 70,600
Provision for income
taxes 10,600 (1,200) 44,000 22,100
Net income 23,500 (3,800) 88,600 48,500
Retained earnings,
beginning of period 530,300 530,900 506,700 506,700
Treasury stock
repurchases (58,700) (20,700) (79,700) (29,400)
Cash dividends (10,700) (10,300) (31,200) (29,700)
Retained earnings,
end of period $484,400 $496,100 $484,400 $496,100
Basic earnings per
share $ .42 $ (.07) $ 1.57 $ .85
Diluted earnings
per share $ .42 $ (.07) $ 1.56 $ .84
Cash dividends per
share $ .19 $ .18 $ .55 $ .52
Average common shares
outstanding-basic 55,936 57,054 56,498 57,054
Average common shares
outstanding-diluted 56,358 57,742 56,838 57,742
<FN>
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(Unaudited)
<CAPTION>
For The Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 88,600 $ 48,500
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 43,300 44,500
Gain on sales of assets --- (17,800)
Other noncash items 23,400 43,400
Changes in assets and liabilities:
Current assets (18,800) (32,400)
Current liabilities 19,500 (8,400)
Other 11,900 (2,000)
167,900 75,800
Cash flows from investing activities:
Capital expenditures (33,900) (25,200)
Payments made for purchases of
businesses --- (6,500)
Proceeds from sale of a product
line --- 24,000
Other long-term investments,
net (17,600) (13,400)
(51,500) (21,100)
Cash flows from financing activities:
Purchase of common stock (80,000) (29,600)
Dividends paid (31,200) (29,700)
Short-term borrowings and other 109,300 (31,800)
Long-term borrowings (118,700) (2,000)
(120,600) (93,100)
Net increase (decrease) in cash
equivalents (4,200) (38,400)
Cash and cash equivalents
at January 1, 36,400 63,600
Cash and cash equivalents
at September 30, $ 32,200 $ 25,200
<FN>
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial statements contained in this filing have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and have not been audited.
However, C. R. Bard, Inc. ("Bard" or the "company") believes that
it has included all adjustments to the interim financial
statements, consisting only of normal recurring adjustments, which
are necessary to present fairly the financial condition and results
of operations at the dates and for the periods. The results of
operations for the interim periods are not necessarily indicative
of results of operations for a full year. These financial
statements should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements
as filed by the company in the 1997 Annual Report on Form 10-K.
Accounting Policies
Earnings Per Share
The company has adopted Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" ("FAS 128"). FAS 128 requires the
presentation of basic earnings per share and diluted earnings per
share. "Basic earnings per share" represents net income divided by
the weighted average shares outstanding and is consistent with the
company's historical presentation. "Diluted earnings per share"
represents net income divided by weighted average shares
outstanding adjusted for the incremental dilution of outstanding
employee stock options and awards.
Comprehensive Income
Effective for fiscal years beginning after December 15, 1997 the
company is required to adopt Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income". For the
company, comprehensive income comprises net income adjusted for the
change in foreign currency translation adjustments.
Historically, these currency translation adjustments were included
in "other" as a separate component of equity in the company's
consolidated balance sheet. The following table reconciles net
income to comprehensive income for the quarter and nine months
ending September 30, 1998 and 1997 and reconciles accumulated other
comprehensive income for the corresponding periods.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(thousands of dollars) For Quarter Ended For Nine Months Ended
September 30 September 30
1998 1997 1998 1997
Net income $ 23,500 $ (3,800) $ 88,600 $ 48,500
Translation adjustments 7,900 (17,100) (5,000) (45,300)
Comprehensive income $ 31,400 $(20,900) $ 83,600 $ 3,200
Accumulated other compre-
hensive income beginning
of period $(51,400) $(20,300) $(38,500) $ 7,900
Translation adjustments 7,900 (17,100) (5,000) (45,300)
Accumulated other compre-
hensive income end of
period $(43,500) $(37,400) $(43,500) $(37,400)
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS 133").
FAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value.
FAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows
a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
FAS 133 is effective for fiscal years beginning after June 15, 1999
with early adoption permitted. The company does not expect that
the adoption of FAS 133 will have a material impact on its
financial statements.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The company enters into foreign exchange options to help reduce the
exposure to fluctuations between certain currencies. These off-balance sheet
options are accounted for on a mark-to-market basis.
The gains and losses associated with these options are recorded on
the income statement as "other income and expense" and on the
balance sheet as "other current assets" or "accrued expenses".
Cash flows associated with the settlement of these options are
reflected as operating activities.
Reclassifications
Certain prior year amounts have been reclassified to conform with
the current year presentation.
Subsequent Event
The company announced on October 1, 1998 that it had completed the
sale of its global coronary cath lab business (angioplasty and
angiography) to Arterial Vascular Engineering, Inc.
The transaction was structured as a sale of certain assets and
certain liabilities of the company and the sale of stock of certain
subsidiaries. In connection with the sale, the company received
$550,000,000 plus 95% of the net book value of certain trade
accounts receivable as of the Closing Date in cash and retained a
portion of cath lab working capital. The sale of the coronary cath
lab business will result in further realignment of Bard's
operations particularly those operations located outside the U.S.
The gain on the sale of the cath lab business will be reflected in
fourth quarter results.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Consolidated net sales of emphasis products for the third quarter
of 1998 of $226,900,000 increased 7 percent from the third quarter
1997 sales of $213,000,000. Consolidated net sales of emphasis
products for the first nine months of 1998 of $667,800,000
increased 6 percent over the $629,300,000 for the same period last
year. Sales in the U.S. for the third quarter of 1998 were
$198,200,000, an increase of 2 percent from the third quarter of
1997, while international sales for the third quarter of 1998 were
$100,300,000, down 3 percent against last year's third quarter.
