-----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, ISYIHhhG1/+rJJxNS/p0QKBKzA580TAmyj8vXfm4MHxIoGnADTihYraC9bC9OatH tlRzHnt6FL2uOMVfkRctkw== 0000009892-97-000005.txt : 19970328 0000009892-97-000005.hdr.sgml : 19970328 ACCESSION NUMBER: 0000009892-97-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARD C R INC /NJ/ CENTRAL INDEX KEY: 0000009892 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 221454160 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06926 FILM NUMBER: 97565388 BUSINESS ADDRESS: STREET 1: 730 CENTRAL AVE CITY: MURRAY HILL STATE: NJ ZIP: 07974 BUSINESS PHONE: 9082778000 MAIL ADDRESS: STREET 1: 730 CENTRAL AVENUE CITY: MURRAY HILL STATE: NJ ZIP: 07974 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 Commission File Number 1-6926 C. R. BARD, INC. (Exact name of registrant as specified in its charter) New Jersey 22-1454160 (State of incorporation) (I.R.S. Employer Identification No.) 730 Central Avenue, Murray Hill, New Jersey 07974 (Address of principal executive offices) Registrant's telephone number, including area code: (908) 277-8000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock - $.25 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ X ] The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $1,560,700,000 based on the closing price of stock traded on the New York Stock Exchange on February 28, 1997. As of February 28, 1997, there were 57,011,717 shares of Common Stock, $.25 par value per share, outstanding. The company's definitive Proxy Statement dated March 7, 1997 has been incorporated by reference with respect to certain information contained therein in Part III and Part IV of this Form 10-K. The exhibit index is located in Part IV, Item 14, Page IV-1. PART I Item 1. Business General Development of Business The company was started by Charles Russell Bard in 1907. One of its first medical products was the silk urethral catheter imported from France. In 1923, the company was incorporated as C. R. Bard, Inc. and distributed an assortment of urological and surgical products. Bard became a publicly-traded company in 1963 and five years later was traded on the New York Stock Exchange. In 1966, Bard acquired its supplier of urological and cardiovascular specialty products - the United States Catheter & Instrument Co. In 1980 Bard acquired its major source of the Foley catheter - Davol Inc. Numerous other acquisitions were made over the last thirty-five years broadening Bard's product lines. Today, C. R. Bard, Inc. is a leading multinational developer, manufacturer and marketer of health care products. 1996 sales of $1.194 billion increased 5% from 1995. 1995 sales of $1.138 billion increased 7% from 1994. Net income for 1996 totaled $92.5 million or $1.62 per share, and increased 7% and 6% respectively against 1995. Net income for 1995 totaled $86.8 million or $1.53 per share, an increase of 15% and 14% respectively against 1994. Acquisitions In September of 1996 Bard completed the acquisition of IMPRA, Inc. ("IMPRA"), a company that develops, manufactures and markets vascular grafts used for blood vessel replacement surgery. The purchase and acquisition costs which approximated $155.4 million were financed with commercial paper. In addition, during 1996, the company acquired St. Jude Medical's Cardiac Assist Division and X-Trode S.r.l. These acquisitions enhance and expand the company's existing product lines and further develop international markets. The cost of these acquisitions amounted to approximately $44.0 million and were financed through internally generated cash and available credit lines. In September 1995, the company completed a merger with MedChem Products, Inc. ("MedChem") issuing 3,192,345 shares of its common stock in exchange for all outstanding common stock of MedChem. In October 1995, the company completed a merger with American Hydro-Surgical Instruments, Inc. ("AHS") issuing 1,338,446 shares of its common stock in exchange for all outstanding common stock of AHS. These mergers have been accounted for as poolings of interests, and accordingly, the company's information contained in this Annual Report on Form 10-K were restated in 1995. I-1 Acquisitions (continued) During 1994 the company spent $118.2 million acquiring new businesses. Angiomed AG, a German company with products marketed in the areas of urology, radiology, vascular surgery and gastroenterology was purchased in October 1994. VasCath, Inc., a Canadian company with a strong position in specialty catheter products was acquired in December 1994. Product Group Information Bard is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Hospitals, physicians and nursing homes purchase approximately 90% of the company's products, most of which are used once and discarded. The following table sets forth for the last three years ended December 31, 1996, the approximate percentage contribution by product line to Bard's consolidated net sales. The figures are on a worldwide basis. Years Ended December 31, 1996 1995 1994 Cardiovascular 33% 33% 35% Urological 29% 28% 27% Surgical 38% 39% 38% Total 100% 100% 100% Narrative Description of Business General Historically, Bard has been known for its products in the urological field, where its Foley catheter is the leading device for bladder drainage. Today, Bard's largest product group is in surgical devices, contributing approximately 38% of consolidated net sales. Bard continually expands its research toward the improvement of existing products and the development of new ones. It has pioneered in the development of disposable medical products for standardized procedures. I-2 General (continued) Bard's domestic sales may be grouped into three principal product lines: cardiovascular, urological and surgical. International sales include most of the same products manufactured and sold by Bard's domestic operations. Domestic and international sales are combined for product group sales presentation. Cardiovascular - Bard's line of cardiovascular products includes balloon angioplasty catheters, steerable guidewires, guide catheters and inflation devices; angiography catheters and accessories; introducer sheaths; electrophysiology products including cardiac mapping and electrophysiology laboratory systems, and diagnostic and temporary pacing electrode catheters; cardiopulmonary support systems; and blood oxygenators and related products used in open-heart surgery. See the first paragraph of Item 3. Legal Proceedings on Page I-6 for additional information. Urological - Bard offers a complete line of urological products including Foley catheters, procedural kits and trays and related urine monitoring and collection systems; biopsy and other cancer detection products; ureteral stents; and specialty devices for incontinence, endoscopic procedures and stone removal. Surgical - Bard's surgical products include specialty access catheters and ports; implantable blood vessel replacements; fabrics and meshes for vessel and hernia repair; surgical suction, irrigation and drainage devices; gastroenterological products, irrigation devices for orthopaedic and laparoscopic procedures; laparoscopic accessories; blood management devices and products for wound management and skin care. International - Bard markets cardiovascular, urological and surgical products throughout the world. Principal markets are Japan, Canada, the United Kingdom and continental Europe. Approximately two-thirds of the sales in this segment are of products manufactured by Bard in its facilities in Canada, France, Germany, Ireland, Malaysia and the United Kingdom. The balance of the sales are from products manufactured in the continental United States, Puerto Rico or Mexico for export. Bard's foreign operations are subject to the usual risks of doing business abroad, including restrictions on currency transfer, exchange fluctuations and possible adverse government regulations. See p. II-28 Note 10 in the Notes to Consolidated Financial Statements for additional information. I-3 Competition The company knows of no published statistics permitting a general industry classification which would be meaningful as applied to the company's variety of products. However, products sold by the company are in substantial competition with those of many other firms, including a number of larger well-established companies. The company depends more on its consistently reliable product quality, dependable service and its ability to develop products to meet market needs than on patent protection, although some of its products are patented or are the subject of patent applications. Marketing The company's products are distributed domestically directly to hospitals and other institutions as well as through numerous hospital/surgical supply and other medical specialty distributors with whom the company has distributor agreements. In international markets, products are distributed either directly or through distributors with the practice varying by country. Sales promotion is carried on by full-time representatives of the company in domestic and international markets. Sales to a distributor, which supplies the company's products to many end-users, accounted for approximately 8% of the company's sales and the five largest distributors combined accounted for approximately 21% of such sales. Combined sales to federal agencies accounted for approximately 2% of sales in 1996 (See Item 3. Legal Proceedings). In order to service its customers, both in the U.S. and outside the U.S., the company maintains inventories at distribution facilities in most of its principal marketing areas. Orders are normally shipped within a matter of days after receipt of customer orders, except for items temporarily out of stock, and backlog is normally not significant in the business of the company. Most of the products sold by the company, whether manufactured by it or by others, are sold under the BARD trade name or trademark or other trademarks owned by the company. Such products manufactured for the company by outside suppliers are produced according to the company's specifications. I-4 Regulation The development, manufacture, sale and distribution of the company's products are subject to comprehensive government regulation. Government regulation by various federal, state and local agencies, which includes detailed inspection of and controls over research and laboratory procedures, clinical investigations, manufacturing, marketing, sampling, distribution, record keeping, storage and disposal practices, substantially increases the time, difficulty, and costs incurred in obtaining and maintaining the approval to market newly developed and existing products. Government regulatory actions can result in the seizure or recall of products, suspension or revocation of the authority necessary for their production and sale, and other civil or criminal sanctions. Raw Materials The company uses a wide variety of readily available plastics, textiles, alloys and rubbers for conversion into its devices. Two large, U.S.-based chemical suppliers have sought to restrict the sale of certain of their materials to the device industry for use in implantable products. Although one guiding principle in the adoption of this policy is the avoidance of negative economic effect on the health care industry, a small portion of our product lines may face a short-term threat to the continuity of their raw material supply. Such suppliers have indicated that their action is based on product liability concerns. Bard and the medical device industry are working to resolve this problem in general and with these suppliers to assure a continuing supply of necessary raw materials. Bard is working to maintain a supply of qualified materials by developing new supplies and increasing inventories of important stocks. Environment The company continues to address current and pending environmental regulations relating to its use of Ethylene Oxide for the sterilization of some of its products. The company is complying with requlations reducing permitted ETO emissions by installing scrubbing equipment and adjusting its processes. The company recognizes the Montreal Protocol Treaty, which plans for the reduction of CFC use worldwide. The company has eliminated the use of CFC's in its sterilization processes. The company intends to continue to reduce its other uses of CFC's. Capital expenditures required will not significantly adversely affect the company's earnings or competitive position. I-5 Employees The company employs approximately 9,800 persons. Seasonality The Company's business is not affected to any material extent by seasonal factors. Research and Development The Company's research and development expenditures amounted to approximately $77,300,000 in 1996, $75,600,000 in 1995 and $71,600,000 in 1994. Item 2. Properties The executive offices of the company are located in Murray Hill, New Jersey in facilities which the company owns. Domestic manufacturing and development units are located in Arizona, California, Georgia, Kansas, Massachusetts, Michigan, New Jersey, New York, Ohio, Puerto Rico, Rhode Island, South Carolina, Texas, Utah and Washington. Sales offices and distribution points are in these locations as well as others. Outside the U.S., the company has plants or offices in Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The company owns approximately 2,528,000 square feet in 23 locations and leases approximately 1,233,000 square feet of space in 68 locations. All these facilities are well maintained and suitable for the operations conducted in them. Item 3. Legal Proceedings On October 14, 1993, the company entered into a Plea Agreement with the Department of Justice in connection with charges stemming from violations, primarily during the 1980s by the Company's USCI division, of the Federal Food, Drug and Cosmetic Act and other statutes. In connection with such violations, the Defense Logistics Agency debarred the USCI division from entering into new contracts with the U.S. Government. Such debarment expired on June 19, 1996. I-6 Item 3. Legal Proceedings (continued) In November 21, 1994 an action was commenced against the company by Surgical Laser Technologies, Inc. (SLT) in the United States District Court for the Eastern District of Pennsylvania. The Amended Complaint alleged that the company has repudiated, refused to perform and breached an alleged contract with SLT, and further alleges a breach of the duty of good faith and fair dealing in the conduct of contract negotiations between the parties and unfair competition. Damages of an unspecified amount are sought together with injunctive relief. The company has answered the Amended Complaint, denying that there was ever agreement to the alleged contract, or that the company otherwise