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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 QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 1-6351
ELI LILLY AND COMPANY
(Exact name of Registrant as specified in its charter)
INDIANA 35-0470950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
LILLY CORPORATE CENTER, INDIANAPOLIS, INDIANA 46285
(Address of principal executive offices)
Registrant's telephone number, including area code (317)
276-2000
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, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- -----
The number of shares of common stock outstanding as of
April 30, 1996:
Class Number of Shares Outstanding
----- ----------------------------
Common 552,523,346
1
PART I FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months
Ended March 31,
1996 1995
-----------------
(Dollars in millions
except per-share data)
Net sales $1,783.3 $1,717.3
Cost of sales 518.0 512.5
Research and development 276.0 236.7
Marketing and administrative 460.0 407.2
Interest expense 69.9 66.2
Other income - net (64.4) (33.2)
------- -------
1,259.5 1,189.4
------- -------
Income from continuing operations
before income taxes 523.8 527.9
Income taxes 134.6 153.1
----- -----
Income from continuing operations 389.2 374.8
Income from discontinued operations,
next of tax - 18.4
----- -----
Net income $389.2 $393.2
===== =====
Earnings per share:
Income from continuing operations $ .71 $ .65
Income from discontinued operations - .03
---- ----
Net income $ .71 $ .68
==== ====
Dividends paid per share $ .3425 $ .3225
See Notes to Consolidated Condensed Financial Statements.
2
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Eli Lilly and Company and Subsidiaries
March 31, December 31,
1996 1995
----------------------------
(Millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 898.4 $ 999.5
Short-term investments 95.0 84.6
Accounts receivable, net of
allowances of $57.4 (1996)
and $55.1 (1995) 1,494.7 1,520.5
Other receivables 255.2 287.9
Inventories 843.7 839.6
Deferred income taxes 116.3 259.2
Prepaid expenses 144.2 147.3
------- -------
TOTAL CURRENT ASSETS 3,847.5 4,138.6
OTHER ASSETS
Prepaid retirement 486.6 484.2
Investments 578.7 573.8
Goodwill and other intangibles, net
of allowances for amortization of
$221.9 (1996) and $192.2 (1995) 4,114.2 4,105.2
Sundry 919.3 871.4
------- -------
6,098.8 6,034.6
PROPERTY AND EQUIPMENT
Land, buildings, equipment, and
construction-in-progress 6,837.4 6,828.3
Less allowances for depreciation 2,623.3 2,589.0
------- -------
4,214.1 4,239.3
------- -------
$14,160.4 $14,412.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 2,027.6 $ 1,908.8
Accounts payable 815.4 1,018.0
Employee compensation 202.5 316.0
Dividends payable - 189.1
Income taxes payable 593.4 660.5
Other liabilities 797.6 874.6
------- -------
TOTAL CURRENT LIABILITIES 4,436.5 4,967.0
LONG-TERM DEBT 2,576.2 2,592.9
DEFERRED INCOME TAXES 309.4 295.5
RETIREE MEDICAL BENEFIT OBLIGATION 137.7 147.8
OTHER NONCURRENT LIABILITIES 855.0 976.7
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Common stock 355.6 355.6
Additional paid-in capital 351.0 418.3
Retained earnings 6,881.6 6,484.3
Deferred costs-ESOP (195.9) (199.5)
Currency translation adjustments (42.8) (0.6)
------- -------
7,349.5 7,058.1
Less cost of common stock in
treasury 1,503.9 1,625.5
------- -------
5,845.6 5,432.6
------- -------
$14,160.4 $14,412.5
======== ========
See Notes to Consolidated Condensed Financial Statements.
3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Ended
March 31,
1996 1995
---------------
(Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $389.2 $393.2
Adjustments to Reconcile Net Income to
Cash
Flows from Operating Activities:
Changes in operating assets and (395.4) (288.5)
liabilities
Change in deferred taxes 157.2 60.9
Depreciation and amortization 132.7 140.1
Other items, net (62.7) (21.9)
----- -----
NET CASH FLOWS FROM OPERATING ACTIVITIES 221.0 283.8
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment (101.1) (96.9)
Additions to sundry assets and (9.6) (3.4)
intangibles
Reduction of investments 55.5 129.9
Additions to investments (75.7) (57.0)
Acquisitions (86.0) (28.4)
---- ----
NET CASH USED FOR INVESTING ACTIVITIES (216.9) (55.8)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (187.6) (186.6)
Purchase of common stock and other
capital transaction (7.8) (22.4)
Net additions to short-term borrowings 109.6 412.2
Net reductions to long-term debt (0.4) (15.2)
----- ----
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES (86.2) 188.0
Effect of Exchange Rate Changes on Cash (19.0) 25.9
----- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (101.1) 441.9
Cash and cash equivalents at January 1 999.5 536.9
----- -----
CASH AND CASH EQUIVALENTS AT MARCH 31 $898.4 $978.8
===== =====
See Notes to Consolidated Condensed Financial Statements.
4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the
requirements of Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flow in
conformity with generally accepted accounting principles. In
the opinion of management, the financial statements reflect all
adjustments (consisting only of normal recurring accruals) that
are necessary for a fair statement of the results for the
periods shown. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures at the date of the financial
statements and during the reporting period. Actual results
could differ from those estimates.
As a consequence of the 1995 divestiture, the operating results
of the Medical Device and Diagnostics businesses have been
reflected as "discontinued operations" in the Company's 1995
financial statements and have been excluded from consolidated
sales and expenses reflected therein.
As presented herein, sales include sales of the Company's life-
sciences products and service revenue from PCS Health Systems,
Inc. (PCS) and Integrated Medical Systems, Inc. (IMS).
CONTINGENCIES
The Company has been named as a defendant in numerous product
liability lawsuits involving primarily two products,
diethylstilbestrol and ProzacR. The Company has accrued for its
estimated exposure, including costs of litigation, with respect
to all current product liability claims. In addition, the
Company has accrued for certain future anticipated product
liability claims to the extent the Company can formulate a
reasonable estimate of their costs. The Company's estimates of
these expenses are based primarily on historical claims
experience and data regarding product usage. The Company expects
the cash amounts related to the accruals to be paid out over the
next several years. The majority of costs associated with
defending and disposing of these suits are covered by insurance.
The Company's estimate of insurance recoveries is based on
existing deductibles, coverage limits, and the existing and
projected future level of insolvencies among its insurance
carriers.
Under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund, the Company has been
designated as one of several potentially responsible parties with
respect to certain sites. Under Superfund, each responsible
party may be jointly and severally liable for the entire amount
of the cleanup. The Company also continues remediation of
certain of its own sites. The Company has accrued for estimated
Superfund cleanup costs, remediation, and certain other
environmental matters, taking into account, as applicable,
available information regarding site conditions, potential
cleanup methods, estimated costs, and the extent to which other
parties can be expected to contribute to the payment of those
costs. The Company has reached a settlement with its primary
liability insurance carrier providing for coverage for
certain environmental liabilities and has reserved its right to
pursue claims against its excess carriers. However, because of
uncertainties with respect to the timing and ultimate realization
of recoveries under the primary and excess policies, the Company
has not recorded any environmental insurance recoverables.
The Company has been named, along with numerous other U.S.
prescription drug manufacturers, as a defendant in a large number
of related actions brought by retail pharmacies alleging
violations of federal and state antitrust and pricing laws. The
federal suits include a class action on behalf of the majority of
U.S. retail pharmacies. The Company and several other
manufacturers agreed to settle the federal class action case and
the anticipated settlement was accrued in the fourth quarter of
1995. In April
5
1996, the U.S. District Court rejected the proposed settlement,
reversing the court's preliminary approval granted in February
1996. Thereafter, the Company and most of the original settling
defendants have reached a new tentative settlement, subject to
court approval, intended to address the court's objections to the
original settlement. The District Court has preliminarily
approved the new settlement and a final hearing on the settlement
has been scheduled for June 11, 1996. The new settlement
provides for payment of the same amount by the Company;
accordingly, amounts recorded for the anticipated settlement in
the fourth quarter of 1995 are unchanged at March 31, 1996.
Other related suits, brought by several thousand pharmacies,
involve claims of price discrimination or claims under other
pricing laws. Additional cases have been brought on behalf of
consumers in eight states.
The environmental liabilities and litigation accruals have been
reflected in the Company's consolidated balance sheet at the
gross amount of approximately $301.3 million at March 31, 1996.
Estimated insurance recoverables have been reflected as assets in
the consolidated balance sheet of approximately $125.6 million
at March 31, 1996.
Barr Laboratories, Inc. (Barr) has asserted a claim that the U.S.
patents covering Prozac, which are material to the Company, are
invalid and unenforceable. The Company has filed suit in federal
court in Indianapolis seeking a ruling that Barr's challenge to
Lilly's patents is without merit. While the Company believes
Barr's claims are without merit, there can be no assurance that
the Company will prevail. An unfavorable outcome of this claim
could have a material adverse effect on the Company's
consolidated financial position, liquidity, or results of
operations.
While it is not possible to predict or determine the outcome of
the product liability, antitrust, patent, or other legal actions
brought against the Company or the ultimate cost of environmental
matters, the Company believes that, except as noted above, the
costs associated with all such matters will not have a material
adverse effect on its consolidated financial position or
liquidity but could possibly be material to the results of
operations in any one accounting period.
EARNINGS PER SHARE
Earnings per share are calculated based on the weighted average
number of outstanding common shares. The number of shares of
common stock and per-share data have been restated for previously
reported periods to reflect the impact of the Company's two-for-
one stock split in the fourth quarter of 1995.
ACCOUNTING CHANGES
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". This statement requires that impairments,
measured using fair market value, are recognized whenever events
or changes in circumstances indicate that the carrying amount of
long-lived assets may not be recoverable and the future
undiscounted cash flows attributable to the asset are less than
its carrying value. Adoption of this statement did not impact
the Company's consolidated results of operations.
Effective January 1, 1996, the Company adopted SFAS No. 123,
"Stock Based Compensation". This statement requires a company to
choose between two different methods of accounting for stock
options. The statement defines a fair-value-based method of
accounting for stock options but allows an entity to continue to
measure compensation cost for stock options using the accounting
prescribed by APB No. 25 (APB 25), "Accounting for Stock Issued
to Employees". The Company has elected to continue applying
accounting prescribed by APB No. 25.
6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations
OPERATING RESULTS OF CONTINUING OPERATIONS:
The Company's sales for the first quarter increased 4 percent as
compared with the first quarter of 1995. Sales inside the United
States were flat while sales outside of the United States
increased 10 percent. Compared with the first quarter of 1995,
volume increased 3 percent, foreign exchange rates had a
favorable effect of 1 percent, and prices remained stable.
Worldwide pharmaceutical sales increased 3 percent in the first
quarter compared with the same period last year. Contributing
significantly to the growth of worldwide pharmaceutical products
were Prozac and ReoProTM, a product launched in February 1995 that
prevents abrupt reclosure of the artery following angioplasty
procedures. Worldwide sales of Prozac in the first quarter of
1996 were $579 million, an increase of 27 percent over the first
quarter of 1995. The Company expects continued growth of Prozac
sales for the remainder of the year, but at a lower rate. Among
other major products, HumulinR declined 3 percent to $207
million; CeclorR declined 41 percent to $157 million; and AxidR
increased 5 percent to $150 million. PCS service revenues were
$73 million for the quarter, an increase of 16 percent.
U.S. pharmaceutical sales were relatively flat compared to the
first quarter of 1995 as decreased anti-infective sales (52
percent)and Humulin sales (16 percent) were offset by increased
Prozac (36 percent) and ReoPro sales. The decline in anti-
infective sales was driven largely by cefaclor, which experienced
a decrease of 84 percent compared to the previous year as a
consequence of intense generic competition and a flu season which
peaked in December 1995. Since May 1995, several companies have
been marketing generic forms of cefaclor in the United States and
quantities of the generic product have been greater than
anticipated by the Company. The Company expects that generic
cefaclor competition, together with strong competition from other
anti-infectives, will result in a continued decline in U.S.
cefaclor sales for the remainder of 1996. Although the impact of
competition cannot be predicted with certainty, it is not
expected to have a material adverse effect on the Company's 1996
consolidated results of operations. Sales of Humulin declined as
compared to the first quarter of 1995 due in part to wholesaler
purchasing patterns, which were affected by the timing of price
increases.