The impact of a strengthening dollar in the third quarter decreased
sales outside the U.S. by 5 percent. For the first nine months of
1998, U.S. sales totaled $584,700,000, down 1 percent, while
international sales for the first nine months were approximately
flat at $310,700,000. Currency translation for the first nine
months of 1998 decreased international sales by approximately 6
percent and decreased worldwide sales by approximately 2 percent.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
PRODUCT GROUP SUMMARY OF NET SALES
(thousands of dollars)
Quarter Ended Nine Months Ended
September 30, September 30,
% %
1998 1997 Change 1998 1997 Change
Vascular $ 51,700 $ 48,700 6 $152,200 $145,400 5
Urology 85,100 80,200 6 249,700 236,300 6
Oncology 53,500 50,200 7 157,300 147,900 6
Surgery 36,600 33,900 8 108,600 99,700 9
Total Emphasis
Products 226,900 213,000 7 667,800 629,300 6
Other 71,600 84,500 (15) 227,600 272,900 (17)
Net Sales$298,500 $297,500 0 $895,400 $902,200 (1)
Based on the sale of the coronary cath lab businesses, (see
"Subsequent Event" on page 6), the company changed its product
group sales reporting. The most significant change was to include
sales from those cardiology businesses which the company intends to
sell in the category designated "other".
Vascular sales increased 6 percent for the quarter and 5 percent
year-to-date with increases occurring in electrophysiology, graft
and radiology products. Increases in infection control catheters,
drainage bags and urological specialties contributed to the 6
percent growth in urology sales for the quarter and year-to-date.
Third quarter increases in specialty access products and mesh were
primarily responsible for the 7 and 8 percent growth in the
oncology and surgery categories, respectively.
Other income and expense for the third quarter of 1998 included
interest income and foreign exchange gains. In addition to
recurring items such as foreign exchange and interest income, other
income and expense in the third quarter of 1997 included the gain
on the sale of the surgical suction product line, a manufacturing
restructuring charge, the impairment of several investments and
intangibles and the settlement of a legal claim.
During the first nine months of 1998 and 1997, the company acquired
2,100,000 and 855,200, respectively, of its common shares.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Restructuring Charges
As a result of extensive reviews of operations, during the third
quarter of 1997, the Board of Directors and management authorized
and committed the company to a restructuring of its global
manufacturing operations. Five manufacturing facilities will be
closed, four additional facilities will be downsized and several
European distribution centers will be consolidated. The products
manufactured at these locations will be redeployed to other
facilities including a new plant. The restructuring plan resulted
in a charge of $44,100,000 exclusive of certain period costs which
are required to be expensed as incurred. To date, approximately
$22,700,000 has been incurred against the $44,100,000 charge.
Year 2000 Functionality
The company has a company-wide initiative to address the Year 2000
issue. A team of technology professionals began addressing the
Year 2000 issue in 1996. Since then, the company has identified
all significant third party and internal applications that require
modification to address Year 2000 functionality.
The company divides its Year 2000 initiative into two components,
information technology (IT) and non-information technology (Non-IT).
The IT initiative includes third party and company mainframe
and desktop systems and applications. The Non-IT initiative
includes third party suppliers, embedded systems and the company's
larger commercial customers.
Internal and external resources are being used to make the required
IT modifications and test Year 2000 functionality. The
modification process of all critical IT applications is
substantially complete. The company is currently on schedule to
complete the testing processes for these applications by December
31, 1998. These applications will undergo additional testing
during 1999. In addition, the company is utilizing both internal
and external resources to provide independent system verification
and validation of Year 2000 functionality. This process will
continue through the end of 1999. The company believes that
contingency plans for its IT initiatives are not necessary since
the company anticipates that its IT systems will be fully Year 2000
functional during 1999.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Year 2000 Functionality (continued)
The company's Non-IT efforts include ensuring third party
suppliers, embedded systems and the company's larger customers are
Year 2000 functional. The company is communicating with third
party suppliers that provide critical products or services and
large customers. The company is testing significant embedded
systems. If as a result of the company's communications or as a
result of the company's testing of Non-IT embedded systems there
appear to be Year 2000 functionality problems, contingency plans
will be implemented. The company believes that any Non-IT
contingency plan can be put in place during 1999 if necessary.
There can be no guarantee that the systems of other companies on
which the company's systems rely will be converted in a timely
manner, or that a failure to convert by another company, or a
conversion that is incompatible with the company's systems, would
not have a material adverse effect on the company. In addition,
there are many risks associated with the Year 2000 issue, including
but not limited to the possible failure of the company's computer
and information technology systems. Any such failure by a third-party
service provider, utility, supplier, customer or other entity may
have a material adverse financial or operational effect on the
company.
For the first nine months, the company's marketing, selling and
administrative expense included $3,600,000 for IT-related Year 2000
expenditures. Management believes that the company will incur
additional expenses of $1,700,000 during the remainder of 1998 and
approximately $3,000,000 in 1999. These incremental costs do not
include existing resources allocated to the project effort.
These costs and the date on which the company plans to complete the
Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability
of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ from those plans.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained herein or in other company documents
and certain statements that may be made by management of the
company orally, including statements regarding the use of net
proceeds from the sale of the company's global coronary cath lab
business and statements regarding cost savings from restructuring,
may contain forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Because actual results
are affected by risks and uncertainties, the company cautions
investors that actual results may differ materially from those
expressed or implied. Factors which could cause the actual results
to differ materially from expected and historical results
include, but are not limited to: health care industry consolidation
resulting in customer demands for price concessions, competitor's
attempts to gain market share through aggressive marketing
programs; fewer medical procedures performed in a cost-conscious
environment; the lengthy approval time by the FDA or other
government authorities to clear medical devices for commercial
release; unanticipated product failures; legislative or
administrative reforms to the U.S. Medicare and Medicaid systems or
other non-U.S. reimbursement systems in a manner that would
significantly reduce reimbursements for procedures using the
company's medical devices; the acquisition of key patents by
competitors that would have the effect of excluding the company
from new market segments; the uncertainty of whether increased
research and development expenditures will result in increased
sales; unpredictability of existing and future litigation including
litigation regarding product liability; uncertainty related to tax
appeals and litigation; price increases from the company's
suppliers of critical components; foreign currency fluctuations;
unanticipated business disruptions from Year 2000 issues; the risk
that the company may not achieve manufacturing or administrative
efficiencies as a result of the company's restructuring, in the
integration of acquired businesses or divestitures.