breached any duty owed to SLT. Discovery has recently commenced and no trial date has yet been set. The company believes it has meritorious defenses to this action. On October 6, 1995, Trimedyne, Inc. filed a complaint in State Court in California alleging breach of contract, fraud and negligent misrepresentation by the company in connection with its performance under a Development, Supply and License Agreement dated June 28, 1991, concerning side-firing laser products (Urolase ). In addition, the complaint alleges that the company has failed to pay for product purchased, along with certain other charges. Trimedyne, Inc. seeks damages totalling $72 million plus punitive damages. The case has been removed to the Federal District Court and transferred to the District of New Jersey. The company believes it has some liability to the plaintiff for certain goods ordered; however, the amount is in dispute. Except as to this claim, the company believes that it has meritorious defenses to this action. During 1993, the United States Environmental Protection Agency (the "EPA") notified the Company's Urological division that it may be a potentially responsible party relative to clean-up of the Frontier Chemical site in Niagara Falls, New York. In September, 1993, the company entered into a consent order concerning the first phase of the clean-up, which was a drum removal action. The Company's liability for the first phase was $119,000. A second phase of remedial action involves removal of waste in several large tanks. The Company's liability for this phase was assessed at less than $14,000. The third phase of remedial action involves soil and groundwater contamination which may be significant in view of the age of this industrial site. The Company's responsibility for clean up of this phase is unknown at this time, but it is believed that the final resolution of this matter is not expected to have a material adverse financial impact on the company. I-7 Item 3. Legal Proceedings (continued) During 1992, the EPA notified the company that it had been identified as a potentially responsible party in connection with an ongoing investigation of the Solvents Recovery Service of New England site in Southington, Connecticut. Although the full extent of liability in this case is unknown, the company has been identified with less than one-half percent of the total gallonage of waste materials. In June of 1995, the company accepted the EPA's invitation to enter into negotiations concerning the Group's undertaking the remedial investigation and feasibility study. Negotiations concerning a Consent Order to allow the Group to undertake the remedial investigation and feasibility study are ongoing. The final resolution of this matter is not expected to have a material adverse financial impact on the company. The company is also subject to other legal proceedings and claims which arise in the ordinary course of business. Item 4. Results of Votes of Security Holders Not applicable. I-8 Executive Officers of the Registrant Set forth below is the name, age, position, five year business history and other information with respect to each executive officer of the company as of March 1, 1997. No family relationships exist among the officers of the company. Name Age Position William H. Longfield 58 Chairman and Chief Executive Officer and Director Benson F. Smith 49 President and Chief Operating Officer and Director William C. Bopp 53 Executive Vice President and Chief Financial Officer and Director Guy J. Jordan 49 Group Vice President Timothy M. Ring 39 Group Vice President William T. Tumber 62 Senior Vice President John H. Weiland 41 Group Vice President E. Robert Ernest 56 Vice President - Planning and Development Richard A. Flink 62 Vice President, General Counsel and Secretary Christopher D. Ganser 44 Vice President - Quality Assurance Hope Greenfield 46 Vice President - Human Resources Charles P. Grom 49 Vice President and Controller Richard D. Manthei 61 Vice President-Scientific Affairs Earle L. Parker 53 Vice President and Treasurer All officers of the company are elected annually by the Board of Directors. I-9 Mr. Longfield joined the company in 1989 and was elected executive vice president and chief operating officer. In 1991 he was elected president. In June 1994 he was elected president and chief executive officer. In September 1995 he was elected to his present position. Prior to joining the company, he was chief executive officer since 1984 of the Cambridge Group, Inc., a provider of long term health services for the elderly. Prior to joining Cambridge, he was employed by Lifemark, Inc., a health care management company, and for over 20 years with American Hospital Supply Corporation. Mr. Smith joined Bard in 1980. In 1990, he was appointed to the position of group executive. In 1991, he was elected group vice president. In 1993, he was elected to the position of executive vice president with worldwide responsibility for operations. In 1994 he was elected to the additional post of chief operating officer. In October 1995 he was elected to his present position. Mr. Bopp joined the company in 1980. In 1983 he was elected to the position of treasurer. He was named vice president and treasurer in 1989. In 1992 he was elected senior vice president and chief financial officer. In October 1995 he was elected to his present position. Mr. Jordan joined the company in 1986 as director of research and development for USCI. In 1990 he was promoted to vice president for specialty access products for Davol. In 1991 he was promoted to vice president and general manager of Bard Access Systems and became president of the division in 1993. In 1996 he was elected to his present position. Mr. Ring joined the company in 1992 and was elected vice president- human resources. Prior to joining the company he had been with Abbott Laboratories Inc., a pharmaceutical company, since 1982 and his last position with their Hospital Products division had been director of personnel. In December 1993, he was elected to the position of group vice president. Mr. Tumber joined Bard in 1980. In 1988 he was promoted to vice president and general manager of Davol Inc. In 1990 he was promoted to president of Davol Inc. and subsequently appointed to the position of group executive. In September 1991, he was elected to group vice president and in 1996 appointed to his present position of senior vice president. I-10 Mr. Weiland joined the company in February 1996 as group vice president. Prior to joining the company, since 1991 he was senior vice president, North American Group, with Dentsply International, the nation's largest manufacturer of professional dental products. Prior to that he was president and chief executive officer of Pharmacia Diagnostics, Inc., a manufacturer of medical diagnostic supplies and in various positions with Baxter International, Inc., a manufacturer of health care products and services. Mr. Ernest joined the company in 1977 and was elected to his present position in 1979. Mr. Flink joined the company in 1970, was elected vice president and general counsel in 1973 and was elected to his present position in 1985. Mr. Ganser joined the company in 1989 as Manager, Quality Assurance in the Moncks Corner facility. In April, 1994 he was elected to his present position. Ms. Greenfield joined the company in October 1995 as corporate vice president, human resources. Prior to joining the company she had been with Digital Equipment Corporation, a supplier of information systems and hardware, as vice president development and learning and in various human resource positions. Mr. Grom joined the company in 1977. In 1989 he was promoted to assistant corporate controller and in 1994 was elected corporate controller. In April 1995 he was elected to his present position. Mr. Manthei joined the company is 1996. Prior to joining the company, he was a partner in the law firm of McKenna and Cuneo in Washington, DC, where he chaired the Food, Drug, Cosmetic and Medical Device Department. Mr. Parker joined the company in 1979. In December 1990 he was promoted to vice president-operations for the USCI division and, later that year, was promoted to vice president and general manager of the USCI Angiography division. In 1992 he was elected Treasurer and effective January 1, 1995 he was elected to his present position. I-11 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters Market and Market Prices of Common Stock The Company's common stock is traded on the New York Stock Exchange using the symbol: BCR. The following table illustrates the high and low sales prices as traded on the New York Stock Exchange for each quarter during the last two years. Quarters 1st 2nd 3rd 4th Year 1996 High 37-3/8 37 34-3/8 32-3/4 37-3/8 Low 29-1/2 31-7/8 28-3/4 25-7/8 25-7/8 Close 35-5/8 34-1/8 31-1/8 28 28 1995 High 28-1/8 31-1/8 31-7/8 32-1/4 32-1/4 Low 25-1/2 27-1/4 29-1/4 27-7/8 25-1/2 Close 27-5/8 30 30-1/2 32-1/4 32-1/4 Approximate Number of Equity Security Holders Approximate Number of Record Holders Title of Class as of February 28, 1997 Common Stock - $.25 par value 7,184* *Included in the number of shareholders of record are shares held in "nominee" name. Dividends The company paid cash dividends of $37,700,000 or $.66 per share in 1996 and $33,100,000 or $.62 per share in 1995. The following table illustrates the quarterly rate of dividends paid per share. Quarters 1st 2nd 3rd 4th Year 1996 $ .16 $ .16 $ .17 $ .17 $ .66 1995 $ .15 $ .15 $ .16 $ .16 $ .62 In January 1997, the first quarter dividend of $.17 per share was declared, indicating an annual rate of $.68 per share. The first quarter dividend was paid on January 31, 1997 to shareholders of record on January 20. II-1 Item 6. Selected Financial Data (Thousands of dollars except per share amounts)
For the Years Ended December 31, 1996 1995 1994 1993 1992 INCOME STATEMENT DATA Net sales $1,194,400 $1,137,800 $1,064,600 $1,008,800 $1,033,800 Net income 92,500 86,800 75,600 57,800 83,400 BALANCE SHEET DATA Total assets $1,332,500 $1,091,000 $1,043,100 $ 881,400 $ 789,200 Working capital 240,700 230,600 72,300 165,200 213,200 Long-term debt 342,800 198,400 93,400 82,100 84,000 Total debt 491,000 265,300 294,000 171,000 148,300 Shareholders' investment 601,500 564,600 495,400 439,900 444,900 COMMON STOCK DATA Net income per share $ 1.62 $ 1.53 $ 1.34 $ 1.02 $ 1.45 Cash dividends per share .66 .62 .58 .54 .50 Shareholders' investment per share $ 10.56 $ 9.89 $ 8.77 $ 7.77 $ 7.75 Average shares outstanding (000's) 57,090 56,731 56,461 56,692 57,422 SUPPLEMENTARY DATA Return on average shareholders' investment 15.9% 16.4% 16.2% 13.1% 19.2% Net income/net sales 7.7% 7.6% 7.1% 5.7% 8.1% Days-accts rec 70.3 66.7 62.3 60.7 63.1 Days-inventory 151.7 149.4 143.6 135.9 129.4 Total debt/total capitalization 44.9% 32.0% 37.2% 28.0% 25.0% Interest expense $ 26,400 $ 24,200 $ 16,300 $ 12,500 $ 13,400 R&D expense $ 77,300 $ 75,600 $ 71,600 $ 67,500 $ 62,300 # of employees 9,800 9,400 8,900 8,650 9,000 Net sales per employee $ 121.9 $ 121.0 $ 119.6 $ 116.6 $ 114.9 Net income per employee $ 9.4 $ 9.2 $ 8.5 $ 6.7 $ 9.3
II-2 Item 7. Management's Discussion and Analysis of Results of Operations and of Financial Conditions General Bard is a leading multinational developer, manufacturer and marketer of products for the large and growing health care industry. Worldwide health care expenditures approximated $2.3 trillion in 1996 with about half that amount spent in the United States. Bard's segment of this industry, itself a multi-billion dollar market, is primarily specialized products used mainly in hospitals, in outpatient centers and in physician's offices to meet the needs of the medical profession in caring for their patients. We seek to focus and concentrate on selected markets with cost-effective, innovative products and specialized sales forces to maximize our opportunities in these markets. Summary Results Consolidated net sales increased 5% in 1996 with the growth well balanced among product groups and geographic areas. Net income increased 7% and earnings per share rose 6%, with 1996 and 1995 income both affected by one-time charges, which are described below. One-time Items Affecting Results Net income was affected in 1996 by one-time charges of $29.8 million, partially offset by a total of $18.6 million for the reversal of tax reserves no longer required and certain other items. These charges and income items are described on page II-6 of this financial review and resulted in a net after-tax reduction in income of $11.2 million. Net income in 1995 was reduced by $13.5 million reflecting the costs of combining the operations of MedChem and AHS into Bard. Net income in 1994 was reduced by $16.9 million for certain legal fees and settlements. Results of Operations - 1996 vs. 1995 Net sales totaled $1.194 billion in 1996, a 5% increase over 1995. Price reductions totaled about 2% worldwide while a stronger dollar reduced reported sales by 1%. Sales of cardiovascular products rose 5% in 1996 to $394.2 million. Radiology devices showed strong growth, primarily in markets outside the U.S. Sales of cardiac assist devices acquired from St. Jude Medical in January 1996 also added to the cardiovascular growth rate. II-3 Results of Operations - 1996 vs. 1995 (continued) Urological product group sales totaled $342.4 million in 1996, a 6% increase over 1995. Basic drainage products such as Foley catheters and trays, other procedural trays, urinary bags and meters and specialty devices all contributed to this growth. Our growth in urological products was high in the U.S. market and we continue to try to broaden our international market penetration. Surgical product group sales increased 4% in 1996 to $457.8 million with the growth in international markets a little higher than in the U.S. The additional sales generated from the September 1996 IMPRA acquisition contributed significantly to surgical product growth. Individual areas of good performance continue to be our vascular access catheters and ports, hernia repair fabrics, and orthopaedic irrigation devices. This was substantially offset by declines in basic drainage and general surgery devices. Sales in the United States grew 4% in 1996 to $782.0 million, representing 65% of worldwide sales. Urological turned in the highest growth rate of our three product groups, but surgical continues to generate the most revenue. Cardiovascular sales showed only a marginal increase in 1996 as fourth quarter new product launches did not have enough time to generate increased sales momentum. Sales outside the U.S. grew 6% in 1996 to $412.4 million, representing 35% of worldwide sales, compared with 34% in 1995. Growth was highest in the cardiovascular product area, primarily from strong balloon