International pharmaceutical sales growth of 9 percent in the
first quarter was driven by Prozac and Humulin which increased 7
and 32 percent, respectively, as compared to the first quarter of
1995. International sales growth relates largely to volume
growth resulting from the Company's continued globalization
efforts.
Worldwide sales of animal health products increased 10 percent
over the first quarter of 1995. The increase resulted from
strong performance across a majority of the product line in
international markets.
Cost of sales decreased in the first quarter to 29.0 percent of
sales from 29.8 percent of sales in the same quarter of 1995.
This decrease is primarily the result of continued productivity
improvements and favorable impacts from changes in product mix
and foreign exchange rates. These improvements were partially
offset by increases in the cost of services at PCS.
Operating expenses increased 14 percent in the first quarter
compared with the same period in 1995. The increase reflects a
17 percent growth in research and development due to the large
number of compounds that have entered the later and more
expensive phases of clinical research to support the Company's
extensive pipeline of potential new products, including
raloxifene. Marketing and administrative expenses increased 13
percent from the first quarter of 1995 primarily due to
additional employee costs associated with expansion in new and
emerging markets, increased information technology capabilities,
and accruals for performance-related compensation.
7
Net other income for the quarter was $31.2 million more than that
of 1995. This increase relates largely to non-recurring income
received under a co-development and co-marketing contract and the
sale of U.S. marketing rights to TapazoleR.
The Company's estimated tax rate was 25.7 percent in the first
quarter of 1996 versus a tax rate of 29.0 percent in the first
quarter of 1995. The estimated effective tax rate for the first
quarter 1996 essentially equals the annual 1995 rate of 26
percent. The decline from the first quarter of 1995 is primarily
the result of changes in the mix of earnings between
jurisdictions having lower tax rates compared with those having
higher rates and the effectiveness of various tax planning
strategies. The Company expects current tax strategies will
allow its 1996 effective tax rate to remain approximately the
same as the 1995 annual rate.
For the first quarter of 1996, the growth in sales-related gross
margins, the reduced estimated tax rate and increased other
income was largely offset by the growth in operating expenses.
As a consequence, income from continuing operations reflected an
increase of 4 percent to $389.2 million and earnings per share
from continuing operations increased 9 percent to $0.71. After
considering the impact of income from discontinued operations
during the first quarter of 1995, net income decreased 1 percent
and earnings per share increased 4 percent for the first quarter
of 1996. Earnings per share calculations for the quarter
benefited by a reduction of approximately 32 million shares of
stock outstanding as a result of the Guidant split-off completed
in September, 1995.
FINANCIAL CONDITION
As of March 31, 1996, cash, cash equivalents, and short term
investments totaled $993.4 million as compared with $1,084.1
million at December 31, 1995. Total debt at March 31, 1996, was
$4,603.8 million, an increase of $102.1 million from December 31,
1995. The increase primarily reflects additional borrowings
necessary to fund normal seasonal operating needs. Short-term
debt aggregating $2,027.6 million is primarily in the form of
commercial paper.
The Company believes that cash generated from operations, along
with available cash and equivalents, will be sufficient to fund
essentially all the Company's operating needs, including debt
service, capital expenditures, and dividends for the remainder of
1996. The Company believes that amounts available through
existing commercial paper programs should be adequate to fund
maturities of short-term borrowings. The outstanding commercial
paper is also backed up by committed bank credit facilities.
8
PART II OTHER INFORMATION
--------------------------
Item 1.LEGAL PROCEEDINGS
-----------------
Reference is made to the discussion of the antitrust litigation
brought by retail pharmacies against the Company and numerous
other U.S. prescription pharmaceutical manufacturers, contained
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 under Part I, Item 3, "Legal Proceedings". The
Company and several other manufacturers agreed to settle the
federal class action case and the anticipated settlement was
accrued in the fourth quarter of 1995. The Company has not
engaged in any wrongdoing, nor is there an admission of
wrongdoing in the settlement agreement. Rather, the Company
entered into the settlement agreement for the purpose of avoiding
the expense and uncertainty typically associated with cases of
this size and complexity. In April 1996, the U.S. District Court
rejected the proposed settlement, reversing the court's
preliminary approval granted in February 1996. In addition, the
District Court denied the manufacturer defendants' motions for
summary judgment but granted summary judgment to the wholesaler
defendants. The District Court also postponed the May 7, 1996
trial date, and no new date has been set. Subsequent to the
District Court's rulings, the Company and most of the original
settling defendants have entered into a new tentative settlement
agreement, subject to court approval, which is intended to
address the District Court's objections to the original
settlement. The District Court has preliminarily approved the
new settlement and a final hearing on the settlement has been
scheduled for June 11, 1996. The new settlement provides for
payment of the same amount by the Company; accordingly, amounts
recorded in the fourth quarter of 1995 for the anticipated
settlement are unchanged at March 31, 1996.
In March 1996, the Federal Trade Commission (FTC) commenced a
non-public investigation focusing on the pricing practices at
issue in the litigation described above. The Company has been
informed by the FTC of the investigation; however, to date, no
requests for information have been received. Should any such
requests be made, the Company intends to cooperate fully with the
Commission's investigation.
In March 1996, the Company was informed by Barr Laboratories,
Inc., (Barr) that it had submitted an abbreviated new drug
application seeking to market a generic form of Prozac in the
U.S. market several years before the expiration of the Company's
patents. Barr has alleged that Lilly's U.S. patents covering
Prozac are invalid and unenforceable. On April 11, 1996, the
Company filed suit in the United States District Court in
Indianapolis seeking a ruling that Barr's challenge to Lilly's
patents is without merit. The compound patent expires in
February, 2001, and a patent for the mechanism of action by which
Prozac operates expires in December, 2003. These patents are
material to the Company. The Company believes that Barr's claims
are without merit and that the Company should be successful in
this litigation. However, as with any litigation, there can be
no assurance that the Company will prevail. An unfavorable
outcome of this claim could have a material adverse effect on the
Company's consolidated financial position, liquidity, or results
of operations.
In October 1995, Pfizer, Inc. sued PCS in the New York Supreme
Court for New York County alleging that PCS breached a 1994
rebate agreement between the companies. The suit sought
injunctive relief and damages. In April 1996, the court ordered
PCS to pay Pfizer an immaterial amount of damages and issued an
injunction ordering PCS to take certain steps to comply with the
rebate agreement. In the opinion of the Company, compliance with
the court order will not have a material adverse effect on the
consolidated financial position, liquidity, or results of
operations of the Company.
Reference is made to the federal action in the Northern District
of California filed by a California retail pharmacy against the
Company and PCS seeking divestiture of PCS by the Company. On
April 29, 1996, the District Court denied the motion to dismiss
filed by the Company and PCS.
9
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.The following documents are filed as exhibits to
-------- this Report:
3.1. Amended Articles of Incorporation (as amended
through April 15, 1996)
3.2. By-Laws (as amended through April 15, 1996)
11. Statement re: Computation of Earnings Per Share on
Primary and Fully Diluted Bases
12. Statement re: Computation of Ratio of Earnings from
Continuing Operations to Fixed Charges
27. Financial Data Schedule
(b) Reports on Form 8-K
On January 12, 1996, the Company filed a Form 8-K
relating to the issuance and sale by Eli Lilly and
Company of $200,000,000 aggregate principal amount of its
6.57% Notes Due 2016 and $300,000,000 aggregate principal
amount of its 6.77% Notes Due 2036.
10
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.
ELI LILLY AND COMPANY
---------------------
(Registrant)
Date May 10,1996 S/Daniel P. Carmichael
------------ -------------------------------
Daniel P. Carmichael
Secretary and Deputy General Counsel
Date May 10, 1996 S/Arnold C. Hanish
------------- -------------------------------
Arnold C. Hanish
Director, Corporate Accounting and
Chief Accounting Officer
11
INDEX TO EXHIBITS
The following documents are filed as a part of this Report:
Exhibit
-------
3.1. Amended Articles of Incorporation
3.2. By-Laws
11. Statement re: Computation of Earnings Per
Share on Primary and Fully Diluted Bases
12. Statement re: Computation of Ratio of Earnings
from Continuing Operations to Fixed Charges
27. Financial Data Schedule
(As Amended through April 15, 1996)
ELI LILLY AND COMPANY
(an Indiana corporation)
AMENDED ARTICLES OF INCORPORATION
1. The name of the Corporation shall be
ELI LILLY AND COMPANY.
2. The purposes for which the Corporation is formed are to
engage in any lawful act or activity for which a corporation may
be organized under the Indiana Business Corporation Law.
3. The period during which the Corporation is to continue
as a corporation is perpetual.
4. The total number of shares which the Corporation shall
have authority to issue is 1,605,000,000 shares, consisting of
1,600,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. The Corporation's shares do not have any par or
stated value, except that, solely for the purpose of any statute
or regulation imposing any tax or fee based upon the
capitalization of the Corporation, each of the Corporation's
shares shall be deemed to have a par value of $0.01 per share.
5. The following provisions shall apply to the
Corporation's shares:
(a) The Corporation shall have the power to acquire
(by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel, or otherwise
dispose of the shares of the Corporation in the manner and
to the extent now or hereafter permitted by the laws of the
State of Indiana (but such power shall not imply an
obligation on the part of the owner or holder of any share
to sell or otherwise transfer such share to the
Corporation), including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or
indirectly, and without pro rata treatment of the owners or
holders of any class or series of shares, unless, after
giving effect thereto, the Corporation would not be able to
pay its debts as they become due in the usual course of
business or the Corporation's total assets would be less
than its total liabilities (and without regard to any
amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other
acquisition, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are
superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise
acquired, unless otherwise expressly provided with respect
to a series of Preferred Stock). Shares of the Corporation
purchased, redeemed, or otherwise acquired by it shall
constitute authorized but unissued shares, unless prior to
any such purchase, redemption, or other acquisition, or
within thirty (30) days thereafter, the Board of Directors
adopts a resolution providing that such shares constitute
authorized and issued but not outstanding shares.
(b) Preferred Stock of any series that has been
redeemed (whether through the operation of a retirement or
sinking fund or otherwise) or purchased by the Corporation,
or which, if convertible, have been converted into shares of
the Corporation of any other class or series, may be
reissued as a part of such series or of any other series of
Preferred Stock, subject to such limitations (if any) as may
be fixed by the Board of Directors with respect to such
series of Preferred Stock in accordance with the provisions
of Article 7 of these Amended Articles of Incorporation.
(c) The Board of Directors of the Corporation may
dispose of, issue, and sell shares in accordance with, and
in such amounts as may be permitted by, the laws of the
State of Indiana and the provisions of these Amended
Articles of Incorporation and for such consideration, at
such price or prices, at such time or times and upon such
terms and conditions (including the privilege of selectively
repurchasing the same) as the Board of Directors of the
Corporation shall determine, without the authorization or
approval by any shareholders of the Corporation. Shares may
be disposed of, issued, and sold to such persons, firms, or
corporations as the Board of Directors may determine,
without any preemptive or other right on the part of the
owners or holders of other shares of the Corporation of any
class or kind to acquire such shares by reason of their
ownership of such other shares.
6. The following provisions shall apply to the Common
Stock:
(a) Except as otherwise provided by the Indiana
Business Corporation Law and subject to such shareholder
disclosure and recognition procedures (which may include
voting prohibition sanctions) as the Corporation may by
action of its Board of Directors establish, shares of Common
Stock shall have unlimited voting rights and each
outstanding share of Common Stock shall, when validly issued
by the Corporation, entitle the record holder thereof to one
vote at all shareholders' meetings on all matters submitted
to a vote of the shareholders of the Corporation.
(b) Shares of Common Stock shall be equal in every
respect insofar as their relationship to the Corporation is
concerned, but such equality of rights shall not imply
equality of treatment as to redemption or other acquisition
of shares by the Corporation. Subject to the rights of the
holders of any outstanding series of Preferred Stock, the
holders of Common Stock shall be entitled to share ratably
in such dividends or other distributions (other than
purchases, redemptions, or other acquisitions of shares by
the Corporation), if any, as are declared and paid from time
to time on the Common Stock at the discretion of the Board
of Directors.
(c) In the event of any liquidation, dissolution, or
winding up of the Corporation, either voluntary or
involuntary, after payment shall have been made to the
holders of any outstanding series of Preferred Stock of the
full amount to which they shall be entitled, the holders of
Common Stock shall be entitled, to the exclusion of the
holders of the Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common
Stock held by them, in all remaining assets of the
Corporation available for distribution to its shareholders.