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<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10ac - Todd C. Schermerhorn Change of Control
Agreement dated as of October 14, 1998.
(b) Exhibit 10ad - James L. Natale Change of Control Agreement
dated as of October 14, 1998.
(c) Exhibit 12.1 - Computation of Ratio of Earnings to Fixed
Charges
(d) Exhibit 27 - Financial Data Schedule
(e) Reports on Form 8-K
1. The registrant filed a current report on Form 8-K
dated July 23 announcing the sale of its Global
Coronary Cath Lab business to Arterial Vascular
Engineering, Inc.
2. The registrant filed a current report on Form 8-K
dated October 1, 1998 announcing the close of its
sale of its Global Coronary Cath Lab business to
Arterial Vascular Engineering, Inc. and proforma
information.
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.
C. R. BARD, INC.
(Registrant)
William C. Bopp /s/
William C. Bopp
Executive Vice President and
Chief Financial Officer
Charles P. Grom /s/
Charles P. Grom
Vice President and Controller and
Chief Accounting Officer
Date: November 13, 1998
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EXHIBIT 10ac
AGREEMENT
AGREEMENT by and between C. R. BARD, INC., a New Jersey
corporation (the "Corporation"), and Todd C. Schermerhorn (the
"Executive"), dated as of the 14th day of October, 1998.
WHEREAS, the Corporation, on behalf of itself and its
shareholders, wishes to assure that the Corporation will have the
continued dedication of the Executive, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as
defined below) of the Corporation. The Board of Directors of the
Corporation (the "Board") believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control, to encourage his attention and dedication to his
assigned duties currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with
competitive compensation arrangements; therefore, the Board has
caused the Corporation to enter into this Agreement (i) to ensure
the Executive of individual financial security in the event of a
Change of Control, and (ii) to provide such protection in a manner
which is competitive with that of other corporations.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall be the first date during the "Change of Control Period" (as
defined in Section l(b)) on which a Change of Control occurs.
Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Corporation is terminated prior to
the date on which a Change of Control occurs, and the Executive can
reasonably demonstrate that such termination (1) was at the request
of a third party who has taken steps reasonably calculated to
effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the earlier to occur of
(i) the third anniversary of such date or (ii) the first day of the
month next following the Executive's normal retirement date
("Normal Retirement Date") under the Corporation's retirement plan;
provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date
and each annual anniversary thereof is hereinafter referred to as
the "Renewal Date"), the Change of Control Period shall be auto-
matically extended so as to terminate on the earlier of (x) two
years from such Renewal Date or (y) the first day of the month
coinciding with or next following the Executive's Normal Retirement
Date, unless at least 60 days prior to the Renewal Date the
Corporation shall give notice that the Change of Control Period
shall not be so extended.
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<PAGE>
2. Change of Control. (a) For purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred
if a change of control of the nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K
as in effect on the date hereof pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") occurs,
provided that, without limitation, a "Change of Control" shall be
deemed to have occurred if (i) the beneficial ownership at any time
hereafter by any person, as defined herein, of capital stock of the
Corporation, constitutes 20 percent or more of the general voting
power of all of the Corporation's outstanding capital or (ii)
individuals who, as of the date hereof, constitute the Board (as of
the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any
person becoming a Director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least three-quarters of
the Directors comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the Directors of the
Corporation, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of
the Incumbent Board. No sale to underwriters or private placement
of its capital stock by the Corporation, nor any acquisition
initiated by the Corporation, through merger, purchase of assets or
otherwise, effected in whole or in part by issuance or reissuance
of shares of its capital stock, shall constitute a Change of
Control.
(b) For purposes of the definition of "Change of
Control", the following definitions shall be applicable:
(i) The term "person" shall mean any individual,
corporation or other entity and any group as such term is used
in Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(ii) Any person shall be deemed to be the beneficial
owner of any shares of capital stock of the Corporation:
A. which that person owns directly, whether or not
of record, or
B. which that person has the right to acquire
pursuant to any agreement or understanding or upon
exercise of conversion rights, warrants, or options, or
otherwise, or
C. which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause (B) above), by an "affiliate" or
"associate" (as defined in the rules of the Securities
and Exchange Commission under the Securities Act of 1933,
as amended) of that person, or
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<PAGE>
D. which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause (B) above), by any other person
with which that person or his "affiliate" or "associate"
(defined as aforesaid) has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of capital stock of the Corporation.
(iii) The outstanding shares of capital stock of the
Corporation shall include shares deemed owned through
application of clauses (ii) (B), (C) and (D), above, but shall
not include any other shares which may be issuable pursuant to
any agreement or upon exercise of conversion rights, warrants
or options, or otherwise, but which are not actually
outstanding.
(iv) Shares of capital stock, if any, held by The Chase
Manhattan Bank N.A. under the Indenture and the Escrow
Agreement dated as of November 1, 1971 between International
Paper Corporation and said bank shall not be deemed owned by
International Paper Corporation or by said bank for purposes
of this definition, so long as they are held by said bank
under said Escrow Agreement, but said shares shall be deemed
outstanding for the purpose of determining the aggregate
number of outstanding shares of capital stock of the
Corporation.
3. Employment Period. The Corporation hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Corporation, for the period
commencing on the Effective Date and ending on the earlier to occur
of (a) the third anniversary of such date or (b) the first day of
the month coinciding with or next following the Executive's Normal
Retirement Date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or
any office or location less than thirty-five (35) miles from such
location.
