-----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, FZtqV3BXu5GOnS/Js4q+eWPT6VV48v1434/8un1RDSeelADF/bRWstZnMOOX34S+ w7+dvSP8rgUnCREUZfCnkA== 0000051396-99-000012.txt : 19990217 0000051396-99-000012.hdr.sgml : 19990217 ACCESSION NUMBER: 0000051396-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MALLINCKRODT INC /MO CENTRAL INDEX KEY: 0000051396 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 361263901 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00483 FILM NUMBER: 99542038 BUSINESS ADDRESS: STREET 1: 675 MCDONNELL BLVD STREET 2: PO BOX 5840 CITY: ST LOUIS STATE: MO ZIP: 63134 BUSINESS PHONE: 3146542000 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST LOUIS STATE: MO ZIP: 63105-1820 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT INC /MO DATE OF NAME CHANGE: 19970625 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT GROUP INC DATE OF NAME CHANGE: 19940322 FORMER COMPANY: FORMER CONFORMED NAME: IMCERA GROUP INC DATE OF NAME CHANGE: 19920703 10-Q 1 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 quarterly period ended December 31, 1998 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-483 ------------------------------- MALLINCKRODT INC. (Exact name of registrant as specified in its charter) New York 36-1263901 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 675 McDonnell Boulevard St. Louis, Missouri 63134 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 314-654-2000 ------------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 . Applicable Only To Issuers Involved In Bankruptcy Proceedings During The Preceding Five Years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes . No . Applicable Only To Corporate Issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 71,285,133 shares excluding 15,839,640 treasury shares as of January 31, 1999. (*) Indicates registered trademark PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). The accompanying interim condensed consolidated financial statements of Mallinckrodt Inc. (the Company or Mallinckrodt) do not include all disclosures normally provided in annual financial statements. These financial statements, which should be read in conjunction with the consolidated financial statements contained in Mallinckrodt's Annual Report on Form 10-K/A No. 1 for the year ended June 30, 1998 and the condensed consolidated financial statements contained in Mallinckrodt's Quarterly Report on Form 10-Q/A No. 1 for the three months ended September 30, 1998, are unaudited but include all adjustments which Mallinckrodt's management considers necessary for a fair presentation. These adjustments consist of normal recurring accruals except as discussed in Notes 1, 2 and 3 of the Notes to Condensed Consolidated Financial Statements. Interim results are not necessarily indicative of the results for the fiscal year. All references to years are to fiscal years ended June 30 unless otherwise stated. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts)
Quarter Ended Six Months Ended December 31, December 31, ------------------- ------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net sales $ 636.7 $ 607.3 $1,227.9 $1,061.9 Operating costs and expenses: Cost of goods sold 347.7 395.8 666.0 671.6 Selling, administrative and general expenses 182.2 177.1 354.6 296.1 Purchased research and development 306.3 Research and development expenses 37.4 36.7 71.3 64.4 Other operating income, net (5.3) (.8) (5.3) (2.3) ------- --------- --------- --------- Total operating costs and expenses 562.0 608.8 1,086.6 1,336.1 ------- --------- --------- --------- Operating earnings (loss) 74.7 (1.5) 141.3 (274.2) Interest and other nonoperating income (expense), net (.2) 2.3 .7 11.5 Interest expense (22.5) (29.0) (43.1) (47.3) ------- --------- --------- --------- Earnings (loss) from continuing operations before income taxes 52.0 (28.2) 98.9 (310.0) Income tax provision (benefit) 16.9 (8.8) 32.1 .3 ------- --------- --------- --------- Earnings (loss) from continuing operations 35.1 (19.4) 66.8 (310.3) Discontinued operations 14.5 22.6 14.5 -------- --------- --------- --------- Earnings (loss) before cumulative effect of accounting change 35.1 (4.9) 89.4 (295.8) Cumulative effect of accounting change (8.4) -------- --------- --------- --------- Net earnings (loss) 35.1 (4.9) 89.4 (304.2) Preferred stock dividends (.1) (.1) (.2) (.2) -------- --------- --------- --------- Available for common shareholders $ 35.0 $ (5.0) $ 89.2 $ (304.4) ======== ========= ========= ========= Basic earnings per common share: Earnings (loss) from continuing operations $ .49 (.27) $ .93 $ (4.28) Discontinued operations .20 .31 .20 Cumulative effect of accounting change (.11) -------- --------- --------- --------- Net earnings (loss) $ .49 $ (.07) $ 1.24 $ (4.19) ======== ========= ========= ========= Diluted earnings per common share: Earnings (loss) from continuing operations $ .49 $ (.27) $ .92 $ (4.28) Discontinued operations .20 .31 .20 Cumulative effect of accounting change (.11) -------- --------- --------- --------- Net earnings (loss) $ .49 $ (.07) $ 1.23 $ (4.19) ======== ========= ========= =========
(See Notes to Condensed Consolidated Financial Statements on pages 4 through 7.) CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share and per share amounts) December 31, June 30, 1998 1998 ------------- ---------- Assets Current assets: Cash and cash equivalents $ 57.2 $ 55.5 Trade receivables, less allowances of $19.4 at December 31 and $16.7 at June 30 482.9 486.3 Inventories 521.6 470.0 Deferred income taxes 110.4 95.2 Other current assets 65.9 61.5 Net current assets of discontinued operations 4.8 --------- --------- Total current assets 1,238.0 1,173.3 Investments and other noncurrent assets, less allowances of $8.0 at December 31 and $5.8 at June 30 151.1 154.5 Property, plant and equipment, net 899.7 894.9 Goodwill, net 967.5 987.0 Technology, net 349.7 364.3 Other intangible assets, net 270.5 282.1 Net noncurrent assets of discontinued operations 12.4 Deferred income taxes 4.8 4.6 --------- --------- Total assets $3,881.3 $3,873.1 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Short-term debt $ 415.8 $ 311.4 Accounts payable 190.8 215.0 Accrued liabilities 458.8 532.0 Income taxes payable 67.0 122.3 Deferred income taxes 3.6 1.4 --------- --------- Total current liabilities 1,136.0 1,182.1 Long-term debt, less current maturities 944.3 944.5 Deferred income taxes 405.8 396.2 Postretirement benefits 172.8 169.2 Other noncurrent liabilities and deferred credits 181.7 175.2 --------- --------- Total liabilities 2,840.6 2,867.2 --------- --------- Shareholders' equity: 4 Percent cumulative preferred stock 11.0 11.0 Common stock, par value $1, authorized 300,000,000 shares; issued 87,124,773 shares 87.1 87.1 Capital in excess of par value 314.8 315.2 Reinvested earnings 1,105.3 1,039.7 Accumulated other comprehensive expense (63.3) (72.6) Treasury stock, at cost (414.2) (374.5) --------- --------- Total shareholders' equity 1,040.7 1,005.9 --------- --------- Total liabilities and shareholders' equity $3,881.3 $3,873.1 ========= ========= (See Notes to Condensed Consolidated Financial Statements on pages 4 through 7.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Six Months Ended December 31, --------------------- 1998 1997 --------- --------- Cash Flows - Operating Activities Net earnings (loss) $ 89.4 $ (304.2) Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: Depreciation 58.9 58.8 Amortization 42.2 35.2 Postretirement benefits 3.6 6.1 Gains on asset disposals (40.1) (15.9) Deferred income taxes (3.1) (25.8) Write-off of purchased research and development 308.3 Sale of inventory stepped up to fair value at acquisition 75.4 Write-off of pre-operating costs 12.5 --------- --------- 150.9 150.4 Changes in operating assets and liabilities: Trade receivables 13.3 27.2 Inventories (49.3) (25.8) Other current assets 2.6 47.7 Accounts payable, accrued liabilities and income taxes payable, net (162.6) (193.6) Other noncurrent liabilities and deferred credits 4.5 23.0 Other, net (1.9) (1.4) --------- --------- Net cash provided (used) by operating activities (42.5) 27.5 --------- --------- Cash Flows - Investing Activities Capital expenditures (56.2) (70.0) Proceeds from asset disposals 70.7 29.5 Acquisition spending (1,786.4) Other, net 2.7 --------- --------- Net cash provided (used) by investing activities 14.5 (1,824.2) --------- --------- Cash Flows - Financing Activities Increase in short-term debt 107.5 1,121.1 Payments on long-term debt (7.8) (1.2) Issuance of Mallinckrodt common stock .6 13.1 Acquisition of treasury stock (46.8) (9.7) Dividends paid (23.8) (24.2) --------- --------- Net cash provided by financing activities 29.7 1,099.1 --------- --------- Increase (decrease) in cash and cash equivalents 1.7 (697.6) Cash and cash equivalents at beginning of period 55.5 808.3 --------- --------- Cash and cash equivalents at end of period $ 57.2 $ 110.7 ========= ========= (See Notes to Condensed Consolidated Financial Statements on pages 4 through 7.) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. On August 28, 1997, the Company acquired Nellcor Puritan Bennett Incorporated (Nellcor) through an agreement to purchase for cash all the outstanding shares of common stock of Nellcor. The aggregate purchase price of the Nellcor acquisition was approximately $1.9 billion. The acquisition was accounted for under the purchase method of accounting and, accordingly, the results of operations of Nellcor have been included in the Company's consolidated financial statements since September 1, 1997. The purchase price of the acquisition was allocated to the assets acquired and liabilities assumed based upon generally accepted accounting principles and estimated fair values at the date of acquisition. In connection with the Company's filing of a shelf registration for debt securities in December 1997, Mallinckrodt was engaged in discussions with the staff of the Securities and Exchange Commission (SEC) regarding the purchase price allocation related to the acquisition of Nellcor. On January 26, 1999, the Company concluded these discussions with the SEC and, as a result, has agreed to recalculate and restate the amount of purchase price allocated to purchased research and development under a methodology preferred by the SEC as articulated publicly in an SEC letter to the American Institute of Certified Public Accountants (AICPA) in September 1998. The amount of purchased research and development charged to operations in the first quarter of 1998 of $398.3 million has been reduced by $90 million to $308.3 million. Of this amount, $306.3 million related to ongoing operations and $2.0 million related to operations classified as discontinued operations. This one-time noncash acquisition-related cost had no tax benefit. A corresponding $90 million increase in goodwill is being amortized on a straight-line basis over the previously established 30-year amortization period beginning in September 1997. The sale of Nellcor inventories, which were stepped up to fair value in connection with the allocation of purchase price, resulted in charges of $56.6 million, $35.0 million net of taxes and $75.4 million, $46.7 million net of taxes for the quarter and six months ended December 31, 1997, respectively. Of the pre-tax amounts, $55.8 million and $74.4 million related to ongoing operations for the quarter and six months ended December 31, 1997, respectively, and the remainder related to operations classified as discontinued operations. In addition, results for the quarter ended December 31, 1997 included Nellcor integration charges of $6.7 million, $4.3 million net of taxes. During 1998, in connection with management's plan to integrate Mallinckrodt and Nellcor into one company, the Company recorded additional purchase liabilities of $50.1 million, $30.8 million net of related tax benefit, which were included in the acquisition cost allocation and related goodwill. The principal actions of the plan included Nellcor employee severance of $37.2 million, Nellcor employee relocation costs of $3.8 million and the elimination of contractual obligations of Nellcor, which had no future economic benefit, of $9.1 million. Approximately $34.9 million of cash expenditures have been incurred through December 31, 1998 and liabilities of $15.2 million related to the Nellcor integration plan remained in accrued liabilities at December 31, 1998. The majority of the remaining cash expenditures will occur in 1999 and, although none are expected, reductions in the estimated liability for these integration activities will be offset against the related goodwill. During 1998, the Company recorded a pretax charge of $19.1 million associated with exiting certain activities related to Mallinckrodt operations that were identified in the Nellcor integration plan. The charge included $17.1 million related to Mallinckrodt employee severance costs and facility exit costs of $2.0 million. Approximately $6.9 million of cash expenditures have been incurred through December 31, 1998. The majority of the remaining cash expenditures will occur in 1999 and no material adjustments to the original reserve are anticipated. 2. The Company sold certain chemical additive product lines in the second quarter of 1998. In the fourth quarter of 1998, the Company sold its catalyst business and Aero Systems division. In June 1998, the Company committed to the sale of the remaining chemical additives business of the catalysts and chemical additives division, and closing of the sale occurred on July 31, 1998. The transaction resulted in a $37.0 million gain on sale, $22.6 million net of taxes, which was included in discontinued operations for the six months ended December 31, 1998. Earnings from operations were zero for the one month of operations. Included in prior year discontinued operations are the earnings from operations of the catalysts and chemical additives and Aero Systems divisions, which included $6.9 million of after-tax earnings from operations, $2.6 million of after-tax acquisition accounting charges, and a gain of $10.2 million after taxes resulting from the sale of chemical additive product lines. 3. The Company elected to early adopt the provisions of the American Institute of Certified Public Accountants SOP 98-5, "Reporting on the Costs of Start-Up Activities" (SOP 98-5), in its financial statements for the year ended June 30, 1998. The effect of adoption of SOP 98-5 was to record a charge of $8.4 million, net of taxes, for the cumulative effect of an accounting change to expense costs that had previously been capitalized prior to July 1, 1997. 4. On October 6, 1994, Augustine Medical, Inc. (Augustine) commenced a patent infringement litigation against Mallinckrodt Inc. and its wholly owned subsidiary, Mallinckrodt Medical, Inc. (collectively, the Company) in the U.S. District Court for the District of Minnesota. Specifically, Augustine alleged that the Company's sale of all five models of its convective warming blankets infringes certain claims of one or more of Augustine's patents. The Company filed counterclaims against Augustine in connection with the above actions alleging unfair competition, antitrust violations, and invalidity of the asserted patents, among other things. The liability phase of the case was tried to a jury in August 1997 and the verdict was that the Company's blankets infringe certain Augustine patents under the doctrine of equivalents, but do not literally infringe the patents. There was also a finding of no willful infringement. On September 22, 1997, the jury awarded damages in the amount of $16.8 million for the period ended September 30, 1997 and the judge put in place an injunction which stopped the Company from manufacturing and selling blankets in the United States. The Company appealed the jury verdicts of liability and damages to the Court of Appeals for the Federal Circuit (a special court for patent appeals that does not involve a jury). The Court of Appeals has stayed the injunction pending the outcome of the Company's appeal, and the Company continues to sell and manufacture blankets in the United States. With the advice of outside counsel, the Company believes there was insufficient evidence of equivalents presented and, consequently, for this and other reasons the verdicts were in error. The Company is working vigorously in the Appeals Court to overturn the verdicts and believes that it has strong arguments that its blankets do not infringe Augustine's patents. Based on all the facts available to management, the Company believes that it is reasonably possible but not probable that the jury verdict and the trial court injunction will be upheld on appeal. If damages were assessed in the same manner as determined by the jury for sales subsequent to September 30, 1997 plus interest on the estimated total, the total liability would approximate $27.5 million at December 31, 1998. The Company has not recorded an accrual for payment of the damages, because an unfavorable outcome in this litigation is, in management's opinion, reasonably possible but not probable. See Part II, Item 1 "Legal Proceedings" for additional information about this and related claims by Augustine against the Company. 5. The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, the Company is in varying stages of active investigation or remediation of alleged or acknowledged contamination at 23 currently or previously owned or operated sites and at 15 off- site locations where its waste was taken for treatment or disposal. See Part II, Item 1 "Legal Proceedings" for additional information about legal proceedings involving the Company. Once the Company becomes aware of its potential environmental liability at a particular site, the measurement of the related environmental liabilities to be recorded is based on an evaluation of currently available facts such as the extent and types of hazardous substances at a site, the range of technologies that can be used for remediation, evolving standards of what constitutes acceptable remediation, presently enacted laws and regulations, engineers and environmental specialists' estimates of the range of expected clean-up costs that may be incurred, prior experience in remediation of contaminated sites, and the progress to date on remediation in process. While the current law potentially imposes joint and several liability upon each party at a Superfund site, the Company's contribution to clean up these sites is expected to be limited, given the number of other companies which have also been named as potentially responsible parties and the volumes of waste involved. A reasonable basis for apportionment of costs among responsible parties is determined and the likelihood of contribution by other parties is established. If it is considered probable that the Company will only have to pay its expected share of the total clean-up, the recorded liability reflects the Company's expected share. In determining the probability of contribution, the Company considers the solvency of the parties, whether responsibility is disputed, existence of an allocation agreement, status of current action, and experience to date regarding similar matters. Current information and developments are regularly assessed by the Company, and accruals are adjusted on a quarterly basis, as required, to provide for the expected impact of these environmental matters. The Company has established accruals only for those matters that are in its view probable and estimable. Based upon information currently available, management believes that existing accruals are sufficient to satisfy any known environmental liabilities, and that it is not reasonably possible at this time that any additional liabilities will result from the resolution of these matters that would have a material adverse effect on the Company's consolidated results of operations or financial position. 6. The following table sets forth the computation of basic and diluted earnings (loss) from continuing operations per common share (in millions, except shares and per share amounts).