7. The Board of Directors is hereby expressly authorized to
provide, out of the unissued shares of Preferred Stock, for one
or more series of Preferred Stock. Before any shares of any such
series are issued, the Board of Directors shall fix, and hereby
is expressly empowered to fix, by the adoption and filing in
accordance with the Indiana Business Corporation Law, of an
amendment or amendments to these Amended Articles of
Incorporation, the terms of such Preferred Stock or series of
Preferred Stock, including the following:
(a) the designation of such series, the number of
shares to constitute such series and the stated value
thereof if different from the par value thereof;
(b) whether the shares of such series shall have
voting rights, in addition to any voting rights provided by
law, and, if so, the terms of such voting rights, which may
be general or limited and may include the right, under
specified circumstances, to elect additional directors;
(c) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and, if so,
from what dates, the conditions and dates upon which such
dividends shall be payable, the preference or relation which
such dividends shall bear to the dividends payable on any
shares of stock of any other class or any other series of
Preferred Stock;
(d) whether the shares of such series shall be subject
to redemption by the Corporation and, if so, the times,
prices and other conditions of such redemption;
(e) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such series
in, the voluntary or involuntary liquidation, dissolution or
winding up, or upon any distribution of the assets, of the
Corporation;
(f) whether the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so,
the extent to and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to
the operation thereof;
(g) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock of
any other class or any other series of Preferred Stock or
any other securities (whether or not issued by the
Corporation) and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding
upon the payment of dividends or the making of other
distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of
Preferred Stock;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the
issue of any additional stock, including additional shares
of such series or of any other series of Preferred Stock or
of any other class of stock; and
(j) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof.
Except to the extent otherwise expressly provided in these
Amended Articles of Incorporation or required by law (i) no share
of Preferred Stock shall have any voting rights other than those
which shall be fixed by the Board of Directors pursuant to this
Article 7 and (ii) no share of Common Stock shall have any voting
rights with respect to any amendment to the terms of any series
of Preferred Stock; provided however, that in the case of this
clause (ii) the terms of such series of Preferred Stock, as so
amended, could have been established without any vote of any
shares of Common Stock.
8. The Corporation shall have the power to declare and pay
dividends or other distributions upon the issued and outstanding
shares of the Corporation, subject to the limitation that a
dividend or other distribution may not be made if, after giving
it effect, the Corporation would not be able to pay its debts as
they become due in the usual course of business or the
Corporation's total assets would be less than its total
liabilities (and without regard to any amounts that would be
needed, if the Corporation were to be dissolved at the time of
the dividend or other distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights
are superior to those of the holders of shares receiving the
dividend or other distribution, unless otherwise expressly
provided with respect to any outstanding series of Preferred
Stock). The Corporation shall have the power to issue shares of
one class or series as a share dividend or other distribution in
respect of that class or series or one or more other classes or
series.
9. The following provisions are inserted for the management
of the business and for the conduct of the affairs of the
Corporation, and it is expressly provided that the same are
intended to be in furtherance and not in limitation or exclusion
of the powers conferred by statute:
(a) The number of directors of the Corporation,
exclusive of directors who may be elected by the holders of
any one or more series of Preferred Stock pursuant to
Article 7(b) (the "Preferred Stock Directors"), shall not be
less than nine, the exact number to be fixed from time to
time solely by resolution of the Board of Directors, acting
by not less than a majority of the directors then in office.
(b) The Board of Directors (exclusive of Preferred
Stock Directors) shall be divided into three classes, with
the term of office of one class expiring each year. At the
annual meeting of shareholders in 1985, five directors of
the first class shall be elected to hold office for a term
expiring at the 1986 annual meeting, five directors of the
second class shall be elected to hold office for a term
expiring at the 1987 annual meeting, and six directors of
the third class shall be elected to hold office for a term
expiring at the 1988 annual meeting. Commencing with the
annual meeting of shareholders in 1986, each class of
directors whose term shall then expire shall be elected to
hold office for a three-year term. In the case of any
vacancy on the Board of Directors, including a vacancy
created by an increase in the number of directors, the
vacancy shall be filled by election of the Board of
Directors with the director so elected to serve for the
remainder of the term of the director being replaced or, in
the case of an additional director, for the remainder of the
term of the class to which the director has been assigned.
All directors shall continue in office until the election
and qualification of their respective successors in office.
When the number of directors is changed, any newly created
directorships or any decrease in directorships shall be so
assigned among the classes by a majority of the directors
then in office, though less than a quorum, as to make all
classes as nearly equal in number as possible. No decrease
in the number of directors shall have the effect of
shortening the term of any incumbent director. Election of
directors need not be by written ballot unless the By-laws
so provide.
(c) Any director or directors (exclusive of Preferred
Stock Directors) may be removed from office at any time, but
only for cause and only by the affirmative vote of at least
80% of the votes entitled to be cast by holders of all the
outstanding shares of Voting Stock (as defined in Article 13
hereof), voting together as a single class.
(d) Notwithstanding any other provision of these
Amended Articles of Incorporation or of law which might
otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of any particular
class of Voting Stock required by law or these Amended
Articles of Incorporation, the affirmative vote of at least
80% of the votes entitled to be cast by holders of all the
outstanding shares of Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal
this Article 9.
10. The Board of Directors of the Corporation is
exclusively authorized (a) to adopt, repeal, alter or amend the
By-laws of the Corporation by the vote of a majority of the
entire Board of Directors and (b) to adopt any By-laws which the
Board of Directors may deem necessary or desirable for the
efficient conduct of the affairs of the Corporation, including,
without limitation, provisions governing the conduct of, and the
matters which may properly be brought before, meetings of the
shareholders and provisions specifying the manner and extent to
which prior notice shall be given of the submission of proposals
to be submitted at any meeting of shareholders or of nominations
of elections of directors to be held at any such meeting.
11. The Corporation shall, to the fullest extent permitted
by applicable law now or hereafter in effect, indemnify any
person who is or was a director, officer or employee of the
Corporation (an "Eligible Person") and who is or was involved in
any manner (including, without limitation, as a party or a
witness) or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action,
suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or
proceeding by or in the right of the Corporation to procure a
judgment in its favor) (a "Proceeding") by reason of the fact
that such person is or was a director, officer or employee of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, partner, member,
manager, trustee, fiduciary or agent of another corporation,
partnership, joint venture, limited liability company, trust or
other enterprise (including, without limitation, any employee
benefit plan), against all expenses (including attorneys' fees),
judgments, fines or penalties (including excise taxes assessed
with respect to an employee benefit plan) and amounts paid in
settlement actually and reasonably incurred by such Eligible
Person in connection with such Proceeding; provided, however,
that the foregoing shall not apply to a Proceeding commenced by
an Eligible Person except to the extent provided otherwise in the
Corporation's By-laws or an agreement with an Eligible Person.
The Corporation may establish provisions supplemental to or in
furtherance of the provisions of this Article 11, including, but
not limited to, provisions concerning the determination of any
Eligible Person to indemnification, mandatory or permissive
advancement of expenses to an Eligible Person incurred in
connection with a Proceeding, the effect of any change in control
of the Corporation on indemnification and advancement of expenses
and the funding or other payment of amounts necessary to effect
indemnification and advancement of expenses, in the By-laws of
the Corporation or in agreements with any Eligible Person.
12. Except as otherwise expressly provided for in these
Amended Articles of Incorporation, the Corporation reserves the
right to amend, alter or repeal any provision contained in these
Amended Articles of Incorporation, in the manner now or hereafter
prescribed by law, and all rights conferred upon shareholders
herein are subject to this reservation.
13. In addition to all other requirements imposed by law
and these Amended Articles and except as otherwise expressly
provided in paragraph (c) of this Article 13, none of the actions
or transactions listed below shall be effected by the
Corporation, or approved by the Corporation as a shareholder of
any majority-owned subsidiary of the Corporation if, as of the
record date for the determination of the shareholders entitled to
vote thereon, any Related Person (as hereinafter defined) exists,
unless the applicable requirements of paragraphs (b), (c), (d),
(e), and (f) of this Article 13 are satisfied.
(a) The actions or transactions within the scope of
this Article 13 are as follows:
(i) any merger or consolidation of the
Corporation or any of its subsidiaries into or with
such Related Person;
(ii) any sale, lease, exchange, or other
disposition of all or any substantial part of the
assets of the Corporation or any of its majority-owned
subsidiaries to or with such Related Person;
(iii) the issuance or delivery of any Voting
Stock (as hereinafter defined) or of voting securities
of any of the Corporation's majority-owned subsidiaries
to such Related Person in exchange for cash, other
assets or securities, or a combination thereof;
(iv) any voluntary dissolution or liquidation of
the Corporation;
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its subsidiaries, or any other
transaction (whether or not with or otherwise involving
a Related Person) that has the effect, directly or
indirectly, of increasing the proportionate share of
any class or series of capital stock of the
Corporation, or any securities convertible into capital
stock of the Corporation or into equity securities of
any subsidiary, that is beneficially owned by any
Related Person; or
(vi) any agreement, contract, or other
arrangement providing for any one or more of the
actions specified in the foregoing clauses (i) through
(v).
(b) The actions and transactions described in
paragraph (a) of this Article 13 shall have been authorized
by the affirmative vote of at least 80% of all of the votes
entitled to be cast by holders of the outstanding shares of
Voting Stock, voting together as a single class.
(c) Notwithstanding paragraph (b) of this Article 13,
the 80% voting requirement shall not be applicable if any
action or transaction specified in paragraph (a) is approved
by the Corporation's Board of Directors and by a majority of
the Continuing Directors (as hereinafter defined).
(d) Unless approved by a majority of the Continuing
Directors, after becoming a Related Person and prior to
consummation of such action or transaction.
(i) the Related Person shall not have acquired
from the Corporation or any of its subsidiaries any
newly issued or treasury shares of capital stock or any
newly issued securities convertible into capital stock
of the Corporation or any of its majority-owned
subsidiaries, directly or indirectly (except upon
conversion of convertible securities acquired by it
prior to becoming a Related Person or as a result of a
pro rata stock dividend or stock split or other
distribution of stock to all shareholders pro rata);
(ii) such Related Person shall not have received
the benefit directly or indirectly (except
proportionately as a shareholder) of any loans,
advances, guarantees, pledges, or other financial
assistance or tax credits provided by the Corporation
or any of its majority-owned subsidiaries, or made any
major changes in the Corporation's or any of its
majority-owned subsidiaries' businesses or capital
structures or reduced the current rate of dividends
payable on the Corporation's capital stock below the
rate in effect immediately prior to the time such
Related Person became a Related Person; and
(iii) such Related Person shall have taken all
required actions within its power to ensure that the
Corporation's Board of Directors included
representation by Continuing Directors at least
proportionate to the voting power of the shareholdings
of Voting Stock of the Corporation's Remaining Public
Shareholders (as hereinafter defined), with a
Continuing Director to occupy an additional Board
position if a fractional right to a director results
and, in any event, with at least one Continuing
Director to serve on the Board so long as there are any
Remaining Public Shareholders.
(e) A proxy statement responsive to the requirements
of the Securities Exchange Act of 1934, as amended, whether
or not the Corporation is then subject to such requirements,
shall be mailed to the shareholders of the Corporation for
the purpose of soliciting shareholder approval of such
action or transaction and shall contain at the front
thereof, in a prominent place, any recommendations as to the
advisability or inadvisability of the action or transaction
which the Continuing Directors may choose to state and, if
deemed advisable by a majority of the Continuing Directors,
the opinion of an investment banking firm selected by a
majority of the Continuing Directors as to the fairness (or
not) of the terms of the action or transaction from a
financial point of view to the Remaining Public
Shareholders, such investment banking firm to be paid a
reasonable fee for its services by the Corporation. The
requirements of this paragraph (e) shall not apply to any
such action or transaction which is approved by a majority
of the Continuing Directors.