(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Corporation and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
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shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Corporation in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Corporation.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive a base salary ("Base
Salary") at a monthly rate at least equal to the highest monthly
base salary paid to the Executive by the Corporation during the
twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Base
Salary shall be reviewed at least annually and shall be increased
at any time and from time to time as shall be consistent with
increases in base salary awarded in the ordinary course of business
to other key executives of the Corporation. Any increase in Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Base Salary shall not be
reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year during the
Employment Period, an annual bonus (an "Annual Bonus") in cash at
least equal to the average bonus received by the Executive from the
Corporation in respect of the three fiscal years immediately
preceding the fiscal year in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable as hereinabove
provided, the Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans
and programs, whether qualified or non-qualified, then applicable
to other key executives of the Corporation and its affiliates
(including the Corporation's 1981 Stock Option Plan, the Long-Term
Performance Incentive Plan, the 1986 Stock Award Plan, the 1981
Employee Stock Appreciation Rights Plan, the Employees' Stock
Ownership Plan and the Employees' Retirement Savings Plan, in each
case to the extent then in effect or as subsequently amended);
provided, however, that such plans and programs, in the aggregate,
shall provide the Executive with compensation, benefits and reward
opportunities at least as favorable as the most favorable such
compensation benefits and reward opportunities provided by the
Corporation for the Executive under such plans and programs as in
effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as
provided at any time thereafter with respect to other key
executives.
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(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans provided by the
Corporation (including, without limitation, medical, prescription,
dental, disability, salary continuance, executive life, group life,
accidental death and travel accident insurance plans and programs),
at least comparable to those in effect at any time during the
90-day period immediately preceding the Effective Date which would
be most favorable to the Executive or, if more favorable to the
Executive, as in effect at any time thereafter with respect to
other key executives.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies and procedures of the Corporation and
its affiliates in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect to
other key executives.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, in
accordance with the most favorable policies of the Corporation and
its affiliates in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect to
other key executives.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other appointments, and
to secretarial and other assistance, at least equal to those
provided to the Executive at any time during the 90-day period
immediately preceding the Effective Date which would be most
favorable to the Executive or, if more favorable to the Executive,
as provided at any time thereafter with respect to other key
executives.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable policies of the Corporation and its affiliates as in
effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
5. Termination. (a) Death or Disability. This
Agreement shall terminate automatically upon the Executive's death.
The Corporation may terminate this Agreement, after having
established the Executive's Disability (pursuant to the definition
of "Disability" set forth below), by giving to the Executive
written notice of its intention to terminate the Executive's
employment. In such a case, the Executive's employment with the
Corporation shall terminate effective on the 180th day after
receipt of such notice (the "Disability Effective Date"), provided
that, within 180 days after such receipt, the Executive shall not
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have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" means disability
which, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Corporation
or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(b) Cause. The Corporation may terminate the
Executive's employment for "Cause." For purposes of this Agreement,
"Cause" means (i) an act or acts of dishonesty taken by the
Executive and intended to result in substantial personal enrichment
of the Executive at the expense of the Corporation, (ii) repeated
violations by the Executive of the Executive's obligations under
Section 4(a) of this Agreement which are demonstrably willful and
deliberate on the Executive's part and which are not remedied after
the receipt of notice from the Corporation or (iii) the conviction
of the Executive of a felony.
(c) Termination by Executive for Good Reason. The
Executive's employment may be terminated by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means
(i) (A) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or (B) any
other action by the Corporation which results in a diminution
in such position, authority, duties or responsibilities, other
than an insubstantial and inadvertent action which is remedied
by the Corporation promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Corporation to comply with any
of the provisions of Section 4(b) of this Agreement, other
than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice
thereof given by the Executive;
(iii) the Corporation's requiring the Executive to be
based at any office or location other than that described in
Section 4(a)(i)(B) hereof, except for travel reasonably
required in the performance of the Executive's
responsibilities;
(iv) any purported termination by the Corporation of
the Executive's employment otherwise than as permitted by this
Agreement; or
(v) any failure by the Corporation to comply with and
satisfy Section 11(c) of this Agreement.
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Anything in this Agreement to the contrary
notwithstanding, any termination by the Executive for any reason
whatsoever during the six month period immediately following the
first anniversary of the date of a Change of Control shall be a
termination for "Good Reason". For purposes of this Section 5(c),
any good faith determination of "Good Reason" made by the Executive
shall be conclusive.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated and (iii) if the termination date is other
than the date of receipt of such notice, specifies the termination
date (which date shall be not more than fifteen (15) days after the
giving of such notice).
(e) Date of Termination. "Date of Termination" means
the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be. If the Executive's
employment is terminated by the Corporation other than for Cause or
Disability, the Date of Termination shall be the date on which the
Corporation notifies the Executive of such termination.
6. Obligations of the Corporation upon Termination. (a)
Death. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives under
this Agreement, other than those obligations accrued or earned by
the Executive hereunder at the date of the Executive's death.
Anything in this Agreement to the contrary notwithstanding, the
Executive's family shall be entitled to receive benefits at least
equal to the most favorable benefits provided by the Corporation to
surviving families of executives of the Corporation under such
plans, programs and policies relating to family death benefits, if
any, as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the
Executive's death with respect to other key executives and their
families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, this Agreement
shall terminate without further obligations to the Executive, other
than those obligations accrued or earned by the Executive hereunder
as of the Disability Effective Date. Anything in this Agreement to
the contrary notwithstanding, the Executive shall be entitled after
the Disability Effective Date to receive disability and other
benefits at least equal to the most favorable of those provided by
the Corporation to disabled employees and/or their families in
accordance with such plans, programs and policies relating to
disability, if any, as in effect at any time during the 90-day
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period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in
effect at any time thereafter with respect to other key executives
and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment other than for Good Reason, the
Corporation shall pay the Executive his full Base Salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given and shall have no further obligations to the
Executive under this Agreement.