Quarter Ended Six Months Ended December 31, December 31, --------------------- --------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Numerator: Earnings (loss) from continuing operations $ 35.1 $ (19.4) $ 66.8 $(310.3) Preferred stock dividends (.1) (.1) (.2) (.2) --------- --------- --------- -------- Numerator for basic and diluted earnings (loss) per share-- income (loss) available to common shareholders $ 35.0 $ (19.5) $ 66.6 $(310.5) ========= ========= ========= ======== Denominator: Denominator for basic earnings (loss) per share--weighted- average shares 71,349,208 72,957,721 72,133,170 72,716,625 Potential dilutive common shares-- employee stock options 229,031 157,899 ---------- ---------- ---------- ---------- Denominator for diluted earnings (loss) per share--adjusted weighted-average shares 71,578,239 72,957,721 72,291,069 72,716,625 ========== ========== ========== ========== Basic earnings (loss) from continuing operations per common share $ .49 $ (.27) $ .93 $ (4.28) ======== ========= ======== ========= Diluted earnings (loss) from continuing operations per common share $ .49 $ (.27) $ .92 $ (4.28) ======== ========= ======== =========
The diluted share bases for the quarter and six months ended December 31, 1997 excluded incremental shares related to employee stock options of 777,875 and 734,493, respectively. These shares were excluded due to their antidilutive effect as a result of the Company's loss from continuing operations during these periods. 7. The components of inventory included the following as of December 31, 1998: (In millions) Raw materials and supplies $ 231.4 Work in process 51.0 Finished goods 239.2 -------- $ 521.6 ======== 8. The Company has authorized and issued 100,000 shares, 98,330 outstanding at December 31, 1998, of par value $100, 4 percent cumulative preferred stock. The Company has authorized 1,400,000 shares, par value $1, of series preferred stock, none of which was outstanding during 1999 and 1998. Shares included in treasury stock were: December 31, June 30, 1998 1998 ------------ ---------- Common stock 15,787,427 13,941,638 4 Percent cumulative preferred stock 1,670 1,670 9. Common shares reserved at December 31, 1998 consisted of the following: Exercise of common stock purchase rights 82,090,855 Exercise of stock options and granting of stock awards 10,753,509 ---------- 92,844,364 ========== 10. Supplemental cash flow information for the six months ended December 31 included: (In millions) 1998 1997 ------ ------ Interest paid $ 42.8 $ 39.2 Income taxes paid 106.0 57.8 Noncash investing and financing activities: Assumption of liabilities related to an acquisition 458.1 Issuance of stock for investment plan match 6.0 9.8 Restricted stock and directors' plan awards .1 10.1 11. Effective July 1, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes new rules for the reporting and display of comprehensive income and its components. Comprehensive income includes net income and other comprehensive income/(expense). Other comprehensive income/(expense) includes foreign currency translation adjustments and unrealized gains and losses on investments which prior to adoption were reported separately in shareholders' equity. A comparison of comprehensive income and its components follows: (In millions)
Quarter Ended Six Months Ended December 31, December 31, --------------------- --------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net earnings (loss) $ 35.1 $ (4.9) $ 89.4 $(304.2) Other comprehensive income/(expense): Currency translation adjustment (8.5) (8.8) 12.7 (15.8) Net unrealized loss on investment securities (1.7) (4.8) (5.4) (1.4) Tax benefit related to items of other comprehensive income .6 2.0 -------- -------- -------- -------- Other comprehensive income (expense), net of tax (9.6) (13.6) 9.3 (17.2) -------- -------- -------- -------- Total comprehensive income (loss) $ 25.5 $ (18.5) $ 98.7 $(321.4) ======== ======== ======== ========
As of December 31, 1998, the cumulative balances for currency translation adjustment loss and the unrealized loss on investment securities were $58.4 million and $4.9 million, respectively. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. (1) All references to years are to fiscal years ended June 30 unless otherwise stated. Certain amounts in the prior year have been reclassified to conform to the current year presentation. All earnings per share amounts are calculated on a diluted basis unless otherwise stated. Results of Operations Overview - -------- As disclosed in previous filings, in connection with the Company's filing of a shelf registration for debt securities, Mallinckrodt was engaged in discussions with the staff of the SEC regarding the purchase price allocation related to the acquisition of Nellcor. The Company has concluded these discussions with the SEC and, as a result, has agreed to recalculate and restate the amount of purchase price allocated to purchased research and development under a methodology preferred by the SEC as articulated publicly in an SEC letter to the AICPA in September 1998. The amount of purchased research and development charged to operations in the first quarter of 1998 of $398.3 million has been reduced by $90 million to $308.3 million. A corresponding $90 million increase in goodwill is being amortized on a straight-line basis over the previously established 30-year amortization period beginning in September 1997. The effects of this change on previously reported consolidated financial statements are shown in the Company's Annual Report on Form 10-K/A No. 1 for the year ended June 30, 1998, and the effects of this change on previously reported condensed consolidated financial statements are shown in the Company's Quarterly Report on Form 10-Q/A No. 1 for the three months ended September 30, 1998. Management's Discussion and Analysis of Financial Condition and Results of Operations reflects these adjustments in all the periods of 1999 and 1998 presented and discussed below. - ----------------------------------- (1) CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Our discussion and analysis in this quarterly report contain some forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts, but rather give our current expectations or forecasts of future events. Forward-looking statements may be identified by their use of words such as "plans," "expects," "will," "anticipates," "believes," and other words of similar meaning. Such statements may address, among other things, the Company's strategy for growth, product development, regulatory approvals, the outcome of contingencies such as legal proceedings, market position, expenditures, and financial results. Forward-looking statements are based on current expectations of future events. Such statements involve risks and uncertainties and actual results could differ materially from those discussed. Among the factors that could cause actual results to differ materially from those projected in any such forward-looking statements are as follows: the effect of business and economic conditions; the impact of competitive products and continued pressure on prices realized by the Company for its products; constraints on supplies of raw materials used in manufacturing certain of the Company's products; capacity constraints limiting the production of certain products; difficulties or delays in the development, production, testing, and marketing of products; difficulties or delays in receiving required governmental or regulatory approvals; market acceptance issues, including the failure of products to generate anticipated sales levels; difficulties in rationalizing acquired businesses and in realizing related cost savings and other benefits; the effects of and changes in trade, monetary, and fiscal policies, laws, and regulations; foreign exchange rates and fluctuations in those rates; the costs and effects of legal and administrative proceedings, including environmental proceedings and patent disputes involving the Company; difficulties or delays in addressing "Year 2000" problems in the Company's operations, or the inability of a major supplier or customer to continue operations due to such problems (as discussed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations); and the risk factors reported from time to time in the Company's SEC reports. The Company undertakes no obligation to update any forward-looking statements as a result of future events or developments. General - ------- The Company recorded earnings from continuing operations of $35.1 million, or 49 cents per share for the quarter ended December 31, 1998. Earnings from continuing operations for the same quarter last year were $19.5 million, or 26 cents per share, before charges related to the acquisition and integration of Nellcor. With these charges, the Company recorded a loss from continuing operations in the second quarter of 1998 of $19.4 million, or 27 cents per share. Acquisition and integration charges for the quarter ended December 31, 1997 were composed of a cost of goods sold charge of $55.8 million, $34.6 million net of taxes, related to the sale of inventories stepped up to fair value, and a charge for integration activities of $6.7 million, $4.3 million net of taxes. The acquisition of Nellcor was accounted for under the purchase method of accounting and, accordingly, the results of operations of Nellcor have been included in the Company's consolidated financial statements since September 1, 1997. The purchase price of the acquisition was allocated to the assets acquired and liabilities assumed based upon generally accepted accounting principles and estimated fair values at the date of acquisition. Actual revenues of some significant acquired in-process projects have experienced shortfalls when compared to revenue estimates developed as of the acquisition date. These shortfalls are primarily attributable to delays in receiving regulatory clearance to market and/or problems with production ramp up activities which often occur at the early stages of manufacturing a new product. Such revenue shortfalls experienced to date are not indicative of any expected inability of these products to meet customer needs or their long-term revenue expectations. These delays/problems can have an impact on sales for the first several quarters versus the plan established at the date of acquisition because of the typically steep increase in sales which occurs with the introduction of a new product; however, such delays are usually inconsequential over the life of the product. Thus, management believes the delays/problems experienced to date of some significant products will not reduce the expected long-term revenues of these products, but only the timing of the receipt of these revenues. Net earnings for the second quarter of 1999 were $35.1 million, or 49 cents per share as compared to a net loss of $4.9 million, or 7 cents per share for the same period of 1998. The net loss for the second quarter in 1998 included earnings from discontinued operations of $14.5 million, or 20 cents per share representing a gain on the sale of a chemical additives business and after-tax earnings from operations for the period associated with the catalysts and chemical additives and Aero Systems divisions which were reclassified to discontinued operations in 1998. Net sales for the quarter ended December 31, 1998 were $636.7 million or 5 percent greater as compared to $607.3 million for the same period a year earlier. For the six months ended December 31, 1998, the Company recorded earnings from continuing operations of $66.8 million, or 92 cents per share. For the same period of 1998, the Company recorded a loss from continuing operations of $310.3 million, or a loss of $4.28 per share. The loss included pretax acquisition and integration charges of $387.4 million associated with the Nellcor acquisition. These charges included a one-time charge of $306.3 million for the write- off of purchased research and development at the date of acquisition, which had no offsetting tax benefit, a cost of goods sold charge of $74.4 million, $46.1 million net of taxes recognized during the first and second quarters related to the sale of inventories stepped up to fair value, and a charge related to integration activities of $6.7 million, $4.3 million net of taxes recorded in the second quarter. Excluding the acquisition and integration charges, earnings from continuing operations for the first half of 1998 were $46.4 million, or 63 cents per share. Net earnings for the first six months of 1999 were $89.4 million, or $1.23 per share. This result included a gain of $22.6 million, or 31 cents per share, on the sale of the remaining chemical additives business of the catalysts and chemical additives division which was reclassified to discontinued operations in 1998. For the first half of 1998, the Company recorded a net loss of $304.2 million, or $4.19 per share. In addition to the loss from continuing operations in 1998 discussed above, the Company recorded earnings from discontinued operations of $14.5 million, or 20 cents per share, representing a gain on the sale of a chemical additives business and after-tax earnings from operations associated with the catalysts and chemical additives and Aero Systems divisions which were reclassified to discontinued operations. In addition, the net loss for the period ended December 31, 1997 included an after-tax charge of $8.4 million, or 11 cents per share related to the cumulative effect of an accounting change discussed in Note 3 of the Notes to Condensed Consolidated Financial Statements. Net sales for the first half of 1999 were $1.23 billion, up 16 percent from the $1.06 billion in the same period last year, which included only four months of operations of Nellcor. Sales to customers outside the United States during the six months ended December 31, 1998 were $395 million, or 32 percent of total sales. A comparison of sales and operating earnings follows: (In millions)
Quarter Ended Six Months Ended December 31, December 31, --------------------- --------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net sales Respiratory $ 290.3 $ 275.7 $ 546.5 $ 417.6 Imaging 195.2 189.1 378.1 366.4 Pharmaceuticals 151.2 142.5 303.3 277.9 --------- --------- --------- --------- $ 636.7 $ 607.3 $1,227.9 $1,061.9 ========= ========= ========= ========= Operating earnings (loss) Respiratory $ 34.3 $ 29.0 $ 56.7 $ 51.2 Imaging 28.8 26.0 59.5 49.1 Pharmaceuticals 17.1 13.1 37.6 25.5 --------- --------- --------- --------- 80.2 68.1 153.8 125.8 Corporate expense (5.5) (7.1) (12.5) (12.6) --------- --------- --------- --------- 74.7 61.0 141.3 113.2 Acquisition and integration charges (62.5) (387.4) --------- --------- --------- --------- $ 74.7 $ (1.5) $ 141.3 $ (274.2) ========= ========= ========= =========
Operating earnings for the quarter ended December 31, 1998 were $74.7 million, which is a 22 percent improvement over the $61.0 million recorded in the same period of last year before the inclusion of acquisition and integration charges associated with the acquisition of Nellcor which were discussed previously. Operating earnings for the first half of 1999 were $141.3 million, or 25 percent greater than those reported for the first half of 1998 before acquisition and integration charges. The Respiratory Group, of which Nellcor is now a part, had sales for the quarter ended December 31, 1998 of $290.3 million, or 5 percent greater than the sales recorded for the same period last year. The year-to-year sales improvement was attributable to volume growth of 6 percent or $18 million offset by price erosion of one percent. The volume growth of pulse oximetry, ventilation, service, blood analysis, and anesthesiology and respiratory disposables as a group exceeded 12 percent. Oxygen therapy, sleep, portable ventilation and other product lines had a volume decline primarily due to delayed product introductions and competitive pressures associated with cost reimbursement on existing products in these businesses. These pressures will continue until the new products are introduced over the next several quarters. Operating earnings of this Group for the second quarter were $34.3 million, or 18 percent greater than the $29.0 million reported in the comparable period of 1998. The year- to-year improvement is primarily attributable to the higher sales volumes which occurred in those product lines generating the highest margins. For the first six months of 1999, Respiratory Group sales increased 31 percent over the same period of last year. The prior year included only four months of Nellcor sales and operating results. The Group's sales increase of $128.9 million was attributable to volume growth of 33 percent, of which 24 percent was due to the inclusion of only four months of Nellcor revenue in 1998 and 14 percent was due to volume growth for pulse oximetry, ventilation, service, blood analysis, and anesthesiology and respiratory disposables as group, partially offset by price declines and lower volumes in sleep, portable ventilation and other product lines for the reasons discussed above. Operating earnings for the Respiratory Group for the first half of 1999 were $56.7 million, or 11 percent above the comparable prior year period. In spite of the benefits of increased sales, the earnings comparison with prior year was negatively impacted by two months of additional expenses, including additional amortization of intangibles and goodwill of $8.4 million. The Imaging Group had sales for the second quarter of $195.2 million, 3 percent or $6.1 million above the comparable prior year results. The sales improvement was primarily attributable to a $9.3 million increase in sales of nuclear medicine products, which more than offset the decline in x-ray contrast media revenues. Operating earnings for the three-month period ended December 31, 1998 were $28.8 million, or 11 percent above the comparable prior year period which is primarily attributable to volume growth and increased manufacturing efficiencies, partially offset by higher rebates. The Imaging Group's year-to-date sales were $378.1 million, or 3 percent above the sales for the same six-month period last year. The growth is primarily attributable to increased sales of nuclear medicine products ($16 million). Operating earnings for the same period were $59.5 million, which is a 21 percent improvement as compared to the prior year. The operating earnings improvement over prior year is driven by the same factors noted for the second quarter. Although price declines in the x-ray contrast media portion of the business were a less significant factor in the Group's results for the first half as compared to price declines experienced in 1998 and 1997, it is probable that this will be a factor having a greater impact on results in the third and fourth quarters of 1999. The demand for price discounts is expected to increase and reduce profitability in 1999, but at a lower rate than was experienced in 1998 and 1997. The Pharmaceuticals Group's sales for the quarter ended December 31, 1998 were $151.2 million, or 6 percent above sales in the comparable prior year period of $142.5 million. The sales increase of $8.7 million was primarily attributable to volume increases in narcotics and drug chemicals of $7.3 million and $2.1 million, respectively, offset by volume declines in acetaminophen. Price increases generated 3 percent, or one half of the sales growth. Operating earnings for this Group were $17.1 million, or 31 percent greater