(f) For the purpose of this Article 13
(i) the term "Related Person" shall mean any
other corporation, person, or entity which beneficially
owns or controls, directly or indirectly, 5% or more of
the outstanding shares of Voting Stock, and any
Affiliate or Associate (as those terms are defined in
the General Rules and Regulations under the Securities
Exchange Act of 1934) of a Related Person; provided,
however, that the term Related Person shall not include
(a) the Corporation or any of its subsidiaries, (b) any
profit-sharing, employee stock ownership or other
employee benefit plan of the Corporation or any
subsidiary of the Corporation or any trustee of or
fiduciary with respect to any such plan when acting in
such capacity, or (c) Lilly Endowment, Inc.; and
further provided, that no corporation, person, or
entity shall be deemed to be a Related Person solely by
reason of being an Affiliate or Associate of Lilly
Endowment, Inc.;
(ii) a Related Person shall be deemed to own or
control, directly or indirectly, any outstanding shares
of Voting Stock owned by it or any Affiliate or
Associate of record or beneficially, including without
limitation shares
a. which it has the right to acquire
pursuant to any agreement, or upon exercise of
conversion rights, warrants, or options, or
otherwise or
b. which are beneficially owned, directly or
indirectly (including shares deemed owned through
application of clause a. above), by any other
corporation, person, or other entity with which it
or its Affiliate or Associate has any agreement,
arrangement, or understanding for the purpose of
acquiring, holding, voting, or disposing of Voting
Stock, or which is its Affiliate (other than the
Corporation) or Associate (other than the
Corporation);
(iii) the term "Voting Stock" shall mean all
shares of any class of capital stock of the Corporation
which are entitled to vote generally in the election of
directors;
(iv) the term "Continuing Director" shall mean a
director who is not an Affiliate or Associate or
representative of a Related Person and who was a member
of the Board of Directors of the Corporation
immediately prior to the time that any Related Person
involved in the proposed action or transaction became a
Related Person or a director who is not an Affiliate or
Associate or representative of a Related Person and who
was nominated by a majority of the remaining Continuing
Directors; and
(v) the term "Remaining Public Shareholders"
shall mean the holders of the Corporation's capital
stock other than the Related Person.
(g) A majority of the Continuing Directors of the
Corporation shall have the power and duty to determine for
the purposes of this Article 13, on the basis of information
then known to the Continuing Directors, whether (i) any
Related Person exists or is an Affiliate or an Associate of
another and (ii) any proposed sale, lease, exchange, or
other disposition of part of the assets of the Corporation
or any majority-owned subsidiary involves a substantial part
of the assets of the Corporation or any of its subsidiaries.
Any such determination by the Continuing Directors shall be
conclusive and binding for all purposes.
(h) Nothing contained in this Article 13 shall be
construed to relieve any Related Person or any Affiliate or
Associate of any Related Person from any fiduciary
obligation imposed by law.
(i) The fact that any action or transaction complies
with the provisions of this Article 13 shall not be
construed to waive or satisfy any other requirement of law
or these Amended Articles of Incorporation or to impose any
fiduciary duty, obligation, or responsibility on the Board
of Directors or any member thereof, to approve such action
or transaction or recommend its adoption or approval to the
shareholders of the Corporation, nor shall such compliance
limit, prohibit, or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect
to such action or transaction. The Board of Directors of the
Corporation, when evaluating any actions or transactions
described in paragraph (a) of this Article 13, shall, in
connection with the exercise of its judgment in determining
what is in the best interests of the Corporation and its
shareholders, give due consideration to all relevant
factors, including without limitation the social and
economic effects on the employees, customers, suppliers, and
other constituents of the Corporation and its subsidiaries
and on the communities in which the Corporation and its
subsidiaries operate or are located.
(j) Notwithstanding any other provision of these
Amended Articles of Incorporation or of law which might
otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of any particular
class of Voting Stock required by law or these Amended
Articles of Incorporation, the affirmative vote of the
holders of at least 80% of the votes entitled to be cast by
holders of all the outstanding shares of Voting Stock,
voting together as a single class, shall be required to
alter, amend, or repeal this Article 13.
14. A total of 1,400,000 shares of the 5,000,000 shares of
authorized Preferred Stock are designated as "Series A
Participating Preferred Stock" (the "Series A Preferred Stock"),
which shall possess the rights, preferences, qualifications,
limitations, and restrictions set forth below:
(a) The holders of shares of Series A Preferred Stock
shall have the following rights to dividends and
distributions:
(i) The holders of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable
in cash on the first day of April, July, October and
January in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the
greater of (i) $0.05 or (ii) subject to the provision
for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions
other than a dividend or distribution payable in shares
of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value
$.621/2 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series
A Preferred Stock. If on any Quarterly Dividend Payment
Date the Corporation's Articles of Incorporation shall
limit the amount of dividends which may be paid on the
Series A Preferred Stock to an amount less than that
provided above, such dividends will accrue and be paid
in the maximum permissible amount and the shortfall
from the amount provided above shall be a cumulative
dividend requirement and be carried forward to
subsequent Quarterly Dividend Payment Dates.
(ii) In the event the Corporation shall at any
time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount to
which holders of shares of Series A Preferred Stock are
entitled immediately prior to such event under the
second preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock
outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such
event.
(iii) When, as and if the Corporation shall
declare a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common
Stock), the Corporation shall at the same time declare
a dividend or distribution on the Series A Preferred
Stock as provided in this paragraph (a) and no such
dividend or distribution on the Common Stock shall be
paid or set aside for payment on the Common Stock
unless such dividend or distribution on the Series A
Preferred Stock shall be simultaneously paid or set
aside for payment; provided that, in the event no
dividend or distribution shall have been declared on
the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00
per share on the Series A Preferred Stock shall
nevertheless be payable, when, as and if declared by
the Board of Directors, on such subsequent Quarterly
Dividend Payment Date.
(iv) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred
Stock from the date of issue of such shares of Series A
Preferred Stock, unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend
Payment Date, in which event such dividends shall begin
to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares
of Series A Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which
record date shall be no more than 60 days prior to the
relevant Quarterly Dividend Payment Date.
(b) The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(i) The holders of outstanding Series A Preferred
Stock shall be entitled to vote as a class for the
election of two (2) directors if the Corporation shall
fail for six quarters to pay the dividend payable with
respect to such shares pursuant to paragraph (a)
hereof. Such limited voting rights may be exercised at
the next annual meeting of shareholders following the
failure to pay a dividend for the sixth quarter and at
each succeeding annual meeting of shareholders until
payment of all such preferred dividends which are in
arrears has been made or provided for (the "Dividend
Date"), at which time the right to vote for election of
two directors conferred upon the holders of the
outstanding Series A Preferred Stock shall cease. Each
of such two directors shall be elected to one of the
three classes of directors so that the three classes
shall be as equal in number as may be feasible and
shall be elected to hold office for a term expiring at
the earlier of (i) the expiration of the term of the
class to which he is elected or (ii) the Dividend Date.
In addition to the conditional right to vote for
election of two directors, any proposal to amend the
relative rights and privileges of shares of Series A
Preferred Stock (including those conferred by this
paragraph (b) (i)) upon which the holders of such
Series A Preferred Stock are entitled by the provisions
of the Indiana Business Corporation Law to vote upon as
a class shall require, instead of a vote of the holders
of a majority of such shares, the affirmative vote of
the holders of two-thirds (2/3) of such shares.
(ii) Except as specified in paragraph (b) (i)
above, the holders of Series A Preferred Stock shall
not be entitled to any vote on any matter, including
questions of merger, consolidation, and the sale of all
or substantially all of the assets of the Corporation.
(c) The Corporation shall be subject to the following
restrictions:
(i) Whenever quarterly dividends or other
dividends or distributions payable on the Series A
Preferred Stock as provided in paragraph (a) of this
Article 14 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the
Corporation shall not
a. declare or pay dividends on, make any
other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to
the Series A Preferred Stock;
b. declare or pay dividends on or make any
other distributions on any shares of stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid
ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable
or in arrears in proportion to the total amounts
to which the holders of all such shares are then
entitled;
c. except as permitted by subparagraph d of
this paragraph (c)(i), redeem or purchase or
otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to
the Series A Preferred Stock; or
d. purchase or otherwise acquire for
consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing
or by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after
consideration of the respective annual dividend
rates and other relative rights and preferences of
the respective series and classes, shall determine
in good faith will result in fair and equitable
treatment among the respective series or classes,
provided that the Corporation may at any time
purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock.
(ii) The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under
subparagraph (i) of this paragraph (c), purchase or
otherwise acquire shares at such time and in such
manner.
(iii) The Corporation shall not issue any shares
of Series A Preferred Stock except upon exercise of
Rights issued pursuant to that certain Rights Agreement
dated as of July 18, 1988 between the Corporation and
Bank One, Indianapolis, NA, a copy of which is on file
with the Secretary of the Corporation at its principal
executive office and shall be made available to
shareholders of record without charge upon written
request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing
contained herein shall prohibit or restrict the
Corporation from issuing for any purpose any series of
preferred stock with rights and privileges similar to
or different from those of the Series A Preferred
Stock.
(d) Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their
cancellation without designation as to series, become
authorized but unissued shares of preferred stock and may be
reissued as part of a new series of preferred stock to be
created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on
issuance set forth herein.
(e) Upon any voluntary liquidation, dissolution or
winding up of the Corporation, no distribution shall be made
(i) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless, prior thereto,
the holders of shares of Series A Preferred Stock shall have
received, subject to adjustment as hereinafter provided, an
aggregate amount equal to (a) $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such
payment or (b) if greater, an aggregate amount per share,
subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock plus an
amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date
of such payment, or (ii) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution,
or winding up, disregarding for this purpose the amounts
referred to in clause (i) (b) of this paragraph (e). In the
event the Corporation shall at any time declare or pay any
dividend or make any distribution on Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately
prior to such event under the provision in clause (i) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
(f) In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any
other property, then in any such case proper provision shall
be made so that the shares of Series A Preferred Stock shall
at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
The Corporation shall not consummate any such consolidation,
merger, combination or other transaction unless prior
thereto the Corporation and the other party or parties to
such transaction shall have so provided in any agreement
relating thereto. In the event the Corporation shall at any
time declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in share of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately
prior to such event.
(g) The shares of Series A Preferred Stock shall not
be redeemable. Notwithstanding the foregoing sentence, the
Corporation may acquire shares of Series A Preferred Stock
in any other manner permitted by law, hereby and the
Articles of Incorporation of the Corporation, as from time
to time amended.
(h) The Articles of Incorporation of the Corporation
shall not be amended in any manner which would increase or
decrease the aggregate number of authorized shares of Series
A Preferred Stock, increase or decrease the par value of the
shares of Series A Preferred Stock, or alter or change the
powers, preferences or special rights of the shares of
Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or
more of the outstanding shares of Series A Preferred Stock,
voting together as a single class.