(d) Termination by Executive for Good Reason;
Termination by Corporation Other Than for Cause or Disability. If,
during the Employment Period, the Corporation shall terminate the
Executive's employment other than for Cause or Disability, or the
employment of the Executive shall be terminated by the Executive
for Good Reason:
(i) the Corporation shall pay to the Executive in a
lump sum in cash within 10 days after the Date of Termination
(the "Payment Date") the aggregate of the following amounts:
A. to the extent not theretofore paid, the
Executive's Base Salary through the Date of Termination
at the rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time within
the three year period preceding the Effective Date (the
"Highest Base Salary"); and
B. the product of (x) the average of the annual
bonuses paid, or payable to the extent deferred, to the
Executive for the three full fiscal years prior to the
Effective Date (the "Recent Bonus") and (y) the fraction
obtained by dividing (i) the number of days between the
Date of Termination and the last day of the last full
fiscal year and (ii) 365; and
C. the product of (x) three and (y) the sum of the
Highest Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred
by the Executive, all amounts previously deferred and not
yet paid by the Corporation; and
(ii) for one year after the Date of Termination, the
Corporation shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would
have been provided to them in accordance with the plans,
programs and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been
terminated, including health insurance and life insurance, if
and as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect at any time thereafter with
respect to other key executives and their families and for
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purposes of eligibility for retiree benefits pursuant to such
plans, programs and policies, the Executive shall be
considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such
period.
Anything herein to the contrary notwithstanding, the
Executive may elect in his Notice of Termination to receive the
payment provided for pursuant to Section 6(d)(i)(C) hereof (the
"Severance Payment") in installments. If the Executive elects the
installment method, one-quarter of the Severance Payment shall be
paid to the Executive on the Payment Date and one-quarter of the
severance payment shall be paid to the Executive on each of the
next three anniversaries thereof and, in the case of the latter
three payments, the amounts to be paid shall include interests from
the Payment Date on the remaining unpaid balance of the Severance
Payment calculated at the Morgan Guaranty Trust Company prime rate
as in effect from time to time.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other plan
or program provided by the Corporation or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any stock option or other agreements with
the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Corporation or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan or program.
8. Full Settlement. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or
action which the Corporation may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement. The Corporation agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Corporation or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof or as a result of
any contest by the Executive about the amount of any payment
pursuant to Section 9 of this Agreement, plus in each case interest
at the Federal Rate (as defined below).
9. Gross-up.
(a) In the event it shall be determined that any
payment, benefit or distribution (or combination thereof) by the
Corporation to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement, or otherwise) (a "Payment") would be subject to the
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excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by Executive of the Excise Tax
imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur Andersen &
Co. (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Corporation and Executive within fifteen
(15) business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by
the Corporation. In the event that the Accounting Firm is serving
as accountant or auditor for an individual, entity or group
effecting the change in ownership or effective control (within the
meaning of Section 280G of the Code), Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Corporation to Executive within
five (5) days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by Executive, it shall so indicate to Executive in
writing. Any determination by the Accounting Firm shall be binding
upon the Corporation and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Corporation should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Corporation exhausts its remedies pursuant to Section 9(c)
and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Corporation to or for the benefit of
Executive.
(c) Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Corporation of the Gross-Up
Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Executive is
informed in writing of such claim and shall apprise the Corporation
of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to
the expiration of the thirty (30) day period following the date on
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which it gives such notice to the Corporation (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies Executive in
writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) give the Corporation any information reasonably
requested by the Corporation relating to such claim;
(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Corporation;
(iii) cooperate with the Corporation in good faith in
order to effectively contest such claim; and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after-tax basis, for
any Excise Tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine; provided, however, that
if the Corporation directs Executive to pay such claim and sue for
a refund, the Corporation shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and
hold Executive harmless, on an after-tax basis, from any Excise Tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that if Executive
is required to extend the statute of limitations to enable the
Corporation to contest such claim, Executive may limit this
extension solely to such contested amount.
(d) If, after the receipt by Executive of an amount
advanced by the Corporation pursuant to Section 9(c), Executive
becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Corporation's complying with the
requirements of Section 9(c)) promptly pay to the Corporation the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Corporation pursuant to
Section 9(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the
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Corporation does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold
in a fiduciary capacity for the benefit of the Corporation all
secret or confidential information, knowledge or data relating to
the Corporation or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Corporation or
any of its affiliated companies and which shall not be public
knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). After termination
of the Executive's employment with the Corporation, the Executive
shall not, without the prior written consent of the Corporation,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Corporation
shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors.
(c) The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State
of New Jersey, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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If to the Executive:
Todd C. Schermerhorn
5 Langford Drive
Mendham, NJ 07945
If to the Corporation:
C. R. BARD, INC.
730 Central Avenue
Murray Hill, New Jersey 07974
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Corporation may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
(f) This Agreement contains the entire understanding of
the Corporation and the Executive with respect to the subject
matter hereof.
(g) The Executive and the Corporation acknowledge that
the employment of the Executive by the Corporation is "at will",
and, prior to the Effective Date, may be terminated by either the
Executive or the Corporation at any time. Upon a termination of
the Executive's employment or upon the Executive's ceasing to be an
officer of the Corporation, in each case, prior to the Effective
Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Corporation has caused these presents to be executed
in its name on its behalf, all as of the day and year first above
written.
Todd C. Schermerhorn /s/
Todd C. Schermerhorn
C. R. BARD, INC.
By: William H. Longfield /s/
William H. Longfield
Chairman and
Chief Executive Officer Attest:
Assistant Secretary
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EXHIBIT 10ad
AGREEMENT
AGREEMENT by and between C. R. BARD, INC., a New Jersey
corporation (the "Corporation"), and James L. Natale (the
"Executive"), dated as of the 14th day of October, 1998.
