-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VjQQyoYS1KQocvIaWnomt9eNR+6rWFjtAuRjt0FX9jdNuHXHBsesVERS3eKWDOoM uWAocbxomDfi4NKMEB0oEA== 0000310158-95-000018.txt : 19950814 0000310158-95-000018.hdr.sgml : 19950814 ACCESSION NUMBER: 0000310158-95-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: BSE SROS: CSE SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHERING PLOUGH CORP CENTRAL INDEX KEY: 0000310158 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221918501 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06571 FILM NUMBER: 95561358 BUSINESS ADDRESS: STREET 1: ONE GIRALDA FARMS CITY: MADISON STATE: NJ ZIP: 07940-1000 BUSINESS PHONE: 2018227000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 Commission file number 1-6571 SCHERING-PLOUGH CORPORATION Incorporated in New Jersey 22-1918501 One Giralda Farms (I.R.S. Employer Identification No.) Madison, N.J. 07940-1000 (201) 822-7000 (telephone number) 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 Common Shares Outstanding as of June 30, 1995: 372,335,498 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (Dollars in millions, except per share figures)
Three Months Six Months Ended Ended June 30 June 30 1995 1994 1995 1994 Sales . . . . . . . . . . . . . . $1,332.5 $1,149.0 $2,556.7 $2,281.9 Costs and expenses: Cost of sales. . . . . . . . . . 272.5 227.4 508.3 460.6 Selling, general and administrative. . . . . . . 511.9 447.1 967.7 873.2 Research and development . . . . 162.1 149.5 309.3 289.1 Other expense, net . . . . . . . 20.4 15.7 28.4 12.0 966.9 839.7 1,813.7 1,634.9 Income before income taxes. . . . 365.6 309.3 743.0 647.0 Income taxes . . . . . . . . . . 89.5 75.8 182.0 158.5 Income from continuing operations 276.1 233.5 561.0 488.5 Discontinued operations, net of tax: Income (loss) from operations . (3.9) 7.2 (10.2) 5.4 Loss on disposal. . . . . . . . (156.2) - (156.2) - Net income. . . . . . . . . . . . $ 116.0 $ 240.7 $ 394.6 $ 493.9 Earnings per common share: Continuing operations . . . . . $ .74 $ .61 $ 1.51 $ 1.27 Discontinued operations: Income (loss) from operations. (.01) .02 (.03) .01 Loss on disposal . . . . . . . (.42) - (.42) - Total . . . . . . . . . . . . . . $ .31 $ .63 $ 1.06 $ 1.28 Dividends per common share. . . . $ .29 $ .255 $ .545 $ .48 See notes to consolidated financial statements.
PAGE SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions, except per share figures)
June 30, December 31, 1995 1994 Assets Cash and cash equivalents . . . . . . . . $ 226.8 $ 115.6 Accounts receivable, net. . . . . . . . . 814.2 627.9 Inventories . . . . . . . . . . . . . . . 474.4 466.3 Prepaid expenses, deferred income taxes and other current assets . . . . . 536.6 529.3 Total current assets. . . . . . . . . 2,052.0 1,739.1 Property, plant and equipment . . . . . . 3,013.2 3,049.7 Less accumulated depreciation . . . . . . 1,005.4 967.4 Property, net . . . . . . . . . . . . 2,007.8 2,082.3 Intangible assets, net. . . . . . . . . . 171.3 168.3 Other assets. . . . . . . . . . . . . . . 375.7 336.0 $4,606.8 $4,325.7 Liabilities and Shareholders' Equity Accounts payable. . . . . . . . . . . . . $ 274.5 $ 285.2 Short-term borrowings and current portion of long-term debt. . . . . . . . 752.0 782.3 Other accrued liabilities . . . . . . . . 1,032.0 961.3 Total current liabilities . . . . . . 2,058.5 2,028.8 Long-term debt. . . . . . . . . . . . . . 186.3 185.8 Other long-term liabilities . . . . . . . 566.7 536.7 Shareholders' Equity: Preferred shares - $1 par value each; issued - none. . . . . . . . . . . - - Common shares - $1 par value each; shares issued: 1995 - 502,965,382; 1994 - 251,482,691 . . . . . . . . . . . 503.0 251.5 Paid-in capital . . . . . . . . . . . . . 4.7 133.3 Retained earnings . . . . . . . . . . . . 4,063.4 3,978.2 Foreign currency translation adjustment and other . . . . . . . . . . (90.4) (117.0) Total . . . . . . . . . . . . . . . . 4,480.7 4,246.0 Less treasury shares, at cost - 1995, 130,629,884 shares; 1994, 65,468,430 shares . . . . . . . . 2,685.4 2,671.6 Total shareholders' equity. . . . . . 1,795.3 1,574.4 $4,606.8 $4,325.7 See notes to consolidated financial statements.