ELI LILLY AND COMPANY
BY-LAWS
As Amended through
April 15, 1996
INDEX
ARTICLE I
The Shareholders
Page
Section 1.0. Annual Meetings 1
Section 1.1. Special Meetings 1
Section 1.2. Time and Place of Meetings 1
Section 1.3. Notice of Meetings 1
Section 1.4. Quorum 1
Section 1.5. Voting 2
Section 1.6. Voting Lists 2
Section 1.7. Fixing of Record Date 2
Section 1.8. Notice of Shareholder Business 2
Section 1.9. Notice of Shareholder Nominees 3
ARTICLE II
Board of Directors
Section 2.0. General Powers 4
Section 2.1. Number and Qualifications 4
Section 2.2. Classes of Directors and Terms 4
Section 2.3. Election of Directors 4
Section 2.4. Meetings of Directors 5
a. Annual Meetings 5
b. Regular Meetings 5
c. Special Meetings 5
Section 2.6. Resignations 6
Section 2.7. Removal of Directors 6
Section 2.8. Action without a Meeting 6
Section 2.9. Attendance and Failure to Object 6
Section 2.10.Special Standing Committees 6
Section 2.11.Appointment of Auditors 7
Section 2.12.Transactions with Corporation 7
Section 2.13.Compensation of Directors 7
ii
ARTICLE III
Officers
Page
Section 3.0. Officers, General Authority and Duties 7
Section 3.1. Election, Term of Office, Qualifications 8
Section 3.2. Other Officers, Election or Appointment 8
Section 3.3. Resignation 8
Section 3.4. Removal 8
Section 3.5. Vacancies 9
Section 3.6. Honorary Chairman of the Board of Directors 9
Section 3.7. Chairman of the Board of Directors 9
Section 3.9. Executive Vice Presidents 9
Section 3.10.Group Vice Presidents 9
Section 3.11.Vice Presidents 10
Section 3.12.Secretary 10
Section 3.13.Assistant Secretaries 10
Section 3.14.Chief Financial Officer 10
Section 3.15.Treasurer 11
Section 3.16.Assistant Treasurers 11
Section 3.17.Chief Accounting Officer 11
Section 3.18.General Counsel 12
Section 3.19.Other Officers or Agents 12
Section 3.20.Compensation 12
Section 3.21.Surety Bonds 12
ARTICLE IV
Execution of Instruments and Deposit
of Corporate Funds
Section 4.0. Execution of Instruments Generally 12
Section 4.1. Notes, Checks, Other Instruments 13
Section 4.2. Proxies 13
ARTICLE V
Shares
Section 5.0. Certificates for Shares 13
Section 5.1. Transfer of Shares 14
Section 5.2. Regulations 14
Section 5.3. Transfer Agents and Registrars 14
Section 5.4. Lost or Destroyed Certificates 14
Section 5.5. Redemption of Shares Acquired in
Control Share Acquisitions 15
iii
ARTICLE VI
Indemnification
Page
Section 6.0. Right to Indemnification 15
Section 6.1. Insurance, Contracts and Funding 16
Section 6.2. Non-Exclusive Rights; Applicability
to Certain Proceedings 16
Section 6.3. Advancement of Expenses 16
Section 6.4. Procedures; Presumptions and Effect
of Certain Proceedings; Remedies 16
Section 6.5. Certain Definitions 18
Section 6.6. Indemnification of Agents 19
Section 6.7. Effect of Amendment or Repeal 19
Section 6.8. Severability 20
ARTICLE VII
Miscellaneous
Section 7.0. Corporate Seal 20
Section 7.1. Fiscal Year 20
Section 7.2. Amendment of By-laws 20
BY-LAWS
of
ELI LILLY AND COMPANY
(An Indiana Corporation)
ARTICLE I
The Shareholders
SECTION 1.0. Annual Meetings. The annual meeting of the
shareholders of the Corporation for the election of directors and
for the transaction of such other business as properly may come
before the meeting shall be held on the third Monday in April in
each year, if not a legal holiday, or, if a legal holiday, then
on the next succeeding day not a legal holiday. Failure to hold
an annual meeting of the shareholders at such designated time
shall not affect otherwise valid corporate acts or work a
forfeiture or dissolution of the Corporation.
SECTION 1.1. Special Meetings. Special meetings of the
shareholders may be called at any time by the Board of Directors,
the Chairman of the Board of Directors, or the President.
SECTION 1.2. Time and Place of Meetings. Each meeting of
the shareholders shall be held at such time of day and place,
either within or without the State of Indiana, as shall be
determined by the Board of Directors. Each adjourned meeting of
the shareholders shall be held at such time and place as may be
provided in the motion for adjournment.
SECTION 1.3. Notice of Meetings. The Secretary shall cause
a written or printed notice of the place, day and hour and the
purpose or purposes of each meeting of the shareholders to be
delivered or mailed at least ten (10) but not more than sixty
(60) days prior to the meeting, to each shareholder of record
entitled to vote at the meeting, at the shareholder's post office
address as the same appears on the records maintained by the
Corporation. Notice of any such shareholders meeting may be
waived by any shareholder by delivering a written waiver to the
Secretary before or after such meeting. Attendance at any
meeting in person or by proxy when the instrument of proxy sets
forth in reasonable detail the purpose or purposes for which the
meeting is called, shall constitute a waiver of notice thereof.
Notice of any adjourned meeting of the shareholders of the
Corporation shall not be required to be given unless otherwise
required by statute.
SECTION 1.4. Quorum. At any meeting of the shareholders a
majority of the outstanding shares entitled to vote on a matter
at such meeting, represented in person or by proxy, shall
constitute a quorum for action on that matter. In the absence of
a quorum, the holders of a majority of the shares entitled to
vote present in person or by proxy, or, if no shareholder
entitled to vote is present in person or by proxy, any officer
entitled to preside at or act as Secretary of such meeting, may
adjourn such meeting from time to time, until a quorum shall be
present. At any such adjourned meeting
at which a quorum may be present any business may be transacted
which might have been transacted at the meeting as originally
called.
SECTION 1.5. Voting. Except as otherwise provided by
statute or by the Articles of Incorporation, at each meeting of
the shareholders each holder of shares entitled to vote shall
have the right to one vote for each share standing in the
shareholder's name on the books of the Corporation on the record
date fixed for the meeting under Section 1.7. Each shareholder
entitled to vote shall be entitled to vote in person or by proxy
executed in writing (which shall include telegraphing, cabling,
or facsimile transmission) by the shareholder or a duly
authorized attorney in fact. The vote of shareholders approving
any matter to which the provisions of Article 9(c) or 9(d) or
Article 13 of the Articles of Incorporation or of a statute are
applicable shall require the percentage of affirmative vote
therein specified. All other matters, except the election of
directors, shall require that the votes cast in favor of the
matter exceed the votes cast opposing the matter at a meeting at
which a quorum is present. In the event that more than one group
of shares is entitled to vote as a separate voting group, the
vote of each group shall be considered and decided separately.
SECTION 1.6. Voting Lists. The Secretary shall make or cause
to be made, after a record date for a meeting of shareholders has
been fixed under Section 1.7 and at least five (5) days before
such meeting, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the
address of each such shareholder and the number of shares so
entitled to vote held by each which list shall be on file at the
principal office of the Corporation and subject to inspection by
any shareholder entitled to vote at the meeting. Such list shall
be produced and kept open at the time and place of the meeting
and subject to the inspection of any such shareholder during the
holding of such meeting or any adjournment. Except as otherwise
required by law, such list shall be the only evidence as to who
are the shareholders entitled to vote at any meeting of the
shareholders. In the event that more than one group of shares is
entitled to vote as a separate voting group at the meeting, there
shall be a separate listing of the shareholders of each group.
SECTION 1.7. Fixing of Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
Board of Directors shall fix in advance a date as the record date
for any such determination of shareholders, not more than seventy
(70) days prior to the date on which the particular action
requiring this determination of shareholders is to be taken.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this
section, the determination shall, to the extent permitted by law,
apply to any adjournment thereof.
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SECTION 1.8. Notice of Shareholder Business. At an annual
meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors,
(b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly
brought before the meeting by a shareholder. For business to be
properly brought before an annual meeting by a shareholder, the
shareholder must have the legal right and authority to make the
proposal for consideration at the meeting and the shareholder
must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive
offices of the Corporation, not less than sixty (60) days prior
to the meeting; provided, however, that in the event that less
than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by
the shareholder to be timely must be so received not later than
the close of business on the tenth (10th) day following the day
on which such notice of the date of the annual meeting was mailed
or such public disclosure was made. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder
proposes to bring before the annual meeting (a) a brief
description of the business described to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (b) the name and record address of the
shareholder(s) proposing such business, (c) the class and number
of the Corporation's shares which are beneficially owned by such
shareholder(s), and (d) any material interest of such
shareholder(s) in such business. Notwithstanding anything in
these By-laws to the contrary, no business shall be conducted at
an annual meeting except in accordance with the procedures set
forth in this Section 1.8. The Chairman of an annual meeting
shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in
accordance with the provisions of this Section 1.8, and if he
should so determine, he shall so declare to the meeting any such
business not properly brought before the meeting shall not be
transacted. At any special meeting of the shareholders, only
such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of
Directors.
SECTION 1.9. Notice of Shareholder Nominees. Only persons
who are nominated in accordance with the procedures set forth in
this Section 1.9 shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors may
be made at a meeting of shareholders by or at the direction of
the Board of Directors, by any nominating committee or person
appointed by the Board of Directors entitled to vote for the
election of Directors at the meeting who complies with the notice
procedures set forth in this Section 1.9. Such nominations,
other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than
sixty (60) days prior to the meeting; provided, however, that in
the event that less than seventy (70) days' notice or prior
public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholders to be timely must be so
received not later than the close of business on the tenth (10th)
day following the date on
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which such notice of the date of the meeting was made. Such
shareholder's notice shall set forth (a) as to each person whom
the shareholder proposes to nominate for election or re-election
as a director, (i) the name, age, business address and residence
address of such person; (ii) the principal occupation or
employment of such person; (iii) the class and number of the
Corporation's shares which are beneficially owned by such person;
and (iv) to the extent reasonably available to the shareholder,
any other information relating to such person that is required to
be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named
in the proxy statement as a nominee and to serving as a Director
if elected); and (b) as to the shareholder giving the notice (i)
the name and record address of such shareholder and (ii) the
class and number of the Corporation's shares which are
beneficially owned by such shareholder. No person shall be
eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this
Section 1.9. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination
was not so declared in accordance with the procedures prescribed
by these By-laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE II
Board of Directors
SECTION 2.0. General Powers. The property, affairs and
business of the Corporation shall be managed under the direction
of the Board of Directors.
SECTION 2.1. Number and Qualifications. The number of
directors which shall constitute the whole Board of Directors
shall be sixteen (16), which number may be either increased or
diminished by resolution adopted by not less than a majority of
the directors then in office; provided that the number may not be
diminished below nine (9) and no reduction in number shall have
the effect of shortening the term of any incumbent director. In
the event that the holders of shares of preferred stock become
entitled to elect two directors, the number of directors and the
minimum number of directors shall be increased by two. Neither
ownership of stock of the Corporation nor residence in the State
of Indiana shall be required as a qualification for a director.
SECTION 2.2. Classes of Directors and Terms. The
directors shall be divided into three classes as nearly equal in
number as possible. Except as provided in Article 9 of the
Articles of Incorporation fixing one, two, and three year terms
for the initial classified board, each class of directors shall
be elected for a term of three (3) years. In the event of
vacancy, either by death, resignation, or removal of a director,
or by reason of an increase in the number of directors, each
replacement or new director shall serve for the balance of the
term of the class of the director he or she succeeds or, in the
event of an increase in the number of directors, of
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the class which he or she is assigned. All directors elected
for a term shall continue in office until the election and
qualification of their respective successors, their death, their
resignation in accordance with Section 2.6, their removal in
accordance with Section 2.7, or if there has been a reduction in
the number of directors and no successor is to be elected, until
the end of the term.
SECTION 2.3. Election of Directors. At each annual meeting
of shareholders, the class of directors to be elected at the
meeting shall be chosen by a plurality of the votes cast by the
holders of shares entitled to vote in the election at the
meeting, provided a quorum is present. The election of directors
by the shareholders shall be by written ballot if directed by the
chairman of the meeting or if the number of nominees exceeds the
number of directors to be elected.
Any vacancy on the Board of Directors shall be filled by the
affirmative vote of a majority of the remaining directors.
If the holders of preferred stock are entitled to elect any
directors voting separately as a class, those directors shall be
elected by a plurality of the votes cast by the holders of shares
of preferred stock entitled to vote in the election at the
meeting, provided a quorum of the holders of shares of preferred
stock is present.
SECTION 2.4. Meetings of Directors.
a. Annual Meeting. Unless otherwise provided by resolution
of the Board of Directors, the annual meeting of the Board of
Directors shall be held at the place of and immediately following
the annual meeting of shareholders, for the purpose of
organization, the election of officers and the transaction of
such other business as properly may come before the meeting. No
notice of the meeting need be given, except in the case an
amendment to the By-laws is to be considered.
b. Regular Meetings. The Board of Directors by resolution
may provide for the holding of regular meetings and may fix the
times and places (within or outside the State of Indiana) at
which those meetings shall be held. Notice of regular meetings
need not be given except when an amendment to the By-laws is to
be considered. Whenever the time or place of regular meetings
shall be fixed or changed, notice of this action shall be mailed
promptly to each director not present when the action was taken,
addressed to the director at his or her residence or usual place
of business.
c. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the
President and shall be called by the Secretary at the request of
any three (3) directors. Except as otherwise required by
statute, notice of each special meeting shall be mailed to each
director at his or her residence or usual place of business at
least three (3) days before the day on which the meeting is to be
held, or shall be sent to the director at such place by telegram,
facsimile transmission, or cable, or telephoned or personally
delivered, not later than the day before the day on which the
meeting is to be held. The notice shall state the time and place
-5-
(which may be within or outside the State of Indiana) of the
meeting but, unless otherwise required by statute, the Articles
of Incorporation or the By-laws, need not state the purposes
thereof.