WHEREAS, the Corporation, on behalf of itself and its
shareholders, wishes to assure that the Corporation will have the
continued dedication of the Executive, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as
defined below) of the Corporation. The Board of Directors of the
Corporation (the "Board") believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control, to encourage his attention and dedication to his
assigned duties currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with
competitive compensation arrangements; therefore, the Board has
caused the Corporation to enter into this Agreement (i) to ensure
the Executive of individual financial security in the event of a
Change of Control, and (ii) to provide such protection in a manner
which is competitive with that of other corporations.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall be the first date during the "Change of Control Period" (as
defined in Section l(b)) on which a Change of Control occurs.
Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Corporation is terminated prior to
the date on which a Change of Control occurs, and the Executive can
reasonably demonstrate that such termination (1) was at the request
of a third party who has taken steps reasonably calculated to
effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the earlier to occur of
(i) the third anniversary of such date or (ii) the first day of the
month next following the Executive's normal retirement date
("Normal Retirement Date") under the Corporation's retirement plan;
provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date
and each annual anniversary thereof is hereinafter referred to as
the "Renewal Date"), the Change of Control Period shall be auto-
matically extended so as to terminate on the earlier of (x) two
years from such Renewal Date or (y) the first day of the month
coinciding with or next following the Executive's Normal Retirement
Date, unless at least 60 days prior to the Renewal Date the
Corporation shall give notice that the Change of Control Period
shall not be so extended.
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2. Change of Control. (a) For purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred
if a change of control of the nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K
as in effect on the date hereof pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") occurs,
provided that, without limitation, a "Change of Control" shall be
deemed to have occurred if (i) the beneficial ownership at any time
hereafter by any person, as defined herein, of capital stock of the
Corporation, constitutes 20 percent or more of the general voting
power of all of the Corporation's outstanding capital or (ii)
individuals who, as of the date hereof, constitute the Board (as of
the date hereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any
person becoming a Director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least three-quarters of
the Directors comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the Directors of the
Corporation, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of
the Incumbent Board. No sale to underwriters or private placement
of its capital stock by the Corporation, nor any acquisition
initiated by the Corporation, through merger, purchase of assets or
otherwise, effected in whole or in part by issuance or reissuance
of shares of its capital stock, shall constitute a Change of
Control.
(b) For purposes of the definition of "Change of
Control", the following definitions shall be applicable:
(i) The term "person" shall mean any individual,
corporation or other entity and any group as such term is used
in Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(ii) Any person shall be deemed to be the beneficial
owner of any shares of capital stock of the Corporation:
A. which that person owns directly, whether or not
of record, or
B. which that person has the right to acquire
pursuant to any agreement or understanding or upon
exercise of conversion rights, warrants, or options, or
otherwise, or
C. which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause (B) above), by an "affiliate" or
"associate" (as defined in the rules of the Securities
and Exchange Commission under the Securities Act of 1933,
as amended) of that person, or
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D. which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause (B) above), by any other person
with which that person or his "affiliate" or "associate"
(defined as aforesaid) has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of capital stock of the Corporation.
(iii) The outstanding shares of capital stock of the
Corporation shall include shares deemed owned through
application of clauses (ii) (B), (C) and (D), above, but shall
not include any other shares which may be issuable pursuant to
any agreement or upon exercise of conversion rights, warrants
or options, or otherwise, but which are not actually
outstanding.
(iv) Shares of capital stock, if any, held by The Chase
Manhattan Bank N.A. under the Indenture and the Escrow
Agreement dated as of November 1, 1971 between International
Paper Corporation and said bank shall not be deemed owned by
International Paper Corporation or by said bank for purposes
of this definition, so long as they are held by said bank
under said Escrow Agreement, but said shares shall be deemed
outstanding for the purpose of determining the aggregate
number of outstanding shares of capital stock of the
Corporation.
3. Employment Period. The Corporation hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Corporation, for the period
commencing on the Effective Date and ending on the earlier to occur
of (a) the third anniversary of such date or (b) the first day of
the month coinciding with or next following the Executive's Normal
Retirement Date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i)
During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or
any office or location less than thirty-five (35) miles from such
location.
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(ii) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Corporation and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Corporation in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Corporation.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive a base salary ("Base
Salary") at a monthly rate at least equal to the highest monthly
base salary paid to the Executive by the Corporation during the
twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Base
Salary shall be reviewed at least annually and shall be increased
at any time and from time to time as shall be consistent with
increases in base salary awarded in the ordinary course of business
to other key executives of the Corporation. Any increase in Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Base Salary shall not be
reduced after any such increase.
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year during the
Employment Period, an annual bonus (an "Annual Bonus") in cash at
least equal to the average bonus received by the Executive from the
Corporation in respect of the three fiscal years immediately
preceding the fiscal year in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable as hereinabove
provided, the Executive shall be entitled to participate during the
Employment Period in all incentive, savings and retirement plans
and programs, whether qualified or non-qualified, then applicable
to other key executives of the Corporation and its affiliates
(including the Corporation's 1981 Stock Option Plan, the Long-Term
Performance Incentive Plan, the 1986 Stock Award Plan, the 1981
Employee Stock Appreciation Rights Plan, the Employees' Stock
Ownership Plan and the Employees' Retirement Savings Plan, in each
case to the extent then in effect or as subsequently amended);
provided, however, that such plans and programs, in the aggregate,
shall provide the Executive with compensation, benefits and reward
opportunities at least as favorable as the most favorable such
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compensation benefits and reward opportunities provided by the
Corporation for the Executive under such plans and programs as in
effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as
provided at any time thereafter with respect to other key
executives.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans provided by the
Corporation (including, without limitation, medical, prescription,
dental, disability, salary continuance, executive life, group life,
accidental death and travel accident insurance plans and programs),
at least comparable to those in effect at any time during the
90-day period immediately preceding the Effective Date which would
be most favorable to the Executive or, if more favorable to the
Executive, as in effect at any time thereafter with respect to
other key executives.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies and procedures of the Corporation and
its affiliates in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect to
other key executives.