PAGE SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (UNAUDITED) (Dollars in millions)
1995 1994 Operating Activities: Income from continuing operations . . . . $ 561.0 $ 488.5 Depreciation and amortization . . . . . . 78.8 71.2 Working capital changes - source (use): Accounts receivable. . . . . . . . . . . (192.8) (98.3) Inventories. . . . . . . . . . . . . . . (11.9) (39.4) Other current assets . . . . . . . . . . (31.9) (32.2) Accounts payable and other accrued liabilities . . . . . . . . . . . . . . 41.3 23.0 Other, net. . . . . . . . . . . . . . . . (58.4) 3.4 Net cash provided by operating. . . . . . activities . . . . . . . . . . . . . . . 386.1 416.2 Investing Activities: Reduction of investments. . . . . . . . . 45.1 98.7 Purchases of investments. . . . . . . . . (49.3) (11.9) Capital expenditures. . . . . . . . . . . (103.7) (132.6) Other, net. . . . . . . . . . . . . . . . (1.6) - Net cash used for investing . . . . . . . activities . . . . . . . . . . . . . . . (109.5) (45.8) Financing Activities: Net change in short-term borrowings . . . (42.6) (211.3) Common shares repurchased . . . . . . . . (13.8) (105.0) Dividends paid to common shareholders . . (202.8) (185.4) Proceeds from other equity. . . . . . . . transactions . . . . . . . . . . . . . . 15.0 6.8 Other, net. . . . . . . . . . . . . . . . .5 .1 Net cash used for financing. . . . . . . activities . . . . . . . . . . . . . . . (243.7) (494.8) Effect of Exchange Rates on Cash and Cash Equivalents. . . . . . . . . . . . . (1.4) .1 Net Cash Flow from Continuing Operations . 31.5 (124.3) Net Cash Flow from Discontinued Operations 79.7 2.8 Net Increase (Decrease) in Cash and Cash Equivalents. . . . . . . . . . . . . 111.2 (121.5) Cash and Cash Equivalents, Beginning of Period . . . . . . . . . . . . . . . . 115.6 222.2 Cash and Cash Equivalents, End of Period . $ 226.8 $ 100.7 See notes to consolidated financial statements.
PAGE SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars in millions, except per share figures) Basis of Presentation The unaudited financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The statements should be read in conjunction with the accounting policies and notes to consolidated financial statements included in the Company's 1994 Annual Report on Form 10-K. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the operations for the interim periods presented. Discontinued Operations On June 28, 1995, the Company completed the sale of its worldwide contact lens business. In connection therewith, the Company recorded a loss on disposal of $156.2, net of tax benefits of $75.3, ($.42 per share). Proceeds from the sale were $47.5. The contact lens business is reported as a discontinued operation for all periods presented. The statements of consolidated income and cash flows have been restated to conform to the discontinued operation presentation. Contact lens sales for the three and six months ended June 30, 1995 were $26.1 and $46.2, respectively; sales for the three and six months ended June 30, 1994 were $41.0 and $69.8, respectively. Earnings Per Common Share On April 4, 1995, the Board of Directors of the Company authorized a 2-for-1 stock split, and voted to increase the number of authorized common shares from 300 million to 600 million. Distribution of the split shares was made on June 9, 1995. The per share amounts included in these consolidated financial statements reflect the stock split. Earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Shares issuable through the exercise of stock options and warrants and under deferred delivery agreements are not considered in the calculation, as they do not have a material effect on the determination of earnings per common share. The weighted-average number of shares used in the computation of earnings per common share for the six months ended June 30, 1995 and 1994 were 372,105,000 and 385,936,000, respectively. Inventories Inventories consisted of: June 30, December 31, 1995 1994 Finished products . . . . . . . $ 168.3 $ 180.1 Goods in process. . . . . . . . 196.5 193.8 Raw materials and supplies. . . 109.6 92.4 Total inventories . . . . . . $ 474.4 $ 466.3 Sales Segment sales for the six months ended June 30, 1995 and 1994 were as follows: 1995 1994 Pharmaceutical products . . . . $2,186.4 $1,903.9 Health care products. . . . . . 370.3 378.0 Consolidated sales. . . . . . $2,556.7 $2,281.9 Legal and Environmental Matters The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including environmental matters and product liability cases. The recorded liabilities for these matters at June 30, 1995 were not material. Management believes that, except for the matters discussed in the following two paragraphs, it is remote that any material liability in excess of the amounts accrued will be incurred. In 1994, a judgment in the amount of $63.6, including $57.5 in punitive damages, was entered against the Company in connection with a product liability lawsuit involving THEO-DUR. An appeal from this judgment has been taken. While the success of the appeal cannot be predicted with certainty, the Company will vigorously pursue its case through the appellate courts. The Company believes it has insurance coverage for amounts in excess of $3.0, but the insurance carriers have reserved their rights with respect to liability for punitive damages. The Company has instituted a lawsuit against its insurance carriers seeking a declaration from the state court in Oregon that the carriers are obligated to indemnify the Company for any punitive damages it may be required to pay in connection with the underlying product liability action. The Company, along with other prescription drug manufacturers, is a defendant in more than 145 antitrust actions commenced in state and federal courts by independent and chain retail pharmacies and others. The plaintiffs allege price discrimination and/or conspiracy between the Company and other defendants to restrain trade by jointly refusing to sell prescription drugs at discounted prices to the plaintiffs. One of these cases is a class action on behalf of U.S. retail pharmacies. Plaintiffs seek treble damages in an unspecified amount and an injunction against the allegedly unlawful conduct. Another of these actions has been certified as a class of all pharmaceutical consumers in California seeking to recover treble damages for overcharges on prescription drugs purchased at retail. Other cases alleging to be class actions under various state laws have also been brought. The Company believes that all these actions are without merit and is defending itself vigorously against all such claims. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - three and six months ended June 30, 1995 compared with the corresponding periods in 1994. On June 28, 1995, the Company completed the sale of its worldwide contact lens business. The following results exclude the Company's contact lens business, which has been treated as a discontinued operation for all periods presented. Consolidated sales for the second quarter increased $183.5 million or 16 percent compared with the same period in 1994. For the six months, sales rose $274.8 million or 12 percent over 1994. Excluding the effect of foreign currency exchange rate changes, consolidated sales grew 12 percent in the quarter and 9 percent for the six-month period. In the United States, many of the Company's pharmaceutical products are subject to increasingly competitive pricing as managed care groups, institutions and government agencies seek price discounts. Future health care reform proposals also could have an impact on operations of the Company. In most international markets, the Company operates in an environment of government-mandated cost containment programs. Sales of INTRON A, the Company's alpha-2 interferon anticancer and antiviral agent, declined in Japan as a result of various 1994 cost-containment efforts by the Japanese health authorities on the overall interferon market. In addition, several other markets have been affected by the implementation of across-the- board price cuts and government-imposed restrictions. Since the Company is unable to predict the form and timing of domestic and international governmental health care reform actions, their effect on future operations and cash flows cannot be reasonably estimated. Sales Domestic prescription pharmaceutical sales advanced 26 percent for the 1995 second quarter and 21 percent for the six-month period. Sales of respiratory products increased 30 percent in the quarter and 32 percent for the first half, reflecting significant market share growth for the CLARITIN brand of nonsedating antihistamines. CLARITIN-D, which combines the decongestant pseudoephedrine, was launched in the U.S. in November 1994. Sales growth in both periods was also aided by increases for VANCENASE allergy and VANCERIL asthma products. Despite generic competition for the solution, tablet and syrup formulations, sales for the PROVENTIL line of asthma products grew modestly in both the quarter and six-month period, due to higher prescription levels for the metered dose inhaler. These gains were tempered by lower solution sales following the nonrecurrence of heavy 1994 purchases, which resulted from the recall of a competitor's product. The Food and Drug Administration (FDA) has issued bioequivalence standards for generic albuterol metered dose inhalers. Generic entries are expected to enter the market in the future. The introduction of a generic inhaler will negatively affect sales and profitability of PROVENTIL. U.S. sales of cardiovascular products rose 77 percent in the quarter and 26 percent for the six months, reflecting prescription growth for IMDUR, a once-daily oral nitrate, and K- DUR potassium supplements. The quarter sales increase also was due to promotional programs for NITRO-DUR transdermal nitroglycerin patches. Sales of anti-infective and anticancer products were essentially flat in the second quarter, but advanced 15 percent for the six-month period. The quarter performance reflects growth for EULEXIN, a prostate cancer therapy, which was offset by lower INTRON A sales. For the first half, prescription growth for EULEXIN and expanded indication usage of INTRON A accounted for the sales increase. International pharmaceutical sales increased 4 percent in the second quarter and 3 percent for the six-month period after excluding the impact of foreign currency exchange fluctuations. Sales of respiratory products grew 13 percent in the quarter and 15 percent for the six months, due to higher sales of CLARITIN in Europe and allergy products in Japan. Cardiovascular product sales rose 10 percent in both the three- and six-month periods, reflecting growth for NITRO-DUR in Europe and Latin America. Sales of dermatological products increased 6 percent in the quarter and 8 percent for the six months, reflecting advances for topical steroids. Sales growth in both periods was also aided by higher sales of LOSEC, an anti-ulcer treatment licensed from AB Astra. International sales of anti-infective and anticancer products declined 1 percent in the second quarter and 6 percent in the first half, due to continued shortfalls of INTRON A in Japan. These declines were moderated by higher sales in several markets of EULEXIN and CEDAX, a third-generation cephalosporin. Health care product sales increased 5 percent in the 1995 second quarter, but declined 2 percent for the six-month period. The quarter sales advance reflects increased sales of allergy/cold products as a result of an extended cold and flu season, and higher foot care product sales due to growth in recently launched products. The six-month decline in health care products sales reflects lower sales of sun care products due to a highly competitive marketplace. Income before income taxes from continuing operations increased 18 percent for the quarter as compared with 1994, and represented 27.4 percent of sales versus 26.9 percent last year. For the six months, income before income taxes grew 15 percent over 1994, representing 29.1 percent of sales compared with 28.4 percent last year. Cost of sales as a percentage of sales increased to 20.4 percent from 19.8 percent in the quarter, principally the result of an unfavorable sales mix of lower margin pharmaceutical products in international markets. For the first half, the cost of sales ratio declined to 19.9 percent from 20.2 percent, as a favorable sales mix of higher margin pharmaceutical products in the U.S. mitigated the impact of the unfavorable sales mix in international markets. Selling, general and administrative expenses represented 38.4 percent of sales in the second quarter compared with 38.9 percent last year. For the six-month period, the ratio was 37.9 percent versus 38.3 percent in 1994. The improved ratios resulted from controls on administrative costs. Marketing-related expenses as a percentage of sales remained the same as last year. Research and development spending rose 8 percent in the quarter, representing 12.2 percent of sales compared with 13.0 percent a year ago. For the first half, spending grew 7 percent and represented 12.1 percent of sales versus 12.7 percent in 1994. It is anticipated that total research and development expenses will approximate $650 million in 1995. The effective tax rate for continuing operations was 24.5 percent in the three- and six-month periods of both 1995 and 1994. Earnings per common share from continuing operations advanced 21 percent in the second quarter to $.74 from $.61 in 1994. For the six-month period, earnings per common share from continuing operations increased 19 percent to $1.51 from $1.27 last year. Excluding the impact of changes in foreign currency exchange rates, earnings per common share from continuing operations would have risen approximately 18 percent in the quarter and 16 percent for the six months. Discontinued Operations In connection with the sale of the worldwide contact lens business, the Company recorded a loss on disposal of $156.2 million, net of tax benefits of $75.3 million, or $.42 per share in the 1995 second quarter. Worldwide contact lens sales for the three and six months ended June 30, 1995 were $26.1 million and $46.2 million, respectively. For the corresponding periods of 1994 sales totaled $41.0 million and $69.8 million, respectively. Liquidity and financial resources - six months ended June 30, 1995. Cash generated from operations and selected borrowings continues to be the Company's major source of funds to finance working capital, additions to property and shareholder dividends. Cash provided from operations totaled $386.1 million for the first six months of 1995. This cash funded the spending of $202.8 million for shareholder dividends, $103.7 million for capital expenditures and $13.8 million for common share repurchases. Net cash flow from discontinued operations totaled $79.7 million, and includes the proceeds from the sale of the worldwide contact lens business, related tax benefits and cash results of discontinued operations for the first six months of 1995. In February 1995, the Company completed a $500 million repurchase program, which had begun in 1994. In June, the Board of Directors authorized the purchase of an additional $500 million of common shares. The Company's liquidity and financial resources continue to be sufficient to meet its operating needs. PART II OTHER INFORMATION Item 1. Legal Proceedings The penultimate paragraph of Item 3, Legal Proceedings of Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 1994, relating to a product liability lawsuit involving THEO-DUR, is incorporated by reference. In June 1995, the Company instituted a lawsuit against its insurance carriers seeking a declaration from the state court in Oregon that the carriers are obligated to indemnify the Company for any punitive damages it may be required to pay in connection with the underlying product liability action. The final paragraph of Item 3, Legal Proceedings of Part I of the Company's annual report on Form 10-K for the fiscal year ended December 31, 1994, relating to certain antitrust actions pending against the Company and other prescription drug manufacturers, is incorporated by reference. More than 145 such actions have been commenced. One such action has been certified as a class of all pharmaceutical consumers in California seeking to recover treble damages for overcharges on prescription drugs purchased at retail. Other cases alleging to be class actions under various state laws have also been brought. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on April 25, 1995. (b) Not applicable. (c) The designation of Deloitte & Touche LLP to audit the books and accounts of the Company for the year ending December 31, 1995 was ratified by a vote of shares, as follows: FOR AGAINST ABSTAIN 166,029,179 347,381 423,155 All of the nominees for director were elected for a three year term by a vote of shares, as follows: FOR WITHHELD Hugh A. D'Andrade 166,041,867 757,848 Richard J. Kogan 166,043,978 755,737 Richard de J. Osborne 166,039,695 760,020 William A. Schreyer 165,990,794 808,921 R.J. Ventres 165,903,630 896,085 (d) None Item 6. Exhibits and Reports on Form 8-K a) Exhibits - The following Exhibits are filed with this document: Exhibit 3(i) - Certificate of Incorporation of the Company, as amended Exhibit 11 - Computation of Earnings Per Common Share Exhibit 27 - Financial Data Schedule Exhibit 99 - Forward-looking statements by the Company. b) Reports on Form 8-K: A report on Form 8-K was filed on June 30, 1995. Item 5, Other events, and Item 7, Financial Statements and Exhibits, were reported on relating to the disposition of the Wesley- Jessen vision care business. SIGNATURE(S) 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. Schering-Plough Corporation (Registrant) Date August 11, 1995 /s/ Thomas H. Kelly Thomas H. Kelly Vice President and Controller EX-3 2 CERTIFICATE OF INCORPORATION OF SCHERING-PLOUGH CORPORATION [Includes all amendments recorded and filed as of May 16, 1995] First: The name of the Corporation is Schering-Plough Corporation. Second: The Corporation is organized to engage in any activity within the purposes for which a corporation may be organized under the New Jersey Business Corporation Act. Third: The aggregate number of shares which the Corporation shall have authority to issue shall be six hundred fifty million (650,000,000) shares to consist of: (a) Six hundred million (600,000,000) Common Shares of the par value of One Dollar ($1.00) per share, and (b) Fifty million (50,000,000) Preferred Shares of the par value of One Dollar ($1.00) per share issuable in series to consist of: (i) One million, five hundred thousand (1,500,000) Preferred Shares designated "Series A Junior Participating Preferred Stock," and (ii) Forty-eight million, five hundred thousand (48,500,000) Preferred Shares whose designations have not yet been determined. Fourth: The relative rights, preferences and limitations of each class and series are as follows: (a) COMMON SHARES (1) VOTING RIGHTS. Each holder of record of Common Shares shall be entitled to one vote in person or by proxy for each share standing in his name on the books of the Corporation. (2) DIVIDENDS. Dividends may be paid on the Common Shares when and as declared by the Board of Directors after payment has been made, or funds have been set aside for payment, of all dividends, sinking funds, retirement funds or other retirement benefits to which the holders of Preferred Shares are entitled. (3) LIQUIDATION. In the event of any liquidation or dissolution, after the full preferential amounts to which the holders of Preferred Shares and any other class having preference over the Common Shares have been paid or set aside, the holders of the Common Shares shall be entitled to receive the remaining assets of the Corporation available for distribution. (b) PREFERRED SHARES (1) ISSUANCE. The Board of Directors may issue the Preferred Shares in series and fix the voting powers, designations, preferences, rights, qualifications, limitations and restrictions of each such series to the extent not fixed or limited by the provisions set forth herein (and subject to limitations prescribed by law). (2) VOTING. Whenever accrued dividends on the Preferred Shares in an amount equivalent to six quarterly dividends shall not have been paid or declared and a sum sufficient for the payment thereof set aside, the holders of the Preferred Shares, voting separately as a class, shall be entitled to elect two directors at the next annual or special meeting of the shareholders. Such right of the holders of the Preferred Shares to elect two directors may be exercised until dividends in default on the Preferred Stock shall have been paid in full or declared and a sum sufficient for the payment thereof set aside. When so paid or provided for, the right of the holders of the Preferred Shares to elect such number of directors shall cease, but subject always to the same provisions for the vesting of such voting rights in the case of any such future dividend default or defaults. During any time that the holders of the Preferred Shares, voting as a class, are entitled to elect two directors as hereinabove provided, the holders of any series of Preferred Shares entitled to participate with the holders of the Common Shares in the election of directors shall not be so entitled to participate with the holders of the Common Shares in the election of such directors. At any annual or special meeting of the shareholders or any adjournment thereof at which the holders of Preferred Shares shall be entitled to elect two directors, if the holders of at least a majority of the Preferred Shares then outstanding shall be present or represented by proxy, then, by vote of the holders of at least a majority of the Preferred Shares then present or so represented at such meeting, the authorized number of directors of the Corporation shall be increased by two, and at such meeting the holders of the Preferred Shares, voting as a class, shall be entitled to elect the additional directors so provided for. Whenever the holders of Preferred Shares shall be divested of special voting power as herein provided, the terms of all persons elected as directors by the holders of the Preferred Shares as a class shall terminate at the next annual meeting, and the authorized number of directors of the Corporation shall be reduced accordingly. (c) SERIES A JUNIOR PARTICIPATING PREFERRED STOCK: 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $1 per share (the "Common Stock"), of the Corporation, and of any other junior 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 March, June, September and December 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 (a) $1 or (b) 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 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 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. In the event the Corporation shall at any time declare or pay any dividend on the 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 were entitled immediately prior to such event under clause (b) 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. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); 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 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or 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 either of which events 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 not more than 60 days prior to the date fixed for the payment thereof. 3. Voting Rights.The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the 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 number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number 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. (B) Except as otherwise provided herein, in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law or the Certificate of Incorporation, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 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: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, 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; (iii) redeem or purchase or otherwise acquire for considera- tion shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior 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 (iv) redeem or purchase or otherwise acquire for considera- tion 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. (B) 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 paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, disso- lution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $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, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive 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 shares of Common Stock, or (2) to the holders of 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 distributions made ratably on the Series A Preferred Stock and all 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. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the out- standing 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 proviso in clause (1) 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. 7. Consolidation, Merger, etc. 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 each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into 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. In the event the Corporation shall at any time declare or pay any dividend on the 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 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. 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. Fifth: The Board of Directors may divide the Preferred Shares into classes or series or both and may determine or change the designation, number of shares, relative rights, preferences and limitations of any class or series except as otherwise provided herein. Sixth: The address of the Corporation's current registered office is: One Giralda Farms P.O. Box 1000 Madison, New Jersey 07940-1000 and the name of the Corporation's current registered agent at such address is Kevin A. Quinn. Seventh: Neither the name "Schering" nor the name "Plough" shall be deleted from the name of the Corporation except with the affirmative vote of at least two-thirds of the shares at the time outstanding and entitled to vote. Eighth: The number of directors constituting the current Board of Directors is thirteen. The names and addresses of the directors are as follows: NAMES ADDRESSES Martin J Condon III 3022 Jackson Avenue Memphis, Tennessee 38101 W. H. Conzen 60 Orange Street Bloomfield, New Jersey 07003 Everett R. Cook 3022 Jackson Avenue Memphis, Tennessee 38101 R. Lee Jenkins 3022 Jackson Avenue Memphis, Tennessee 38101 George J. Leness 60 Orange Street Bloomfield, New Jersey 07003 Donald R. Longman 60 Orange Street Bloomfield, New Jersey 07003 Willard F. McCormick 60 Orange Street Bloomfield, New Jersey 07003 NAMES ADDRESSES Anton F. Pestalozzi 60 Orange Street Bloomfield, New Jersey 07003 Abe Plough 3022 Jackson Avenue Memphis, Tennessee 38101 Harry B. Solmson 3022 Jackson Avenue Memphis, Tennessee 38101 George G. Walker 60 Orange Street Bloomfield, New Jersey 07003 Robert E. Waterman 60 Orange Street Bloomfield, New Jersey 07003 Gustave E. Weidenmyer 60 Orange Street Bloomfield, New Jersey 07003 Ninth: Board of Directors (a) Number, Election and Terms. The business and affairs of the Corporation shall be managed by a Board of Directors which, subject to any rights of the holders of any series of Preferred Shares of the Corporation ("Preferred Shares") then outstanding to elect additional directors under specified circumstances, shall consist of not less than nine (9) nor more than twenty-one (21) persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by either (i) the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors or (ii) the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. At the 1985 annual meeting of shareholders, the directors shall be divided into three classes, as nearly equal in number as possible (but with not less than three directors in each class), with the term of office of the first class to expire at the 1986 annual meeting of shareholders, the term of office of the second class to expire at the 1987 annual meeting of shareholders and the term of office of the third class to expire at the 1988 annual meeting of shareholders, and with the members of each class to hold office until their successors shall have been elected and qualified. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. (b) Shareholder Nomination of Director Candidates. Advance notice of shareholder nominations for the election of directors shall be given in the manner provided in the By-laws. (c) Newly Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Shares then outstanding, newly created directorships resulting from any increase in the authorized number of directors and any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by a majority vote of the directors then in office even though less than a quorum, or by a sole remaining director. (d) Removal. Subject to the rights of the holders of any series of Preferred Shares then outstanding, any director, or the entire Board of Directors, may be removed from office at any time only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. (e) Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this Article Ninth entitled "Board of Directors", or to alter, amend, adopt any provision inconsistent with or repeal Sections 1 ("Number, Election and Terms"), 2 ("Removal") or 3 ("Newly Created Directorships and Vacancies") of Article V ("Directors"), Article VI ("Nominations of Director Candidates") or Article X ("Amendment, Repeal, etc.") of the By-laws of the Corporation. Tenth: Shareholder Action Subject to the rights of the holders of any series of Preferred Shares then outstanding, any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders unless all of the shareholders entitled to vote thereon consent thereto in writing. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this Article entitled "Shareholder Action", or to alter, amend, adopt any provision inconsistent with or repeal Article IV ("Shareholder Action") of the By-laws of the Corporation. Eleventh: Business Combinations (a) Vote Required for Business Combinations. (1) Higher Vote for Business Combinations. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in Section (b) of this Article Eleventh, any Business Combination (as hereinafter defined) shall require the affirmative vote of the holders of at least 80% of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class (it being understood that, for purposes of this Article Eleventh, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth of this Certificate of Incorporation). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) Definition of "Business Combination". The term "Business Combination" as used in this Article Eleventh shall mean any transaction which is referred to in any one or more of the following clauses (i) through (v): (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $50,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary having an aggregate Fair Market Value of $50,000,000 or more to any Interested Shareholder or any Affiliate of any Interested Shareholder; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or (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 into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder. (b) When Higher Vote is Not Required. The provisions of Section (a) of this Article Eleventh shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Certificate of Incorporation, if all of the conditions specified in either of the following paragraphs (1) or (2) are met: (1) Approval by Continuing Directors. The Business Combination shall have been approved by a majority of the total number of the Continuing Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Continuing Director. (2) Price, Form of Consideration and Procedural Requirements. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination (the "Consummation Date") of consideration other than cash to be received per share by holders of Common Shares of the Corporation (the "Common Shares") in such Business Combination shall be at least equal to the sum of: (a) the greater of (1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of Common Shares acquired or beneficially owned by it that were acquired within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Shareholder, whichever is higher, or (2) the Fair Market Value per share of Common Shares on the day after the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article Eleventh as the "Determination Date"), whichever is higher; and (b) interest on the per share price calculated at the rate for 90-day United States Treasury obligations in effect on the Determination Date, compounded annually from that date until the Consummation Date, less the per share amount of cash dividends payable to holders of record on record dates occurring in the interim, up to the amount of such interest. (ii) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of shares of any class of outstanding Voting Stock, other than Common Shares (and other than Institutional Voting Stock, as hereinafter defined), in such Business Combination shall be at least equal to the sum of the following, unless such Business Combination is one in which the Corporation is to become the surviving entity and such class of outstanding Voting Stock is to remain outstanding without any change in its rights, preferences and limitations, in which case such aggregate amount shall be at least equal to the sum of (x) the higher of the amounts set forth in subparagraphs (a)(1) and (a)(3) below and (y) the amount set forth in subparagraph (b) below [it being intended that the requirements of this paragraph (2)(ii) shall be required to be met with respect to every such class of outstanding Voting Stock (other than Institutional Voting Stock), whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock]: (a) the greatest of (1) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of such class of Voting Stock acquired or beneficially owned by it that were acquired within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Shareholder, whichever is higher, (2) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or (3) the Fair Market Value per share of such class of Voting Stock on the day after the Announcement Date or on the Determination Date, whichever is higher; and (b) interest on the per share price calculated at the rate of 90-day United States Treasury obligations in effect on the Determination Date, compounded annually from that date until the Consummation Date, less the per share amount of cash dividends payable on such class to holders of record on record dates occurring in the interim, up to the amount of such interest. (iii) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Shares) shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of Voting Stock. If the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. (iv) The holders of all outstanding shares of Voting Stock not beneficially owned by the Interested Shareholder immediately prior to the consummation of any Business Combination shall be entitled to receive in such Business Combination cash or other consideration for their shares meeting all of the terms and conditions of this paragraph (2) (provided, however, that the failure of any shareholders who are exercising their statutory rights to dissent from such Business Combination and receive payment of the fair value of their shares to exchange their shares in such Business Combination shall not be deemed to have prevented the condition set forth in this subparagraph (2)(iv) from being satisfied). (v) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the total number of Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding Preferred Shares of the Corporation; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Shares (except as necessary to reflect any subdivision of the Common Shares), except as approved by a majority of the total number of Continuing Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding Common Shares, unless the failure so to increase such annual rate is approved by a majority of the total number of Continuing Directors; and (c) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (vi) After such Interested Shareholder has become an Interested Shareholder, such interested Shareholder 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 any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vii) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Such proxy or information statement shall contain, if a majority of the total number of Continuing Directors so requests, an opinion of a reputable investment banking firm (which firm shall be selected by a majority of the total number of Continuing Directors, furnished with all information it reasonably requests, and paid a reasonable fee for its services by the Corporation upon the Corporation's receipt of such opinion) as to the fairness (or lack of fairness) of the terms of the proposed Business Combination from the point of view of the holders of shares of Voting Stock (other than the Interested Shareholder). (c) Certain Definitions. For the purposes of this Article Eleventh: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (i) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the then outstanding Voting Stock; or (ii) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two- year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be a "beneficial owner" of any shares of Voting Stock: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (4) In determining whether a person is an Interested Shareholder pursuant to paragraph (2) of this Section (c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (3) of this Section (c) but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on April 23, 1985. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph (2) of this Section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (7) "Continuing Director" shall mean any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Shareholder and who was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is unaffiliated with the Interested Shareholder and who is recommended to succeed a Continuing Director by a majority of the total number of Continuing Directors then on the Board of Directors. (8) "Fair Market Value" shall mean: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the total number of Continuing Directors in good faith, in each case with respect to any class of such stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the total number of Continuing Directors in good faith. (9) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs (2)(i) and (2)(ii) of Section (b) of this Article Eleventh shall include the Common Shares and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (10) References to "highest per share price" shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. (11) "Institutional Voting Stock" shall mean any class of Voting Stock which was issued to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors. (d) Powers of the Board and the Continuing Directors. A majority of the entire Board of Directors of the Corporation shall have the power and duty to determine for the purposes of this Article Eleventh, on the basis of information known to them after reasonable inquiry, whether a person is an Interested Shareholder. Once the Board of Directors has made a determination, pursuant to the preceding sentence, that a person is an Interested Shareholder, a majority of the total number of Directors of the Corporation who would qualify as Continuing Directors shall have the power and duty to interpret all of the terms and provisions of this Article Eleventh, and to determine on the basis of information known to them after reasonable inquiry all facts necessary to ascertain compliance with this Article Eleventh, including, without limitation, (A) the number of shares of Voting Stock beneficially owned by any person, (B) whether a person is an Affiliate or Associate of another, (C) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $50,000,000 or more, and (D) whether all of the applicable conditions set forth in paragraph (2) of Section (b) of this Article Eleventh have been met with respect to any Business Combination. Any determination pursuant to this Section (d) made in good faith shall be binding and conclusive on all parties. (e) No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article Eleventh shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. (f) Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), and in addition to any affirmative vote of the holders of Preferred Shares or any other class of capital stock of the Corporation or any series of any of the foregoing then outstanding which is required by law or by or pursuant to this Certificate of Incorporation, the affirmative vote of the holders of 80% or more of the voting power of all the shares of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Article Eleventh of this Certificate of Incorporation. Twelfth: Anti-Greenmail (a) Except as expressly permitted in section (b) of this Article Twelfth, any purchase by the Corporation, or any Subsidiary (as hereinafter defined), of shares of Voting Stock (as hereinafter defined) from a 5% Shareholder (as hereinafter defined) at a per share price in excess of the Market Price (as hereinafter defined) at the time of such purchase of the shares so purchased shall require the affirmative vote of the holders of that amount of the voting power of the Voting Stock equal to the sum of (i) the voting power of the shares of Voting Stock of which the 5% Shareholder is the beneficial owner (as hereinafter defined) and (ii) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class. (b) The provisions of Section (a) of this Article Twelfth shall not be applicable to any purchase of shares of Voting Stock pursuant to (i) an offer made available on the same terms to the holders of all of the outstanding shares of the same class of Voting Stock as those so purchased or (ii) a purchase program effected on the open market and not as a result of a privately- negotiated transaction. (c) For the purposes of this Article Twelfth: (i) A "person" shall mean any individual, firm, corporation or other entity. (ii) "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors. (iii) "5% Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (a) is the beneficial owner, directly or indirectly, of more than five percent of the voting power of the outstanding shares of Voting Stock; or (b) is an Affiliate (as hereinafter defined) of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of more than five percent of the voting power of the then outstanding shares of Voting Stock; or (c) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any 5% Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (iv) A person shall be a "beneficial owner" of any shares of Voting Stock: (a) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates or Associates has (1) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (2) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (v) For the purpose of determining whether a person is a 5% Shareholder pursuant to paragraph (iii) of this Section (c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (iv) of this Section (c), but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (vi) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on April 28, 1987. (vii) "Subsidiary" shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purpose of the definition of a 5% Shareholder set forth in paragraph (iii) of this Section (c) the term "Subsidiary" shall mean only a corporation of which a majority of the voting power of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation. (viii) "Market Price" shall mean the last closing sale price immediately preceding the time in question of a share of the stock in question on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the last closing bid quotation with respect to a share of such stock immediately preceding the time in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any comparable system then in use (or any other system of reporting or ascertaining quotations then available), or, if such stock is not so quoted, the fair market value at the time in question of a share of such stock as determined by a majority of the entire Board of Directors in good faith. (d) The Board of Directors of the Corporation shall have the power and duty to determine for the purposes of this Article Twelfth, on the basis of information known to them after reasonable inquiry, (i) whether the provisions of this Article Twelfth are applicable to a particular transaction, (ii) whether a person is a 5% Shareholder, (iii) the number of shares of Voting Stock beneficially owned by any person and (iv) whether a person is an Affiliate or an Associate of another person. The good faith determination of the Board of Directors shall be conclusive and binding for all purposes of this Article Twelfth. (e) Notwithstanding anything contained in this Certificate of Incorporation or the By-Laws of the Corporation to the contrary (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), and in addition to any affirmative vote of the holders of Preferred Shares or any other class of capital stock of the Corporation or any series of any of the foregoing then outstanding which is required by law or by or pursuant to this Certificate of Incorporation, the affirmative vote of the holders of at least 80% of the voting power of the outstanding Voting Stock, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this Article Twelfth. Thirteenth: Limitation of Liability, Indemnification and Insurance (a) Elimination of Certain Liability. (1) A director of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except for liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. (2) An officer of the Corporation shall not be personally liable, for the duration of any time permitted by law as it now exists or may hereafter be amended, to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except