angioplasty product sales in Europe. Balloon angioplasty products continued to do better outside the U.S. due to a quicker regulatory approval process in most international markets. Sales of urological products showed a small increase outside the U.S. Significant declines in basic surgical suction, irrigation, drainage and general surgery products offset good increases in sales of several other surgical group products. The effect of currency translation was to lower international sales by almost 3% for the year. Excluding this effect, reported international sales would have increased 9% over the prior year. The geographic breakdown of sales outside the U.S. for the last three years is: 1996 1995 1994 Europe, Middle East, Africa 62% 62% 56% Asia/Pacific area and Western hemisphere, excluding U.S. 38% 38% 44% 100% 100% 100% II-4 Results of Operations - 1996 vs. 1995 (continued) The cost of goods sold increased to 48.7% of sales in 1996 compared with 48.3% in the prior year as price declines exceeded our ability to reduce costs. Bard historically had been able to recover these costs through its strong product position in its markets or by offsetting the effect of inflation through its cost reduction programs. Recently, market price reductions have exceeded our gains in manufacturing efficiencies and our efforts to shift our mix to higher margin products. Marketing, selling and administrative expenses increased just over 3% in 1996, lower than the rate of growth in sales, as efforts were increased to lower expenses to help offset some of the effects of price declines. Also, we have realized synergies from the two mergers completed late in 1995. As a percent to total sales, these expenses represented 30.6% in 1996 compared with 31.2% in 1995. Research and development spending increased over 2% in 1996, representing 6.5% of sales, slightly less than the ratio to sales in 1995. In our efforts to reduce costs, we eliminated certain planned spending while continuing sufficient work on the programs needed for our future success. Additional interest expense related to acquisitions in 1996 resulted in an increase in total interest expense for the year. Costs to combine the operations of acquisitions of $9.0 million in 1996 and $17.7 million in 1995 affected income in both years. Please refer to Note 9, Other (Income) Expense, Net of the Notes to Consolidated Financial Statements in this report for a summary of items in this category in the last three years. Included in this category in 1996 are charges of $31.0 million for the write down of assets related to guidewire technology, $10.0 million for the closing of certain manufacturing operations and a net amount of $3.5 million for certain legal fees and settlements. Also included are nonrecurring royalty payments of $9.2 million received in 1996 for prior periods. Income Tax The effective income tax rate was 10% in 1996. Excluding the impact of the first quarter reversal of approximately $15 million in tax reserves no longer required and the increased tax benefit in the U.S. related to the one-time charges discussed previously, the effective tax rate would have been 29.5% compared with 29.7% in 1995. II-5 Net Income Net income increased 7% in 1996 and was affected over the last three years by costs to combine the operations of acquired companies in 1995 and 1996 and by other one-time items in 1994 and 1996. The effect on net income and earnings per share in the last three years were (in millions except per share amounts): 1996 Reorganization, asset writedown and costs to combine operations $(29.80) Reversal of tax reserves 15.00 Prior period royalty payments, legal settlements and other 3.60 Total 1996 $(11.20) Equivalent per share $ (.20) 1995 Costs to combine operations $(13.50) Equivalent per share $( .24) 1994 Legal fees and settlements $(16.90) Equivalent per share $ ( .30) After adjusting for the items shown above, net income and earnings per share (EPS) would have been: Net Income (millions) EPS 1996 $103.7 $1.82 1995 $100.3 $1.77 1994 $ 92.5 $1.64 Results of Operations - 1995 vs. 1994 Net sales totaled $1.138 billion in 1995, an increase of 12% over the $1.018 billion originally reported for 1994. This 12% increase includes 5% from new sales as a result of the two acquisitions Bard made in 1995. Since they were accounted for as poolings of interests, Bard's restated sales for 1994 are $1.065 billion, resulting in a 7% increase to $1.138 billion in 1995. Worldwide revenue growth of 10% in 1995 in the urological and surgical product groups combined with a 1% increase in cardiovascular sales, resulted in the consolidated increase of 7%. All of the growth came from sales outside the U.S. as U.S. sales approximated the prior year's level. Price reductions totaled 2% on a worldwide basis in 1995 while higher foreign currency values versus the dollar increased total reported sales by 2%. II-6 In the urological product group, worldwide sales increased 10% in 1995, all of it from outside the U.S., with a substantial portion the result of a full year's sales of Angiomed products in 1995 versus two months of sales following the acquisition in 1994. Urological sales in 1994 increased 16% with a majority of the increase a result of sales of the Contigen implant. Surgical product group sales increased 10% in 1995, a majority of which was outside the U.S. A full year of sales of Angiomed and Vas-Cath products (acquired in 1994) benefited this area substantially, as did strong growth in sales of vascular access catheters and ports, fabrics and mesh products for hernia repair and gastroenterology devices. Sales in 1994 of surgical products increased 6% with the areas of vascular access, vascular fabrics and mesh and gastroenterology showing good gains. Sales of cardiovascular products increased just 1% in 1995. A full year of Angiomed product sales benefited this area along with good increases in interventional radiology and the FemoStop device. U.S. sales continued to decline as the company awaited clearance from the Food and Drug Administration (FDA) for new products from our USCI division. In 1994, continued weakness in certain cardiovascular product areas resulted in a 3% decline in sales in this group. Increased sales outside the U.S. were more than offset by declines in the U.S. which continued to be affected by the lack of approvals by the FDA of new products from our USCI division. Sales in the United States declined slightly in 1995 versus 1994 and represented 66% of total sales. Total surgical product sales in the U.S. showed good growth with significant increases in sales of vascular access, gastroenterology, hernia repair fabrics and new MedChem products. Urological product sales in the U.S. were level with 1994 while sales of cardiovascular products declined. Sales in the United States increased 4% in 1994 and represented 71% of total sales. Sales of the Contigen implant were the most important contributor to this growth. Sales growth outside the U.S. continued to be strong in 1995 with a 24% increase over 1994, a significant portion from a full year of sales of Angiomed and Vas-Cath products. Higher foreign currency values in 1995 contributed 7% of the increase. Numerous products in all three product groups showed significant gains in revenue in 1995. Sales outside the U.S. increased 9% in 1994 with a little more than 1% of that growth the result of higher foreign currency values. The growth was broad-based throughout our product areas and major geographic markets. Acquisitions accounted for 3% of this growth. II-7 The cost of goods sold as a percent of sales was 48.3% in 1995 and 48.2% in 1994. Productivity gains, cost reductions and a favorable product mix all contributed to reduced costs as a percent of sales for several years through 1994 and these factors almost matched the level of price reductions in 1995. Marketing, selling and administrative expenses increased by 8.6% as we invested in programs to boost future sales revenue. The synergies from the two mergers closed late in 1995, and from our divisional reorganization, were not realized by year-end. As a percent of sales, these expenses were 31.2% in 1995 and 30.7% in 1994. Research and development spending continued to increase as we worked on new technologies and applications for the future. The level of spending as a percent to sales was 6.6% in 1995 and 6.7% in 1994. Interest expense increased from $16.3 million in 1994 to $24.2 million in 1995 as average debt levels increased as a result of acquisitions made in 1994. Costs to combine the operations of acquisitions made in 1995 were $17.7 million. No amounts were recorded in this category in 1994. Other (income) expense, net in 1994 included a $28.2 million one-time charge for certain legal fees and the settlement of a suit. No nonrecurring items were recorded in 1995 in this category. The effective income tax rate was 29.7% in 1995 and 27.4% in 1994. The tax benefit from operations in Puerto Rico and Ireland favorably affected the tax rate each year. The lower rate in 1994 was primarily due to the one-time charge that was tax effected at U.S. rates. Net income increased 15% in 1995 and 31% in 1994. Each year was affected by one-time items as described earlier in this financial review. Financial Condition and Liquidity Bard's financial condition remains strong. While total debt increased by $225.7 million in 1996, primarily for acquisitions, $150 million in long-term debt was issued in the public market and $120 million remains classified as long-term with the backing of our committed credit facility. The ratio of total debt to total capitalization was at 45% in 1996 compared with 32% in 1995 II-8 and 37% in 1994. In 1995, Bard's equity base was increased with the issuance of common stock for the acquisitions of MedChem Products and American Hydro-Surgical. In 1995 the company completed the arrangement of a $350 million syndicated, committed credit facility with a group of 15 banks. With the long-term debt issue in December 1996, the company reduced the credit agreement to $300 million with 11 banks, effective January 1, 1997. The credit agreement supports a commercial paper program which started in September 1996 with a maximum amount of $350 million, reduced by the company to $300 million effective January 1, 1997. The company borrows actively under this program. In addition to the $300 million committed credit agreement, Bard maintains uncommitted credit lines with banks for short-term cash needs and these lines were used as needed during the last three years. At December 31, 1996 the unused uncommitted lines of credit totaled $239 million. As now structured, the company expects cash flows from operating activities to exceed capital expenditures and dividend payments. The company believes it could borrow adequate funds at competitive terms and rates, should it be necessary. This overall financial strength gives Bard sufficient financing flexibility. Total cash outlays made for purchases of businesses, patents, trademarks and other related items were $237 million in 1996, $19 million in 1995 and $148 million in 1994 for a total over the last three years of $404 million. The majority of these investments were for intangible assets, reflecting the premium over book value for these purchases. The cash outlays exclude common stock valued at $135 million issued in 1995 for the acquisitions of MedChem Products and American Hydro-Surgical. The majority of the cash outlays were financed with additional debt ($320 million) with the balance coming from cash from operations. Periodically, the company purchases its common stock in the open market to replace shares issued under various employee stock plans. Net shares issued under the plans were 699,085 in 1996; 648,943 in 1995; and 318,912 in 1994. Total shares purchased were 813,700 in 1996; 75,000 in 1995; and 350,000 in 1994. In June 1996 the Board of Directors authorized the purchase from time to time of up to 1 million shares of which 244,800 had been purchased as of December 31, 1996. II-9 Foreign Currency Risk The company periodically enters into foreign exchange contracts to reduce its exposure to fluctuations in currency values. Contracts have been exclusively for the forward purchase of currencies in which the company has known or anticipated payments. These are primarily for intercompany transactions, resulting in a high degree of confidence that the anticipated transactions will take place. Monetary assets of the company held in foreign currencies have relatively short maturities and are denominated in currencies that have not experienced wide short-term fluctuations in their equivalent U.S. dollar values. Please refer to Note 4 of the Notes to Consolidated Financial Statements of this report for current details of the company's foreign exchange contracts. Legal Proceedings For a discussion of pending legal proceedings and related matters, please see Note 5, Commitments and Contingencies, of the Notes to Consolidated Financial Statements on page II-21. Acquisitions For information on the company's acquisitions of businesses, please see Note 2 of the Notes to Consolidated Financial Statements on page II-17. II-10 Item 8. Financial Statements and Supplementary Data Report of Independent Public Accountants To the Shareholders and Board of Directors of C. R. Bard, Inc.: We have audited the accompanying consolidated balance sheets of C. R. Bard, Inc. (a New Jersey corporation) and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of C. R. Bard, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Roseland, New Jersey January 24, 1997 II-11 C. R. BARD, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME
(Thousands of dollars except For the Years Ended December 31, per share amounts) 1996 1995 1994 Net sales $1,194,400 $1,137,800 $1,064,600 Costs and expenses: Cost of goods sold 581,300 550,000 513,500 Marketing, selling and administrative 365,800 354,600 326,500 Research and development 77,300 75,600 71,600 Interest expense 26,400 24,200 16,300 Costs to combine operations 9,000 17,700 --- Other(income)expense, net 31,900 (7,800) 32,600 Total costs & expenses 1,091,700 1,014,300 960,500 Income before taxes 102,700 123,500 104,100 Income tax provision 10,200 36,700 28,500 Net income $ 92,500 $ 86,800 $ 75,600 Net income per share $ 1.62 $ 1.53 $ 1.34
C. R. BARD, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
(Thousands of dollars except For the Years Ended December 31, per share amounts) 1996 1995 1994 Balance, beginning of year $ 478,900 $ 427,300 $ 392,800 Net income 92,500 86,800 75,600 Cash dividends (per share 1996, $.66; 1995, $.62; 1994, $.58) (37,700) (33,100) (30,100) Excess of cost over par value of treasury stock retired (1996-813,700 shares, 1995-75,000 shares and 1994-350,000 shares) (27,000) (2,100) (8,900) Adjustment to give effect to change in reporting period for MedChem --- --- (2,100) Balance, end of year $ 506,700 $ 478,900 $ 427,300