Notice of any meeting need not be given to any director,
however, who shall attend the meeting, or who shall waive notice
thereof, before, at the time of, or after the meeting, in a
writing signed by the director and delivered to the Corporation.
No notice need be given of any meeting at which every member of
the Board of Directors shall be present.
SECTION 2.5. Quorum and Manner of Acting. A majority of the
actual number of directors established pursuant to Section 2.1,
from time to time, shall be necessary to constitute a quorum for
the transaction of any business except the filling of vacancies
on the Board of Directors under Section 2.3 or voting on a
conflict of interest transaction under Section 2.12. The act of
a majority of the directors present at a meeting at which a
quorum is present, shall be the act of the Board of Directors,
unless the act of a greater number is required by statute, by the
Articles of Incorporation, or by the By-laws. Under the
provisions of Article 13 of the Articles of Incorporation,
certain actions by the Board of Directors therein specified
require not only approval by the Board of Directors, but also
approval by a majority of the Continuing Directors, as therein
defined. Any or all directors may participate in a meeting of
the Board of Directors by means of a conference telephone or
similar communications equipment by which all persons
participating in the meeting may simultaneously hear each other,
and participation in this manner shall constitute presence in
person at the meeting. In the absence of a quorum, a majority of
the directors present may adjourn the meeting from time to time
until a quorum shall be present. No notice of any adjourned
meeting need be given.
SECTION 2.6. Resignations. Any director may resign at any
time by giving written notice of resignation to the Board of
Directors, the Chairman of the Board, the President, or the
Secretary. Unless otherwise specified in the written notice, the
resignation shall take effect upon receipt thereof.
SECTION 2.7. Removal of Directors. Any director, other
than a director elected by holders of preferred stock voting as a
class, may be removed from office at any time but only for cause
and only upon the affirmative vote of at least 80% of the votes
entitled to be cast by holders of all of the outstanding shares
of Voting Stock (as defined in Article 13 of the Articles of
Incorporation), voting together as a single class.
SECTION 2.8. Action without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting, if
taken by all members of the Board of Directors or such committee,
as the case may be, evidenced by a written consent signed by all
such members and effective on the date, either prior or
subsequent to the date of the consent, specified in the written
consent, or if no effective date is specified in the written
consent, the date on which the
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consent is filed with the minutes of proceedings of the Board of
Directors or committee.
SECTION 2.9. Attendance and Failure to Object. A director,
who is present at a meeting of the Board of Directors, at which
action on any corporate matter is taken, shall be presumed to
have assented to the action taken, unless (a) the director's
dissent shall be entered in the minutes of the meeting, (b) the
director shall file a written dissent to such action with the
Secretary of the meeting before adjournment thereof, or (c) the
director shall forward such dissent by registered mail to the
Secretary immediately after adjournment of the meeting. The
right of dissent provided for by the preceding sentence shall not
be available, in respect of any matter acted upon at any meeting,
to a director who voted in favor of such action.
SECTION 2.10. Special Standing Committees. The Board of
Directors, by resolution adopted by a majority of the actual
number of directors elected and qualified, may designate from
among its members one or more committees. Such committees shall
have those powers of the Board of Directors which may by law be
delegated to such committees and are specified by resolution of
the Board of Directors.
SECTION 2.11. Appointment of Auditors. The Board of
Directors, prior to each annual meeting of shareholders, shall
appoint a firm of independent public accountants as auditors of
the Corporation. Such appointment shall be submitted to the
shareholders for ratification at the annual meeting next
following such appointment. Should the holders of a majority of
the outstanding shares entitled to vote fail to ratify the
appointment of any firm as auditors of the Corporation, or should
the Board of Directors for any reason determine that any such
appointment be terminated, the Board of Directors shall appoint
another firm of independent public accountants to act as auditors
of the Corporation and such appointment shall be submitted to the
shareholders for ratification at the annual or special
shareholders meeting next following such appointment.
SECTION 2.12. Transactions with Corporation. No
transactions with the Corporation in which one or more of its
directors has a direct or indirect interest shall be either void
or voidable solely because of such interest if any one of the
following is true:
(a) the material facts of the transaction and the
director's interest are disclosed or known to the Board of
Directors or committee which authorizes, approves, or ratifies
the transaction by the affirmative vote or consent of a majority
of the directors (or committee members) who have no direct or
indirect interest in the transaction and, in any event, of at
least two directors (or committee members);
(b) the material facts of the transaction and the
director's interest are disclosed or known to the shareholders
entitled to vote and they authorize, approve or ratify such
transaction by vote; or
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(c) the transaction is fair to the Corporation.
If a majority of the directors or committee members who have
no direct or indirect interest in the transaction vote to
authorize, approve, or ratify the transaction, a quorum is
present for purposes of taking action under subsection (a) of
this section. The presence of, or a vote cast by, a director
with a direct or indirect interest in the transaction does not
affect the validity of any actions taken under subsection (a) of
this section.
SECTION 2.13. Compensation of Directors. The Board of
Directors is empowered and authorized to fix and determine the
compensation of directors and additional compensation for such
additional services any of such directors may perform for the
Corporation.
ARTICLE III
Officers
SECTION 3.0. Officers, General Authority and Duties. The
officers of the Corporation shall be a Chairman of the Board, a
President, two (2) or more Vice Presidents, a Secretary, a Chief
Financial Officer, a Treasurer, a Chief Accounting Officer, and
such other officers as may be elected or appointed in accordance
with the provisions of Section 3.2. One or more of the Vice
Presidents may be designated by the Board to serve as Executive
Vice Presidents or Group Vice Presidents. Any two (2) or more
offices may be held by the same person. All officers and agents
of the Corporation, as between themselves and the Corporation,
shall have such authority and perform such duties in the
management of the Corporation as may be provided in the By-laws
or as may be determined by resolution of the Board of Directors
not inconsistent with the By-laws.
SECTION 3.1. Election, Term of Office, Qualifications. Each
officer (except such officers as may be appointed in accordance
with the provisions of Section 3.2. of this Article III) shall be
elected by the Board of Directors at each annual meeting. Each
such officer (whether elected at an annual meeting of the Board
of Directors or to fill a vacancy or otherwise) shall hold office
until the officer's successor is chosen and qualified, or until
death, or until the officer shall resign in the manner provided
in Section 3.3. or be removed in the manner provided in Section
3.4. The Chairman of the Board and the President shall be chosen
from among the directors. Any other officer may but need not be
a director of the Corporation. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 3.2. Other Officers, Election or Appointment. The
Board of Directors from time to time may elect such other
officers or agents (including one or more Assistant Vice
Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, a Controller, and one or more Assistant
Controllers) as it may deem necessary or advisable. The Board of
Directors may delegate to any officer the power to appoint any
such officers or agents and to prescribe their respective terms
of office, powers and duties.
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SECTION 3.3. Resignation. Any officer may resign at any
time by giving written notice of such resignation to the Board of
Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Unless otherwise specified in such
written notice, such resignation shall take effect upon receipt
thereof and unless otherwise specified in it, the acceptance of
the resignation shall not be necessary to make it effective.
SECTION 3.4. Removal. The officers specifically designated
in Section 3.0. may be removed, either for or without cause, at
any meeting of the Board of Directors called for the purpose, by
the vote of a majority of the actual number of directors elected
and qualified. The officers and agents elected or appointed in
accordance with the provisions of Section 3.2. may be removed,
either for or without cause, at any meeting of the Board of
Directors at which a quorum be present, by the vote of a majority
of the directors present at such meeting, by any superior officer
upon whom such power of removal shall have been conferred by the
Board of Directors, or by any officer to whom the power to
appoint such officer has been delegated by the Board of Directors
pursuant to Section 3.2. Any removal shall be without prejudice
to the contract rights, if any, of the person so removed.
SECTION 3.5. Vacancies. A vacancy in any office by reason
of death, resignation, removal, disqualification or any other
cause, may be filled by the Board of Directors or by an officer
authorized under Section 3.2. to appoint to such office.
SECTION 3.6. Honorary Chairman of the Board of Directors.
The Board of Directors may elect or appoint an Honorary Chairman
of the Board of Directors, who shall be vested with and shall
perform all such powers and duties as may be prescribed by the
Board.
SECTION 3.7. Chairman of the Board of Directors. The
Chairman of the Board shall be the chief executive officer of the
Corporation and, subject to the control of the Board of
Directors, shall have general supervision over the management and
direction of the business of the Corporation. He or she shall
see that all orders and resolutions of the Board of Directors are
carried into effect. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors if
present and shall have such powers and perform such duties as are
assigned to him by the By-laws and by the Board of Directors. He
or she shall, in the absence or incapacity of the President,
perform all the duties and the functions and exercise the powers
of the President. The Chairman shall be chosen by the Board of
Directors at each annual meeting from among the directors and
shall serve until a successor is chosen and qualified, or until
resignation or death.
SECTION 3.8. President. The President shall have such
powers and perform such duties as are assigned to him by the By-
laws, the Chairman of the Board, or the Board of Directors. The
President shall, in the absence or
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incapacity of the Chairman of the Board, perform all the duties
and functions and exercise the powers of the Chairman of the Board.
SECTION 3.9. Executive Vice Presidents. Each Executive Vice
President shall have such powers and perform such duties as may
be assigned to him or her by the Chairman of the Board, the
President or the Board of Directors. In the case of the death or
incapacity of the Chairman of the Board and the President, the
Executive Vice Presidents, if one or more be designated, shall,
in the order of their seniority in office as Executive Vice
Presidents, perform the duties and exercise the powers of the
President.
SECTION 3.10. Group Vice Presidents. Each Group Vice
President shall perform such duties and have such powers as may
be assigned to him or her by the Chairman of the Board, the
President or the Board of Directors. In the case of the death or
incapacity of the Chairman of the Board, the President and the
Executive Vice Presidents, the Group Vice Presidents shall, in
the order of their seniority in office as Group Vice Presidents,
perform the duties and exercise the powers of the President
unless otherwise ordered by the Board of Directors.
SECTION 3.11. Vice Presidents. Each Vice President shall
perform such duties and have such powers as may be assigned to
him or her by the Chairman of the Board, the President or the
Board of Directors.
SECTION 3.12. Secretary. The Secretary shall:
(a) record all the proceedings of the meetings of the
shareholders and Board of Directors in books to be kept for such
purposes;
(b) cause all notices to be duly given in accordance with
the provisions of these By-laws and as required by statute;
(c) be custodian of the Seal of the Corporation, and cause
such Seal to be affixed to all certificates representing shares
of the Corporation prior to the issuance thereof (subject,
however, to the provisions of Section 5.0) and to all instruments
the execution of which on behalf of the Corporation under its
Seal shall have been duly authorized in accordance with these By-
laws;
(d) subject to the provisions of Section 5.0, sign
certificates representing shares of the Corporation the issuance
of which shall have been authorized by the Board of Directors;
and
(e) in general, perform all duties incident to the office
of Secretary and such other duties as are given to the Secretary
by these By-laws or as may be assigned to him or her by the
Chairman of the Board, the President or the Board of Directors.
SECTION 3.13. Assistant Secretaries. Each Assistant
Secretary shall assist the Secretary in his or her duties, and
shall perform such other duties
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as the Board of Directors may from time to time prescribe or the
Chairman of the Board or the President may from time to time
delegate. At the request of the Secretary, any Assistant
Secretary may temporarily act in the Secretary's place in the
performing of part or all of the duties of the Secretary. In the
case of the death of the Secretary, or in the case of the
Secretary's absence or inability to act without having designated
an Assistant Secretary to act temporarily in his or her place, the
Assistant Secretary who is to perform the duties of the Secretary
shall be designated by the Chairman of the Board, the President or
the Board of Directors.
SECTION 3.14. Chief Financial Officer. The Chief Financial
Officer shall:
(a) have supervision over and be responsible for the funds,
securities, receipts, and disbursements of the Corporation;
(b) cause to be kept at the principal business office of
the Corporation and preserved for review as required by law or
regulation records of financial transactions and correct books of
account using appropriate accounting principles;
(c) be responsible for the establishment of adequate
internal control over the transactions and books of account of
the Corporation;
(d) be responsible for rendering to the proper officers and
the Board of Directors upon request, and to the shareholders and
other parties as required by law or regulation, financial
statements of the Corporation; and
(e) in general perform all duties incident to the office
and such other duties as are given by the By-laws or as may be
assigned by the Chairman of the Board, the President or the Board
of Directors.