than those recorded in the comparable period last year. The operating earnings improvement was primarily attributable to increased sales volumes of higher margin narcotic products and price increases. The Pharmaceuticals Group's sales for the six-month period ended December 31, 1998 were $303.3 million, or 9 percent above the revenues generated during the comparable period last year. The sales increase of $25.4 million was primarily attributable to volume increases in narcotics and drug chemicals of $28.5 million, which is an increase of 23 percent. Sales volumes of acetaminophen and laboratory and microelectronic chemicals declined 10 percent and 4 percent, respectively. The decline in acetaminophen sales is due to a late flu season in the U.S. Price increases generated a 3 percent increase in sales for the Group when compared with the first half of last year. Corporate Matters Corporate expense is down 23 percent and 1 percent for the second quarter and first half of the year compared to the respective prior year periods. Interest and other nonoperating income, net was $.7 million for the first six months of 1999, and $11.5 million for the same period last year. In the prior year, the Company generated interest income on cash proceeds from 1997 divestitures invested in interest bearing securities. These cash equivalents were utilized to acquire Nellcor at the end of August 1997. The Company's effective tax rates were 32.5 percent and 31.2 percent for the three-month periods ended December 31, 1998 and 1997, respectively. The Company's effective tax rate for the first half of 1999 was 32.5 percent. For the first six months of the prior year, the Company had a loss from continuing operations of $310.3 million including the one-time noncash write-off of purchased research and development of $306.3 million, which had no tax benefit. Financial Condition The Company's financial resources are expected to continue to be adequate to support existing businesses. Since June 30, 1998, cash and cash equivalents increased $1.7 million. Operations utilized $42.5 million of cash, while capital spending totaled $56.2 million. The Company received $70.7 million in proceeds from asset disposals. The Company's current ratio at December 31, 1998 was 1.1:1. Debt as a percentage of invested capital was 56.7 percent. In December 1997, the Company filed a $500 million shelf debt registration statement which has not, as yet, been declared effective. At December 31, 1998, the Company has a $1.0 billion private placement commercial paper program. The program is backed by a $1.0 billion revolving credit facility expiring September 12, 2002. The revolving credit facility was reduced from $1.6 billion to $1.0 billion in September 1998. There was no borrowing outstanding under the revolving credit facility at December 31, 1998. Commercial paper borrowings under this program were $390.5 million as of December 31, 1998. Non-U.S. lines of credit totaling $154.1 million were also available, and borrowings under these lines amounted to $20.4 million at December 31, 1998. The non-U.S. lines are cancelable at any time. The Company's Board of Directors previously authorized repurchase of 47 million shares of common stock and additional repurchases not to exceed cash outlays of $250 million. Share repurchases under these authorizations have totaled 38.9 million shares, including 2.1 million shares during the six months ended December 31, 1998. Estimated capital spending for the year ending June 30, 1999 is approximately $140 million. Year 2000 Update - ---------------- The Year 2000 issue is the result of date-sensitive devices, systems and computer programs that were deployed using two digits rather than four to define the applicable year. Any such technologies may recognize a year containing "00" as the year 1900 rather than the year 2000. If left unaddressed, this could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process transactions or engage in similar normal business activities. The Company has completed its assessment of its information systems which support business applications and is in the final stages of modifying or replacing and testing those portions of the software that are required. The assessment of products sold to customers has also been completed. Compliance status and applicable remediation steps for known currently and previously marketed products have been communicated via the Internet using a dedicated web page. Development and testing of modifications necessary to achieve remediation for such products are substantially complete, and such modifications are available to customers in accordance with the above communicated remediation steps. Assessment and remediation of research and development, manufacturing process and facility management systems are well underway. All of these modification, replacement or conversion efforts should be substantially complete during the first quarter of calendar 1999, which is prior to any anticipated significant impact on Mallinckrodt's operations. The Company is also assessing the readiness of its key suppliers and business partners to be Year 2000 compliant. Information requests have been distributed and replies are being evaluated. To supplement these evaluations, the Company plans to perform more detailed reviews of certain of its key suppliers and business partners. To date, no matters have been identified from the replies received that would appear to materially affect the operations of the Company's businesses. To further recognize potential adverse impact, the Company is developing operating contingency plans to address unanticipated interruptions that could occur in processes, systems and devices that have been assessed, remediated and considered Year 2000 ready by Mallinckrodt and its key suppliers and business partners. Such operating contingency plans are expected to be substantially complete before June 30, 1999. Both internal and external resources are being used to reprogram or replace non-compliant technologies, and to appropriately test Year 2000 modifications. Such modifications are being funded through operating cash flows. The project to address Year 2000 has been underway since February 1997. The pretax costs incurred for this effort were approximately $7 million and $1 million in 1998 and 1997, respectively. The Company anticipates expenses of approximately $13 million will be incurred in 1999 to substantially complete the effort. The cost of the project and the date on which the Company believes it will substantially complete Year 2000 modifications are based on management's best estimates. Such estimates were derived using software surveys and programs to evaluate calendar date exposures and numerous assumptions of future events, including the continued availability of certain resources and other factors. Because none of these estimates can be guaranteed, actual results could differ materially from those anticipated. Specific factors that might cause such differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. If the modifications and conversions are not made or are not completed timely and operating contingency plans developed do not work as anticipated, the result could be an interruption, or a failure, of certain normal business activities or operations. Such failures could materially impact and adversely affect the Company's results of operations, liquidity and financial condition. Readers are cautioned that forward looking statements contained in this Year 2000 Update should be read in conjunction with the Company's disclosures under the heading "CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995" on page 7. European Monetary Union (EMU) - ----------------------------- The euro was introduced on January 1, 1999, at which time the eleven participating EMU member countries established fixed conversion rates between their existing currencies (legacy currencies) and the euro. The legacy currencies will continue to be valid as legal tender through June 30, 2002; thereafter, the legacy currencies will be canceled and euro bills and coins will be used for cash transactions in the participating countries. The Company's European sales offices and various manufacturing and distribution facilities affected by the euro conversion have established plans to address the systems issues raised by the euro currency conversion. The Company is cognizant of the potential business implications of converting to a common currency; however, it is unable to determine, at this time, the ultimate financial impact of the conversion on its operations, if any, given that the impact will be dependent upon the competitive situations which exist in the various regional markets in which the Company participates and the potential actions which may or may not be taken by the Company's competitors and suppliers. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company has determined that its market risk exposures, which arise primarily from exposures to fluctuations in interest rates and foreign currency rates, are not material to its future earnings, fair value and cash flows. PART II. OTHER INFORMATION Item 1. Legal Proceedings. The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, in connection with laws and regulations pertaining to the protection of the environment, the Company is actively involved in the investigation or remediation of alleged or acknowledged contamination at 23 currently or previously owned or operated sites and at 15 off- site locations where its waste was taken for treatment or disposal. These actions are in various stages of development and generally include demands for reimbursement of previously incurred costs, or costs for future investigation and/or for remedial actions. In many instances, the dollar amount of the claim is not specified. For some sites, other potentially responsible parties may be jointly and severally responsible, along with the Company, to pay for any past remediation and other related expenses. For other sites, the Company may be solely responsible for remediation and related costs. The Company anticipates that a portion of these costs will be covered by insurance or third party indemnities. A number of the currently pending matters relate to historic and formerly owned operations of the Company. Each of these matters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. Previously Reported Matters - --------------------------- The following is a brief discussion of material developments in proceedings previously reported in the Company's Annual Report on Form 10-K for the year ended June 30, 1998, as amended by the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. Environmental Matters - --------------------- Animal Health Business Properties - Schering-Plough Corporation has notified the Company that it intends to pursue investigations at the South American facilities that were transferred as part of the sale of the Company's animal health business. The Company is currently evaluating whether any investigations are necessary. Orrington, ME - The Company has completed additional supplemental work which was required before submitting the final Site Investigation Plan to the EPA and the State of Maine. The Company submitted the supplemental Site Investigation Plan on December 29, 1998 to the EPA and the State of Maine. St. Louis, MO/CT Decommissioning - The Company met with the Nuclear Regulatory Commission (NRC) in December 1998 to discuss the Phase I Decommissioning and Decontamination Plan (Phase I Plan). The NRC published notice in the Federal Register regarding the Company's submission of the Phase I Plan. The Company expects any comments on the Phase I Plan in February. The Company requested an extension of time to submit the Phase II Decommissioning and Decontamination Plan (Phase II Plan) to the NRC. This Phase II Plan is now due in June 2000. The NRC asked the Company to submit a financial assurance plan for the Phase I Plan and the Phase II Plan. The financial assurance plan is due April 1999. Raleigh, NC - The Company has worked with federal and state agencies to complete the Resource Conservation Recovery Act Facility Investigation (RFI) and identified certain Solid Waste Management Units (SWMUs). Final approval of the RFI was granted and field work has been completed. The Company's Phase I RFI report will be submitted to the North Carolina Department of Environment, Health and Natural Resources in mid-February 1999. Springville, UT - The parties met with the Utah Department of Environmental Quality (DEQ) in January 1998 to update DEQ on the progress of the off-site remedial activities and the progress of RCRA Corrective Action activities at the site. The Ensign-Bickford Company submitted the Revised RFI Work Plan (Plan) to the DEQ in December 1998. This Plan is undergoing review by the DEQ. Approval is anticipated in late February 1999. The allocation consultant hired by the parties has been reviewing documents in connection with historic practices at the site in order to assist the parties in developing a final allocation. The allocation consultant is going to prepare company profiles for all parties at the site. These profiles will be used by the parties to negotiate a final allocation. In October 1996, a resident with property bordering the Springville site filed suit against Ensign Bickford Industries (EBI) in the U.S. District Court for the District of Utah (Don Henrichsen, et al v. The ---------------------------- Ensign-Bickford Company, et al) alleging nuisance and trespass for - ------------------------------ contamination that allegedly migrated onto the resident's property. On January 31, 1997, the Company was added as a defendant. Depositions are being completed and expert reports have been generated. Plaintiffs have made settlement overtures, but the Company has rejected such proposals. A trial date has been set for this matter in August 1999. The Ensign-Bickford Company (EBCo) and the Company received notice of a threatened lawsuit in this matter by Howard and Kay Ruff. EBCo and the Company received a draft complaint which alleged property damage and personal injury from using allegedly contaminated water for irrigation purposes. EBCo, the Company and the plaintiffs have entered into a tolling agreement and are discussing these potential claims. The lawsuit has not been filed to date. The Company has also received another letter in connection with this matter from the children of David Nemelka and Kent Stephens who had previously settled a lawsuit with the Company and EBCo. In this letter, counsel for the children of these individuals has made a demand for payment to address various illnesses alleged to have been caused by contaminants originating at the Springville, Utah plant site. The Company and EBCo are currently evaluating these claims. Other Litigation - ---------------- OPTISON(*) Patent Litigation - Sonus Litigation - The Company anticipates that reexamination proceedings in the United States Patent Office will conclude shortly with the confirmation of patentability of some of the claims in the two Sonus Pharmaceuticals, Inc. patents under reexamination. Thus, the District Court has been asked to lift the previously granted stay so that pretrial discovery can resume. The Company will continue to challenge the validity of the Sonus patents in this litigation. Nycomed Litigation - On October 13, 1998, Mallinckrodt Medical B.V., through counsel, appeared in court in response to the legal action filed by Nycomed Imaging AS in the District Court of The Hague, the Netherlands. The other named defendants, Mallinckrodt Medical GmbH, Mallinckrodt Medizintechnik GmbH, Mallinckrodt Chemical GmbH, Mallinckrodt Medical Holdings GmbH, Mallinckrodt Chemical Holdings GmbH, and Molecular Biosystems Inc., were not as yet served and did not appear. For Nycomed to proceed with the action, it must formally serve the six unserved defendants outside the Netherlands under The Hague Convention. Augustine Medical, Inc. - United States - A hearing before the Court of Appeals for the Federal Circuit was held on December 9, 1998. A decision by the Court of Appeals is expected in the second quarter of calendar year 1999. Europe - Trial of this action before the District Court of The Hague occurred on December 4, 1998. A decision by the Court is expected in February 1999. Item 2. Changes in Securities and Use of Proceeds. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. The following matters were voted upon at the Annual Meeting of Shareholders held on October 21, 1998, and received the votes set forth below: 1. All of the following persons nominated were elected to serve as directors and received the number of votes set opposite their names: For 3-year Terms Votes For Votes Withheld ---------------- ---------- -------------- Roberta S. Karmel 58,948,380 82,693 William L. Davis 58,951,954 79,119 Brian M. Rushton 58,947,638 83,435 For a 1-year Term ----------------- Daniel R. Toll 58,945,767 85,306 In addition, the holders of 869,149 shares withheld authority to vote for all of the above-named nominees. 2. A proposal to ratify the appointment of independent public accountants received 59,640,182 votes FOR and 162,938 votes AGAINST, with 97,102 abstentions. 3. A proposal to amend the Restated Certificate of Incorporation and By-Laws of the Company to reduce the minimum required number of directors from 10 to 8 received 55,529,023 votes FOR and 4,220,526 AGAINST, with 150,673 abstentions. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description - ------- ---------------------------------------------------------- 3.1 (a) Restated Certificate of Incorporation of Mallinckrodt, dated June 22, 1994 (filed with this electronic submission) 3.1 (b) Certificate of Amendment of the Certificate of Incorporation of Mallinckrodt, dated October 16, 1996 (filed with this electronic submission) 3.1 (c) Certificate of Amendment of the Certificate of Incorporation of Mallinckrodt, dated October 30, 1998 (filed with this electronic submission) 3.2 By-Laws of Mallinckrodt as amended through October 21, 1998 (filed with this electronic submission) 10.30 Agreement, dated November 9, 1998, between Mallinckrodt and Mack G. Nichols (filed with this electronic submission) (1) 27 Financial data schedule for the quarter ended December 31, 1998 (filed with this electronic submission) - ---------------------- (1) Management contract or compensatory plan required to be filed pursuant to Item 601 of Regulation S-K. (b) Reports on Form 8-K. Not applicable. * * * * * * * * * * * * * * 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. Mallinckrodt Inc. - ----------------------------- Registrant By: s/s MICHAEL A. ROCCA By: /s/ DOUGLAS A. MCKINNEY ------------------------- -------------------------- Michael A. Rocca Douglas A. McKinney Senior Vice President and Vice President and Controller Chief Financial Officer Date: February 15, 1999 EX-3.1(A) 2 Exhibit 3.1(a) RESTATED CERTIFICATE OF INCORPORATION OF Mallinckrodt Group Inc. ------- Under Section 807 of the Business Corporation Law Pursuant to Section 807 of the Business Corporation Law, the undersigned hereby certify: I. That the name of the corporation is Mallinckrodt Group Inc. and the name under which it was formed is International Agricultural Corporation. II. That the Certificate of Incorporation of the corporation (under the name of International Agricultural Corporation) was originally filed under the Business Corporation Law of the State of New York by the Department of State, Albany, New York on the 14th day of June, 1909. III. That Article Fourth of the Certificate of Incorporation of Mallinckrodt Group Inc. is hereby amended to change the address to which the secretary of state shall mail a copy of any process against the corporation served upon him. IV. That the above-described amendment to the Certificate of Incorporation was authorized by vote of the board of directors of the corporation without a vote of the shareholders, as authorized by Section 803(b)(2) of the Business Corporation Law. V. That the text of the Certificate of Incorporation of said Mallinckrodt Group Inc. is hereby restated as amended to read as herein set forth in full: CERTIFICATE OF INCORPORATION of Mallinckrodt Group Inc. We, the undersigned, all being persons of full age and at least two-thirds being citizens of the United States and at least one of us a resident of the State of New York, desiring to form a stock corporation pursuant to the Business Corporation Law of the State of New York, do hereby make, sign, acknowledge and file this certificate for that purpose, as follows: FIRST: The name of the corporation is Mallinckrodt Group Inc. SECOND: The purposes of the Corporation are as follows: 1. To manufacture, mine, extract, process, construct, develop, assemble, and produce in any way, to sell, lease, supply, export, import, and store, transport, distribute, market or dispose of in any way, to purchase, lease, and acquire in any way, to own, operate, experiment with, deal or trade in, finance, provide services for or in respect of, and use in any way minerals, metals, chemicals, fertilizers, foods, beverages, timber and other forestry products, energy sources, materials, equipment, apparatus, appliances, devices, structures, facilities, processes, information, tangible and intangible property, services and systems of every kind, nature and description, in any part of the world for any application or purpose whatsoever, including but not limited to industrial, mining, agricultural, consumer, defense, governmental, scientific, educational, cultural, financial, recreational, transportation, construction, publication, and communication applications or purposes. 2. To conduct studies and research and development, and to engage in any other activity relating to the development, application and dissemination of information concerning science, technology, and other fields of endeavor. 3. To acquire by purchase, lease, subscription or otherwise all or any part of any interest in the property, good will, business, franchises or assets of any corporation, association, firm or individual and undertake either wholly or in part the liabilities of any corporation, association, firm or individual and to take up any business as a going concern or otherwise (a) by purchase of the assets thereof wholly or in part; (b) by acquisition of the capital stock or any part thereof; or (c)in any other manner, and to pay for the same in cash or in the stock or bonds of the Corporation or otherwise; to hold, maintain and operate, or in any manner deal in or dispose of the whole or any part of any interest in the property, good will, business, franchises, or assets so acquired, and to conduct in any lawful manner the whole or any part of any business so acquired; and without limiting the generality of the foregoing, to apply for, acquire, hold and operate under or to dispose of, mining and prospecting permits or leases from any government anywhere in the world or from any department or authority of any thereof. 4. To do any and all of the things herein set forth to the same extent as natural persons might or could do and in any part of the world, as principals, agents, contractors, or otherwise; and in general, to engage in any part of the world, directly or indirectly, in any activity which may promote the interests of the Corporation, or enhance the value of its property to the fullest extent permitted by applicable law, and in furtherance of the foregoing purposes, to exercise all powers now or hereafter granted or permitted by applicable law, including the powers specified in the New York Business Corporation Law. The foregoing clauses shall be construed as objects and powers as well as purposes, and it is hereby expressly provided that enumeration herein of specific purposes, objects and powers shall not be held to limit or restrict in any way the general powers of the Corporation. Third: The aggregate number of shares which the Corporation shall have authority to issue is 301,500,000 divided into 100,000 shares of 4% Cumulative Preferred Stock of the par value of $100 per share (hereinafter called "Preferred Stock"), 1,400,000 shares of Series Preferred Stock of the par value of $1 per share (hereinafter called "Series Preferred Stock") and 300,000,000 shares of Common Stock of the par value of $1 per share (hereinafter called "Common Stock"). All of such shares shall be issued as full-paid and non-assessable shares, and the holders thereof shall not be liable for any further payments in respect thereto. The Series Preferred Stock shall rank subordinate to the Preferred Stock in respect of the payment of dividends and on any distribution upon dissolution, liquidation or winding up of the Corporation, and in respect of the rights of the Preferred Stock. A statement of the designations, preferences, privileges and voting powers of the shares of each class and the restrictions and qualifications thereof shall be as follows: (a) PREFERRED STOCK 1. DIVIDENDS: The holders of the Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of the assets or funds of the Corporation legally available therefor, dividends at the fixed rate of four percent (4%) per annum and no more, payable quarterly on the thirtieth day of March, June, September and December of each year (the periods between such dates, commencing on such dates, being herein designated as "dividend periods"). Dividends on the Preferred Stock shall be cumulative from and after the first day of April, 1942. Such dividends on the Preferred Stock shall be declared and paid or set apart for payment before any dividends shall be declared or paid or set apart for payment on the Series Preferred Stock or the Common Stock and shall be cumulative as above provided, so that if in any quarterly dividend period dividends at the rate of four percent (4%) per annum shall not have been declared and paid or set apart for payment on all outstanding shares of Preferred Stock for such quarterly dividend period and all preceding quarterly dividend periods from and after the first day of the quarterly dividend period from which dividends are cumulative, then the aggregate deficiency shall be declared and fully paid or set apart for payment, but without interest, before any dividends shall be declared or paid or set apart for payment on the Series Preferred Stock or the Common Stock. After full cumulative dividends on all shares of Preferred Stock outstanding shall have been declared and paid or set apart for payment for all previous dividend periods and for the current quarterly dividend period, as above provided, then, and not otherwise so long as any shares of the Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment on the Series Preferred Stock and the Common Stock out of the assets or funds of the Corporation legally available therefor. 2. VOTING RIGHTS: The holders of the Preferred Stock shall be entitled to one vote for each share held. So long as the Preferred Stock shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of at least two-thirds (2/3) thereof, amend the Certificate of Incorporation of the Corporation in such manner as to alter or change the preferences, special rights or powers of the Preferred Stock so as to affect such class of stock adversely, or to increase or decrease the amount of the authorized stock of such class or to increase or decrease the par value thereof. At any time when six (6) quarterly dividends on such Preferred Stock shall be in default, the holders of the Preferred Stock at such time or times outstanding shall be entitled, at the next annual meeting of stockholders for the election of directors, and until payment in full of all such dividends then in default, or provision therefor by the declaration and setting aside thereof, voting as a class, to the exclusion of the holders of the Common Stock and the holders of the Series Preferred Stock to vote for and elect two members of the Board of Directors of the Corporation; and, subject to any voting rights with respect to any series of Series Preferred Stock, the holders of the Common Stock, voting as a class, to the exclusion of the holders of Preferred Stock, shall be entitled to vote for and elect the balance of the Board of Directors. Directors elected by any class of stock voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. 3. LIQUIDATION: The holders of the Preferred Stock, upon any dissolution, liquidation or winding up of the Corporation, will be entitled to receive, out of the assets and funds of the Corporation, whether from capital or surplus, if such dissolution, liquidation or winding up be voluntary, $110 per share, or if such dissolution, liquidation or winding up be involuntary, $100 per share, in either case with an amount equal to all accrued and unpaid dividends, before any distribution is made to the holders of Series Preferred Stock or the Common Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to permit the payment in full of the amounts payable as aforesaid to the holders of the Preferred Stock, then, to the exclusion of the holders of the Series Preferred Stock and the holders of the Common Stock, the holders of the Preferred Stock shall share ratably, in proportion to the amounts which they are respectively entitled to receive in such event, in the distribution of assets, according to the number of shares of Preferred Stock which they respectively hold. 4. REDEMPTION: The Preferred Stock shall be subject to redemption in whole or in part at any time and from time to time at the option of the Corporation upon payment of $110 per share and in addition thereto a sum equal to all accrued and unpaid dividends thereon to the date fixed for redemption, provided, however, that a notice specifying the shares to be redeemed, and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be published once in a daily newspaper printed in the English language and published and of general circulation in the Borough of Manhattan, the City of New York, and shall be mailed, addressed to the holders of record of the Preferred Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not less than thirty (30) days previous to the date fixed for redemption. If less than the whole amount of outstanding Preferred Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Preferred Stock as stockholders of the Corporation, except the right to receive the redemption price upon surrender of the certificates representing the Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and determine. With respect to any shares of Preferred Stock so called for redemption, if, before the redemption date, the Corporation shall deposit with a bank or trust company in the Borough of Manhattan, City of New York, having a capital and surplus of at least $5,000,000 funds necessary for such redemption, in trust, to be applied to the redemption of the shares of Preferred Stock so called for redemption, then from and after the date of such deposit, all rights of the holders of such shares of Preferred Stock, so called for redemption, shall cease and determine, except the right to receive, on and after the redemption date, the redemption price upon surrender of the certificates representing such shares of Preferred Stock, so called for redemption, duly endorsed for transfer, if required. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six (6) years from such redemption date shall be released or repaid to the Corporation, after which the holders of such shares of Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. (b) SERIES PREFERRED STOCK 1. BOARD AUTHORITY: The Series Preferred Stock may be issued from time to time by the Board of Directors as herein provided in one or more series. The designations, relative rights, preferences and limitations of the Series Preferred Stock, and particularly of the shares of each series thereof, may be similar to or may differ from those of any other series. The Board of Directors of the Corporation is hereby expressly granted authority, subject to the provisions of this ARTICLE THIRD, to issue from time to time Series Preferred Stock in one or more series and to fix from time to time before issuance thereof, by filing a certificate pursuant to the Business Corporation Law, the number of shares in each such series of such class and all designations, relative rights (including the right to convert into shares of any class or into shares of any series of any class), preferences and limitations of the shares in each such series, including but without limiting the generality of the foregoing, the following: (i) The number of shares to constitute such series (which number may at any time, or from time to time, be increased or decreased by the Board of Directors, notwithstanding that shares of the series may be outstanding at the time of such increase or decrease, unless the Board of Directors shall have otherwise provided in creating such series) and the distinctive designation thereof; (ii) The dividend rate on the shares of such series, and the date or dates, if any, from which dividends thereon shall be cumulative; (iii) Whether or not the shares of such series shall be redeemable, and, if redeemable, the date or dates upon or after which they shall be redeemable, the amount per share (which shall be, in the case of each share, not less than its preference upon involuntary liquidation, plus an amount equal to all dividends thereon accrued and unpaid, whether or not earned or declared) payable thereon in the case of the redemption thereof, which amount may vary at different redemption dates; (iv) The right, if any, of holders of shares of such series to convert the same into, or exchange the same for Common Stock, and the terms and conditions of such conversion or exchange, as well as provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine; (v) The amount per share payable on the shares of such series upon the voluntary and involuntary liquidation, dissolution or winding up of the Corporation; (vi) Whether the holders of shares of such series shall have voting power, full or limited, in addition to the voting powers provided by law, and in case additional voting powers are accorded to fix the extent thereof; and (vii) Generally to fix the other rights and privileges and any qualifications, limitations or restrictions of such rights and privileges of such series, provided, however, that no such rights, privileges, qualifications, limitations or restrictions shall be in conflict with the Certificate of Incorporation of the Corporation or with the resolution or resolutions adopted by the Board of Directors, as hereinabove provided, providing for the issue of any series for which there are shares then outstanding. All shares of Series Preferred Stock of the same series shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates, if any, from which dividends thereon may accumulate or accrue. All shares of Series Preferred Stock of all series shall be of equal rank and shall be identical in all respects except that to the extent not otherwise limited in this ARTICLE THIRD any series may differ from any other series with respect to any one or more of the designations, relative rights, preferences and limitations described or referred to in subparagraphs (I) to (vii) inclusive above. 2. DIVIDENDS: Dividends on the outstanding Series Preferred Stock of each series shall be declared and paid or set apart for payment before any dividends shall be declared and paid or set apart for payment on the Common Stock with respect to the same quarterly dividend period. Dividends on any shares of Series Preferred Stock shall be cumulative only if and to the extent set forth in a certificate filed pursuant to law. After dividends on all shares of Series Preferred Stock (including cumulative dividends if and to the extent any such shares shall be entitled thereto) shall have been declared and paid or set apart for payment with respect to any quarterly dividend period, and subject to the provisions of the Preferred Stock with respect to dividends as above provided, then and not otherwise so long as any shares of the Preferred Stock or Series Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment with respect to the same quarterly dividend period on the Common Stock out of the assets or funds of the Corporation legally available therefor. All shares of Series Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and when the stated dividends are not paid in full, the shares of all series of the Series Preferred Stock shall share ratably in the payment thereof in accordance with the sums which would be payable on such shares if all dividends were paid in full, provided, however, that any two or more series of the Series Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends, as aforesaid. 3. VOTING RIGHTS: Except as otherwise specifically provided herein or in the certificate filed pursuant to law with respect to any series of the Series Preferred Stock, or as otherwise provided by law, the Series Preferred Stock shall not have any right to vote for the election of directors or for any other purpose and the Preferred Stock and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes; provided, however, that at any time when six (6) quarterly dividends on any one or more series of Series Preferred Stock entitled to receive cumulative dividends shall be in default, the holders of all such cumulative series at the time or times outstanding as to which such default shall exist shall be entitled, at the next annual meeting of stockholders for the election of directors, voting as a class, whether or not the holders thereof shall be entitled otherwise to vote by certificate filed pursuant to law, to the exclusion of the holders of Common Stock, Preferred Stock and any series of noncumulative Series Preferred Stock, to vote for and elect two (2) members of the Board of Directors of the Corporation, and provided, further, that at any time when six (6) quarterly dividends on any one or more series of noncumulative Series Preferred Stock shall be in default, the holders of all such noncumulative series at the time or times outstanding as to which such default shall exist shall be entitled, at the next annual meeting of stockholders for the election of directors, voting as a class, whether or not the holders thereof shall be entitled otherwise to vote by certificate filed pursuant to law, to the exclusion of the holders of Common Stock, Preferred Stock and any series of cumulative Series Preferred Stock, to vote for and elect two (2) members of the Board of Directors of the Corporation. All rights of all series of Series Preferred Stock to participate in the election of directors pursuant to this paragraph 3 shall continue in effect, in the case of all series thereof entitled to receive cumulative dividends, until cumulative dividends have been paid in full or set apart for payment on each cumulative series which shall have been entitled to vote at the previous annual meeting of stockholders, or in the case of all series of noncumulative Series Preferred Stock, until noncumulative dividends have been paid in full or set apart for payment for four consecutive quarterly dividend periods on each noncumulative series which shall have been entitled to vote at the previous annual meeting of stockholders. Directors elected by any class of stock, voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. Subject to the voting rights of the Preferred Stock and the voting rights, if any, specifically provided in a certificate filed pursuant to law in respect of any series of Series Preferred Stock, the holders of the Common Stock, voting as a class, to the exclusion of the holders of such series so entitled to vote for and elect members of the Board pursuant to this paragraph 3, shall be entitled to vote for and elect the balance of the Board of Directors. Each stockholder entitled to vote at any particular time in accordance with the foregoing provisions shall not have more than one vote for each share of stock held of record by him and at the time entitled to voting rights. 