(vi) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to fringe benefits, in
accordance with the most favorable policies of the Corporation and
its affiliates in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect to
other key executives.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other appointments, and
to secretarial and other assistance, at least equal to those
provided to the Executive at any time during the 90-day period
immediately preceding the Effective Date which would be most
favorable to the Executive or, if more favorable to the Executive,
as provided at any time thereafter with respect to other key
executives.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable policies of the Corporation and its affiliates as in
effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key executives.
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Agreement shall terminate automatically upon the Executive's death.
The Corporation may terminate this Agreement, after having
established the Executive's Disability (pursuant to the definition
of "Disability" set forth below), by giving to the Executive
written notice of its intention to terminate the Executive's
employment. In such a case, the Executive's employment with the
Corporation shall terminate effective on the 180th day after
receipt of such notice (the "Disability Effective Date"), provided
that, within 180 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" means disability
which, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Corporation
or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(b) Cause. The Corporation may terminate the
Executive's employment for "Cause." For purposes of this Agreement,
"Cause" means (i) an act or acts of dishonesty taken by the
Executive and intended to result in substantial personal enrichment
of the Executive at the expense of the Corporation, (ii) repeated
violations by the Executive of the Executive's obligations under
Section 4(a) of this Agreement which are demonstrably willful and
deliberate on the Executive's part and which are not remedied after
the receipt of notice from the Corporation or (iii) the conviction
of the Executive of a felony.
(c) Termination by Executive for Good Reason. The
Executive's employment may be terminated by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means
(i) (A) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or (B) any
other action by the Corporation which results in a diminution
in such position, authority, duties or responsibilities, other
than an insubstantial and inadvertent action which is remedied
by the Corporation promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Corporation to comply with any
of the provisions of Section 4(b) of this Agreement, other
than an insubstantial and inadvertent failure which is
remedied by the Corporation promptly after receipt of notice
thereof given by the Executive;
(iii) the Corporation's requiring the Executive to be
based at any office or location other than that described in
Section 4(a)(i)(B) hereof, except for travel reasonably
required in the performance of the Executive's
responsibilities;
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(iv) any purported termination by the Corporation of
the Executive's employment otherwise than as permitted by this
Agreement; or
(v) any failure by the Corporation to comply with and
satisfy Section 11(c) of this Agreement.
Anything in this Agreement to the contrary
notwithstanding, any termination by the Executive for any reason
whatsoever during the six month period immediately following the
first anniversary of the date of a Change of Control shall be a
termination for "Good Reason". For purposes of this Section 5(c),
any good faith determination of "Good Reason" made by the Executive
shall be conclusive.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated and (iii) if the termination date is other
than the date of receipt of such notice, specifies the termination
date (which date shall be not more than fifteen (15) days after the
giving of such notice).
(e) Date of Termination. "Date of Termination" means
the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be. If the Executive's
employment is terminated by the Corporation other than for Cause or
Disability, the Date of Termination shall be the date on which the
Corporation notifies the Executive of such termination.
6. Obligations of the Corporation upon Termination. (a)
Death. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives under
this Agreement, other than those obligations accrued or earned by
the Executive hereunder at the date of the Executive's death.
Anything in this Agreement to the contrary notwithstanding, the
Executive's family shall be entitled to receive benefits at least
equal to the most favorable benefits provided by the Corporation to
surviving families of executives of the Corporation under such
plans, programs and policies relating to family death benefits, if
any, as in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the
Executive's death with respect to other key executives and their
families.
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<PAGE>
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, this Agreement
shall terminate without further obligations to the Executive, other
than those obligations accrued or earned by the Executive hereunder
as of the Disability Effective Date. Anything in this Agreement to
the contrary notwithstanding, the Executive shall be entitled after
the Disability Effective Date to receive disability and other
benefits at least equal to the most favorable of those provided by
the Corporation to disabled employees and/or their families in
accordance with such plans, programs and policies relating to
disability, if any, as in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in
effect at any time thereafter with respect to other key executives
and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause or the
Executive terminates his employment other than for Good Reason, the
Corporation shall pay the Executive his full Base Salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given and shall have no further obligations to the
Executive under this Agreement.
(d) Termination by Executive for Good Reason;
Termination by Corporation Other Than for Cause or Disability. If,
during the Employment Period, the Corporation shall terminate the
Executive's employment other than for Cause or Disability, or the
employment of the Executive shall be terminated by the Executive
for Good Reason:
(i) the Corporation shall pay to the Executive in a
lump sum in cash within 10 days after the Date of Termination
(the "Payment Date") the aggregate of the following amounts:
A. to the extent not theretofore paid, the
Executive's Base Salary through the Date of Termination
at the rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time within
the three year period preceding the Effective Date (the
"Highest Base Salary"); and
B. the product of (x) the average of the annual
bonuses paid, or payable to the extent deferred, to the
Executive for the three full fiscal years prior to the
Effective Date (the "Recent Bonus") and (y) the fraction
obtained by dividing (i) the number of days between the
Date of Termination and the last day of the last full
fiscal year and (ii) 365; and
C. the product of (x) three and (y) the sum of the
Highest Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred
by the Executive, all amounts previously deferred and not
yet paid by the Corporation; and
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<PAGE>
(ii) for one year after the Date of Termination, the
Corporation shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would
have been provided to them in accordance with the plans,
programs and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been
terminated, including health insurance and life insurance, if
and as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect at any time thereafter with
respect to other key executives and their families and for
purposes of eligibility for retiree benefits pursuant to such
plans, programs and policies, the Executive shall be
considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such
period.