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SECTION 3.15. Treasurer. The Treasurer shall:
(a) have charge of the funds, securities, receipts and
disbursements of the Corporation;
(b) cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers
or other depositories as shall be selected in accordance with
resolutions adopted by the Board of Directors;
(c) cause the funds of the Corporation to be disbursed from
the authorized depositories of the Corporation, and cause to be
taken and preserved proper records of all moneys disbursed; and
(d) in general, perform all duties incident to the office
of Treasurer and such other duties as are given to the Treasurer
by the By-laws or as may be assigned to him or her by the
Chairman of the Board, the President, the Chief Financial
Officer, or the Board of Directors.
SECTION 3.16. Assistant Treasurers. Each Assistant Treasurer
shall assist the Treasurer in his or her duties, and shall
perform such other duties as the Board of Directors may from time
to time prescribe or the Chairman of the Board, the President or
the Chief Financial Officer may from time to time delegate. At
the request of the Treasurer, any Assistant Treasurer may
temporarily act in the Treasurer's place in performing part or
all of the duties of the Treasurer. In the case of the death of
the Treasurer, or in the case of the Treasurer's absence or
inability to act without having designated an Assistant Treasurer
to act in his or her place, the Assistant Treasurer who is to
perform the duties of the Treasurer shall be designated by the
Chairman of the Board, the President or the Board of Directors.
SECTION 3.17. Chief Accounting Officer. The Chief
Accounting Officer shall:
(a) keep full and accurate accounts of all assets,
liabilities, commitments, revenues, costs and expenses, and other
financial transactions of the Corporation in books belonging to
the Corporation, and conform them to sound accounting principles
with adequate internal control;
(b) cause regular audits of these books and records to be
made;
(c) see that all expenditures are made in accordance with
procedures duly established, from time to time, by the
Corporation;
(d) render financial statements upon the request of the
Board of Directors, and a full financial report prior to the
annual meeting of shareholders, as well as such other financial
statements as are required by law or regulation; and
(e) in general, perform all the duties ordinarily connected
with the office of Chief Accounting Officer and such other duties
as may be assigned to
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him or her by the Chairman of the Board, the President, the Chief
Financial Officer, or the Board of Directors.
SECTION 3.18. General Counsel. The Board of Directors may
appoint a general counsel who shall have general control of all
matters of legal import concerning the Corporation.
SECTION 3.19. Other Officers or Agents. Any other officers
or agents elected or appointed pursuant to Section 3.2 shall have
such duties and responsibilities as may be fixed from time to
time by the By-laws or as may be assigned to them by the Chairman
of the Board, the President or the Board of Directors.
SECTION 3.20. Compensation. The compensation of executive
officers of the Corporation shall be fixed from time to time by
the Compensation Committee established pursuant to Section 2.10.
Unless the Board of Directors by resolution shall direct
otherwise, the Salary Committee shall have the power to fix the
compensation of employees who are not executive officers of the
Corporation. No employee shall be prevented from receiving such
compensation by reason of being a director of the Corporation.
SECTION 3.21. Surety Bonds. In case the Board of Directors
shall so require, any officer or agent of the Corporation shall
execute to the Corporation a bond in such sum and with such
surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his or her duties to
the Corporation, including responsibility for negligence and for
the accounting of all property, funds or securities of the
Corporation which the officer or agent may handle.
ARTICLE IV
Execution of Instruments and Deposit of Corporate Funds
SECTION 4.0. Execution of Instruments Generally. All deeds,
contracts, and other instruments requiring execution by the
Corporation may be signed by the Chairman of the Board, the
President or any Vice President. Authority to sign any deed,
contract, or other instrument requiring execution by the
Corporation may be conferred by the Board of Directors upon any
person or persons whether or not such person or persons be
officers of the Corporation. Such person or persons may delegate,
from time to time, by instrument in writing, all or any part of
such authority to any other person or persons if authorized so to
do by the Board of Directors.
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SECTION 4.1. Notes, Checks, Other Instruments. All notes,
drafts, acceptances, checks, endorsements, and all evidences of
indebtedness of the Corporation whatsoever, shall be signed by
such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from
time to time may determine. Endorsements for deposit to the
credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of
Directors from time to time may determine.
SECTION 4.2. Proxies. Proxies to vote with respect to shares
of other corporations owned by or standing in the name of the
Corporation may be executed and delivered from time to time on
behalf of the Corporation by the Chairman of the Board, the
President or a Vice President or by any other person or persons
thereunto authorized by the Board of Directors.
ARTICLE V
Shares
SECTION 5.0. Certificates for Shares. Every holder of
shares in the Corporation shall be entitled to have a certificate
evidencing the shares owned by the shareholder, signed in the
name of the Corporation by the Chairman of the Board, the
President or a Vice President and the Secretary or an Assistant
Secretary, certifying the number of shares owned by the
shareholder in the Corporation. The signatures of the Chairman
of the Board, the President, Vice President, Secretary, and
Assistant Secretary, the signature of the transfer agent and
registrar, and the Seal of the Corporation may be facsimiles. In
case any officer or employee who shall have signed, or whose
facsimile signature or signatures shall have been used on, any
certificate shall cease to be an officer or employee of the
Corporation before the certificate shall have been issued and
delivered by the Corporation, the certificate may nevertheless be
adopted by the Corporation and be issued and delivered as though
the person or persons who signed the certificate or whose
facsimile signature or signatures shall have been used thereon
had not ceased to be such officer or employee of the Corporation;
and the issuance and delivery by the Corporation of any such
certificate shall constitute an adoption thereof. Every
certificate shall state on its face the name of the Corporation
and that it is organized under the laws of the State of Indiana,
the name of the person to whom it is issued, and the number and
class of shares and the designation of the series, if any, the
certificate represents, and shall state conspicuously on its
front or back that the Corporation will furnish the shareholder,
upon written request and without charge, a summary of the
designations, relative rights, preferences and limitations
applicable to each class and the variations in rights,
preferences and limitations determined for each series (and the
authority of the Board of Directors to determine variations for
future series). Every certificate shall state whether such
shares have been fully paid and are non-assessable. If any such
shares are not fully paid, the certificate shall be legibly
stamped to indicate the percentum which has been paid up, and as
further payments are made thereon, the certificate shall be
stamped accordingly. Subject to the foregoing provisions,
certificates representing shares in the Corporation shall be in
such form as shall be approved by the Board of Directors. There
shall be entered upon the stock books of the Corporation at the
time of the
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issuance or transfer of each share the number of the
certificates representing such share, the name of the person
owning the shares represented thereby, the class of such share
and the date of the issuance or transfer thereof.
SECTION 5.1. Transfer of Shares. Transfer of shares of the
Corporation shall be made on the books of the Corporation by the
holder of record thereof, or by the shareholder's attorney
thereunto duly authorized in writing and filed with the Secretary
of the Corporation or any of its transfer agents, and on
surrender of the certificate or certificates representing such
shares. The Corporation and its transfer agents and registrars,
shall be entitled to treat the holder of record of any share or
shares the absolute owner thereof for all purposes, and
accordingly shall not be bound to recognize any legal, equitable
or other claim to or interest in such share or shares on the part
of any other person whether or not it or they shall have express
or other notice thereof, except as otherwise expressly provided
by the statutes of the State of Indiana. Shareholders shall
notify the Corporation in writing of any changes in their
addresses from time to time.
SECTION 5.2. Regulations. Subject to the provisions of this
Article V the Board of Directors may make such rules and
regulations as it may deem expedient concerning the issuance,
transfer and regulation of certificates for shares of the
Corporation.
SECTION 5.3. Transfer Agents and Registrars. The Board of
Directors may appoint one or more transfer agents, one or more
registrars, and one or more agents to act in the dual capacity of
transfer agent and registrar with respect to the certificates
representing shares of the Corporation.
SECTION 5.4. Lost or Destroyed Certificates. The holders of
any shares of the Corporation shall immediately notify the
Corporation or one of its transfer agents and registrars of any
loss or destruction of the certificate representing the same.
The Corporation may issue a new certificate in the place of any
certificate theretofore issued by it alleged to have been lost or
destroyed upon such terms and under such regulations as may be
adopted by the Board of Directors, and the Board of Directors may
require the owner of the lost or destroyed certificate or the
owner's legal representatives to give the Corporation a bond in
such form and for such amount as the Board of Directors may
direct, and with such surety or sureties as may be satisfactory
to the Board of Directors to indemnify the Corporation and its
transfer agents and registrars against any claim that may be made
against it or any such transfer agent or registrar on account of
the alleged loss or destruction of any such certificate or the
issuance of such new certificate. A new certificate may be issued
without requiring any bond when, in the judgment of the Board of
Directors, it is proper so to do.
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SECTION 5.5. Redemption of Shares Acquired in Control
Acquisitions. Any or all control shares acquired in a control
share acquisition shall be subject to redemption by the
Corporation, if either:
(a) No acquiring person statement has been filed with the
Corporation with respect to the control share acquisition; or
(b) The control shares are not accorded full voting rights
by the Corporation's shareholders as provided in IC 23-1-42-9.
A redemption pursuant to Section 5.5(a) may be made at any
time during the period ending sixty (60) days after the date of
the last acquisition of control shares by the acquiring person.
A redemption pursuant to Section 5.5(b) may be made at any time
during the period ending two (2) years after the date of the
shareholder vote with respect to the voting rights of the control
shares in question. Any redemption pursuant to this Section 5.5
shall be made at the fair value of the control shares and
pursuant to such procedures for the redemption as may be set
forth in these By-laws or adopted by resolution of the Board of
Directors.
As used in this Section 5.5, the terms "control shares,"
"control share acquisition," "acquiring person statement" and
"acquiring person" shall have the meanings ascribed to them in IC
23-1-42.
ARTICLE VI
Indemnification
SECTION 6.0. Right to Indemnification. The Corporation
shall, to the fullest extent permitted by applicable law now or
hereafter in effect, indemnify any person who is or was a
director, officer or employee of the Corporation ("Eligible
Person") and who is or was involved in any manner (including,
without limitation, as a party or a witness) or is threatened to
be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without
limitation, any action, suit or proceeding by or in the right of
the Corporation to procure a judgment in its favor) (a
"Proceeding") by reason of the fact that such Eligible Person
is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a
director, officer, partner, member, manager, trustee, employee,
fiduciary or agent of another corporation, partnership, joint
venture, limited liability company, trust or other enterprise
(including, without limitation, any employee benefit plan) (a
"Covered Entity"), against all expenses (including attorneys'
fees), judgments, fines or penalties against (including excise
taxes assessed with respect to an employee benefit plan) and
amounts paid in settlement actually and reasonably incurred by
such Eligible Person in connection with such Proceeding;
provided, however, that the foregoing shall not apply to a
Proceeding commenced by a current or former director, officer or
employee of the Corporation except for such a Proceeding
commenced following a Change in Control (as hereafter defined)
with respect to actions or failure to act prior to such Change in
Control. Any right of an Eligible Person to indemnification
shall be a contract right and shall include the right to receive,
prior to the conclusion
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of any Proceeding, advancement of any expenses incurred by the
Eligible Person in connection with such Proceeding in accordance
with Section 6.3.
SECTION 6.1. Insurance, Contracts and Funding. The
Corporation may purchase and maintain insurance to protect itself
and any Eligible Person against any expense, judgments, fines and
amounts paid in settlement as specified in Section 6.0 of this
Article or incurred by any Eligible Person in connection with any
Proceeding referred to in such section, to the fullest extent
permitted by applicable law now or hereafter in effect. The
Corporation may enter into agreements with any director, officer,
employee or agent of the Corporation or any director, officer,
employee, fiduciary or agent of any Covered Entity supplemental
to or in furtherance of the provisions of this Article and may
create a trust fund or use other means (including, without
limitation, a letter of credit) to ensure the payment of such
amounts as may be necessary to effect indemnification and
advancement of expenses as provided in this Article.
SECTION 6.2. Non-Exclusive Rights; Applicability to Certain
Proceedings. The rights provided in this Article shall not be
exclusive of any other rights to which any Eligible Person may
otherwise be entitled, and the provisions of this Article shall
inure to the benefit of the heirs and legal representatives of
any Eligible Person and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article,
whether arising from acts or omissions occurring before or after
such adoption.