4. LIQUIDATION: In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each series of Series Preferred Stock shall have preference and priority over the Common Stock for payment of the amount to which each outstanding series of Series Preferred Stock shall be entitled in accordance with the provisions thereof and each holder of Series Preferred Stock shall be entitled to be paid in full such amounts, or have a sum sufficient for the payment in full set aside, before any payments shall be made to the holders of Common Stock, provided, however, that each holder entitled to receive any preferential amounts provided by certificate filed pursuant to law with respect to any series of the Series Preferred Stock shall not be entitled to receive for each share so held, if such liquidation, dissolution or winding up be voluntary, more than $55.00 per share, or if such liquidation, dissolution or winding up be involuntary, more than $50.00 per share plus in either case an amount equal to all dividends thereon accrued and unpaid. If, upon liquidation, dissolution or winding up of the Corporation, the assets of the Corporation or proceeds thereof, distributable among the holders of the shares of all series of the Series Preferred Stock, shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable if all amounts payable thereon were paid in full. After the payment to the holders of Series Preferred Stock of all such amounts to which they are entitled, as above provided, and subject to rights with respect to the Preferred Stock upon any such liquidation, dissolution or winding up as above provided, the remaining assets and funds of the Corporation shall be divided and paid to the holders of the Common Stock. 5. REDEMPTION: In the event that the Series Preferred Stock of any series shall be made redeemable as provided in clause (iii) of paragraph 1 of section (b) of this ARTICLE THIRD, the Corporation, at the option of the Board of Directors, may redeem at any time or times, and from time to time, all or any part of any one or more series of Series Preferred Stock outstanding upon notice duly given as hereinafter specified, by paying for each share the then applicable redemption price fixed by the Board of Directors (including an amount equal to accrued and unpaid dividends to the date fixed for redemption); provided, however, that a notice specifying the shares to be redeemed, and the time and place of redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be published once in a daily newspaper printed in the English language and published and of general circulation in the Borough of Manhattan, The City of New York, and shall be mailed, addressed to the holders of record of the Series Preferred Stock to be redeemed at their respective addresses as the same shall appear upon the books of the Corporation, not less than thirty (30) days previous to the date fixed for redemption. If less than the whole amount of any outstanding series of Series Preferred Stock is to be redeemed, the shares of such series to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to be fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Series Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series Preferred Stock as stockholders in the Corporation, except the right to receive the redemption price upon surrender of the certificate representing the Series Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and determine. With respect to any shares of Series Preferred Stock so called for redemption, if, before the redemption date, the Corporation shall deposit with a bank or trust company in the Borough of Manhattan, The City of New York, having a capital and surplus of at least $5,000,000, funds necessary for such redemption, in trust, to be applied to the redemption of the shares of Series Preferred Stock so called for redemption, then from and after the date of such deposit, all rights of the holders of such shares of Series Preferred Stock so called for redemption shall cease and determine, except the right to receive, on and after the redemption date, the redemption price upon surrender of the certificates representing such shares of Series Preferred Stock so called for redemption, duly endorsed for transfer, if required. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six (6) years from such redemption date shall be released and repaid to the Corporation, after which the holders of such shares of Series Preferred Stock so called for redemption shall look only to the Corporation for payment of the redemption price. Notwithstanding the foregoing, no redemption of any shares of any series of Series Preferred Stock shall be made by the Corporation (1) which as of the date of mailing of the notice of such redemption would, if such date were the date fixed for redemption, reduce the net assets of the Corporation remaining after such redemption below the aggregate amount payable upon voluntary or involuntary liquidation, dissolution or winding up to the holders of shares having rights senior or equal to the Series Preferred Stock in the assets of the Corporation upon liquidation, dissolution or winding up; or (2) unless all cumulative dividends for the current and all prior dividend periods have been declared and paid or declared and set apart for payment on all shares of the Corporation having a right to cumulative dividends; or (3) at a redemption price in excess of $55.00 per share plus all accrued and unpaid dividends thereon to the date fixed for redemption. No sinking funds shall be created for the redemption, purchase or reacquisition otherwise of any shares of any series of Series Preferred Stock not called for redemption as above provided. (c) COMMON STOCK 1. DIVIDENDS: Subject to all of the rights of the Preferred Stock and the Series Preferred Stock, dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends. 2. VOTING RIGHTS: Except as otherwise expressly provided with respect to the Preferred Stock and the Series Preferred Stock or with respect to any series of the Series Preferred Stock, the Preferred Stock and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Preferred Stock and the Common Stock being entitled to one vote for each share thereof held. 3. LIQUIDATION: Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and after the holders of the Preferred Stock and holders of the Series Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or an amount sufficient to pay the aggregate amount to which the holders of the Preferred Stock and the Series Preferred Stock of each series shall be entitled shall have been deposited with a bank or trust company having its principal office in the Borough of Manhattan, The City of New York, and having a capital, surplus and undivided profits of at least Twenty-Five Million Dollars ($25,000,000) as a trust fund for the benefit of the holders of such Preferred Stock and Series Preferred Stock, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of such Preferred Stock, and Series Preferred Stock. (d) GENERAL PROVISIONS Shares of Preferred Stock of the Corporation redeemed as hereinabove provided shall be deemed retired and extinguished and may not be reissued. A consolidation or merger of the Corporation with or into another corporation or corporations or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all of the assets of the Corporation shall not be deemed or construed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Article. No holder of Common Stock, Preferred Stock or Series Preferred Stock of the Corporation shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration, or by way of dividend. FOURTH: The office of the Corporation shall be located in the City, County and State of New York. The address to which the Secretary of State shall mail a copy of process in any action or proceeding against the Corporation which may be served upon him is 7733 Forsyth Boulevard, St. Louis, Missouri 63105. FIFTH: The duration of the Corporation shall be perpetual. SIXTH: The Secretary of State of New York is designated as the agent of the Corporation upon whom process in any action or proceeding against it may be served. In addition, CT Corporation System, 1633 Broadway, New York, New York 10019, is designated as the registered agent of the Corporation upon whom process in any action or proceeding against it may be served. SEVENTH: The following provisions are inserted for the regulation and conduct of the affairs of the Corporation, and it is expressly provided that they are intended to be in furtherance and not in limitation or exclusion of the powers conferred by statute. (a) The Board of Directors may by resolution passed by two-thirds of the whole Board designate three or more of its number to constitute an Executive Committee, which shall have and exercise, subject to such limitations, if any, as may be prescribed by the By-Laws or by resolution of the Board of Directors, the powers of the Board of Directors in the management of the business and affairs of the Corporation, provided such Executive Committee shall act only at such times as the Board of Directors is not in session and in no case to the exclusion of the right of the Board of Directors at any time to act as a Board upon any business of the Corporation. (b) Subject to the provisions of the By-Laws, meetings of the stockholders and directors of the Corporation for all purposes may be held at any place within the State of New York and, unless otherwise provided by law, at any place without such State. (c) All corporate powers, including the sale, mortgage, hypothecation and pledge of the whole or any part of the corporate property, shall be exercised by the Board of Directors, except as otherwise expressly provided by law. (d) The Board of Directors is hereby expressly authorized to apply in its discretion such portion of the net income of the Corporation as it deems advisable to the redemption or purchase for retirement of the Preferred Stock at an amount not exceeding the redemption price thereof, whether or not there are dividends in arrears on the Preferred Stock and whether or not any dividends have been paid on the Common Stock. (e) The Corporation may have one or more offices within or without the State of New York and may keep the books of the Corporation, subject to the provisions of the laws of the State of New York, at such place or places within or without the State of New York as the Board of Directors shall from time to time determine. (f) The Board of Directors shall from time to time decide whether and to what extent and at what times and under what conditions and requirements the accounts and books of the Corporation, or any of them, except the stock book, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any books or documents of the Corporation except as conferred by the laws of the State of New York or authorized by the Board of Directors. (g) A director of the Corporation shall not, in the absence of fraud, be disqualified by his office from dealing with or contracting with the Corporation either as vendor, purchaser or otherwise, nor, in the absence of fraud, shall any transaction or contract of the Corporation be void or voidable or affected by reason of the fact that any director or any firm, of which any director is a member, or any corporation, of which the director is an officer, director or stockholder, is in any way interested in such transaction or contract; provided that at the meeting of the Board of Directors or of the Committee thereof having authority in the premises to authorize or confirm said contract or transaction, the interest of such director, firm or corporation is disclosed or known, and there shall be present a quorum of directors or of the directors constituting such Committee not so interested or connected, and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of directors not so interested or connected. Nor shall any director or directors so interested or connected be liable to the Corporation or to any stockholders or creditor thereof or to any other person for any loss incurred by it under or by reason of any such contract or transaction. Nor shall any such director or directors be accountable for any gains or profits realized thereon; always provided, however, that such contract or transaction shall at the time it was entered into have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair. (h) Any contract, transaction or act of the Corporation or of the Board of Directors or of the Executive Committee or of any other duly constituted committee and of which disclosure shall be made in the notice of the meeting and which shall be approved or ratified by a majority in interest of a quorum of the stockholders of the Corporation having voting power at any annual or any special meeting called for such purpose shall, except as otherwise specifically provided herein or provided by the laws of the State of New York, be as valid and as binding as though approved or ratified by every stockholder of the Corporation; provided, however, that any failure of the Stockholders to approve or ratify such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or to deprive the Corporation, its directors or officers of their right to proceed with such contract, transaction or action. Any director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. (i) The Board of Directors shall have power from time to time to fix and to determine and vary the amount of the working capital of the Corporation, and to direct and determine the use and disposition of any surplus or net profits over and above the capital stock paid in; and in its discretion the Board of Directors may use and apply any such surplus or accumulated profits in purchasing or acquiring bonds or other obligations of the Corporation, to such extent and in such manner and upon such terms as the Board of Directors shall deem expedient. (j) Directors may be removed at any time by a majority vote of the stockholders entitled to vote, except that directors elected by any class of stock, voting separately as a class, may be removed only by a majority vote of such class, voting separately as a class, so long as the voting power of such class shall continue. (k) A person who is or was a director of the Corporation shall not be liable to the Corporation or its stockholders for damages for any breach of duty in such capacity occurring after the adoption of this paragraph (k), except that the foregoing provisions shall not eliminate or limit liability where such liability is imposed, from time to time, by the law of New York State, provided, however, that nothing in this paragraph shall directly or indirectly increase the liability of any such person based upon acts or omissions occurring before the adoption hereof. EIGHTH: The Corporation hereby reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation as now stated and as hereafter amended, altered or changed in the manner now or hereafter prescribed by the laws of the State of New York, and all rights and powers conferred by this Certificate of Incorporation on stockholders, directors, or officers of the Corporation are hereby granted subject to this reservation; provided that the provisions of this Certificate of Incorporation, as so amended, changed, altered or repealed, shall contain such provisions as shall be lawful. NINTH: The number of directors of the Corporation, exclusive of directors, if any, to be elected by the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of Section (b), respectively, of ARTICLE THIRD herein, shall be not less than ten nor more than sixteen. Subject to such limitation, such number may be fixed by the By-Laws, or by action of the stockholders or of the Board under the specific provisions of a By-Law adopted by the stockholders. The directors of the Corporation shall be divided into three classes as nearly equal in number as possible. There shall be at least three directors in each class. The term of office of the first class shall expire at the first annual meeting of stockholders succeeding the initial classification of directors, the term of the office of the second class shall expire at the second annual meeting succeeding such classification and that of the third class at the third annual meeting succeeding such classification. At each annual meeting, directors to replace those whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting. If the number of directors is changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. If the number of directors is increased by the Board of Directors and any newly created directorships are filled by the Board, there shall be no classification of the additional directors until the next annual meeting of stockholders. Notwithstanding the foregoing, if the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock shall become entitled to elect two members of the Board pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of Section (b), respectively, of ARTICLE THIRD herein, the terms of all members of the Board of Directors previously elected shall expire at the time of such election and the entire Board of Directors shall be elected in the manner specified in said Paragraph 2 of Section (a) or said Paragraph 3 of Section (b) of ARTICLE THIRD, each director to serve until the next meeting of stockholders at which directors are elected; and whenever neither the holders of the 4% Cumulative Preferred Stock nor the holders of any series of Series Preferred Stock is any longer entitled to vote for the election of two directors as provided in said Paragraph 2 of Section (a) or said Paragraph 3 of Section (b) of ARTICLE THIRD, the directors shall be elected at the next annual meeting of stockholders held for such purpose in the manner provided in the first eight sentences of this ARTICLE. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term of three years. No amendment to the Certificate of Incorporation of the Corporation shall amend, alter, change or repeal any of the provisions of this ARTICLE NINTH unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote of the holders of two-thirds of the shares of all classes of stock of the Corporation entitled to vote in elections of directors, considered for the purposes of this ARTICLE NINTH as one class. TENTH: (a) The affirmative vote of the holders of not less than a majority of the Voting Stock (as hereinafter defined) of the Corporation shall be required before the Corporation may purchase any outstanding shares of Common Stock of the Corporation at a price known by the Corporation to be above Market Price (as hereinafter defined) from a person known by the Corporation to be a Selling Shareholder (as hereinafter defined), unless the purchase is made by the Corporation on the same terms and as a result of a duly authorized offer to purchase any and all of the outstanding shares of Common Stock of the Corporation. (b) For purposes of ARTICLE TENTH: (1) The term "Voting Stock" shall mean the outstanding shares of stock of the Corporation entitled to vote in elections of directors of the Corporation considered as one class. (2) The majority vote required by Section (a), when applicable, shall be in addition to any lesser vote or no vote required or permitted by law or this Certificate of Incorporation exclusive of this Article Tenth and the shares of the Selling Shareholder shall, for this purpose, be counted as having abstained regardless of how they have been voted. (3) The term "Market Price" shall mean the highest closing sale price, during the 30-day period immediately preceding the date in question, of a share of the Common Stock of the Corporation on the Composite Tape for New York Stock Exchange Issues, or, if such stock is not quoted on the Composite Tape or 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. (4) The term "Selling Shareholder" shall mean and include any person who or which is the beneficial owner of in the aggregate more than three percent of the outstanding shares of Common Stock of the Corporation and who or which has purchased or agreed to purchase any of such shares within the most recent two-year period. (5) A "person" shall mean any individual, firm, partnership, corporation or other entity. (6) A person shall be the "beneficial owner" of any shares of Common Stock of the Corporation: (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 conditional or 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 thereof. (7) The terms "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 July 1, 1984. (8) For the purposes of determining whether a person is a Selling Shareholder, the number of shares of Common Stock deemed to be outstanding and the number of shares beneficially owned by the person shall include shares respectively deemed owned through application of paragraph (6) of this Section (b) but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise, or shares of the Selling Shareholder whose acquisition of more than three percent of the outstanding shares of Common Stock of the Corporation within the most recent two-year period results from other than a purchase or agreement to purchase or vote shares of the Corporation. (9) Nothing contained in this ARTICLE TENTH shall be construed to relieve any Selling Shareholder from any fiduciary obligation imposed by law. (10) The Board of Directors of the Corporation shall have the power to determine the application of or compliance with this ARTICLE TENTH, including, without limitation, (1) whether a person is a Selling Shareholder; (2) whether a person is an Affiliate or Associate of another; (3) whether Section (a) is or has become applicable in respect of a proposed transaction; (4) what is the Market Price and whether a price is above Market Price; and (5) when or whether a purchase or agreement to purchase any share or shares of Common Stock of the Corporation has occurred and when or whether a person has become a beneficial owner of any share or shares of Common Stock of the Corporation. Any decision or action taken by the Board of Directors arising out of or in connection with the construction, interpretation and effect of this ARTICLE TENTH shall lie within their absolute discretion and shall be conclusive and binding except in circumstances involving bad faith. ELEVENTH: Section 1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. A. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in Section 2 of this ARTICLE ELEVENTH, any transaction or contract which involves or includes: (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 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 to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities (to the extent the acquisition thereof does not come within the requirements of Article Tenth) or other property (or a combination thereof) having an aggregate Fair Market Value of $50,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any 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 Security (as hereinafter defined) of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder: shall require the affirmative vote of the holders of at least 80% of the voting power 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. 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 this Certificate of Incorporation exclusive of this ARTICLE ELEVENTH. B. DEFINITION OF "BUSINESS COMBINATION". The term "Business Combination" used in this ARTICLE ELEVENTH shall mean any transaction or contract which is referred to in any one or more of clauses (I) through (v) of Paragraph A of this Section 1. Section 2. WHEN HIGHER VOTE IS NOT REQUIRED The provisions of Section 1 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 A or B are met: A. APPROVAL BY DIRECTORS. The Business Combination shall have been approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH. B. PRICE AND PROCEDURE REQUIREMENTS. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (a) (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 Stock acquired by it (1) within the two-year period immediately prior to the first public announcement of the terms of the proposed Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; or (b) The Fair Market Value per share of Common Stock on 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; (ii) The aggregate amount of the cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the higher of the following (it being intended that the requirements of this paragraph B (ii) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock): (a) (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 by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) (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; and (c) The Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (iii) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) 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. The price determined in accordance with paragraph B (I) and B (ii) of this Section 2 shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding stock having preference over the Common Stock as to dividends or upon liquidation; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock),except as approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH, 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 shares of the Common Stock, unless the failure so to increase such annual rate is approved by the Board of Directors in accordance with the requirements of ARTICLE SEVENTH; and such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock or securities convertible into Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (v) 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. (vi) 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). Section 3. CERTAIN DEFINITIONS. For the purpose of this ARTICLE ELEVENTH: A. A "person" shall mean any individual, firm, corporation or other entity. B. "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 20% or more of the voting power of the 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 20% 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. C. A person shall be a "beneficial owner" of any 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. D. For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C of this Section 3 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. E. "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 July 1, 1984. F. "Subsidiary" means 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 B of this Section 3, 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. G. "Fair Market Value" means: (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 issues, 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 the Board of Directors in good faith; 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 the Board of Directors in good faith. H. 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 B (I) and (ii) of Section 2 of this ARTICLE ELEVENTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. I. "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on July 1, 1984. Section 4. POWERS OF THE BOARD OF DIRECTORS. The Board of Directors, in accordance with the requirements of ARTICLE SEVENTH, shall have the power to interpret all of the terms and provisions of this ARTICLE ELEVENTH, including, without limitation, and on the basis of information known to the Board after reasonable inquiry (a) whether a person is an Interested Shareholder, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) 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. Section 5. 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. Section 6. AMENDMENT, REPEAL, ETC. notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws or otherwise) the affirmative vote or consent of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this ARTICLE ELEVENTH or any provision hereof. VI: That the restatement of the Certificate of Incorporation and the amendment to Article Fourth contained therein were authorized by a vote of the majority of directors present at a meeting of the Board at which a quorum was present. IN WITNESS WHEREOF, we have made, subscribed and verified the Certificate this 22nd day of June, 1994. Mallinckrodt Group Inc. /s/ C. RAY HOLMAN - -------------------------- C. Ray Holman President and Chief Executive Officer /s/ ROGER A. KELLER - -------------------------- Roger A. Keller Vice President, Secretary and General Counsel (CORPORATE SEAL) State of Missouri ) )ss.: County of St. Louis ) C. Ray Holman, being duly sworn, deposes and says that: he is President and Chief Executive Officer of Mallinckrodt Group Inc., the corporation named in and described in the foregoing certificate; he has read the foregoing certificate and knows the contents thereof; and the same is true of his own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters he believes to be true. /s/ C. RAY HOLMAN - -------------------------- C. Ray Holman Sworn to before me this _____ day of __________, 1994. __________________________ Notary Public My Commission Expires: _________________________. EX-3.1(B) 3 Exhibit 3.1(b) CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF MALLINCKRODT GROUP INC. ************************************ UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW ************************************ CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF MALLINCKRODT GROUP INC. ----------------------------------------------------------- Under Section 805 of the Business Corporation Law ----------------------------------------------------------- Pursuant to Section 805 of the Business Corporation Law, the undersigned, C. Ray Holman, Chairman of the Board and Chief Executive Officer, and Roger A. Keller, Vice President and Secretary, hereby certify as follows: I. The name of the Corporation is Mallinckrodt Group Inc. II. The Certificate of Incorporation of the Corporation (under the name of International Agricultural Corporation) was originally file by the Department of State, Albany, New York, on the 14th day of June, 1909. III. The Certificate of Incorporation of the Corporation shall be amended to change the name of the corporation, and to effect such change, ARTICLE FIRST is hereby amended to read as follows: FIRST: The name of the Corporation is Mallinckrodt Inc. IV. This amendment to ARTICLE FIRST was authorized by the unanimous affirmative vote of the Board of Directors of the Corporation, followed by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation's 4% Cumulative Preferred Stock and Common Stock voting as one class entitled to vote thereon at the annual meeting of the stockholders of the Corporation held on October 16, 1996. IN WITNESS WHEREOF, we have made and subscribed the Certificate this 16th day of October, 1996, and the Chairman of the Board and Chief Executive Officer of the Corporation has also verified this Certificate. Mallinckrodt Group Inc. /s/ C. RAY HOLMAN ---------------------- C. Ray Holman, Chairman of the Board and Chief Executive Officer /s/ ROGER A. KELLER ----------------------- Roger A. Keller, Vice President and Secretary (Corporate Seal) STATE OF MISSOURI ) ) COUNTY OF ST. LOUIS ) C. Ray Holman, being duly sworn, deposes and says that he is Chairman of the Board and Chief Executive Officer of Mallinckrodt Group Inc., the corporation named and described in the foregoing Certificate of Amendment; that he has read the foregoing Certificate of Amendment and knows the contents thereof; and, that the same are true of his own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters he believes them to be true. /s/ C. RAY HOLMAN ------------------------- C. Ray Holman, Chairman of the Board and Chief Executive Officer Sworn to before me this 16th day of October, 1996 - ---------------------------- Notary Public My commission expires: EX-3.1(C) 4 Exhibit 3.1(c) CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF MALLINCKRODT INC. ------------------------------------------------------------- Under Section 805 of the Business Corporation Law ------------------------------------------------------------- Pursuant to Section 805 of the Business Corporation Law, the undersigned, C. Ray Holman, Chairman of the Board and Chief Executive Officer, and Roger A. Keller, Vice President and Secretary, hereby certify as follows: I. The name of the Corporation is Mallinckrodt Inc. II. The Certificate of Incorporation of the Corporation (under the name of International Agricultural Corporation) was originally filed by the Department of State, Albany, New York, on the 14th day of June, 1909. III. The Certificate of Incorporation of the Corporation shall be amended to reduce the minimum required number of directors of the Corporation from ten to eight, and to effect such change, ARTICLE NINTH of the certificate of incorporation shall be amended by revising the first four sentences to read as follows, with the balance of the article remaining unchanged: The number of directors of the Corporation, exclusive of directors, if any, to be elected by the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock pursuant to the provisions of Paragraph 2 of Section (a) or Paragraph 3 of Section (b) , respectively, of ARTICLE THIRD herein, shall be not less than eight nor more than sixteen. Subject to such limitation, such number may be fixed by the By-Laws, or by action of the stockholders or of the Board under the specific provisions of a By-Law adopted by the stockholders. The directors of the Corporation shall be divided into three classes as nearly equal in number as possible. There shall be at least two directors in each class. IV. This amendment to Article Ninth was authorized by the unanimous affirmative vote of the Board of Directors of the Corporation, followed by the affirmative vote of the holders of more than two-thirds of the outstanding shares of the Corporation's 4% Cumulative Preferred Stock and Common Stock voting as one class entitled to vote thereon at the annual meeting of the stockholders of the Corporation held on October 21, 1998. IN WITNESS WHEREOF, we have made and subscribed the Certificate of Amendment this 30 day of October, 1998, and the Chairman of the Board and Chief Executive Officer of the Corporation has also verified this Certificate. MALLINCKRODT INC. (CORPORATE SEAL) /s/ C. RAY HOLMAN ------------------------------------ C. Ray Holman, Chairman of the Board and Chief Executive Officer /s/ ROGER A. KELLER ------------------------------------ Roger A. Keller, Vice President and Secretary STATE OF MISSOURI ) ) ss COUNTY OF ST. LOUIS ) C. Ray Holman, being duly sworn, deposes and says that he is Chairman of the Board and Chief Executive Officer of Mallinckrodt Inc., the corporation named and described in the foregoing Certificate of Amendment; that he has read the foregoing Certificate of Amendment and knows the contents thereof; and that the same are true of his own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters he believes them to be true. /s/ C. RAY HOLMAN ------------------------------------ C. Ray Holman, Chairman of the Board and Chief Executive Officer Sworn to before me this 30 day of October, 1998 - --------------------------- Notary Public My commission expires: EX-3.2 5 Exhibit 3.2 BY-LAWS OF MALLINCKRODT GROUP INC. - --------------------------------------------------------------------- (As Amended through April 15, 1992) Article I --------- Meetings of Stockholders Section 1. The Annual meeting of Stockholders of this Corporation for - --------- the election of directors and the transaction of such other business as may properly come before the meeting shall be held on such day in September, October or November of each year and at such place and hour as may be fixed by the Board of Directors prior to the giving of the notice of the date, place and object of such meeting, or if no other date, place and hour has been so fixed, on the third Wednesday in October and in the office of the Corporation, 421 East Hawley Street, Mundelein, Illinois 60060, at 10:00 o'clock a.m. Chicago time. Notice of the time, place and object of such meeting shall be given by mailing at least ten days previous to such meeting, postage prepaid, a copy of such notice addressed to each stockholder at his residence or place of business as the same shall appear on the books of the Corporation. Section 2. Special meetings of the stockholders other than those - --------- regulated by statute may be called at any time by the Chairman of the Board, the President or by a majority of directors. Notice of every special meeting stating the time, place and object thereof, shall be given by mailing, postage prepaid, at least ten days before such meeting, a copy of such notice addressed to each stockholder at his post office address as the same appears on the books of the Corporation. Section 3. At all meetings of stockholders a majority of the capital - --------- stock outstanding, either in person or by proxy, shall constitute a quorum, excepting as may be otherwise provided by law. Section 4. The Board of Directors may fix a date not more than fifty - --------- days prior to the day of holding any meeting of stockholders as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined. Section 5. At all meetings of stockholders all questions shall be - --------- determined by a majority vote of the stockholders entitled to vote present in person or by proxy, except as otherwise provided by law. Section 6. Except as may otherwise be required by applicable law or - --------- regulation, a stockholder may make a nomination or nominations for director of the Corporation at an annual meeting of stockholders or at a special meeting of stockholders called for the purpose of electing directors or may bring up any other matter for consideration and action by the stockholders at an annual meeting of stockholders only if the provisions of Subsections A, B and C hereto shall have been satisfied. If such provisions shall not have been satisfied, any nomination sought to be made or other business sought to be presented by a stockholder for consideration and action by the stockholders