The accompanying notes to consolidated financial statements are an integral part of these statements. II-12 C. R. BARD, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Thousands of dollars) December 31, 1996 1995 Assets Current assets: Cash $ 11,300 $ 9,300 Short-term investments 66,700 42,000 Accounts receivable, less reserve of $10,200 and $9,700 245,400 215,700 Inventories 245,000 228,200 Other current assets 8,500 8,700 Total current assets 576,900 503,900 Property, plant and equipment, at cost: Land 11,700 11,200 Buildings and improvements 158,700 147,500 Machinery and equipment 194,200 179,200 364,600 337,900 Less - Accumulated depreciation and amortization 138,500 123,700 Net property, plant and equipment 226,100 214,200 Intangible assets, net of amortization 447,200 315,500 Other assets 82,300 57,400 $1,332,500 $1,091,000 Liabilities and shareholders' investment Current liabilities: Short-term borrowings and current maturities of long-term debt $ 148,200 $ 66,900 Accounts payable 59,200 62,700 Accrued compensation and benefits 40,300 39,800 Accrued expenses 81,200 91,600 Federal and foreign income taxes 7,300 12,300 Total current liabilities 336,200 273,300 Long-term debt 342,800 198,400 Other long-term liabilities 52,000 54,700 Commitments and contingencies --- --- Shareholders' investment: Preferred stock, $1 par value, authorized 5,000,000 shares; none issued --- --- Common stock, $.25 par value, authorized 300,000,000 shares; issued and outstanding 56,985,983 shares in 1996, 57,100,598 shares in 1995 14,300 14,300 Capital in excess of par value 77,500 63,300 Retained earnings 506,700 478,900 Other 3,000 8,100 Total shareholders' investment 601,500 564,600 $1,332,500 $1,091,000
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. II-13 C. R. BARD, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars) For the Years Ended December 31, 1996 1995 1994 Cash flows from operating activities: Net income $ 92,500 $ 86,800 $ 75,600 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 57,400 50,600 43,400 Deferred income taxes 7,300 (1,600) (4,400) Expenses under stock plans 2,300 2,000 1,400 Asset write down & tax reserve reversal, net 15,400 0 0 Changes in assets and liabilities net of acquired businesses: Accounts receivable (21,500) (21,600) (7,600) Inventories (9,800) (15,800) (16,300) Other assets 6,000 8,900 9,400 Current liabilities, excluding debt (24,400) 29,100 (23,100) Other long-term liabilities (2,700) (21,700) (7,200) Net cash provided from operating activities 122,500 116,700 71,200 Cash flows from investing activities: Capital expenditures (41,600) (39,600) (37,100) Payments made for purchases of businesses (199,400) (300) (122,200) Patents, trademarks and other (37,700) (18,600) (25,500) Net cash used in investing activities (278,700) (58,500) (184,800) Cash flows from financing activities: Common stock issued for options and benefit plans 11,500 9,500 2,900 Purchase of common stock (27,200) (2,100) (9,000) Proceeds from long-term borrowings 166,400 126,300 3,300 Debt issuance costs (6,800) 0 0 Principal payments of long-term borrowings (3,100) (22,000) (1,100) Proceeds from(repayments of) short-term borrowings, net 79,700 (133,700) 102,000 Dividends paid (37,700) (33,100) (30,100) Net cash provided by (used in) financing activities 182,800 (55,100) 68,000 Translation adjustment (400) (200) 4,300 Cash and cash equivalents: Increase(decrease) during the year 26,200 2,900 (41,300) Balance at January 1, 37,400 34,500 75,800 Balance at December 31, $63,600 $ 37,400 $ 34,500
The accompanying notes to consolidated financial statements are an integral part of these statements. II-14 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS C. R. Bard, Inc. ("the company" or "Bard") is a leading multinational developer, manufacturer and marketer of health care products. The company markets its products worldwide to hospitals, individual health care professionals, extended care facilities and alternate site facilities. The company holds strong positions in cardiovascular, urological and surgical products. 1. Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Income Per Share The computations of income per share are based on the weighted average number of shares outstanding: 57,090,130 in 1996, 56,730,542 in 1995 and 56,460,762 in 1994. The effect of outstanding stock options and stock awards is not material and has been excluded from the computations. Inventories Inventories are stated at the lower of cost or market. Substantially all domestic inventories are accounted for using the LIFO method of determining costs. All other inventories are accounted for using the FIFO method. Inventories valued under the LIFO method were $151,000,000 in 1996, $140,000,000 in 1995 and $138,000,000 in 1994; under the FIFO method such inventories would have been higher by $15,800,000, $15,700,000 and $13,300,000, respectively. The following is a summary of inventories at December 31: (Thousands of dollars) 1996 1995 Finished goods $148,300 $130,700 Work in process 59,500 72,600 Raw materials 37,200 24,900 $245,000 $228,200 Depreciation Property, plant and equipment are depreciated on a straight-line basis over the useful lives of the various classes of assets. Short-term Investments Short-term investments which have a maturity of ninety days or less are considered cash equivalents and amounted to $52,300,000 and $28,100,000 as of December 31, 1996 and 1995. Short-term investments are stated at cost which approximates their market value. II-15 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Intangible Assets Goodwill is amortized using the straight-line method over periods of 15-40 years as appropriate and other intangible assets are amortized over their useful lives. The company continually evaluates its intangibles to assess recoverability from future operations using undiscounted cash flows. Impairment would be recognized in operating results if a permanent diminution in value occurred. As of December 31, 1996 and 1995, intangible assets include the following: (Thousands of dollars) 1996 1995 Goodwill $392,300 $231,900 Other intangibles (primarily 162,900 173,500 patents) Less accumulated amortization (108,000) (89,900) Intangible assets, net $447,200 $315,500 Federal Income Taxes The company has not provided for federal income taxes on the undistributed earnings of its foreign operations (primarily in Ireland) as it is the company's intention to permanently reinvest undistributed earnings (approximately $262,000,000 as of December 31, 1996). Stock-Based Compensation Stock-based compensation is recognized using the intrinsic value method. For disclosure purposes, pro forma net income and earnings per share are provided as if the fair value method had been applied. Concentrations of Credit Risk Financial instruments, which potentially subject the company to significant concentrations of credit risk, consist principally of cash investments, foreign currency exchange contracts, and trade accounts receivable. The company maintains cash and cash equivalents, investments, and certain other financial instruments with various major financial institutions. The company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. However, a significant amount of trade receivables are with national health care systems in several countries. Although the company does not currently foresee a credit risk associated with these receivables, repayment is dependent upon the financial stability of those countries' national economies. II-16 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Use of Estimates The financial statements and related disclosures have been prepared in conformity with generally accepted accounting principles and, accordingly, include amounts based on informed estimates and judgments of management with consideration given to materiality. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. 2. Acquisitions In September of 1996 Bard completed the acquisition of IMPRA, Inc. ("IMPRA"), a company that develops, manufactures and markets vascular grafts used for blood vessel replacement surgery. The purchase and acquisition costs which approximated $155,400,000 were financed with commercial paper. This acquisition has been accounted for under the purchase method of accounting and, accordingly, IMPRA's assets and liabilities have been recorded at their estimated fair market values and the excess purchase price of $140,900,000 has been assigned to goodwill. This acquisition did not have a significant effect on the company's results of operations. The 1996 costs to combine operations related to the acquisition were $9,000,000. During 1996, the company acquired St. Jude Medical's Cardiac Assist Division and X-Trode S.r.l. These acquisitions have been accounted for under the purchase method of accounting and enhance or expand the company's existing product lines and further develop international markets. The cost of these acquisitions amounted to $44,000,000 and were financed through internally generated cash and available credit lines. These acquisitions did not have a significant effect on the company's results of operations. In September 1995, the company completed a merger with MedChem Products, Inc. ("MedChem") issuing 3,192,345 shares of its common stock in exchange for all outstanding common stock of MedChem. In October 1995, the company completed a merger with American Hydro-Surgical Instruments, Inc. ("AHS") issuing 1,338,446 shares of its common stock in exchange for all outstanding common stock of AHS. These mergers were accounted for as poolings of interests and, accordingly, the company's consolidated financial statements for prior periods were restated in 1995. In connection with these mergers, $17,700,000 of merger related costs and expenses ($13,500,000 after-tax or $.24 per share) were incurred and have been charged to expense in 1995. These one-time charges include expenses primarily related to investment bankers and professional fees, and key personnel and severance related costs. II-17 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Acquisitions (continued) During 1994 the company acquired several companies which are primarily located outside the United States. These acquisitions have been accounted for under the purchase method of accounting and enhance or expand the company's existing product lines and further develop international markets. The cost of these acquisitions amounted to $118,200,000 and were financed through internally generated cash and available credit lines. These acquisitions did not have a significant effect on the company's results of operations. 3. Income Tax Expense Income tax expense consists of the following: (Thousands of dollars) 1996 1995 1994 Currently payable: Federal $ (6,300) $ 23,600 $ 22,300 Foreign 7,500 8,900 8,100 State 1,700 5,800 2,500 2,900 38,300 32,900 Deferred: Federal 7,600 (1,700) (3,300) Foreign (300) 100 (1,100) 7,300 (1,600) (4,400) $ 10,200 $36,700 $ 28,500 Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting and the tax basis of assets and liabilities. At December 31, 1996, the company's net deferred tax asset amounted to approximately $22,900,000 which is recorded in other assets. This amount principally comprises the tax effects of the differences between tax and financial accounting treatment of employee benefits of $14,200,000, accrued expenses of $10,200,000 and other temporary differences offset by the effect of accelerated depreciation ($7,800,000). II-18 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Income Tax Expense (continued) The following is a reconciliation between the effective tax rates and the statutory rates: 1996 1995 1994 U.S. federal statutory rate 35% 35% 35% State income taxes net of federal income tax benefits 3 3 2 Foreign operations taxed at less than the U.S. statutory rate, primarily Ireland and Puerto Rico (13) (11) (10) Reversal of tax reserve (15) --- --- Other, net --- 3 --- Effective tax rate 10% 30% 27% During 1996, the company reversed certain tax reserves approximating $15,000,000 that were no longer deemed necessary. Cash payments for income taxes were $27,100,000, $34,100,000 and $47,400,000 in 1996, 1995 and 1994, respectively. 4. Short-Term Borrowings and Long-Term Debt The company maintains uncommitted lines of credit, a commercial paper program and a committed credit facility which supports the commercial paper program. Total short-term borrowings amounted to $146,300,000 and $66,800,000 at December 31, 1996 and 1995, respectively. The maximum amount outstanding during 1996 was approximately $289,400,000 with an average outstanding balance of $165,700,000 and an effective rate of 5.38%. Short-term borrowings under uncommitted lines of credit amounted to $71,400,000 at December 31, 1996. Unused uncommitted lines of credit available to the company amounted to $238,700,000 at December 31, 1996. In 1996, the company initiated a $350,000,000 commercial paper program of which $194,900,000 was outstanding at December 31, 1996. Borrowings of $120,000,000 have been classified as long-term debt since the company has both the intention and ability through its committed credit lines to refinance these amounts on a long-term basis. The committed line of credit is a facility with 11 banks through which the company can borrow at rates slightly above LIBOR through June 2000. The company had no borrowings under the committed line of credit at December 31, 1996. As a result of the long-term debt offering, discussed below, the company amended its commercial paper program and committed line of credit from $350,000,000 to $300,000,000, effective January 1, 1997. II-19 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Short-Term Borrowings and Long-Term Debt (continued) The following is a summary of long-term debt: (Thousands of dollars) 1996 1995 8.69% notes due 1999 $ 60,000 $ 60,000 7.8% mortgage loan 9,500 9,100 Commercial paper and bank borrowings 120,000 120,000 6.70% notes due 2026 150,000 0 Other 5,200 9,400 $344,700 $198,500 Less: amounts classified as current: 1,900 100 $342,800 $198,400 In June 1996, the company filed a shelf registration with the Securities and Exchange Commission for the future issuance of up to $200,000,000 of long-term debt. As part of the registration, in December 1996 the company issued $150,000,000 of long-term notes due 2026. The effective interest of the notes, including the financing costs, is 7.17%. These notes may be redeemed at the option of the note holder on December 1, 2006, at a redemption price equal to the principal amount. Under five deposit loan agreements with a bank, $48,000,000 has been borrowed at floating rates (4.34% at December 31, 1996) with various maturity dates from September 1997 through July 2004. At maturity, the loans are to be repaid through matured certificates of deposits held by the company at the same bank. Since the company has the right of offset under these agreements and it is the company's intention to present these certificates of deposit for repayment of these loans at their maturity, the borrowings have been offset against these certificates of deposit in the accompanying consolidated balance sheet at December 31, 1996. The related interest income has been offset against the interest expense. As of December 31, 1996, the aggregate maturities of long-term debt were as follows: 1997 - $1,900,000; 1998 - $1,200,000; 1999-$61,200,000; 2000 - $121,200,000; 2001 - $1,200,000; 2002 and thereafter - $158,000,000. The fair value of the company's long-term debt is not significantly different from its recorded value. Interest expense in 1996, 1995 and 1994 approximated the cash outlay in each year. II-20 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Short-Term Borrowings and Long-Term Debt (continued) The company's debt agreements contain restrictions which, among other things, require the maintenance of minimum net worth and operating cash flow levels and limitations on the amounts of debt. The company enters into foreign exchange contracts to help reduce the exposure to fluctuations between certain currencies. In 1996 and 1995, the contracts primarily related to the anticipated normal purchases by a subsidiary in Japan from a subsidiary in Ireland. At December 31, 1995, there were Irish pound contracts outstanding payable in Japanese yen equivalent to $5,800,000. Early in 1996 the company entered into similar contracts equivalent to $15,700,000. There were no contracts outstanding at the end of 1996. 