-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JBjNkssrjR+sQH/vGjSUosyP0aJcmJYvVy7Gvlgp8EE+pTdNSyHT/uN+EDr0+uaX jAIpNX/VfA0EJK4fLsbBhQ== 0000277135-95-000013.txt : 19951118 0000277135-95-000013.hdr.sgml : 19951118 ACCESSION NUMBER: 0000277135-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAINGER W W INC CENTRAL INDEX KEY: 0000277135 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DURABLE GOODS [5000] IRS NUMBER: 361150280 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05684 FILM NUMBER: 95588564 BUSINESS ADDRESS: STREET 1: 5500 W HOWARD ST CITY: SKOKIE STATE: IL ZIP: 60077 BUSINESS PHONE: 7089829000 10-Q 1 33 Pages Complete QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q --------------------------- X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended September 30, 1995 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to _______________ ________________________________ Commission file number 1-5684 I.R.S. Employer Identification Number 36-1150280 W.W. Grainger, Inc. (an Illinois Corporation) 5500 W. Howard St. Skokie, IL. 60077-2699 Telephone: (708) 982-9000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 50,856,218 shares of the Company's Common Stock were outstanding as of October 31, 1995. (1) Part I - FINANCIAL INFORMATION W.W. Grainger, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (In thousands of dollars except for per share amounts) (Unaudited) Three Months Ended Sept 30, Nine Months Ended Sept 30, 1995 1994 1995 1994 Net sales $849,963 $779,300 $2,470,308 $2,254,223 Cost of merchandise sold 548,951 505,764 1,591,170 1,456,269 -------- -------- --------- --------- Gross profit 301,012 273,536 879,138 797,954 Warehousing, marketing, and administrative expenses 216,896 199,482 649,517 581,838 Restructuring charges - 779 - 1,446 ------- ------- ------- ------- Total operating expenses 216,896 200,261 649,517 583,284 ------- ------- ------- ------- Operating earnings 84,116 73,275 229,621 214,670 Other income or (deductions) Interest income 1 - 158 14 Interest expense (1,564) (503) (2,727) (1,513) Unclassified-net (387) (671) (483) (598) ------- ------- ------- -------- (1,950) (1,174) (3,052) (2,097) ------- ------- ------- -------- Earnings before income taxes 82,166 72,101 226,569 212,573 Income taxes 33,031 29,056 91,081 85,666 ------- ------- ------- ------- Net earnings $49,135 $43,045 $135,488 $126,907 ======= ======= ======== ======== Net earnings per common and common equivalent share $0.96 $0.84 $2.65 $2.48 ===== ===== ===== ===== Average number of common and common equivalent shares outstanding 51,225,001 51,269,001 51,220,289 51,253,260 ========== ========== ========== ========== Cash dividends paid per share $0.23 $0.20 $0.66 $0.58 ===== ===== ===== ===== The accompanying notes are an integral part of these financial statements. (2) W.W. Grainger, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (Unaudited) ASSETS Sept 30, 1995 Dec 31, 1994 CURRENT ASSETS Cash and cash equivalents $ 22,885 $ 15,292 Accounts receivable, less allowance for doubtful accounts of $17,816 in 1995 and $15,333 in 1994 394,374 345,793 Inventories 597,869 519,966 Prepaid expenses 15,280 14,233 Deferred income tax benefits 68,243 68,362 -------- --------- Total current assets 1,098,651 963,646 PROPERTY, BUILDINGS, AND EQUIPMENT 869,653 810,217 Less accumulated depreciation and amortization 365,987 341,075 --------- --------- Property, buildings, and equipment-net 503,666 469,142 OTHER ASSETS 92,253 101,963 --------- --------- TOTAL ASSETS $1,694,570 $1,534,751 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 105,315 $ 11,134 Current maturities of long-term debt 28,109 26,449 Trade accounts payable 208,866 226,459 Accrued liabilities 150,729 172,359 Income taxes 21,994 22,650 ---------- ---------- Total current liabilities 515,013 459,051 LONG-TERM DEBT (less current maturities) 4,405 1,023 DEFERRED INCOME TAXES 9,096 15,177 ACCRUED EMPLOYMENT RELATED BENEFITS COSTS 29,858 26,695 SHAREHOLDERS' EQUITY Cumulative Preferred Stock - $5.00 par value - authorized 6,000,000 shares, issued and outstanding, none - - Common Stock - $0.50 par value - authorized 150,000,000 shares, issued and outstanding, 50,836,421 shares in 1995 and 50,749,681 shares in 1994 25,418 25,375 Additional contributed capital 83,155 81,796 Unearned restricted stock compensation (28) (61) Retained earnings 1,027,653 925,695 --------- ------- Total shareholders' equity 1,136,198 1,032,805 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,694,570 $1,534,751 ========== ========== The accompanying notes are an integral part of these financial statements. (3) W.W. Grainger, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited) Nine Months Ended Sept 30, 1995 1994 Cash flows from operations: Net earnings $135,488 $126,907 Provision for losses on accounts receivable 8,862 7,410 Depreciation and amortization: Property, buildings, and equipment 43,868 39,613 Intangibles and goodwill 10,481 12,988 Restructuring charges - non-cash - 1,266 Change in operating assets and liabilities net of effect of restructuring charges: (Increase) in accounts receivable (57,443) (65,033) (Increase) in inventories (77,903) (61,756) (Increase) in prepaid expenses (1,047) (5,640) (Decrease) increase in trade accounts payable (17,593) 56,983 (Decrease) increase in other current liabilities (21,630) 1,818 (Decrease) in current income taxes payable (656) (6,711) Increase in accrued employment related benefits costs 3,163 3,078 (Decrease) in deferred income taxes (5,962) (6,504) Other-net (53) (51) ------- ------- Net cash provided by operating activities 19,575 104,368 ------- ------- Cash flows from investing activities: Additions to property, buildings, and equipment - net of dispositions (78,925) (71,830) Other - net (153) 78 ------- ------- Net cash (used in) investing activities (79,078) (71,752) ------- -------- Cash flows from financing activities: Net proceeds from short-term debt 94,181 5,596 Proceeds from long-term debt 5,303 - Long-term debt payments (260) (356) Stock incentive plan 1,402 1,070 Cash dividends paid (33,530) (29,420) ------- ------- Net cash provided by (used in) financing activities 67,096 (23,110) ------- ------- Net increase in cash and cash equivalents 7,593 9,506 Cash and cash equivalents at beginning of year 15,292 2,572 ------- ------- Cash and cash equivalents at end of period $ 22,885 $ 12,078 ======== ======== The accompanying notes are an integral part of these financial statements. (4) W.W. Grainger, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF STATEMENT PRESENTATION The financial statements and the related notes are condensed and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 1994, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions are eliminated from the consolidated financial statements. Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method. The unaudited financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the statements contained herein. Checks outstanding of $43,233,000 and $37,088,000 were included in trade accounts payable at September 30, 1995 and December 31, 1994, respectively. 2. DIVIDEND On October 25, 1995, the Board of Directors declared a quarterly dividend of 23 cents per share, payable December 1, 1995 to shareholders of record on November 6, 1995. (5) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1994: Net Sales Net sales of $849,963,000 in the 1995 third quarter increased 9.1% from net sales of $779,300,000 for the comparable 1994 period. There were 63 sales days in the 1995 third quarter compared with 64 sales days in the 1994 third quarter. The year 1995 will have one less sales day than did the year 1994 (254 versus 255). The sales increase for the 1995 third quarter compared with the 1994 third quarter was principally volume related. The volume increase primarily represented the continuing effects of the Company's market initiatives and an increase in sales of seasonal products. The market initiatives included new product additions, the expansion of branch facilities, adding Zone Distribution Centers (ZDCs), and the National Accounts program. Daily sales to National Account customers within the Company's core branch-based business increased about 23%, on a comparable basis, over the 1994 third quarter. Daily sales of seasonal products within the core business increased about 24% over the 1994 third quarter. The core business experienced selling price increases of about 1.9% when comparing the third quarters of 1995 and 1994. (6) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Earnings Net earnings of $49,135,000 in the 1995 third quarter, increased 12.9%, when compared with 1994 third quarter net earnings of $43,514,000 which excluded the effect of after tax restructuring charges of $469,000. When considering the effect of the restructuring charges, net earnings for the 1995 third quarter increased 14.1%. The net earnings increase of 12.9% was higher than the increase in net sales primarily due to slightly higher gross profit margins and to operating expenses increasing at a slower rate than net sales. The Company's gross profit margin increased by 0.31 percentage point for the third quarter of 1995 as compared with the same 1994 period. This change was primarily related to the following 2 factors: 1. A favorable product mix effect in non-seasonal product categories, partially offset by increased sales of seasonal products. The sales of seasonal products historically have had lower than average gross profit margins. 2. Partially offsetting the above effect was an unfavorable change in selling price category mix which primarily resulted from the growth in sales to National Accounts. Warehousing, marketing, and administrative (operating) expenses increased 8.7% in the third quarter of 1995 when compared with the same period in 1994, excluding the effect of restructuring charges of $779,000 in 1994. This increase was slightly lower than the increase in net sales. Contributing to this favorable comparison were the following factors: 1. The increase in the rate of growth in net sales allowed the Company to leverage its payroll costs. 2. Travel related expenses were lower in the 1995 period as compared with the same 1994 period. 3. The Company experienced lower amortization of goodwill and other acquisition related expenses associated with acquired and start-up businesses. (7) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Earnings (continued) Partially offsetting these favorable comparisons were higher payroll related benefits costs and the Company's continuing investment in the business infrastructure needed to support its market initiatives. Of note were the following factors relating to infrastructure investments: 1. Increased data processing expenses related to the ongoing significant upgrade and replacement of the branch order entry, order processing, and inventory management system. This initiative will continue throughout 1995. 2. Increased expenses related to Grainger Integrated Supply Operations, whose role is managing transactions for the Company and its best-in-class distribution partners. 3. Increased expenses related to the continuing enhancement and reconfiguration of the Company's logistics network. The quarter included expenses related to the ongoing ramp-up of three additional ZDCs. Also included were expenses associated with converting the Niles, Illinois Regional Distribution Center to a National Distribution Center. The Company's effective income tax rate for the third quarter of 1995 was 40.2% versus 40.3% in the comparable 1994 period. (8) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994: Net Sales Net sales of $2,470,308,000 in the first nine months of 1995 increased 9.6% from net sales of $2,254,223,000 in the same 1994 period. There were 191 sales days in the 1995 nine month period versus 192 sales days in the comparable 1994 period. The year 1995 will have one less sales day than did the year 1994 (254 versus 255). The sales increase for the first nine months of 1995 when compared with the same 1994 period was principally volume related. The volume increase can be explained primarily by the Company's market initiatives and the growth in the national economy. Daily sales to National Account customers