SECTION 6.3. Advancement of Expenses. All reasonable
expenses incurred by or on behalf of an Eligible Person in
connection with any Proceeding shall be advanced to the Eligible
Person by the Corporation within sixty (60) days after the
receipt by the Corporation of a statement or statements from the
Eligible Person requesting such advance or advances from time to
time, whether prior to or after final disposition of such
Proceeding unless a determination has been made pursuant to
Section 6.4 that such Eligible Person is not entitled to
indemnification. Any such statement or statements shall
reasonably evidence the expenses incurred by the Eligible Person
and shall include any written affirmation or undertaking to repay
advances if it is ultimately determined that the Eligible Person
is not entitled to indemnification under this Article.
SECTION 6.4. Procedures; Presumptions and Effect of Certain
Proceedings; Remedies. In furtherance, but not in limitation, of
the foregoing provisions, the following procedures, presumptions
and remedies shall apply with respect to and the right to
indemnification and advancement of expenses under this Article.
(a) To obtain indemnification under this Article, an
Eligible Person shall submit to the Secretary of the Corporation
a written request, including such documentation and information
as is reasonably available to the Eligible Person and reasonably
necessary to determine whether and to what extent the Eligible
Person is entitled to indemnification (the ``upporting
Documentation'). The determination of the Eligible Person's
entitlement to
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indemnification shall be made not later than sixty
(60) days after receipt by the Corporation of the written request
together with the Supporting Documentation. The Secretary of the
Corporation shall, promptly upon receipt of such request, advise
the Board in writing of the Eligible Person's request.
(b) An Eligible Person's entitlement to indemnification
under this Article shall be determined in one of the following
methods, such method to be selected by the Board of Directors,
regardless of whether there are any Disinterested Directors (as
hereinafter defined): (i) by a majority vote of the Disinterested
Directors, if they constitute a quorum of the Board; (ii) by a
written opinion of Special Counsel (as hereinafter defined) if
(A) a Change in Control shall have occurred and the Eligible
Person so requests or (B) a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable,
a majority of such Disinterested Directors so directs; (iii) by
the shareholders of the Corporation (but only if a majority of
the Disinterested Directors, if they constitute a quorum of the
Board, presents the issue of entitlement to the shareholders for
their determination); or (iv) as provided in subsection (d).
(c) In the event of the determination of entitlement is to
be made by Special Counsel, a majority of the Disinterested
Directors shall select the Special Counsel, but only Special
Counsel to which the Eligible Person does not reasonably object;
provided, however, that if a Change in Control shall have
occurred, the Eligible Person shall select such Special Counsel,
but only Special Counsel to which a majority of the Disinterested
Directors does not reasonably object.
(d) Except as otherwise expressly provided in this Article,
if a Change in Control shall have occurred, the Eligible Person
shall be presumed to be entitled to indemnification (with respect
to actions or failures to act occurring prior to such Change in
Control) upon submission of a request for indemnification
together with the Supporting Documentation in accordance with
subsection (a), and thereafter the Corporation shall have the
burden of proof to overcome that presumption in reaching a
contrary determination. In any event, if the person or persons
empowered under subsection (c) to determine entitlement shall not
have been appointed or shall not have made a determination within
sixty (60) days after receipt by the Corporation of the request
therefor together with the Supporting Documentation, the Eligible
Person shall be deemed to be, and shall be, entitled to
indemnification and advancement of expenses unless (i) the
Eligible Person misrepresented or failed to disclose a material
fact in making the request for indemnification or in the
Supporting Documentation or (ii) such indemnification is
prohibited by law. The termination of any Proceeding or of any
claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, adversely affect the right of an Eligible
Person to indemnification or create a presumption that the
Eligible Person did not act in good faith and in a manner which
the Eligible Person reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any
criminal proceeding, that the Eligible Person had reasonable
cause to believe that his or her conduct was unlawful.
(e) In the event that a determination is made that the
Eligible Person is not entitled to indemnification (i) the
Eligible Person shall be entitled to
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seek an adjudication of his or her entitlement to such
indemnification either, at the Eligible Person's sole option,
in (A) an appropriate court of the state of Indiana or any other
court of competent jurisdiction or (B) an arbitration to be
conducted in Indianapolis, Indiana, by a single arbitrator
pursuant to the rules of the American Arbitration Association;
(ii) in any such judicial proceeding or arbitration the Eligible
Person shall not be prejudiced by reason of the prior determination
pursuant to this Section 6.4; and (iii) if a Change in Control
shall have occurred, in any such judicial proceeding or arbitration
the Corporation shall have the burden of proving that the Eligible
Person is not entitled to indemnification but only with respect to
actions or failures to act occurring prior to such Change in
Control.
(f) If a determination shall have been made or deemed to
have been made that the Eligible Person is entitled to
indemnification, the Corporation shall be obligated to pay the
amounts incurred by the Eligible Person within ten (10) days
after such determination has been made or deemed to have been
made and shall be conclusively bound by such determination unless
(i) the Eligible Person misrepresented or failed to disclose a
material fact in making the request for indemnification or in the
Supporting Documentation or (ii) such indemnification is
prohibited by law. In the event that (A) any advancement of
expenses is not timely made pursuant to Section 6.3 or (B)
payment of indemnification is not made within ten (10) days after
a determination of entitlement to indemnification has been made,
the Eligible Person shall be entitled to seek judicial
enforcement of the Corporation's obligation, to pay to the
Eligible Person such advancement of expenses or indemnification.
Notwithstanding the foregoing, the Corporation may bring an
action, in an appropriate court in the State of Indiana or any
other court of competent jurisdiction, contesting the right of
the Eligible Person to receive indemnification hereunder due to
the occurrence of an event described in clause (i) or (ii) of
this subsection (f) (a "Disqualifying Event"); provided,
however, that in any such action the Corporation shall have the
burden of proving the occurrence of such Disqualifying Event.
(g) The Corporation shall be precluded from asserting in
any judicial proceeding or arbitration commenced pursuant to this
Section 6.4 that the procedures and presumptions of this Article
are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Corporation is
bound by the provisions of this Article.
(h) In the event that the Eligible Person seeks a judicial
adjudication of or an award in arbitration to enforce his or her
rights under, or to recover damages for breach of this Article,
the Eligible Person shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation,
against, any expenses actually and reasonably incurred by the
Eligible Person if the Eligible Person prevails in such judicial
adjudication or arbitration. If it shall be determined in such
judicial adjudication or arbitration that the Eligible Person is
entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by the
Eligible Person in connection with such judicial adjudication or
arbitration shall be prorated accordingly.
SECTION 6.5. Certain Definitions. For purposes of this
Article:
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(a) "Change in Control" means any of the following
events: (i) the acquisition by any "Person," as that term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), other than (A) the
Corporation, (B) any subsidiary of the Corporation, (C) any
employee benefit plan or employee stock plan of the Corporation
or a subsidiary of the Corporation or any trustee or fiduciary
with respect to any such plan when acting in that capacity, or
(D) Lilly Endowment, Inc., of "Beneficial ownership" as defined
in Rule 13d-3 under the 1934 Act, directly or indirectly, of 20%
or more of the shares of the Corporation's capital stock the
holders of which have general voting power under ordinary
circumstances to elect at least a majority of the Board (or which
would have such voting power but for the application of IC 23-1-
42-1 through IC 23-1-42-11) ("Voting Stock"); (ii) the first
day on which less than two-thirds of the total membership of the
Board shall be Continuing Directors (as such term is defined in
Article 13.(f) of the Articles of Incorporation); (iii) the
approval by the shareholders of the Corporation of a merger,
share exchange, or consolidation of the Corporation (a
"Transaction"), other than a Transaction which would result in
the Voting Stock of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 50% of the Voting Stock of the Corporation or
such surviving entity immediately after such Transaction; or (iv)
approval by the shareholders of the Corporation of a complete
liquidation of the Corporation or a sale of disposition of all or
substantially all the assets of the Corporation.
(b) "Disinterested Director" means a Director who is not
or was not a party to the Proceeding in respect of which
indemnification is sought by the Eligible Person.
(c) "Special Counsel" means a law firm or a member of a
law firm that neither presently is, nor in the past five years
has been, retained to represent any other party to the Proceeding
giving rise to a claim for indemnification under this Article.
In addition, any person who, under applicable standards of
professional conduct, would have a conflict of interest in
representing either the Corporation or the Eligible Person in an
action to determine the Eligible Person's rights under this
Article may not act as Special Counsel.
SECTION 6.6. Indemnification of Agents. Notwithstanding any
other provisions of this Article, the Corporation may, consistent
with the provisions of applicable law, indemnify any person other
than a director, officer or employee of the Corporation who is or
was an agent of the Corporation and who is or was involved in any
manner (including, without limitation, as party or a witness) or
is threatened to be made so involved in any threatened, pending
or completed Proceeding by reasons of the fact that such person
is or was an agent of the Corporation or, at the request of the
Corporation, a director, officer, partner, member, manager,
employee, fiduciary or agent of a Covered Entity against all
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such Proceeding. The Corporation
may also advance expenses incurred by such person in connection
with any such Proceeding, consistent with the provisions of
applicable law.
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SECTION 6.7. Effect of Amendment or Repeal. Neither the
amendment or repeal of, nor the adoption of a provision
inconsistent with, any provision of this Article shall adversely
affect the rights of any Eligible Person under this Article (i)
with respect to any Proceeding commenced or threatened prior to
such amendment, repeal or adoption of an inconsistent provision
or (ii) after the occurrence of a Change in Control, with respect
to any Proceeding arising out of any action or omission occurring
prior to such amendment, repeal or adoption of an inconsistent
provision, in either case without the written consent of such
Eligible Person.
SECTION 6.8. Severability. If any of this Article shall be
held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Article (including, without
limitation, all portions of any Section of this Article
containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions
of this Article (including, without limitation, all portions of
any Section of this Article containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
ARTICLE VII
Miscellaneous
SECTION 7.0. Corporate Seal. The Seal of the Corporation
shall consist of a circular disk around the circumference of
which shall appear the words:
"ELI LILLY AND COMPANY, INDIANAPOLIS, INDIANA"
and across the center thereof the words:
"Established 1876 Incorporated 1901".
SECTION 7.1. Fiscal Year. The fiscal year of the Corporation
shall begin on the first day of January in each year and shall
end on the thirty-first day of the following December.
SECTION 7.2. Amendment of By-laws. These By-laws may be
amended or repealed and new By-laws may be adopted by the
affirmative vote of at least a majority of the actual number of
directors elected and qualified at any regular or special meeting
of the Board of Directors, provided that: (a) the notice or
waiver of notice of such meeting states in effect that
consideration is to be given at such meeting to the amendment or
repeal of the By-laws or the adoption of new By-laws; (b) no
provision of these By-laws incorporating a provision of Articles
9, 13 or 14 of the Articles of Incorporation may be amended
except in a manner consistent with those Articles as they may be
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amended in compliance with the requirements stated therein; and
(c) any amendment to Articles I and VI of these By-laws shall
require the affirmative vote of a majority of (i) the actual
number of directors elected and qualified, and (ii) the
Continuing Directors, as defined in Article 13.(f) of the
Articles of Incorporation.
* * *
EXHIBIT 11. STATEMENT RE: COMPUTATION OF EARNINGS PER
SHARE ON PRIMARY AND FULLY DILUTED BASES
(Unaudited)
Eli Lilly and Company and Subsidiaries
Three Months Ended
March 31,
--------------------
1996 1995
---- ----
(Dollars in millions
except per-share data)
(Shares in thousands)
PRIMARY:
Net income ........................... $389.2 $393.2
Average number of common shares
outstanding .......................... 546,314 578,124
Add incremental shares:
Stock plans and contingent payments .. 13,908 7,152
------- -------
Adjusted average shares .............. 560,222 585,276
======= =======
Primary earnings per share ........... $ .69 $ .67
FULLY DILUTED:
Net income ........................... $389.2 $393.2
Average number of common shares
outstanding .......................... 546,314 578,124
Add incremental shares:
Stock plans and contingent payments .. 16,043 8,942
------- -------
Adjusted average shares .............. 562,357 587,066
======= =======
Fully diluted earnings per share ..... $ .69 $ .67
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIO OF
EARNINGS FROM CONTINUING OPERATIONS TO
FIXED CHARGES
(Unaudited)
Eli Lilly and Company and Subsidiaries
(Dollars in Millions)