5. Commitments and Contingencies During 1994 the company recorded a $28.2 million pretax charge ($16.9 million charge after taxes). This charge related to the settlement of a 1992 lawsuit by the inventor of an atherectomy device and includes a provision for legal costs, and other costs related to the USCI division. During 1996 the remaining accrual of $2.5 million pretax related to this charge was deemed to be no longer required as a result of the elimination of a contractual arrangement and credited to other income. The company is involved in two lawsuits which allege breaches of agreements where substantial amounts have been claimed. In addition, judgments have been rendered against the company potentially aggregating as much as $5 million. The company is presently appealing these judgments. The company is also subject to other legal proceedings and claims involving product liability and disputes on agreements which arise in the ordinary course of business. The company believes that these legal matters will likely be disposed of over an extended period of time and should not have a material adverse impact on the company's financial position or results of operations. The company is committed under noncancelable operating leases involving certain facilities and equipment. The minimum annual rentals under the terms of these leases are as follows: 1997 - $19,600,000; 1998 - $14,300,000; 1999 - $7,300,000; 2000 - $4,800,000; 2001 - $3,500,000; and thereafter - $12,700,000. Total rental expense for all leases approximated $28,400,000 in 1996, $29,300,000 in 1995 and $26,800,000 in 1994. II-21 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Stock Rights In October 1995 the company's Board of Directors declared a dividend distribution of one Common Share Purchase Right for each outstanding share of Bard common stock. These Rights will expire in October 2005 and trade with the company's common stock. Such Rights are not presently exercisable and have no voting power. In the event a person acquires 20% or more, or makes a tender or exchange offer for 30% or more of Bard's common stock, the Rights detach from the common stock and become exercisable and entitle a holder to buy one share of common stock at $120.00 (adjustable to prevent dilution). If, after the Rights become exercisable, Bard is acquired or merged, each Right will entitle its holder to purchase $240 market value of the surviving company's stock for $120, based upon the current exercise price of the Rights. The company may redeem the Rights, at its option, at $.05 per Right, prior to a public announcement that any person has acquired beneficial ownership of at least 20% of Bard's common stock. These Rights are designed primarily to encourage anyone interested in acquiring Bard to negotiate with the Board of Directors. There are 60 million shares of common stock reserved for the rights. 7. Shareholders' Investment The company has stock option, stock award and restricted stock plans under which certain directors, officers and employees are participants. In 1996, shareholders of the company approved the addition of 1,550,000 shares to the 1993 Long-term Incentive Plan. At December 31, 1996, 1,240,170 shares were reserved for issuance under all company plans. Under the company's stock option plans, options have been granted to certain directors, officers and employees at prices equal to the market value of the shares at the date of grant, become exercisable in four annual installments and expire not more than 10 years after the date of grant. In accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), which was effective as of January 1, 1996, the fair value of option grants is estimated on the date of grant using the Black-Scholes option-pricing model for proforma footnote purposes with the following assumptions used for grants in all years; dividend yield of 2%, risk-free interest rate of 6.67% and expected option life of 4.4 years. Expected volatility was assumed to be 33% in 1995 and 29% in 1996. II-22 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Shareholders' Investment (continued) Weighted Weighted Number Average Average Of Exercise Fair Shares Price Value Options outstanding, December 31, 1993 3,062,320 $22.59 Granted 1,065,885 $21.57 Exercised (225,855) $14.93 Canceled (264,770) $27.93 Options outstanding, December 31, 1994 3,637,580 $22.38 (1,881,918 exercisable) Granted 853,075 $34.42 $7.94 Exercised (563,444) $18.37 Canceled (235,272) $50.55 Options outstanding, December 31, 1995 3,691,939 $23.98 (2,038,844 exercisable) Granted 703,940 $32.89 $9.61 Exercised (688,708) $20.47 Canceled (202,116) $26.91 Options outstanding, December 31, 1996 3,505,055 $26.31 (1,905,876 exercisable) The following table summarizes information about stock options outstanding at December 31, 1996: Weighted Weighted Weighted Range of Number Average Average Number Average Exercise Outstanding Remaining Exercise Exercisable Exercise Prices at 12/31/96 Life Price at 12/31/96 Price $10 to 21 482,967 5.5 $17.28 427,886 $16.86 $21 to 24 753,648 5.4 $22.50 455,865 $22.46 $24 to 27 892,993 6.3 $26.44 792,462 $26.41 $27 to 30 631,479 7.2 $29.67 170,358 $29.55 $30 to 41 743,968 8.9 $33.09 59,305 $35.33 $10 to 41 3,505,055 6.5 $26.31 1,905,876 $24.01 As permitted by FAS 123, the company has chosen to continue accounting for stock options at their intrinsic value. Accordingly no compensation expense has been recognized for its stock option compensation plans. Had the fair value method of accounting been applied to the company's stock option plans, the tax-effected impact would be as follows: II-23 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Shareholders' Investment (continued) (Thousands of dollars except per share amounts) 1996 1995 Net income as reported $92,500 $86,800 Estimated fair value of the year's option grants, net of tax (1,700) (600) Net income adjusted $90,800 $86,200 Adjusted net income per share $ 1.59 $ 1.52 This proforma impact only takes into account options granted since January 1, 1995 and is likely to increase in future years as additional options are granted and amortized ratably over the vesting period. Under the company's stock award plans for key employees and directors, shares are granted at no cost to the recipients and distributed in three separate installments. During 1996 awards for 26,742 shares (net of cancellations) were granted and 28,837 shares were issued. Awards are charged to income over the vesting period. At December 31, 1996, 28,124 awarded shares (aggregate market price at date of grant $899,000) have not been issued. Under the company's restricted stock plan, which was established in 1993, common stock may be granted at no cost to certain officers and key employees. Shares are issued to the participants at the date of grant entitling the participants to cash dividends and the right to vote their respective shares. Restrictions limit the sale or transfer of these shares during a five year period from the grant date. Upon issuance of stock under the plan, unearned compensation ($5,000,000 at December 31, 1996) equivalent to the market value of the stock at the date of grant is reflected in shareholders' investment and subsequently amortized to expense over the five year restriction period. During 1996, 71,610 shares were granted, net of forfeitures. Additions to capital in excess of par value of $14,200,000 in 1996 and $12,300,000 in 1995 relate to shares issued under these plans in excess of the related par value of the shares. II-24 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Shareholders' Investment (continued) For shares purchased by the company, common stock is charged for the par value of the shares retired and retained earnings is charged for the excess of the cost over the par value of shares retired. Cumulative foreign currency translation included in other shareholders' investment amounted to $8,000,000 at December 31, 1996, and decreased by $4,400,000 during the year. 8. Postretirement Benefits The company has defined benefit pension plans which cover substantially all domestic and certain foreign employees and its policy is to fund accrued pension expense for these plans up to the full funding limitations. These plans provide for benefits based upon individual participants' compensation and years of service. The company also has a supplemental defined contribution plan for certain officers and key employees. Individual participant accounts under the supplemental plan are credited annually based upon a percentage of compensation. The amounts charged to income for these plans amounted to $13,800,000 in 1996, $12,800,000 in 1995 and $13,600,000 in 1994. The following table sets forth the funded status of the defined benefit pension plans as of September 30, 1996 and 1995 and amounts recognized in the company's consolidated balance sheets at December 31, 1996 and 1995: (Thousands of dollars) 1996 1995 Actuarial present value of accumulated benefit obligation, including vested benefits of $75,000 in 1996 and $68,000 in 1995 $ 84,400 $ 76,400 Plan assets at fair value, primarily investment securities $ 97,000 $ 77,300 Less: Actuarial present value of projected benefit obligation for service rendered to date 102,400 92,500 Projected benefit obligation in excess of plan assets (5,400) (15,200) Unrecognized (income) loss (600) 6,400 Unrecognized prior service cost 6,700 7,600 Unrecognized net asset at transition amortized over 12 years (2,500) (3,400) Accrued pension cost included in other liabilities $ (1,800) $ (4,600) II-25 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Postretirement Benefits Pension costs related to the defined benefit pension plans for the years ended December 31, 1996, 1995 and 1994 are as follows: (Thousands of dollars) 1996 1995 1994 Net pension cost includes: Service cost $ 7,000 $ 6,800 $ 8,000 Interest cost 7,000 6,700 6,700 Actual return on plan assets (12,000) (12,800) (2,600) Net amortization and deferral 5,400 6,000 (3,500) Net pension cost $ 7,400 $ 6,700 $ 8,600 The range of assumed discount rates used was 4.00% to 8.50% with the rate on domestic plans at 8.00% in 1996 and 7.75% in 1995. The rate of increase in future salary levels ranged from 2.00% to 6.50% in determining the projected benefit obligation. The expected long-term rate of return on assets used in determining net pension cost ranged from 7.75% to 9.00%. The company also provides postretirement health care benefits and life insurance coverage to a limited number of employees at a subsidiary. The health care benefits include cost-sharing features based on years of service for future retirees. The company recognizes expense as employees earn postretirement benefits. The amounts charged to income for this plan were approximately $600,000 in 1996 ($100,000 of service cost and $500,000 of interest cost) and $800,000 in 1995 and 1994. Actuarial assumptions included a discount rate of 8.00%. Health care cost trends have been projected at annual rates beginning at 11% for 1996 decreasing gradually down to 6% in 2001 and later years. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at December 31, 1996, by $700,000 and postretirement benefit cost by $100,000. II-26 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Other (Income) Expense, Net In addition to recurring items such as interest income and foreign exchange, other income and expense includes several one-time items. During 1996, the company reorganized its global cardiology business and recorded a $31,000,000 ($16,800,000 net of tax) writedown of assets related to its guidewire technology in accordance with the requirements of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". In addition, the company recorded a one-time charge of $10,000,000 ($6,200,000 net of tax) related to the reorganization of certain existing manufacturing operations and $9,200,000 in income ($5,500,000 net of tax) related to royalty payments received on sales of certain licensed angioplasty products for prior periods. Other (income) expense, net in the Statements of Consolidated Income is summarized as follows: (Thousands of dollars) 1996 1995 1994 Interest Income $ (3,800) $(3,400) $ (4,600) Foreign exchange (gains)losses 400 (3,300) (400) Asset writedown 31,000 --- --- Manufacturing reorganization 10,000 --- --- Prior period royalties (9,200) --- --- Legal fees and settlements, net (Note 5) 3,500 --- 28,200 Other, net --- (1,100) 9,400 Total $ 31,900 $(7,800) $ 32,600 II-27 C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Segment Information The company is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Hospitals, physicians and nursing homes purchase approximately 90% of the company's products, most of which are used once and discarded. Information pertaining to domestic and foreign operations as of December 31, 1996, 1995 and 1994 and for the years then ended is given below.