within the core business increased about 23%, on a comparable basis, over the same 1994 period. The core business experienced selling price increases of about 1.3% when comparing the first nine month period for each year. (9) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Earnings Net earnings for the 1995 first nine months increased 5.6% to $135,488,000 when compared with 1994 net earnings of $128,288,000, which excluded the effect of after tax restructuring charges of $1,381,000. When considering the effect of the restructuring charges, net earnings for the 1995 first nine months increased 6.8%. The net earnings increase of 5.6% was less than the net sales increase primarily due to operating expenses increasing at a faster rate than net sales, partially offset by slightly higher gross profit margins. The Company's gross profit margin increased by 0.15 percentage point for the first nine months of 1995 as compared with the same 1994 period, excluding the effect of restructuring charges of $847,000 in 1994. This change in gross profit margin was primarily the result of the factors discussed for the third quarter (see Third Quarter Net Earnings discussion) with the following exception. The sales of seasonal products had a positive effect on this nine month comparison. During the 1995 nine month period, the sales of seasonal products grew at a slower rate than all other products. Warehousing, marketing, and administrative (operating) expenses for the Company increased 11.6% for the first nine months of 1995 as compared with the same 1994 period, excluding the effect of restructuring charges of $1,446,000 in 1994. This increase was greater than the increase in net sales primarily due to the following factors: 1. The Company's continuing investment in the business infrastructure to support its market initiatives discussed for the third quarter (see Third Quarter Net Earnings discussion). 2. Increased freight-out expenses resulting from several factors including: a. Proportionally more shipments qualifying for prepaid freight. b. Proportionally more orders being transferred within the ZDC/branch network. This resulted in orders being shipped longer distances. These incremental expenses, by policy, were not billed to customers. Partially offsetting these unfavorable comparisons were payroll and related benefits costs increasing somewhat slower than the rate of sales growth and decreased amortization of goodwill and other acquisition related costs associated with acquired and start-up businesses. The Company's effective income tax rate for the nine months of 1995 was 40.2% versus 40.3% in the comparable 1994 period. The Company's effective income tax rate for the full year 1994 would have been 40.4% without the effects of the restructuring charges recorded during 1994. (10) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 1995, working capital increased $79,043,000. The ratio of current assets to current liabilities was 2.1 at September 30, 1995 and 2.1 at December 31, 1994. The Consolidated Statements of Cash Flows, included in this report, detail the sources and uses of cash and cash equivalents. The Company continues to maintain a low debt ratio and a strong liquidity position, which provide flexibility in funding working capital needs and long-term cash requirements. Total debt as a percent of shareholders' equity was 12.1% at September 30, 1995 and 3.7% at December 31, 1994. For the first nine months of 1995, $33,222,000 was expended for land, buildings, and facilities improvements, and $45,854,000 for data processing, office, and other equipment; for a total of $79,076,000. (11) W.W. Grainger, Inc. and Subsidiaries PART II - OTHER INFORMATION Items 1, 2, 3, 4, and 5 not applicable EXHIBIT INDEX Item 6 Exhibits and Reports on Form 8-K (numbered in accordance with Item 601 of regulation S-K). (a) Exhibits (3)(ii) By-Laws, as amended October 25, 1995 14 (11) Computation of Earnings per Common and Common Equivalent Share 32 (27) Financial Data Schedule 33 (b) Reports on Form 8-K - None. (12) 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. W.W. Grainger, Inc. ---------------------------------- (Registrant) Date: November 9, 1995 By: /s/ J. D. Fluno ---------------------------------- J. D. Fluno, Vice Chairman Date: November 9, 1995 By: /s/ P. O. Loux ---------------------------------- P. O. Loux, Vice President, Finance Date: November 9, 1995 By: /s/ R. D. Pappano ----------------------------------- R. D. Pappano, Vice President, Financial Reporting and Investor Relations (13) EX-3 2 Exhibit 3(ii) As Amended October 25, 1995 BY-LAWS ------- OF -- W.W. GRAINGER, INC. ------------------- ARTICLE I --------- OFFICES ----------- The principal office of the corporation shall be located in the State of Illinois. The corporation may have such other offices, either within or without the State of Illinois, as the business of the corporation may require from time to time. The registered office of the corporation required by the Illinois Business Corporation Act to be maintained in the State of Illinois may be, but need not be, identical with the principal office in the State of Illinois, and the address of the registered office may be changed from time to time by the board of directors. ARTICLE II ---------- SHAREHOLDERS ------------ SECTION 1. ANNUAL MEETING. (a) The annual meeting of the shareholders shall be held on the last Wednesday of April, in each year, or at such time as may be determined by the board of directors, for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of the directors shall not be held on the day designated herein for any annual meeting or adjournment thereof, the board of directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as conveniently may be. (b) At any annual meeting or adjournment thereof only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the board of directors or (ii) by any shareholder (x) who is entitled to vote at the time of giving notice provided for in this Section 1(b) and remains such until the meeting and (y) who complies with the procedures set forth in this Section 1(b). For business to be properly brought before an annual meeting or adjournment thereof by a shareholder, the shareholder must have given timely notice thereof in proper written form to the secretary. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal office of the corporation no less than thirty days nor more than sixty days prior to the meeting; provided, however, that in the event that less than forty days' notice or prior public disclosure of the date of the meeting is (14) given or made to shareholders, notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. To be in proper written form, a shareholder's notice to the secretary shall set forth in writing as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the corporation's books, of the shareholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the shareholder and (iv) any material interest of the shareholder in such business. Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at any annual meeting or adjournment thereof except in accordance with the procedures set forth in this Section 1(b). The officer or other person presiding shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the procedures set forth in this Section 1(b), and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called by the chairman of the board, the vice chairman, the president and chief executive officer, the board of directors or by the holders of not less than one-fifth of all the outstanding shares of the corporation, for the purpose or purposes for which the meeting is called. Unless otherwise stated in the notice of special meeting, no other business may be transacted at any such meeting. SECTION 3. PLACE OF MEETING. The board of directors may designate any place, either within or without the State of Illinois, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation in the State of Illinois. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the corporation, with postage thereon prepaid. (15) SECTION 5. FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders 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 of the corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days, prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or entitled to vote at a meeting of shareholders, or entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided above, such determination shall apply to any adjournment thereof. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer books for shares of the corporation shall make within twenty days after the record date for a meeting of shareholders, or ten days before such meeting of shareholders, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the principal office of the corporation in the State of Illinois and shall be subject to inspection by any shareholder at any time during usual business hours and to copying at the shareholder's expense. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in the State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger, or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. A majority of the outstanding shares of the corporation, entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders; provided, that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact . Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. (16) SECTION 9. VOTING OF SHARES. Subject to the provisions of Section 11 of this Article, each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by his administrator or executor, either in person or by proxy. Shares standing in the name of a guardian, conservator, or trustee may be voted by such fiduciary, either in person or by proxy, but no guardian, conservator, or trustee shall be entitled, as such fiduciary, to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. SECTION 11. CUMULATIVE VOTING. In all elections for directors, every shareholder shall have the right to vote, in person or by proxy, the number of shares owned by him, for as many persons as there are directors to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall see fit. SECTION 12. VOTING BY BALLOT. Voting on any question or in any election may be by voice, unless the officer or other person presiding over the meeting shall order or any shareholder shall demand that voting be by ballot. (17) ARTICLE III ----------- DIRECTORS --------- SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed under the direction of its board of directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be not less than seven nor more than twelve. The number of directors may be fixed or changed from time to time, within the minimum and maximum, by the directors or the shareholders without amending these by-laws. Each director shall hold office until the next annual meeting of shareholders or until his successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. The board of directors may provide by resolution, the time and place, either within or without the State of Illinois, for the holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the chairman of the board or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the State of Illinois, as the place for holding any special meeting of the board of directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least two days previously thereto by written notice delivered personally or mailed to each director at his business address, or by telegram. If mailed, such notice shall be deemed to be delivered 24 hours after deposited in the United States mail, next-day delivery guaranteed, so addressed with postage thereon prepaid. If notice to be given by telegram, such notice shall be deemed to be delivered 24 hours after the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the board of directors shall constitute a quorum for transaction of business at any meeting of the board of directors, provided, that if less than a majority of the directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. (18) SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. SECTION 8. VACANCIES. Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose; provided, however, vacancies arising between meetings of shareholders by reason of an increase in the number of directors or otherwise may be filled by a majority of the board of directors then remaining. A director elected by the shareholders to fill a vacancy shall hold office for the balance of the term for which elected. A director appointed by the directors to fill a vacancy shall serve until the next meeting of shareholders at which directors are to be elected. SECTION 9. COMPENSATION. By resolution of the board of directors, the directors may be paid their expenses, if any, for attendance at each meeting of the board or of a committee thereof, and may be paid a fixed sum for attendance at meetings and/or a stated retainer as directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 11. COMMITTEES. Committees of the board of directors shall consist of an audit committee, a compensation committee, a board affairs and nominating committee, and such other committees as the board of directors by resolution may create. Each committee shall have such number of members and shall exercise such authority and carry out such duties as are set forth in resolutions of the board of directors. Committee members shall be elected annually but shall serve at the discretion of the board of directors and may be removed by the board of directors. The board of directors may increase or decrease the number of members of any committee at any time and may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member or members at any meeting of the committee. A majority of members of a committee shall constitute a quorum and, unless otherwise set forth in resolutions of the board of directors, a majority of those members present at a meeting and not disqualified from voting shall constitute the acts of the committee. (19) SECTION 12. INFORMAL ACTION BY DIRECTORS. (a) Any action required to be taken at a meeting of the board of directors of the corporation, or any other action which may be taken at a meeting of the board of directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all of the members of such committee, as the case may be. (b) The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors. All the approvals evidencing the consent shall be delivered to the secretary to be filed in the corporate records. The action taken shall be effective when all the directors have approved the consent unless the consent specifies a different effective date. (c) Any such consent signed by all the directors or all the members of a committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Secretary of State. SECTION 13. TELEPHONE ATTENDANCE. (a) Members of the board of directors or of any committee of the board of directors may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating. (b) The board of directors or any committee may, at its option, provide for a tape recording of any such conference telephone portion of a meeting but the lack thereof shall not affect the validity of any actions taken at such meeting. SECTION 14. REMOVAL OF DIRECTORS. One or more of the directors may be removed, with or without cause, at a meeting of shareholders by the affirmative vote of the holders of a majority of the outstanding shares then entitled to vote at an election of directors, except that: (1) No director shall be removed at a meeting of shareholders unless the notice of such meeting shall state that a purpose of the meeting is to vote upon the removal of one or more directors named in the notice. Only the named director or directors may be removed at such meeting; (2) If less than the entire board is to be removed, no director may be removed, with or without cause, if the votes cast against his removal would be sufficient to elect him, if then cumulatively voted at an election of the entire board of directors; and (3) If a director is elected by a class or series of shares, he may be removed only by the shareholders of that class or series. (20) SECTION 15. DIRECTOR CONFLICT OF INTEREST. If a transaction is fair to the corporation at the time it is authorized, approved or ratified, the fact that a director of the corporation is directly or indirectly a party to the transaction shall not be grounds for invalidating the transaction. SECTION 16. NOMINATIONS OF DIRECTORS. (a) Except for directors elected to fill vacancies pursuant to these by-laws, nominations for election for the board of directors may be made by the board of directors, or by the nominating committee of the board of directors and approved by the board of directors. Such nominations shall be submitted to a vote of the shareholders at the next annual meeting of shareholders or at a special meeting of shareholders called for such purpose. (b) Nominations for election to the board of directors may be made by any shareholder of any outstanding class of stock of the corporation entitled to vote for the election of directors provided that; (i) any such shareholder nominating a director shall, not later than the date with respect to submission of shareholders' proposals for the next annual meeting as set forth in the corporation's proxy statement for the preceding annual meeting of shareholders, notify the chairman of the board of the corporation in writing of the intent to so nominate one or more persons and shall further set forth in such notice the names of all such nominees together with, with respect to each such nominee, his principal occupation, age, holdings of equity securities of the corporation and such other information as would be required under applicable laws, including the various securities laws, to be set forth by the corporation in its proxy statement and related materials if such person were a nominee of the board of directors; (ii) such shareholder so proposing to nominate a person remains a shareholder of the corporation through the date of the annual meeting at which such shareholder, or such shareholder's proxy, nominates such person for election as a director; and (iii) such shareholder delivers the consent of each such nominee to serve as director, or states in the notice that each such nominee, if elected, has consented to serve as director. ARTICLE IV ---------- OFFICERS -------- SECTION 1. NUMBER. The officers of the