at the meeting shall be deemed not properly brought before the meeting, is and shall be ruled by the chairman of the meeting to be out of order, and shall not be presented or acted upon at the meeting. A. The stockholder must, not less than seventy days and not more than ninety-five days before the day of the meeting, deliver or cause to be delivered a written notice to the Secretary of the Corporation; provided, however, that in the event that less than eighty days' notice or prior public disclosure of the date of the meeting is given or made to the stockholders by the Corporation, notice by the stockholder to the Secretary of the Corporation, to be timely, must be received not later than the close of business on the tenth day following the day on which such notice or prior public disclosure was made. Notice by the Corporation shall be deemed to have been given more than eighty days in advance of the annual meeting if the annual meeting is called for the third Wednesday in October without regard for when the notice or public disclosure thereof is actually given or made. The stockholders' notice shall specify (a) the name and address of the stockholder as they appear on the books of the Corporation; (b) the class and number of shares of the Corporation which are beneficially owned by the stockholder; (c) any interest of the stockholder in the proposed business described in the notice which is in the interest of a business or object other than the business of the Corporation; (d) if such business is a nomination for director, each nomination sought to be made and a statement signed by each proposed nominee indicating his or her willingness so to serve if elected and disclosing the information about him or her that is required by the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder to be disclosed in the proxy materials for the meeting involved if he or she were a nominee of the Corporation for election as one of its directors, and (e) if such business is other than a nomination for director, a brief description of such business and the reasons it is sought to be submitted for a vote of the stockholders. B. Notwithstanding satisfaction of the provisions of Subsection A, the proposed business described in the notice may be deemed not to be properly brought before the meeting if, pursuant to state law or to any rule or regulation of the Securities and Exchange Commission, it was offered as a stockholder proposal and was omitted, or had it been so offered, it could have been omitted, from the notice of, and proxy material for, the meeting (or any supplement thereto) authorized by the Board of Directors. C. In the event such notice is timely given and the business described therein is not disqualified because of Subsection B, such business (a) may nevertheless not be presented or acted upon at a special meeting of stockholders unless in all other respects it is properly before such meeting; and (b) may not be presented except by the stockholder who shall have given the notice required by Subsection A or a representative of such stockholder who is qualified under the law of New York to present the proposal on the stockholder's behalf at the meeting. Article II ---------- Directors Section 1. The number of directors of the Corporation may be - --------- determined from time to time by resolution adopted by a majority of the entire Board of Directors, except that such number shall not be less than eight nor more than sixteen, exclusive of directors, if any, to be elected by the holders of 4% Cumulative Preferred Stock or the holders of one or more series of Series Preferred Stock pursuant to the provisions of Article Third of the Certificate of Incorporation of the Corporation. Until the first such resolution is adopted, the Board shall consist of sixteen directors. As provided in the Certificate of Incorporation and subject to the provisions of the ninth sentence of Article Ninth thereof, (i) the directors shall be divided into three classes as nearly equal in number as possible; (ii) at each annual meeting directors to replace those whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting and until their successors are chosen; (iii) if the number of directors is changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible; and (iv) if the number of directors is increased by the Board of Directors and any newly created directorships are filled by the Board, there shall be no classification of the additional directors until the next annual meeting of stockholders. No decrease in the Board shall shorten the term of any incumbent director. As used in these By-Laws, "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. Vacancies occurring in the Board of Directors may be filled for the unexpired term by a majority vote of the remaining directors. The Board of Directors shall adopt such rules and regulations for the conduct of the meetings and management of the affairs of the Corporation as they may deem proper, not inconsistent with the laws of the State of New York or these By-Laws. This By-Law may be amended only by the affirmative vote of the holders of two-thirds of the shares of all classes of stock of the Corporation entitled to vote in elections of directors, considered for the purposes of this By-Law as one class. Section 2. The directors shall elect one of their members, who may or - --------- may not be an officer of the Corporation, to act as Chairman of the Board. He shall preside, when present, at all meetings of the Board of Directors and stockholders. Section 3. As soon as practicable after the Annual Meeting of - --------- Stockholders, the newly elected Board of Directors shall hold its first meeting for the purpose of organization and the transaction of business. At such organizational meeting the Board of Directors shall elect the officers of the Corporation and shall prepare a schedule fixing the time and place of all regular meetings of the Board of Directors to be held during the next ensuing calendar year. All such regular meetings of the Board of Directors may be held without further notice to any director who shall have attended the organizational meeting. Notice of the time and place fixed for such regular meetings shall be given by personal notice or by mail or telegraph to each director who shall not have attended the organizational meeting at least ten days prior to the first Board of Directors' meeting after such organizational meeting which such director shall be eligible to attend. The Board of Directors shall have authority to change the time and place of any regular meeting previously fixed, provided that the foregoing provisions as to notice thereof shall apply to any such changed regular meeting. The Chairman of the Board of Directors or the President may, and at the request of a majority of the Board of Directors in writing must, call a special meeting of the Board of Directors, not less than twenty-four hours' notice of which must be given by personal notice or by mail, telephone, telegraph, facsimile (FAX), or other form of communication. Nothing herein contained shall prevent a waiver of notice of meeting by directors. Section 4. At all meetings of the Board of Directors one-third of the - --------- entire Board of Directors as from time to time fixed under these By-Laws shall constitute a quorum. Article III ----------- Officers Section 1. The officers of the Corporation shall be a President - --------- (subject to Section 4 of this Article III), one or more Vice Presidents, a Secretary, a Controller, a Treasurer, such Assistant Secretaries, Assistant Controllers and Assistant Treasurers as the Board of Directors may deem necessary, a Chairman of the Board if the Board deems this necessary, and a Vice Chairman of the Board if there is a Chairman and the Board deems a Vice Chairman necessary. Any two offices, excepting those of Chairman of the Board and Secretary, and President and Secretary, may be held by one person. Section 2. The Chairman of the Board or the President, as designated - --------- by the Board of Directors, shall be the Chief Executive Officer of the Corporation and subject to the control and direction of the Board of Directors shall exercise the powers and perform the duties usual to the chief executive officer, have general charge of the affairs of the Corporation, see that all orders and resolutions of the Board are carried into effect, and do and perform such other duties as from time to time may be assigned to him by the Board of Directors or these By-Laws. Section 3. The Chairman of the Board shall preside at all meetings of - --------- the Board of Directors and of the stockholders and perform such other duties as from time to time may be assigned to that office by the Board or, when he is not the Chief Executive Officer, by the Chief Executive Officer, or by these By-Laws. Section 4. The President shall perform such duties as from time to - --------- time may be assigned to him by the Board of Directors, or when he is not the Chief Executive Officer, by the Chief Executive Officer, or by these By-Laws, and if there is no Chairman, or in the absence or disability of the Chairman, the President shall perform the duties of that office. When the Chairman of the Board is the Chief Executive Officer, the Board need not designate a President and the duties of President may be performed by the Chief Executive Officer or in part by such officer and in part by another officer or officers of the Corporation, as specified by the Board. Section 5. The Vice Presidents, one or more of whom may be designated - --------- Executive or Senior Vice Presidents, shall perform such duties in such capacities or as heads of their respective operating units as may be assigned by the Board of Directors, or by the Chief Executive Officer. In the absence or disability of the President, and in the absence or disability of the Chairman when there is no President as such, the duties of the respective office shall be performed by the Vice Presidents in the order of priority established by the Board, and unless and until the Board of Directors shall otherwise direct. Section 6. The Controller shall be the chief accounting officer of - --------- the Corporation and shall be in charge of its books of account, accounting records and accounting and internal auditing procedures. He shall be responsible for the verification of all of the assets of the Corporation and the preparation of all tax returns and other financial reports to governmental agencies by the Corporation and shall have such other duties and powers as shall be designated from time to time by the Board of Directors or the Chairman of the Board. The Controller shall be responsible to and shall report to the Board of Directors, but in the ordinary conduct of the Corporation's business shall be under the supervision of the Chairman of the Board or such other officer as the Board of Directors shall designate. Section 7. The Treasurer, subject to the direction and supervision of - --------- such officer and to such limitations on his authority as the Board of Directors may from time to time designate or prescribe, shall have the care and custody of the funds and securities of the Corporation, sign checks, drafts, notes and orders for the payment of money, pay out and dispose of the funds and securities of the Corporation and in general perform the duties customary to the office of Treasurer. Section 8. The Secretary shall keep the minutes of meetings of the - --------- Board of Directors and the minutes of the stockholders' meetings and have the custody of the seal of the Corporation and affix and attest the same to certificates of stock, contracts and other documents when proper and appropriate. He shall perform all of the other duties usual to that office. Section 9. The Assistant Secretaries, Assistant Controllers and - --------- Assistant Treasurers shall perform such duties as may be assigned by the Board of Directors. Section 10. Each officer elected by the Board of Directors shall hold - ---------- office until the next annual meeting of the Board of Directors and until his successor is elected. Any officer may be removed at any time with or without cause by a vote of a majority of the members of the Board of Directors. A vacancy in any office caused by the death, resignation or removal of the person elected thereto or because of the creation of a new office or for any other reason, may be filled for the unexpired portion of the term by election of the Board of Directors at any meeting. In case of the absence or disability, or refusal to act of any officer of the Corporation, or for any other reason that the Board of Directors shall deem sufficient, the Board may delegate, for the time being, the powers and duties, or any of them of such officer to any other officer or to any director. Article IV ---------- Capital Stock Section 1. Subscriptions to the capital stock must be paid to the - --------- Treasurer at such time or times, and in such installments as the Board of Directors may by resolution require. Section 2. The certificate for shares of the Corporation shall be in - --------- such forms as shall be approved by the Board of Directors and shall be signed by the Chairman of the Board or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall be sealed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee. In case any officer has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 3. Registration of transfers of shares shall be made upon the - --------- books of the Corporation by the registered holder in person or by power of attorney, duly executed and filed with the Secretary or other proper officer of the Corporation, and on surrender of the certificate or certificates for such shares, properly assigned for transfer. Article V --------- Committees of the Board Section 1. The Board of Directors may elect from among its members, - --------- by resolution adopted by two-thirds of the entire Board of Directors, an Executive Committee consisting of the Chairman of the Board and three or more other members of the Board. From such Committee members, the Board shall elect a Chairman of such Committee. Section 2. During the intervals between meetings of the Board of - --------- Directors, the Executive Committee shall, subject to any limitations imposed by law or the Board of Directors, possess and may exercise all the powers of the Board of Directors in the management and direction of the Corporation in such manner as the Executive Committee shall deem best for the interests of the Corporation, in all cases in which specific directions shall not have been given by the Board of Directors. Section 3. The Board of Directors may also elect from among its - --------- members, by resolutions adopted by a majority of the entire Board of Directors, such other committee or committees as the Board of Directors shall determine, each such committee to consist of at least three members of the Board. The Board shall elect a Chairman of each such committee, shall fix the number of and elect the other members thereof, and shall establish the duties and authority thereof, subject to such limitations as may be required by law. Section 4. The Board of Directors shall fill any vacancies on any - --------- committee established under this Article, with the objective of keeping the membership of each such committee full at all times. Section 5. All action by any committee of the Board of Directors - --------- shall be referred to the Board of Directors at its meeting next succeeding such action, and shall be subject to revision or alteration by the Board of Directors provided that no rights or acts of third parties shall be affected by any such revision or alteration. Subject to such applicable resolutions as may be adopted by the Board, each committee shall fix its own rules of procedure and shall meet where and as provided in such rules, but in any case the presence of a majority shall be necessary to constitute a quorum. Article VI ---------- Meetings by Consent Section 1. Any action required or permitted to be taken by the Board - --------- of Directors or any committee thereof may be taken without a meeting if all members of the Board or of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board of committee. Section 2. Any one or more members of the Board or any committee - --------- thereof may participate in a meeting of the Board or such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Article VII ----------- Indemnification Section 1. The Company shall, to the fullest extent permitted by - --------- applicable law, indemnify any person who is or was made, or threatened to be made, a party to any action or proceeding, whether civil or criminal, whether involving any actual or alleged breach of duty, neglect or error, any accountability, or any actual or alleged misstatement, misleading statement or other act or omission and whether brought or threatened in any court or administrative or legislative body or agency, including an action by or in the right of the Company to procure a judgment in its favor and an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Company is serving or served in any capacity at the request of the Company, by reason of the fact that he, his testator, or intestate, is or was a director or officer of the Company, or is serving or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement, and costs, charges and expenses, including attorney's fees, or any appeal therein; provided, however, that no indemnification shall be provided to any such person if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. Section 2. The Company may indemnify any other person to whom the - --------- Company is permitted to provide indemnification or the advancement of expenses by applicable law, whether pursuant to rights granted pursuant to, or provided by, the New York Business Corporation Law or other rights created by (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, it being expressly intended that these by-laws authorize the creation of other rights in any such manner. Section 3. The Company shall, from time to time, reimburse or advance - --------- to any person referred to in Section 1 the funds necessary for payment of expenses, including attorney's fees, incurred in connection with any action or proceeding referred to in Section 1, upon receipt of a written undertaking by or on behalf of such person to repay such amount(s) if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. Section 4. Any director or officer of the Company serving (i) another - --------- corporation, of which a majority of the shares entitled to vote in the election of its directors is held by the Company, or (ii) any employee benefit plan of the Company or any corporation referred to in clause (i), in any capacity shall be deemed to be doing so at the request of the Company. Section 5. Any person entitled to be indemnified or to the - --------- reimbursement or advancement of expenses as a matter of right pursuant to this Article may elect to have the right to indemnification (or advancement of expenses) interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the action or proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time indemnification is sought. Section 6. The right to be indemnified or to the reimbursement or - --------- advancement of expenses pursuant to this Article (i) is a contract right pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the Company and the director or officer, (ii) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof, and (iii) shall continue to exist after the rescission or restrictive modification hereof with respect to events occurring prior thereto. Section 7. If a request to be indemnified or for the reimbursement or - --------- advancement of expenses pursuant hereto is not paid in full by the Company within thirty days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the Claim and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses of prosecuting such claim. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. Section 8. A person who has been successful, on the merits or - --------- otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 shall be entitled to indemnification only as provided in Sections 1 and 3, notwithstanding any provision of the New York Business Corporation Law to the contrary. Article VIII ------------ Amendments Section 1. These By-Laws may be amended at any stockholders' meeting - --------- by a majority of the votes cast at such meeting by the holders of shares entitled to vote thereon, represented either in person or by proxy. Section 2. Subject to the limitations, if any, from time to time - --------- prescribed in By-Laws made by stockholders, the Board of Directors at any regular or special meeting, by the vote of a majority of the directors may make, alter, amend and repeal any By-Laws, but any By-Laws made by the Board of Directors may be altered or repealed by the stockholders. EX-10.30 6 Exhibit 10.30 AGREEMENT THIS AGREEMENT is agreed upon and entered into effective seven days after the acceptance date indicated below by and between MALLINCKRODT INC., a New York corporation (the "Company"), with offices at 675 McDonnell Blvd., P.O. Box 5840, St. Louis, Missouri 63134, and MACK G. NICHOLS ("Nichols") who resides at 12300 Halsgame, Creve Coeur, Missouri 63141. WITNESSETH: WHEREAS, Nichols has been in the employ of the Company for many years, most recently as the Chief Operating Officer and President of the Company; and WHEREAS, the parties wish to establish and agree upon the terms and conditions in which the Company shall retain consulting services of Nichols effective with the date of Nichols' retirement from the Company on October 31, 1998 ("Retirement Date" as described below) for a two year period ending October 31, 2000 ("the Consultancy"); NOW, THEREFORE, in consideration of the mutual undertakings of the parties, it is agreed as follows: 1. Retirement. Mr. Nichols agrees that he retired and resigned ---------- as a member of the Board of Directors of the Company effective with the 1998 Annual Meeting and will retire and resigns all of his positions with the Company and its affiliates effective October 31, 1998, which date, October 31, 1998, shall be his "Retirement Date." At that time, upon and following his Retirement Date, Mr. Nichols will make available his services as a consultant to the Company as described in paragraph 11. Mr. Nichols acknowledges that he is an employee at will of the Company. 2. Compensation. Until December 31, 1998, the Company shall ------------ continue to pay Nichols' compensation in accordance with its usual and customary compensation practices at the rate of Nichols' current base salary of $517,512 per year. 3. Annual Incentive Payment. Nichols shall be entitled to ------------------------ participate in the Company's Management Incentive Compensation Plan ("MICP") for the fiscal year ending June 30, 1999, with a target annual incentive award of $142,315.80 (equal to (1/2) (55%) of Nichols' annual base salary of $517,512). The actual amount of Nichols' MICP payment, if any, for fiscal 1999 shall be as awarded by the Board of Directors in its discretion and in accordance with MICP terms at the conclusion of fiscal 1999. Payment of the fiscal 1999 MICP award, if any, shall be made following the close of fiscal year 1999 pursuant to the terms of the MICP. 4. Pension Benefit. (a) Until his termination from --------------- employment, Nichols will participate in the Mallinckrodt Inc. Retirement Plan (the "Qualified Plan") and the Supplemental Executive Retirement Life Plan of Mallinckrodt Inc. (the "SERP") according to their terms. (b) Upon Nichols' termination of employment, he shall be entitled to receive Pension Benefits under the Qualified Plan in accordance with its terms as they exist at that time based upon his actual Credited Service and Final Average Compensation under that Plan and based only upon Nichols' actual employment with the Company. (c) Upon his termination of employment, he shall also be entitled to receive Retirement Benefits under the SERP. However, in determining SERP benefits: (i) the Company shall consider solely for purposes of calculating his SERP benefit and under SERP Section 4.1.3., that Mr. Nichols' Continuous Service shall equal the period of his employment plus an additional twelve years (for a total of 31 years and 3 months at October 31, 1998), (ii) if Nichols commences receipt of his SERP benefit prior to age 62, no reduction in that benefit shall be imposed because of benefit commencement before age 62, and (iii) if Nichols elects a lump sum form of payment, the assumptions used to determine actuarial equivalence shall be the same as used under the Qualified Plan to value similar lump sum payments. (d) Upon his Retirement Date and in addition to the pension benefits provided for in paragraph 4(a), the Company shall pay Nichols a supplemental benefit of One Million Dollars ($1,000,000) payable to Nichols before December 31, 1998. 5. Retirement Medical Benefits. Nichols shall be eligible to --------------------------- participate under the Mallinckrodt Retiree Medical Plan in accordance with the Plan's terms as amended from time to time. Nichols may elect dental and vision coverage in accordance with the Plan's terms until Nichols turns age 65. 6. Stock Options and Awards. ------------------------ a) In regard to options previously granted prior to 1998 under the 1973 Stock Option and Award Plan, during the term of his Consultancy as described in Paragraph 11 below, such options shall continue to be exercisable or become exercisable in accordance with their terms as provided in the 1973 Stock Option and Award Plan, and Nichols shall have three years from the expiration of his Consultancy, but not more than ten years from the date of grant of such options, to exercise any options which are exercisable at the expiration of the Consultancy. b) On October 21, 1998, the Board of Directors granted Nichols, under the Company's 1997 Equity Incentive Plan, 5-year non- qualified options to purchase Fifty-Three Thousand Four Hundred Sixty (53,460) shares of the Company's common stock at a price of $26-9/32 per share. The options expire on October 31, 2003. The options shall vest and be exercisable in accordance with their terms as provided in the 1997 Equity Incentive Plan. 7. Additional Benefits and Executive Perquisites. Following --------------------------------------------- his Retirement Date, in addition to retiree medical benefits, Nichols shall accrue all other retiree benefits then provided to salaried retirees of the Company in accordance with the terms of those plans and programs as they may be amended from time to time. Nichols shall also continue to receive, at the Company's expense, executive tax and estate planning benefits until July 1, 1999, at an annual cost not to exceed the cost of such benefits allotted to Mr. Nichols under the Company's policies and procedures. 8. Life Insurance. Following his Retirement Date, the Company -------------- shall continue to provide life insurance coverage under an endorsement split dollar arrangement on Nichols' life at a level of four times his annual base salary of $517,512. This life insurance coverage includes the benefit formerly provided under the Company's SLIP Program. If the policy is not in effect on the date of his death, the benefit will be payable by the Company equating to four times his annual base salary of $517,512, offset by any other life insurance benefits the Company may maintain, at its cost, on his life that are payable to his beneficiary. 9. Supplemental Annual Incentive Award. Nichols was awarded ----------------------------------- $434,412 by the Board of Directors under the Supplemental Annual Incentive Award ("SAIA") Program. Payment of the SAIA award shall be made to Nichols before December 31, 1998. 10. Termination. Subject to the provisions of Section 12 and ----------- the terms of the applicable benefit plans and programs, the obligations of the Company to pay and otherwise provide compensation and benefits to Nichols as provided in Section 2, 3, 6, 7 and 9, shall also cease upon the death of Nichols. 11. Consultancy. Upon Nichols' Retirement Date, the Company ----------- shall retain him as a consultant until October 31, 2000, to perform special projects, if any, which from time to time may be mutually agreed upon between Nichols and the Chief Executive Officer of the Company. Nichols agrees that prior to his becoming a consultant, he shall execute a Consultant Invention and Secrecy Agreement, a copy of which is attached hereto as Exhibit A. From his Retirement Date, the Company shall pay an annual retainer of $5,000 for consulting services plus $275 per each hour Nichols actually performs consulting services. Any self-employment tax or taxes payable by Nichols on account of his Consultancy, shall be paid by Nichols. Nichols shall provide to the Chief Executive Officer a statement detailing his consulting services and the time spent in the performance thereof for each month in which such services are rendered. Nichols shall be reimbursed for reasonable expenses incurred by him in rendering such consulting services upon receipt by the Chief Executive Officer of a statement of itemized expenses with substantiating documentation. The parties agree that in providing such services, Nichols is not a Company employee but is an independent contractor. While performing these services, Nichols is not entitled to participate in or obtain benefits under any Company employee benefit or compensation plan or program, except as a retiree according to the terms of those plans and programs. Nichols agrees that even if it is determined (by a governmental agency, judicial body or otherwise) that while performing consulting services he was a common law employee, he will not be entitled to any compensation or benefits by reason of such services except as described above and he specifically waives and releases all rights to any other rights under any Company's employee benefit and compensation programs by reason of his consulting services. 12. Payment Upon Death. Notwithstanding anything in this ------------------ Agreement to the contrary, Nichols' spouse, beneficiary or estate, as the case may be, shall be entitled to compensation and benefits pursuant to the terms of the Company's applicable employee benefit and compensation plans and programs, as may be provided for upon Nichols' death, together with the following additional provisions and benefits unless previously paid to Nichols: (a) Nichols' MICP, as discussed in Section 3 above, shall be paid in the amount as specified in Section 3 above. (b) Nichols' Supplemental Retirement Benefit as discussed in Section 4(d) above, shall be paid as specified in Section 4(d) above. (c) Nichols' Supplemental Annual Incentive Award as discussed in Section 9 above, shall be paid as specified in Section 9 above. 13. Noncompete and Confidentiality. During the Consultancy, ------------------------------ Nichols agrees (a) not to become an employee or proprietor of, consultant to, or partner in, any entity which is or becomes, during the term hereof, a direct competitor of any primary or developing product lines within the primary or developing market areas of any business of the Company or any of its wholly-owned subsidiaries or that he knows has the intention of becoming such a direct competitor, without the prior written consent of the Company, which shall not be unreasonably withheld, (b) not to directly or indirectly: (i) induce any customers of the Company or any of its businesses to patronize any competing business, (ii) canvass, solicit or accept (for himself or any other person or entity) any business relationships from any customers of the Company or any of its businesses and (iii) cause, request or advise any customers of the Company or any of its businesses to withdraw, curtail or cancel any business relationship with the Company or any of its businesses, and (c) not to divulge or appropriate for his own use or the use of others any secret or confidential information pertaining to the business of the Company or any of its subsidiaries obtained during his employment by or Consultancy with the Company. The latter obligation shall not apply when and to the extent any of such information is or becomes publicly known or available, other than because of Nichols' act or omission. Notwithstanding the foregoing, any existing confidentiality, nondisclosure or proprietary rights agreement between the Company and Nichols shall remain in full force and effect in accordance with its terms including, without limitation, Exhibit A hereto. In the event that Nichols violates the provisions of this Section 13, the Company shall, in addition to any other rights and remedies available to it, be entitled to injunctive relief issued by a court of competent jurisdiction enjoining restraining him from competing with the Company, and Nichols consents to the issuance of such injunction, and Nichols agrees that the Company shall not be required to prove actual damages to obtain such injunctive relief. 14. Miscellaneous. ------------- A. This Agreement may be amended only in writing signed by both parties and shall be binding upon all persons entitled to receive payments hereunder, and their respective heirs, executors or administrators and upon the Company, its successors and assigns. B. Any payment(s) required to be made by the Company pursuant to this Agreement to a person who is under a legal disability may be made by the Company to or for the benefit of such person in such of the following ways as the Company shall determine: (i) directly to such person, (ii) to the legal representative of such person, (iii) to some near relative of such person to be used for the latters' benefit, or (iv) directly in payment of expenses in support, maintenance or education of such person. The Company shall not be required to see to the application by any third party of any payment(s) made pursuant hereto. The Company and its agents shall be relieved from all further liability for any amounts upon their payment as described above. C. All questions in respect of this Agreement, including those pertaining to its validity, interpretation and performance, shall be determined by the laws of the State of Missouri. The Chairman and Board of Directors of the Company are each fully authorized and given discretion to interpret the provisions of this Agreement and make all determinations and take all actions hereunder, unless otherwise stated, and their decisions will be final and will be given maximum deference by any reviewing court or agency. D. This Agreement supersedes and replaces any other agreement or commitment which Nichols may have from the Company and any negotiations or representations regarding its subject matter except that the terms of all employee benefit and compensation or other plans pursuant to which amounts may be paid under this agreement shall continue to apply. E. If any provision of this Agreement is for any reason invalid or unenforceable, such invalidity or illegality shall not affect the remaining provisions. Rather, each provision shall be fully severable, and the Agreement shall be construed and enforced as if any invalid or illegal provision had not been included. 15. Waiver and Release. In consideration of the benefits ------------------ outlined above, Nichols, on behalf of himself, his heirs, assigns and legal representatives, hereby releases and forever discharges the Company and its officers, directors, insurers and employees and employee benefit plans from any and all claims, demands, damages, causes of action or suits of whatever type under any state, federal or local laws, including, but not limited to, the Age Discrimination in Employment Act and other laws prohibiting employment discrimination, as well as claims at common law or equity and in contract or in tort and whether known or unknown, that Nichols may have, has had or may acquire of whatever nature from the beginning of time to the date of this Agreement or through the end of the period of Consultancy based upon any known or unknown fact, condition or incident occurring through the date of this Agreement or the end of the period of Consultancy including any fact or event related to Nichols' employment or separation from employment with the Company. Nichols agrees not to make any claim for damages or personal recovery by administrative charge, lawsuit or other proceeding related to any of the above and will not seek or accept money damages or personal relief upon the filing of any administrative claim or judicial charge or claims. If any party brings any claim or action which is contrary to the above release, then the party defendant to that action shall be entitled to reimbursement for costs and attorneys' fees incurred in the defense thereof. This release does not discharge the Company from obligations that it otherwise has under this Agreement and the Company's employee benefit and compensation plans for benefits accrued to Nichols. Nichols acknowledges that by signing this Agreement, he waives all claims arising under the Age Discrimination in Employment Act of 1967 (ADEA) and that: (a) This waiver of ADEA rights does not waive any ADEA rights and claims which arise after the date of this Agreement and this waiver is given in exchange for payment of sums and the Consultancy, which are more than Nichols is otherwise entitled to receive; (b) Employee has been advised to consult an attorney before signing this Agreement and has twenty-one (21) days to consider it which period commenced on October 30, 1998; (c) If Nichols executes this Agreement, it will not become effective for seven (7) days thereafter. During this seven (7) day period, he may revoke this release and waiver provided he submits written notification of such revocation to the undersigned prior to the expiration of the revocation period. If Nichols revokes this Agreement during that period, then the Company has no duty to pay any sums or provide any benefits described herein except for amounts which would be payable under plans or programs by their terms without consideration of this Agreement. IN WITNESS WHEREOF, the Company has caused this Agreement be executed on its behalf by a duly authorized officer and Nichols, to evidence his acceptance thereof, has set his hand and seal effective as of the date first above-written. MALLINCKRODT INC. By: /s/ C.R. HOLMAN ---------------------------- C. Ray Holman Chairman & Chief Executive Officer ACCEPTED BY: /s/ M.G. NICHOLS - ----------------- Mack G Nichols Date: 11/9/98 EX-27 7
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations of the Company's Form 10-Q, and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS JUN-30-1999 DEC-31-1998 57 0 502 19 522 1238 1472 573 3881 1136 944 0 11 87 943 3881 1228 1228 666 1087 0 0 43 99 32 67 23 0 0 89 1.24 1.23
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