for liability for any breach of duty based upon an act or omission (i) in breach of such person's duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law or (iii) resulting in receipt by such person of an improper personal benefit. (b) Indemnification and Insurance. (1) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, or any appeal therein or any inquiry or investigation which could lead to such action, suit or proceeding (a "proceeding"), by reason of his or her being or having been a director, officer, employee, or agent of the Corporation or of any constituent corporation absorbed by the Corporation in a consolidation or merger, or by reason of his or her being or having been a director, officer, trustee, employee or agent of any other corporation (domestic or foreign) or of any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise (whether or not for profit), serving as such at the request of the Corporation or of any such constituent corporation, or the legal representative of any such director, officer, trustee, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the New Jersey Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said Act permitted prior to such amendment), from and against any and all reasonable costs, disbursements and attorneys' fees, and any and all amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties, incurred or suffered in connection with any such proceeding, and such indemnification shall continue as to a person who has ceased to be a director, officer, trustee, employee or agent and shall inure to the benefit of his or her heirs, executors, administrators and assigns; provided, however, that, except as provided in paragraph (2) of this Section (b), the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was specifically authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in connection with any proceeding in advance of the final disposition of such proceeding as authorized by the Board of Directors; provided, however, that, if the New Jersey Business Corporation Act so requires, the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon receipt by the Corporation of an undertaking, by or on behalf of such director, officer, employee, or agent to repay all amounts so advanced unless it shall ultimately be determined that such person is entitled to be indemnified under this Section or otherwise. (2) Right of Claimant to Bring Suit. If a claim under paragraph (1) of this Section (b) is not paid in full by the Corporation within thirty days after a written request has been received by the Corporation, the claimant may at any time thereafter apply to a court for an award of indemnification by the Corporation for the unpaid amount of the claim and, if successful on the merits or otherwise in connection with any proceeding, or in the defense of any claim, issue or matter therein, the claimant shall be entitled also to be paid by the Corporation any and all expenses incurred or suffered in connection with such proceeding. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of expenses incurred in connection with any proceeding where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the New Jersey Business Corporation Act for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such proceeding that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the New Jersey Business Corporation Act, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its shareholders) that the claimant has not met such applicable standard of conduct, nor the termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) Non-Exclusivity of Rights. The right to indemnification and advancement of expenses provided by or granted pursuant to this Section (b) shall not exclude or be exclusive of any other rights to which any person may be entitled under a certificate of incorporation, by-law, agreement, vote of shareholders or otherwise, provided that no indemnification shall be made to or on behalf of such person if a judgment or other final adjudication adverse to such person establishes that such person has not met the applicable standard of conduct required to be met under the New Jersey Business Corporation Act. (4) Insurance. The Corporation may purchase and maintain insurance on behalf of any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expenses incurred in any proceeding and any liabilities asserted against him or her by reason of such person's being or having been such a director, officer, employee or agent, whether or not the Corporation would have the power to indemnify such person against such expenses and liabilities under the provisions of this Section (b) or otherwise. Dated: January 8, 1971 SCHERING-PLOUGH CORPORATION By W. H Conzen, President AMENDED: May 4, 1973 [Filing April 2, 1979 Date] May 24, 1979 April 30, 1984 May 31, 1984 April 24, 1985 April 29, 1987 August 7, 1989 October 31, 1994 May 16, 1995 (effective June 9, 1995) 3152-1 EX-11 3 Exhibit 11 SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Dollars in millions, except per share figures)
Six Months Ended June 30, 1995 1994 Income From Continuing Operations . . . . . . . . $ 561.0 $ 488.5 Discontinued Operations: Income(Loss) From Operations. . . . . . . . . . (10.2) 5.4 Loss on Disposal. . . . . . . . . . . . . . . . (156.2) - Net Income. . . . . . . . . . . . . . . . . . . . $ 394.6 $ 493.9 Earnings per Common Share, As Reported: Average Number of Common Shares Outstanding (in thousands). . . . . . . . . . . 372,105 385,936 Earnings per Common Share: Continuing Operations . . . . . . . . . . . . $ 1.51 $ 1.27 Discontinued Opertions: Income(loss) from operations. . . . . . . . (.03) .01 Loss on disposal. . . . . . . . . . . . . . (.42) - Total . . . . . . . . . . . . . . . . . . . . . $ 1.06 $ 1.28 Earnings per Common Share, Assuming Full Dilution: (a) Average Number of Common Shares Outstanding (in thousands) . . . . . . . . . . 372,105 385,936 Shares Contingently Issuable for Stock Incentive Plans (in thousands) . . . . . 5,041 4,348 Average Number of Common Shares and Common Share Equivalents Outstanding (in thousands) . . . . 377,146 390,284 Earnings per Common Share: Continuing Operations . . . . . . . . . . . . $ 1.49 $ 1.25 Discontinued Opertions: Income(loss) from operations. . . . . . . . (.03) .01 Loss on disposal. . . . . . . . . . . . . . (.41) - Earnings per Common Share, Assuming Full Dilution. . . . . . . . . . . . . . . . . $ 1.05 $ 1.26 (a) This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%.
EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND RELATED EXHIBITS FOR THE SIX MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS DEC-31-1995 JUN-30-1995 226800 0 814200 0 474400 2052000 3013200 1005400 4606800 2058500 186300 503000 0 0 1292300 4606800 2556700 2556700 508300 508300 309300 0 0 743000 182000 561000 (166400) 0 0 394600 1.06 1.05
EX-99 5 Company Statements Relating To Forward Looking Information (Filed Pursuant to Rule 175) 1. Extract from press releases issued by the Company on June 21 and 29, 1995 and July 20, 1995: Mr. Robert P. Luciano, Chairman and Chief Executive Officer, commenting on the Company's earnings per share for 1995 stated that he expects earnings per share for the full year 1995 will come in at slightly more than $2.75 (which would be $5.50 before the 2-for-1 stock split distributed on June 9, 1995). 2. Extract from press release issued by the Company on June 21, 1995: Mr. Robert P. Luciano, Chairman and Chief Executive Officer, commenting on the Company's earnings per share for 1996 and 1997 stated that he is confident that the Company can continue to produce at least low-to-mid double digit growth in earnings per share. -----END PRIVACY-ENHANCED MESSAGE-----