corporation shall be a chairman of the board, a vice chairman of the board, a president and chief executive officer, one or more vice presidents or executive, group or senior vice presidents, a treasurer, a secretary, and such other officers and such assistant or administrative officers as may be elected or appointed as hereinafter provided. Any two or more offices may be held by the same person. (21) SECTION 2. ELECTION, APPOINTMENT AND TERM OF OFFICE. Officers of the corporation shall be elected or appointed annually by the board of directors, although vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer elected or appointed by the board of directors shall hold office until the next annual election or appointment of officers by the board of directors, or until his earlier death, resignation or removal. Officers and assistant or administrative officers of the corporation, may also be appointed from time to time by the chairman of the board, to serve as such at his pleasure. SECTION 3. REMOVAL. Any officer or assistant or administrative officer of the corporation elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby. Any officer or assistant or administrative officer of the corporation appointed by the chairman of the board may be removed by the chairman of the board whenever in his judgment the best interests of the corporation would be served thereby. Any removal provided for in this Section 3 shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or assistant or administrative officer of the corporation shall not itself create contract rights. SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall preside at all meetings of the shareholders and of the board of directors, or, from time to time, may delegate any part of such responsibilities to the vice chairman of the board, the president and chief executive officer or any other member of the board of directors. He may sign, with the secretary or any other proper officer of the corporation, authorized by the board of directors, certificates for shares of the corporation. He may from time to time, to the extent not delegated by the board of directors, delegate and re-delegate any part of any of the responsibilities and authority set forth herein to the vice chairman of the board, the president and chief executive officer, or both. He shall perform such other duties as may be prescribed from time to time by the board of directors. The chairman of the board must be a director of the corporation. SECTION 5. VICE CHAIRMAN OF THE BOARD. The vice chairman of the board shall perform such officer's duties as may from time to time be prescribed by the board of directors or delegated to him by the chairman of the board of directors or the president and chief executive officer, including the presiding at meetings of the shareholders and of the board of directors. He may sign, with the secretary or any other proper officer of the corporation authorized by the board of directors, certificates for shares of the corporation. The vice chairman of the board must be a director of the corporation. SECTION 6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The president shall be the chief executive officer of the corporation and shall perform such officer's duties as may from time to time be prescribed by the board of directors or delegated to him by the chairman of the board of directors, including the presiding at meetings of the shareholders and the board of (22) directors. He may sign, with the secretary or any other proper officer of the corporation authorized by the board of directors, certificates for shares of the corporation. He shall be primarily responsible for carrying out the policies established by and the directions of the board of directors. The president and chief executive officer must be a director of the corporation. SECTION 7. OFFICE OF THE CHAIRMAN. The chairman of the board, vice chairman of the board, and the president and chief executive officer shall comprise the office of the chairman which shall act as the senior management of the corporation. By agreement of the members of the office of the chairman, any member or members thereof shall be authorized to act as the office of the chairman. Any member of the office of the chairman may sign deeds, mortgages, bonds, contracts or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The office of the chairman may delegate signing authority to other persons within the corporation as it deems necessary. SECTION 8. VICE PRESIDENTS. Each of the vice presidents shall be responsible for those activities and shall perform those duties as shall from time to time may be assigned to him by the board of directors, the chairman of the board, the vice chairman of the board or the president and chief executive officer. The board of directors may designate one or more of the vice presidents as executive, group or senior vice presidents. SECTION 9. TREASURER. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors shall determine. He shall (a) have charge and custody of and be responsible for all funds and securities of the corporation, (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Article V of these by-laws and (c) in general perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the board of directors, the chairman of the board, the vice chairman of the board or the president and chief executive officer. The treasurer may be elected or appointed by the board of directors or may be appointed as an administrative officer by the chairman of the board pursuant to Article IV, Section 2. SECTION 10. SECRETARY. The secretary shall (a) keep the minutes of the shareholders' and of the board of directors' meetings in one or more books provided for that purpose, (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all certificates (23) for shares prior to the issue thereof and to all documents, the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these by-laws, (d) keep, or cause the transfer agent to keep, a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder, (e) sign with the chairman of the board, the vice chairman of the board or the president and chief