Anything herein to the contrary notwithstanding, the
Executive may elect in his Notice of Termination to receive the
payment provided for pursuant to Section 6(d)(i)(C) hereof (the
"Severance Payment") in installments. If the Executive elects the
installment method, one-quarter of the Severance Payment shall be
paid to the Executive on the Payment Date and one-quarter of the
severance payment shall be paid to the Executive on each of the
next three anniversaries thereof and, in the case of the latter
three payments, the amounts to be paid shall include interests from
the Payment Date on the remaining unpaid balance of the Severance
Payment calculated at the Morgan Guaranty Trust Company prime rate
as in effect from time to time.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other plan
or program provided by the Corporation or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any stock option or other agreements with
the Corporation or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Corporation or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan or program.
8. Full Settlement. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or
action which the Corporation may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of
this Agreement. The Corporation agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Corporation or others of the validity or
enforceability of, or liability under, any provision of this
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Agreement or any guarantee of performance thereof or as a result of
any contest by the Executive about the amount of any payment
pursuant to Section 9 of this Agreement, plus in each case interest
at the Federal Rate (as defined below).
9. Gross-up.
(a) In the event it shall be determined that any
payment, benefit or distribution (or combination thereof) by the
Corporation to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement, or otherwise) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by Executive of the Excise Tax
imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Arthur Andersen &
Co. (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Corporation and Executive within fifteen
(15) business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by
the Corporation. In the event that the Accounting Firm is serving
as accountant or auditor for an individual, entity or group
effecting the change in ownership or effective control (within the
meaning of Section 280G of the Code), Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Corporation to Executive within
five (5) days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by Executive, it shall so indicate to Executive in
writing. Any determination by the Accounting Firm shall be binding
upon the Corporation and Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Corporation should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Corporation exhausts its remedies pursuant to Section 9(c)
and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Corporation to or for the benefit of
Executive.
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(c) Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Corporation of the Gross-Up
Payment. Such notification shall be given as soon as practicable
but no later than ten (10) business days after Executive is
informed in writing of such claim and shall apprise the Corporation
of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to
the expiration of the thirty (30) day period following the date on
which it gives such notice to the Corporation (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies Executive in
writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) give the Corporation any information reasonably
requested by the Corporation relating to such claim;
(ii) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Corporation;
(iii) cooperate with the Corporation in good faith in
order to effectively contest such claim; and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after-tax basis, for
any Excise Tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Corporation shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to
pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine; provided, however, that
if the Corporation directs Executive to pay such claim and sue for
a refund, the Corporation shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and
hold Executive harmless, on an after-tax basis, from any Excise Tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that if Executive
is required to extend the statute of limitations to enable the
Corporation to contest such claim, Executive may limit this
extension solely to such contested amount.
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(d) If, after the receipt by Executive of an amount
advanced by the Corporation pursuant to Section 9(c), Executive
becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Corporation's complying with the
requirements of Section 9(c)) promptly pay to the Corporation the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Corporation pursuant to
Section 9(c), a determination is made that Executive shall not be
entitled to any refund with respect to such claim and the
Corporation does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold
in a fiduciary capacity for the benefit of the Corporation all
secret or confidential information, knowledge or data relating to
the Corporation or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Corporation or
any of its affiliated companies and which shall not be public
knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). After termination
of the Executive's employment with the Corporation, the Executive
shall not, without the prior written consent of the Corporation,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Corporation
shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors.
(c) The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
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12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State
of New Jersey, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
James L. Natale
21 Dunkins Drive
Washington's Crossing, PA 18977
If to the Corporation:
C. R. BARD, INC.
730 Central Avenue
Murray Hill, New Jersey 07974
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Corporation may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
(f) This Agreement contains the entire understanding of
the Corporation and the Executive with respect to the subject
matter hereof.
(g) The Executive and the Corporation acknowledge that
the employment of the Executive by the Corporation is "at will",
and, prior to the Effective Date, may be terminated by either the
Executive or the Corporation at any time. Upon a termination of
the Executive's employment or upon the Executive's ceasing to be an
officer of the Corporation, in each case, prior to the Effective
Date, there shall be no further rights under this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Corporation has caused these presents to be executed
in its name on its behalf, all as of the day and year first above
written.
James L. Natale /s/
James L. Natale
C. R. BARD, INC.
By: William H. Longfield /s/
William H. Longfield
Chairman and
Chief Executive Officer
Attest:
Assistant Secretary
- 14 -
<TABLE>
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
<CAPTION>
Nine Months
Ending
9/30/98 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Earnings before taxes $132,600 $104,900 $102,700 $123,500 $104,100 $101,400
Add(Deduct)
Fixed Charges 26,500 38,200 33,500 31,500 23,200 18,700
Undistributed earnings
of less than 50% owned
companies carried at
equity (300) (500) (700) (800) (400) (200)
Interest capitalized 0 0 0 0 (200) 0
Earnings available for fixed
charges $158,800 $142,600 $135,500 $154,200 $126,700 $119,900
Fixed charges:
Interest, including
amounts capitalized 22,900 32,900 26,400 24,200 16,500 12,500
Proportion of rent
expense deemed to
represent interest
factor 3,600 5,300 7,100 7,300 6,700 6,200
Fixed Charges $ 26,500 $ 38,200 $ 33,500 $ 31,500 $ 23,200 $ 18,700
Ratio of earnings to fixed
charges 5.99 3.73 4.04 4.89 5.46 6.41
<FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18600
<SECURITIES> 14700
<RECEIVABLES> 248800
<ALLOWANCES> 12800
<INVENTORY> 268700
<CURRENT-ASSETS> 573700
<PP&E> 373600
<DEPRECIATION> 157100
<TOTAL-ASSETS> 1257700
<CURRENT-LIABILITIES> 492800
<BONDS> 160300
0
0
<COMMON> 14300
<OTHER-SE> 596400
<TOTAL-LIABILITY-AND-EQUITY> 1257700
<SALES> 895400
<TOTAL-REVENUES> 895400
<CGS> 430400
<TOTAL-COSTS> 776100
<OTHER-EXPENSES> (36200)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22900
<INCOME-PRETAX> 132600
<INCOME-TAX> 44000
<INCOME-CONTINUING> 88600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88600
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.56
</TABLE>