executive officer, certificates for shares of the corporation, the issue of which shall have been authorized by resolution of the board of directors, (f) have general charge of the stock transfer books of the corporation and (g) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the board of directors, the chairman of the board, the vice chairman of the board or the president and chief executive officer. SECTION 11. SALARIES. The salaries of the officers elected or appointed by the board of directors shall be fixed from time to time by the board of directors and no such officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V --------- CONTRACTS, LOANS, CHECKS AND DEPOSITS ------------------------------------- SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositaries as the board of directors may select. <24> ARTICLE VI ---------- CERTIFICATES FOR SHARES AND THEIR TRANSFER ----------------------- SECTION 1. CERTIFICATES FOR SHARES. The issued shares of the corporation shall be represented by certificates, except as and to the extent determined by, or pursuant to, resolution adopted by the board of directors. Certificates representing shares of the corporation shall be in such form as may be determined by the board of directors. Such certificates shall be signed by the chairman of the board, the vice chairman of the board or the president and chief executive officer, and by the secretary or an assistant secretary and shall be sealed with the seal of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation, as shall similar information with respect to shares that are uncertificated. All certificates surrendered to the corporation for transfer shall be canceled. No new certificate shall be issued until the former certificate for a like number of shares, unless the shares are uncertificated, shall have been surrendered and canceled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe. SECTION 2. TRANSFERS OF SHARES. Transfers of shares of the corporation shall be made either on the books of the corporation or on the books of the duly authorized and appointed agent or agents of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation or proper officer of the transfer agent and, unless such shares are uncertificated, on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation or its duly authorized and appointed transfer agent or agents shall be deemed the owner thereof for all purposes as regards the corporation. ARTICLE VII ----------- FISCAL YEAR ----------- The fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year. (25) ARTICLE VIII ------------ DIVIDENDS --------- The board of directors may from time to time, declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its articles of incorporation. ARTICLE IX ---------- SEAL ---- The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words, "Corporate Seal, Illinois". ARTICLE X --------- WAIVER OF NOTICE ---------------- Whenever any notice whatever is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of the Illinois Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein shall be deemed equivalent to the giving of such notice. ARTICLE XI ---------- AMENDMENTS ---------- These by-laws may be altered, amended or repealed and new by-laws may be adopted at any meeting of the board of directors of the corporation by a majority vote of the directors present at the meeting. (26) ARTICLE XII ----------- INDEMNIFICATION OF DIRECTORS AND OFFICERS ----------------------------------------- SECTION 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. The corporation shall indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to the best interests of the corporation, and except that no indemnification shall be made with respect to any claim, issue or matter as to which such person has been finally adjudged to have been liable to the corporation, unless, and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. (27) SECTION 3. Any indemnification under Sections 1 or 2 (unless ordered by a court) shall be made only as authorized in the specific case, upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2. Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable (or, even if obtainable, a quorum of disinterested directors so directs) by independent legal counsel in a written opinion, or (3) by the shareholders. In any event, to the extent that a director or officer of the corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Sections 1 or 2 or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including reasonable attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 4. (a) Reasonable expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding, upon receipt of (i) a statement signed by such director or officer to the effect that such director or officer acted in good faith and in a manner which he believed to be in, or not opposed to the best interests of the corporation and (ii) an undertaking by or on behalf of the director or officer to repay such amount, if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article. (b) The board of directors may, by separate resolution adopted under and referring to this Article of the by-laws, provide for securing the payment of authorized advances by the creation of escrow accounts, the establishment of letters of credit or such other means as the board deems appropriate and with such restrictions, limitations and qualifications with respect thereto as the board deems appropriate in the circumstances. SECTION 5. (a) The indemnification and advancement of expenses provided by or granted under other subsections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The provisions of this ARTICLE XII shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at anytime while this ARTICLE XII is in effect and any indemnification provided under this ARTICLE XII to a person shall continue after such person ceases to be an officer, director, agent or employee of the corporation as to all facts, circumstances and events occurring while such person was such officer, director, agent or employee, and shall not (28) be decreased or diminished in scope without such person's consent, regardless of the repeal or modification of this Article or any repeal or modification of the Illinois Business Corporation Act or any other applicable law. If the scope of indemnity provided by this ARTICLE XII or any replacement article, or pursuant to the Illinois Business Corporation Act or any modification or replacement thereof is increased, then such person shall be entitled to such increased indemnification as is in existence at the time indemnity is provided to such person, it being the intent, subject to Section 10 of this ARTICLE XII, to indemnify persons under this ARTICLE XII to the fullest extent permitted by law. SECTION 6. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. SECTION 7. Subject to Section 10 of this Article, if a claim under this Article is not promptly paid in full by the corporation after a written claim has been received by the corporation or if expenses pursuant to Section 4 of this Article have not been promptly advanced after a written request for such advancement accompanied by the statement and undertaking required by Section 4 of this Article has been received by the corporation, the director or officer may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or the advancement of expenses. If successful, in whole or in part, in such suit, such director or officer shall also be entitled to be paid the reasonable expense thereof, including attorneys' fees. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the director or officer has not met the standards of conduct which make it permissible under the Illinois Business Corporation Act for the corporation to indemnify the director or officer for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its shareholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the director or officer is proper in the circumstances because he or she has met the applicable standard of conduct required under the Illinois Business Corporation Act, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the director or officer had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the director or officer had not met the applicable standard of conduct. (29) SECTION 8. For purposes of this Article, references to "the corporation" shall include, in addition to the surviving corporation, any merging corporation (including any corporation having merged with a merging corporation) absorbed in a merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who was a director or officer of such merging corporation, or was serving at the request of such merging corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the surviving corporation as such person would have with respect to such merging corporation if its separate existence had continued. SECTION 9. For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and references to "officers" shall include elected and appointed officers. A person who acted in good faith and in a manner he reasonably believed to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the corporation" as referred to in this Article. SECTION 10. Anything herein to the contrary notwithstanding, if the corporation purchases insurance in accordance with Section 6 of this ARTICLE XII, the corporation shall not be required to, but may (if the board of directors so determines in accordance with this ARTICLE XII) reimburse any party instituting any action, suit or proceeding if a result of the institution thereof is the denial of or limitation of payment of losses under such insurance when such losses would have been paid thereunder if a non-insured third party had instituted such action, suit or proceedings. ARTICLE XIII ------------ INDEMNIFICATION OF EMPLOYEES AND AGENTS --------------------------------------- The corporation may indemnify any agent or employee of the corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including, but not limited to any such proceeding by or in the right of the corporation) whether civil, criminal, administrative or investigative, by reason of the fact that he is or was serving the corporation at its request and in the course and scope of his duties and acting in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the (30) corporation, against expenses (including reasonable attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding. The standards of conduct, the provisions for payment and advances, and the terms and conditions contained in Article XII, Sections 1, 2, 3, 4, 5(a), 6, 8, 9 and 10 shall apply to any indemnification hereunder. (31) EX-11 3 Exhibit 11 W.W. Grainger, Inc. and Subsidiaries COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE 1995 1994 Nine months ended September 30: ------ ------ Average number of common shares outstanding during the period 50,799,957 50,727,391 Common equivalent shares (a): Shares issuable under outstanding options 1,225,419 1,465,984 Shares which could have been purchased based upon the average market value for the period 813,606 946,921 ---------- --------- 411,813 519,063 Dilutive effect of exercised options prior to being exercised 8,519 6,806 ---------- --------- Shares for the portion of the period that the options were outstanding 420,332 525,869 ---------- --------- Average number of common and common equivalent shares outstanding during the period 51,220,289 51,253,260 ========== ========== Net earnings $135,488,000 $126,907,000 ============ ============ Net earnings per common and common equivalent share $2.65 $2.48 ===== ===== Three months ended September 30: Nine months ended September 30, from above $2.65 $2.48 Six months ended June 30, as previously reported 1.69 1.64 ----- ----- Net earnings per common and common equivalent share for the three months ended September 30 $0.96 $0.84 ===== ===== (a) Does not include options which are not dilutive. Effect under fully diluted computation is not material. (32) EX-27 4
5 1,000 DEC-31-1995 SEP-30-1995 9-MOS 22885 0 412190 17816 597869 1098651 869653 365987 1694570 515013 26215 0 0 25418 1110780 1694570 2470308 2470308 1591170 1591170 640980 8862 2727 226569 91081 135488 0 0 0 135488 2.65 0
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