(Thousands of dollars) United Elimi- Consoli- States Foreign nations dated 1996 Sales: Trade $782,000 $375,100 $ --- $1,157,100 Export 37,300 --- --- 37,300 Intersegment 115,100 21,300 (136,400) --- Total $934,400 $396,400 $(136,400) $1,194,400 Operating income $125,800 $ 68,500 $ (33,300)(a) $ 161,000 Identifiable assets: December 31, 1996 $940,600 $391,900 $ --- $1,332,500 1995 Sales: Trade $749,000 $353,500 $ --- $1,102,500 Export 35,300 --- --- 35,300 Intersegment 95,800 10,400 (106,200) --- Total $880,100 $363,900 $(106,200) $1,137,800 Operating income $102,800 $ 66,600 $ (29,500)(a) $ 139,900 Identifiable assets: December 31, 1995 $747,000 $344,000 $ --- $1,091,000 1994 Sales: Trade $751,500 $283,500 $ --- $1,035,000 Export 29,600 --- --- 29,600 Intersegment 97,700 4,400 (102,100) --- Total $878,800 $287,900 $(102,100) $1,064,600 Operating income $106,700 $ 59,000 $ (12,700) $ 153,000 Identifiable assets: December 31, 1994 $734,000 $309,100 $ --- $1,043,100
(a) Includes nonrecurring acquisition costs of $9,000 and $17,700 in 1996 and 1995, respectively. II-28 C. R. BARD, INC. AND SUBSIDIARIES QUARTERLY FINANCIAL DATA 1996 1st 2nd 3rd 4th Year
(Thousands of dollars except per share amounts) Net sales $289,200 $295,200 $295,800 $314,200 $1,194,400 Cost of goods sold 140,600 143,300 146,600 150,800 581,300 Income before taxes 10,600 39,000 15,200 37,900 102,700 Net income 27,100 27,500 11,400 26,500 92,500 Per share information: Net Income $ .48 $ .48 $ .20 $ .46 $ 1.62 Dividends $ .16 $ .16 $ .17 $ .17 $ .66
Note: The first quarter included nonrecurring items related to an asset writedown, the receipt of revenues related to prior year royalties, miscellaneous charges and tax reserve reversals reducing pretax income by $27,100 with a positive after-tax impact of approximately 1 cent per share. The second quarter included a one-time credit of $2,500 related to the elimination of a contractual arrangement which, if excluded, would have had a negative after-tax impact of approximately 2 cents per share. Reflected in the third quarter results are one-time charges of $10,000 related to the reorganization of certain existing manufacturing operations and $9,000 of expenses as a result of the IMPRA acquisition with a negative after-tax impact of approximately 11 cents per share and 12 cents per share respectively.
1995 1st 2nd 3rd 4th Year (Thousands of dollars except per share amounts) Net sales $278,100 $291,100 $277,600 $291,000 $1,137,800 Cost of goods sold 134,200 140,600 134,200 141,000 550,000 Income before taxes 35,400 35,900 21,200 31,000 123,500 Net income 24,900 25,000 14,100 22,800 86,800 Per share information: Net Income $ .44 $ .44 $ .25 $ .40 $ 1.53 Dividends $ .15 $ .15 $ .16 $ .16 $ .62
Note: The third quarter results include a $12,500 charge (18 cents per share after-tax) for costs associated with the merger of MedChem Products, Inc. The fourth quarter results include a $5,200 charge (6 cents per share after-tax) for costs associated with the merger of American Hydrosurgical Instruments, Inc. II-29 C. R. BARD, INC. AND SUBSIDIARIES Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. II-30 C. R. BARD, INC. AND SUBSIDIARIES PART III Item 10. Directors and Executive Officers of the Registrant Directors of the Registrant Information with respect to Directors of the company is incorporated herein by reference to the material contained under the heading "Proposal No. 1 - Election of Directors" appearing on pages 1 through 4 of the Company's definitive Proxy Statement dated March 7, 1997. Executive Officers of the Registrant Information with respect to Executive Officers of the Registrant are on pages I-9 through I-11 of this filing. Item 11. Executive Compensation The information contained under the caption "Executive Compensation" appearing on Pages 7 through 8 of the Company's definitive Proxy Statement dated March 7, 1997 is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information contained under the captions "Securities Ownership of Certain Beneficial Owners" and "Securities Ownership of Management" on pages 5 and 6 of the Company's definitive Proxy Statement dated March 7, 1997 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information contained under the caption "Compensation of Outside Directors - Related Transactions" on page 15 of the Company's definitive Proxy Statement dated March 7, 1997 is incorporated herein by reference. III-1 C. R. BARD, INC. AND SUBSIDIARIES PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) l. Financial Statements and Supplementary Data Included in Part II Item 8 of this report: Page II-11 Report of Independent Public Accountants. II-12 Statements of Consolidated Income and Statements of Consolidated Retained Earnings for the three years ended December 31, 1996. II-13 Consolidated Balance Sheets at December 31, 1996 and 1995. II-14 Consolidated Statements of Cash Flows for the three years ended December 31, 1996. II-15 Notes to Consolidated Financial Statements. II-29 Quarterly Financial Data. 2. Financial Statement Schedules Schedules are omitted because they are not applicable, are not required or the information required is included in the financial statements or notes thereto. 3. Exhibits, No. 3a Registrant's Restated Certificate of Incorporation, as amended, as of April 17, 1996, filed as Exhibit 3 to the Company's September 30, 1996 Form 10-Q is incorporated herein by reference. 3b Registrant's Bylaws revised as of September 11, 1996. (p. IV-8). 4a Rights Agreement dated as of October 11, 1995 between C. R. Bard, Inc. and First Chicago Trust Company of New York as Rights Agent, filed as Exhibit 1 to the Company's Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 12, 1995 is incorporated herein by reference. 4b Indenture, dated as of December 1, 1996 between C. R. Bard, Inc. and the Chase Manhattan Bank, as trustee, filed as Exhibit 4.1 to the Company's Registration Statement on Form S-3, File No. 333-05997 is incorporated herein by reference. IV-1 C. R. BARD, INC. AND SUBSIDIARIES 3. Exhibits, No. (Continued) 10 Plea Agreement with attachments and Civil Settlement Agreement between United States of America and C. R. Bard, Inc. dated October 14, 1993, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-6926 is incorporated herein by reference. 10a* Benson F. Smith Severance Agreement dated as of June 29, 1994 filed as Exhibit 10a to the 1994 Annual Report on Form 10-K is incorporated herein by reference. 10b* William H. Longfield Severance Agreement as amended dated as of July 13, 1994 filed as Exhibit 10b to the 1994 Annual Report on Form 10-K is incorporated herein by reference. 10c* William C. Bopp Severance Agreement as amended dated as of August 31, 1994 filed as Exhibit 10c to the 1994 Annual Report on Form 10-K is incorporated herein by reference. 10d* Hope Greenfield Severance Agreement dated as of March 6, 1996 filed as Exhibit 10d to the 1995 Annual Report on Form 10-K is incorporated herein by reference. 10e* Richard A. Flink Severance Agreement as amended dated as of July 22, 1994 filed as Exhibit 10e to the 1994 Annual Report on Form 10-K is incorporated herein by reference. 10f* E. Robert Ernest Severance Agreement as amended dated as of July 19, 1994 filed as Exhibit 10f to the 1994 Annual Report on Form 10-K is incorporated herein by reference. 10g* William H. Longfield Supplemental Executive Retirement Agreement dated as of January 12, 1994, filed as Exhibit 10g to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10h* 1990 Stock Option Plan, filed as Exhibit 10h to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10i* 1989 Employee Stock Appreciation Rights Plan, filed as Exhibit 10i to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. IV-2 C. R. BARD, INC. AND SUBSIDIARIES 3. Exhibits, No. (Continued) 10j* C. R. Bard, Inc. Agreement and Plans Trust, filed as Exhibit 10j to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10k* Supplemental Insurance/Retirement Plan, Plan I - For new corporate officer when previous agreement as non-officer exists, Plan II - For new corporate officer when no previous agreement exists, filed as Exhibit 10k to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10l* Retirement Plan for Outside Directors of C. R. Bard, Inc., filed as Exhibit 10l to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10m* Deferred Compensation Contract Deferral of Directors' Fees, as amended entered into with directors William T. Butler, M.D., Regina E. Herzlinger, and Robert P. Luciano, filed as Exhibit 10m to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10n* 1988 Directors Stock Award Plan, as amended in October 1991, filed as Exhibit 10n to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10o* Excess Benefit Plan, filed as Exhibit 10o to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10p* Supplemental Executive Retirement Plan, filed as Exhibit 10p to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10q* 1994 Executive Bonus Plan, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File No. 1-6926 is incorporated herein by reference. 10r* Long Term Performance Incentive Plan, filed as Exhibit 10r to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. IV-3 C. R. BARD, INC. AND SUBSIDIARIES 3. Exhibits, No. (Continued) 10s* Deferred Compensation Contract Deferral of Discretionary Bonus, filed as Exhibit 10s to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10t* Deferred Compensation Contract Deferral of Salary, filed as Exhibit 10t to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10u* 1993 Long Term Incentive Plan, filed as Exhibit 10u to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. 10v* Earle L. Parker Severance Agreement dated as of June 29, 1994 filed as Exhibit 10v to the Company's 1994 Annual Report on Form 10-K is incorporated herein by reference. 10w* John H. Weiland Severance Agreement dated as of March 11, 1996 filed as Exhibit 10w to the Company's 1995 Annual Report on Form 10-K is incorporated herein by reference. 10x* William T. Tumber Severance Agreement dated as of March 13, 1996 filed as Exhibit 10x to the Company's 1995 Annual Report on Form 10-K is incorporated herein by reference. 10y* Timothy M. Ring Severance Agreement dated as of March 12, 1996 filed as Exhibit 10y to the Company's 1995 Annual Report on Form 10-K is incorporated herein by reference. 10z* Guy J. Jordan Severance Agreement dated as of October 10, 1996. (p. IV-20). 10aa* Charles P. Grom Severance Agreement dated as of December 11, 1996. (p. IV-39). 12.1 Computation in Support of Ratio of Earnings to Fixed Charges. 21 Subsidiaries of registrant. (p. IV-58). 23 Arthur Andersen LLP consent to the incorporation by reference of their report on Form 10-K into previously filed Forms S-8. (P.IV-60). IV-4 C. R. BARD, INC. AND SUBSIDIARIES 3. Exhibits, No. (Continued) 27 Financial data schedule 99 Indemnity agreement between the company and each of its directors and officers, filed as Exhibit 99 to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. * Each of these exhibits listed under the number 10 constitutes a management contract or a compensatory plan or arrangement. All other exhibits are not applicable. (b) Reports on Form 8-K (b) The Registrant filed a current Report on Form 8-K as amended, dated September 16, 1996, announcing the acquisition of IMPRA, Inc. and certain financial and proforma information. IV-5 C. R. BARD, INC. AND SUBSIDIARIES Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. C. R. BARD, INC. (Registrant) By: William C. Bopp /s/ William C. Bopp Executive Vice President and Chief Financial Officer Date: March 17, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date William H. Longfield /s/ Chairman and March 17,1997 William H. Longfield Chief Executive Officer and Director (Principal Executive Officer) William C. Bopp /s/ Executive Vice President March 17, 1997 William C. Bopp and Chief Financial Officer and Director (Principal Financial Officer) Charles P. Grom /s/ Vice President and March 17, 1997 Charles P. Grom Controller (Principal Accounting Officer) Benson F. Smith /s/ President and March 17, 1997 Benson F. Smith Chief Operating Officer and Director IV-6 C. R. BARD, INC. AND SUBSIDIARIES Signatures Title Date Joseph F. Abely, Jr. /s/ Director March 26, 1997 Joseph F. Abely, Jr. Marc C. Breslawsky /s/ Director March 26, 1997 Marc C. Breslawsky William T. Butler, M.D. /s/ Director March 26, 1997 William T. Butler, M.D. Raymond B. Carey, Jr. /s/ Director March 26, 1997 Raymond B. Carey, Jr. Daniel A. Cronin, Jr. /s/ Director March 26, 1997 Daniel A. Cronin, Jr. T. Kevin Dunnigan /s/ Director March 26, 1997 T. Kevin Dunnigan Regina E. Herzlinger /s/ Director March 26, 1997 Regina E. Herzlinger Robert P. Luciano /s/ Director March 26, 1997 Robert P. Luciano Robert H. McCaffrey /s/ Director March 26, 1997 Robert H. McCaffrey Tony L. White /s/ Director March 26, 1997 Tony L. White IV - 7 EX-3 2 Exhibit 3B BY-LAWS of C. R. BARD, INC. (A New Jersey Corporation) (Amended September 11, 1996) ARTICLE I Offices The principal office of the Corporation shall be in the Borough of New Providence, County of Union, State of New Jersey. The Corporation may also establish and have such other offices as needed for the conduct of its business at such other place or places within or without the state of New Jersey as may from time to time be designated by the Board of Directors. ARTICLE II Seal The Corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words, "CORPORATE SEAL, NEW JERSEY". ARTICLE III Stockholders' Meetings Section 1. Place of Meetings. Meetings of the stockholders may be held at the principal office in New Jersey or at such other place within or without the State of New Jersey as from time to time may be designated by the Board of Directors and stated in the notice of meeting. Section 2. Annual Meetings. The annual meeting of stockholders for the election of Directors and the transaction of such other business as may properly be brought before the meeting shall be held on the third Wednesday in April in each year. If this date shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day which is not a legal holiday. Section 3. Business Transacted Annual Meetings. At any annual meeting of the stockholders of the Corporation, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who complies with the procedures set forth in this Section 3. For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice must be IV-8 delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. To be in proper written form, a stockholder's notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 3. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 3, and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 4. Special Meetings. Except as otherwise provided by law, special meetings of the stockholders may be called at any time by the Chairman of the Board, the President, or a majority of the Board of Directors. Section 5. Business Transacted Special Meetings. Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice thereof. Section 6. Notice of Meetings. Written notice of the annual meeting or of a special meeting, stating the time, place, and purpose or purposes of the meeting, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, represented in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders IV-9 present in person or represented by proxy shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. Voting. Whenever any action, other than the election of directors, is to be taken by vote of the stockholders, it shall be authorized by a majority of the votes cast at a meeting of stockholders at which a quorum is present by the holders of shares entitled to vote thereon, unless a greater plurality is required by law or by the Restated Certificate of Incorporation. Section 9. Proxies. Any stockholder of record entitled to vote may be represented at any annual or special meeting of the stockholders by a duly appointed proxy. All proxies shall be written and properly signed, but shall require no other attestation and shall be filed with the Secretary of the meeting before being voted. Section 10. Consents to Corporate Action. (a) Action by Written Consent. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation, subject to the provisions of subsections (b) and (c) of this Section 10, may be taken without a meeting upon the written consent (which shall set forth the action to be so taken) of less than all the stockholders entitled to cast at least the minimum number of votes which would be required to take such action at a meeting at which all stockholders entitled to vote thereon are present; provided, however, that prompt notice of the taking of corporate action without a meeting and by less than unanimous written consent shall be given to those stockholders who have not consented in writing. (b) Determination of Record Date for Action by Written Consent. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be fixed by the Board of Directors of the Company. Any stockholder seeking to have the stockholders of the Corporation authorize or take corporate action by written consent without a meeting shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. Upon receipt of such a request, the Secretary shall, as promptly as practicable, call a special meeting of the Board of Directors to be held as promptly as practicable. At such meeting, the Board of Directors shall fix a record date within the limitations provided in Section 14A:5-7 (or its successor provision) of the New Jersey Business Corporation Act. Notice of the record date shall be published in accordance with the rules and policies of any stock IV-10 exchange on which securities of the Company are then listed. Should the Board of Directors fail to fix a record date as provided for in this paragraph (b), then the record date shall be the close of business on the day next preceding the day on which notice of the meeting is given or, if no notice is given, the day next preceding the day on which the meeting is held. (c) Procedures for Written Consent. In the event of the delivery to the Company of a written consent or consents purporting to represent the requisite voting power to authorize or take corporate action and/or related revocations, the Secretary of the Corporation shall provide for the safe-keeping of such consents and revocations and shall engage nationally recognized independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations. No action by written consent without a meeting shall be effective until such inspectors have completed their review, have determined that the requisite number of valid and unrevoked consents has been obtained to authorize the action specified in the consents, and have certified such determination for entry into the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders. ARTICLE IV Directors Section 1. Number and Term of Directors. The Board of Directors of the Corporation shall consist of no fewer than three and no more than fourteen Directors and shall be divided into three classes, namely, Classes I, II and III, with each class consisting of not fewer than one nor more than five Directors, as the Board of Directors shall from time to time determine. In the absence of such determination by the Board of Directors, the number shall be the number of Directors elected at the preceding Annual Meeting of Stockholders. At each Annual Meeting of Stockholders, the successors to any class of Directors whose terms shall then expire shall be elected to serve until the third Annual Meeting following their election and until their respective successors shall have been duly elected and qualified. Directors elected as hereinbefore provided may not be removed prior to the expiration of their respective terms of office without cause. Directors need not be residents of the State of New Jersey nor stockholders of the Corporation. Section 2. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy resulting from an increase in the number of Directors, may be filled until the next succeeding Annual Meeting of Stockholders by the affirmative vote of a majority of the remaining Directors through less than a quorum of the Board of Directors. IV-11 Section 3. Notice of Stockholder Nominees. Only persons who are nominated in accordance with the procedures set forth in this Section 3 shall be eligible for election as Directors of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation entitled to vote for the election of Directors at such meeting who complies with the procedures set forth in this Section 3. All nominations by stockholders shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper written form, such stockholder's notice shall set forth in writing (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. In the event that a stockholder seeks to nominate one or more Directors, the Secretary shall appoint two inspectors, who shall not be affiliated with the Corporation, to determine whether a stockholder has complied with this Section 3. If the inspectors shall determine that a stockholder has not complied with this Section 3, the inspectors shall direct the chairman of the meeting to declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws of the Corporation, and the chairman shall so declare to the meeting and the defective nomination shall be disregarded. IV-12 Section 4. Duties and Powers. The Board of Directors shall have the control and management of the affairs of the Corporation and shall exercise all such powers of the Corporation and do all such lawful acts and things necessary or expedient in the control and management thereof as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. The Directors may adopt such rules and regulations for the conduct of their meetings and the management of the Corporation as they may deem proper, not inconsistent with the laws of the State of New Jersey. Section 5. Meetings of the Board of Directors. Meetings of the Board of Directors shall be held at the office of the Corporation or at any other place within or without the State of New Jersey which the Chairman of the Board, or the President or a majority of the Board of Directors may from time to time designate. There shall be an annual meeting of the Board of Directors held without notice upon the day of their election or as soon thereafter as convenient and such regular meetings, without notice, as the Board of Directors may by resolution establish. The Chairman of the Board or the President shall call a special meeting of the Board of Directors whenever requested in writing by five (5) or more Directors so to do. Two (2) days notice shall be given to each Director by the Secretary of each special meeting of the Board of Directors. Such notice may be given by mail, telegram or in person. A majority of the number of Directors shall constitute a quorum for the transaction of business, but the Director or Directors present, if less than a quorum, may adjourn any meeting from time to time until such quorum be present. All questions coming before the Board shall be determined and decided by a majority vote of Directors present. Each Director shall be entitled to one (1) vote at all meetings of Directors. Section 6. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but the Board may, from time to time, by resolution, fix the fees or compensation of the Directors for services as such to the Corporation, including attendance at meetings of the Board of Directors or any committee thereof. Nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 7. Executive Committee. The Board of Directors shall appoint an Executive Committee from the Directors, consisting of not less than three (3) members, to constitute an Executive Committee, which Committee shall have and exercise all of the authority of the Board of Directors in the management of the Corporation, except as otherwise required by law. Vacancies in the membership of the Committee shall be filled by the Board of IV-13 Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular Minutes of its proceedings and report the same to the Board when required. A majority of the Committee shall be necessary to constitute a quorum, and in every case the vote of the majority of the members present shall be necessary for the passage of any resolution. Section 8. Other Committees. The Board of Directors may appoint any other committees, standing or special, from time to time, from among its own members or otherwise confer powers on such committees and revoke such powers and terminate the existence of such committees at pleasure. Each such committee shall keep Minutes of its proceedings and report same to the Board when required. ARTICLE V Notices Section 1. Giving of Notice. Whenever, under the provision of the law or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any Director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such Director or stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given by telegram. Section 2. Waiver. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE VI Officers Section 1. Election of Officers. The officers of the Corporation shall be a Chairman of the Board; a Chief Executive Officer; a President; a Chief Operating Officer; a Chief Financial Officer; one or more Executive Vice Presidents; one or more Vice Presidents; a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers, agents and employees as it shall deem necessary. Any two (2) of the aforesaid offices may be held by the same person. Every officer shall perform such duties as the Board of Directors may from time to time designate. IV-14 The Directors, immediately after each annual meeting of stockholders, shall appoint from their number a Chairman of the Board, a Chief Executive Officer, and a President. At such meeting the Directors shall also choose one or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a member of the Board. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 2. Compensation. The salaries of all officers of the Corporation earning more than $100,000 shall be fixed by the Board of Directors. Section 3. Term and Removal. The officers of the Corporation shall hold office for one (1) year and until their successors are chosen and qualified in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Directors. If the office of any officer becomes vacant for any reason, the vacancy shall be filed by the Board of Directors. Section 4. Chairman of the Board. The Chairman of the Board shall be an Officer of the Corporation and shall preside at all meetings of the Board of Directors and stockholders. He shall assist the Board of Directors and other officers in the formulation of the policies of the Corporation and shall be available to other officers for consultation and advice. He shall have such other powers and duties as may be from time to time prescribed by the Board of Directors. Section 5. Chief Executive Officer. The Chief Executive Officer shall be either the Chairman of the Board or the President as designated by the Board of Directors. Under the direction of the Board of Directors, he shall have responsibility for the general direction of the Corporation's business, policies and affairs. The Chief Executive Officer shall be empowered at any time and from time to time to issue and promulgate rules, regulations and directives relating to the conduct and the business and affairs of the Corporation. The Chief Executive Officer may hold such other offices of the Corporation as shall be designated by the Board of Directors. In the absence or disability of the Chairman of the Board, he shall preside over meetings of the Board of Directors and shareholders. Section 6. President. The President shall be an officer and shall perform such duties as assigned to him by the Board of Directors or Chairman of the Board. Subject to the above, he shall IV-15 have the general powers and duties of management usually vested in the office of President of the Corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws. Section 7. Chief Operating Officer. The Chief Operating Officer shall be an officer and shall have the responsibility for the active executive management and direction of the operating divisions of the Corporation, subject to the overall direction of the Chief Executive Officer and to the control of the Board of Directors and the Executive Committee. He shall have such additional powers and duties as the Chief Executive Officer or the Board of Directors may from time to time assign to him. Section 8. Chief Financial Officer. The Chief Financial Officer shall be an officer, elected and designated by the Board of Directors as Chief Financial Officer, who shall be responsible: (a) for the receipt, custody and disbursement of all funds and securities of the Corporation; (b) to receive and give receipts for monies due and payable to the Corporation from any source whatsoever and deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall from time to time be selected; (c) to disburse the funds of the Corporation as ordered by the Chief Executive Officer or as required in the ordinary conduct of the business of the Corporation; (d) to render to the Chief Executive Officer or the Board of Directors, upon request, an account of all transactions and on the financial condition of the Corporation; and (e) in general, to perform all the duties incident to the office of Chief Financial Officer and such other duties as from time to time may be assigned by the Chief Executive Officer, or the Board of Directors. Section 9. Executive Vice President. The Corporation may have one or more Executive Vice Presidents. Such Executive Vice Presidents shall, under the direction of the President, exercise general supervision over those functions of the Corporation designated to such Executive Vice President. He may act for the President in other ways as specifically directed by the President. In the absence of the President, an Executive Vice President so designated shall have and exercise all powers and duties of the President and perform such other duties as may be prescribed by the Board of Directors. Section 10. Vice President. The Vice President, or if there shall be more than one (1), shall have such powers and perform such duties as may be assigned by the President or Board of Directors. Vice Presidents may be so designated by seniority and by function. IV-16 Section 11. Secretary. The Secretary shall attend all meetings of the Board of Directors and of the stockholders, and shall record all votes and the Minutes of all proceedings in a book to be kept for that purpose. The Secretary shall give or cause to be given notice of all meetings of the stockholders and the Board of Directors and shall affix the seal of the Corporation to all certificates of stock, and to such other documents as may require it, and shall have charge of the Corporation's seal, and the stock certificate book, and such other books and papers as the Board of Directors may direct, and shall cancel all surrendered stock certificates before issuing new certificates, and shall preserve such cancelled certificates. The Secretary shall also perform such other duties as the Board of Directors may from time to time prescribe. Section 12. Assistant Secretary. An Assistant Secretary shall have and exercise all the powers and duties of the Secretary in case of the Secretary's absence or inability to act and shall have such other powers and perform such other duties as may be assigned to the Secretary by the Board of Directors. Section 13. Treasurer. The Treasurer shall have the custody of the Corporate funds and securities and shall deposit all monies and other valuable effects in the name and to credit of the Corporation in such depositories as may be authorized by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements and shall render to the Corporation an account of all transactions and of the financial condition of the Corporation. The Treasurer shall perform such other duties and have such other powers as the Board, the Chief Executive Officer, the Chief Financial Officer, or the officer to whom he shall report may from time to time prescribe. Section 14. Assistant Treasurer. As Assistant Treasurer shall have and exercise all the powers and duties of the Treasurer in case of the Treasurer's absence or inability to act and shall have such other powers and perform such other duties as may be assigned by the Board of Directors. Section 15. Controller. The Controller shall be the chief accounting officer of the Corporation and shall keep or cause to be kept correct records of the business and transactions of the Corporation and shall, upon request, at all reasonable times exhibit or cause to be exhibited such records at the place where such records are kept. He shall perform such other duties as from time to time may be assigned to him by the Chief Executive Officer, the President, the Chief Financial Officer or the officer to whom he shall report. IV-17 Section 16. General Counsel. The General Counsel shall be the chief legal officer of the Corporation and shall have, subject to the control of the Board of Directors and the Chief Executive Officer, general and active supervision and direction over the legal affairs of the Corporation. He shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer, or the officer to whom he shall report. ARTICLE VII Certificates of Stock Section 1. Form. The certificates of stock of the Corporation shall be numbered and entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and the number of shares and shall be signed by the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall bear the Corporate seal. Such seal may be a facsimile, engraved or printed. Where certificates are manually signed by a Transfer Agent or Registrar who is not an officer or employee of the Corporation, all other signatures on the certificates may be facsimile. Section 2. Transfer of Stock. Upon surrender to the Corporation or the Transfer Agent of the Corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto and cancel the old certificates; every such transfer of stock shall be entered on the stock books of the Corporation. Section 3. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claims to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of New Jersey. ARTICLE VIII General Provisions Section 1. Stockholders' Record Date. Except as otherwise provided in these By-Laws, in order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any IV-18 change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the day of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 2. Dividends. Dividends upon the capital stock of the Corporation, subject to any provisions of the Certificate of Incorporation relating thereto, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Before payment of any dividend, there may be set aside out of the net profits of the Corporation available for dividends such sum or sums as the Directors from time to time in their absolute discretion think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interests of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. ARTICLE IX Amendments These By-Laws may be altered, amended, or repealed or new By-Laws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board, subject to any provisions in the Certificate of Incorporation or the statutes, reserving to the stockholders the power to adopt, amend, or repeal By-Laws, provided, however, that By-Laws made by the Board may be altered or repealed and new By-Laws made by the stockholders. The stockholders may prescribe that any By-Law made by them shall not be altered or repealed by the Board. IV-19 EX-10 3 Exhibit 10z AGREEMENT AGREEMENT by and between C. R. BARD, INC., a New Jersey corporation (the "Corporation"), and Guy J. Jordan (the "Executive"), dated as of the 10th day of October, 1996. WHEREAS, the Corporation, on behalf of itself and its shareholders, wishes to assure that the Corporation will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Corporation. The Board of Directors of the Corporation (the "Board") believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage his attention and dedication to his assigned duties currently and in the event of any threatened or pending Change of Control, and to provide the Executive with competitive compensation arrangements; therefore, the Board has caused the Corporation to enter into this Agreement (i) to ensure the Executive of individual financial security in the event of a Change of Control, and (ii) to provide such protection in a manner which is competitive with that of other corporations. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section l(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Corporation is terminated prior to the date on which a Change of Control occurs, and the Executive can reasonably demonstrate that such termination (1) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (i) the third anniversary of such date or (ii) the first day of the month next following the Executive's normal retirement date IV-20 ("Normal Retirement Date") under the Corporation's retirement plan; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be auto- matically extended so as to terminate on the earlier of (x) two years from such Renewal Date or (y) the first day of the month coinciding with or next following the Executive's Normal Retirement Date, unless at least 60 days prior to the Renewal Date the Corporation shall give notice that the Change of Control Period shall not be so extended. 2. Change of Control. (a) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if a change of control of the nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K as in effect on the date hereof pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") occurs, provided that, without limitation, a "Change of Control" shall be deemed to have occurred if (i) the beneficial ownership at any time hereafter by any person, as defined herein, of capital stock of the Corporation, constitutes 20 percent or more of the general voting power of all of the Corporation's outstanding capital or (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a Director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three-quarters of the Directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board. No sale to underwriters or private placement of its capital stock by the Corporation, nor any acquisition initiated by the Corporation, through merger, purchase of assets or IV-21 otherwise, effected in whole or in part by issuance or reissuance of shares of its capital stock, shall constitute a Change of Control. (b) For purposes of the definition of "Change of Control", the following definitions shall be applicable: (i) The term "person" shall mean any individual, corporation or other entity and any group as such term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act. (ii) Any person shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation: A. which that person owns directly, whether or not of record, or B. which that person has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise, or C. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by an "affiliate" or "associate" (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933, as amended) of that person, or D. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by any other person with which that person or his "affiliate" or "associate" (defined as aforesaid) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the Corporation. (iii) The outstanding shares of capital stock of the Corporation shall include shares deemed owned through IV-22 application of clauses (ii) (B), (C) and (D), above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise, but which are not actually outstanding. (iv) Shares of capital stock, if any, held by The Chase Manhattan Bank N.A. under the Indenture and the Escrow Agreement dated as of November 1, 1971 between International Paper Corporation and said bank shall not be deemed owned by International Paper Corporation or by said bank for purposes of this definition, so long as they are held by said bank under said Escrow Agreement, but said shares shall be deemed outstanding for the purpose of determining the aggregate number of outstanding shares of capital stock of the Corporation. 3. Employment Period. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation, for the period commencing on the Effective Date and ending on the earlier to occur of (a) the third anniversary of such date or (b) the first day of the month coinciding with or next following the Executive's Normal Retirement Date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of IV-23 the Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the highest monthly base salary paid to the Executive by the Corporation during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be consistent with increases in base salary awarded in the ordinary course of business to other key executives of the Corporation. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. (ii) Annual Bonus. In addition to Ease Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (an "Annual Bonus") in cash at least equal to the average bonus received by the Executive from the Corporation in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs. IV-24 (iii) Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans and programs, whether qualified or non-qualified, then applicable to other key executives of the Corporation and its affiliates (including the Corporation's 1981 Stock Option Plan, the Long-Term Performance Incentive Plan, the 1986 Stock Award Plan, the 1981 Employee Stock Appreciation Rights Plan, the Employees' Stock Ownership Plan and the Employees' Retirement Savings Plan, in each case to the extent then in effect or as subsequently amended); provided, however, that such plans and programs, in the aggregate, shall provide the Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable such compensation benefits and reward opportunities provided by the Corporation for the Executive under such plans and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans provided by the Corporation (including, without limitation, medical, prescription, dental, disability, salary continuance, executive life, group life, accidental death and travel accident insurance plans and programs), at least comparable to those in effect at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies and procedures of the Corporation and its affiliates in effect at any time during the 90-day period IV-25 immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, in accordance with the most favorable policies of the Corporation and its affiliates in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to those provided to the Executive at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable policies of the Corporation and its affiliates as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. 5. Termination. (a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death. The Corporation may terminate this Agreement, after having established the Executive's Disability (pursuant to the definition of "Disability" set forth below), by giving to the Executive written notice of its intention to terminate the Executive's employment. In such a case, the Executive's employment with the Corporation shall terminate effective on the 180th day after receipt of such notice (the "Disability Effective Date"), provided that, within 180 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. IV-26 For purposes of this Agreement, "Disability" means disability which, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Corporation may terminate the Executive's employment for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Corporation, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement which are demonstrably willful and deliberate on the Executive's part and which are not remedied after the receipt of notice from the Corporation or (iii) the conviction of the Executive of a felony. (c) Termination by Executive for Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means (i) (A) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or (B) any other action by the Corporation which results in a diminution in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Corporation to comply with any of the provisions of Section 4(b) of this Agreement, other than an insubstantial and inadvertent failure which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; IV-27 (iii) the Corporation's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof, except for travel reasonably required in the performance of the Executive's responsibilities; (iv) any purported termination by the Corporation of the Executive's employment otherwise than as permitted by this Agreement; or (v) any failure by the Corporation to comply with and satisfy Section 11(c) of this Agreement. Anything in this Agreement to the contrary notwithstanding, any termination by the Executive for any reason whatsoever during the six month period immediately following the first anniversary of the date of a Change of Control shall be a termination for "Good Reason". For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Corporation for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice). IV-28 (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be. If the Executive's employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination. 6. Obligations of the Corporation upon Termination. (a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than those obligations accrued or earned by the Executive hereunder at the date of the Executive's death. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Corporation to surviving families of executives of the Corporation under such plans, programs and policies relating to family death benefits, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other key executives and their families. (b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive, other than those obligations accrued or earned by the Executive hereunder as of the Disability Effective Date. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Corporation to disabled employees and/or their families in accordance with such plans, programs and policies relating to disability, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other key executives and their families. IV-29 (c) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment other than for Good Reason, the Corporation shall pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and shall have no further obligations to the Executive under this Agreement. (d) Termination by Executive for Good Reason; Termination by Corporation Other Than for Cause or Disability. If, during the Employment Period, the Corporation shall terminate the Executive's employment other than for Cause or Disability, or the employment of the Executive shall be terminated by the Executive for Good Reason: (i) the Corporation shall pay to the Executive in a lump sum in cash within 10 days after the Date of Termination (the "Payment Date") the aggregate of the following amounts: A. to the extent not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time within the three year period preceding the Effective Date (the "Highest Base Salary"); and B. the product of (x) the average of the annual bonuses paid, or payable to the extent deferred, to the Executive for the three full fiscal years prior to the Effective Date (the "Recent Bonus") and (y) the fraction obtained by dividing (i) the number of days between the Date of Termination and the last day of the last full fiscal year and (ii) 365; and C. the product of (x) three and (y) the sum of the Highest Base Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by the Executive, all amounts previously deferred and not yet paid by the Corporation; and IV-30 (ii) for one year after the Date of Termination, the Corporation shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated, including health insurance and life insurance, if and as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives and their families and for purposes of eligibility for retiree benefits pursuant to such plans, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period. Anything herein to the contrary notwithstanding, the Executive may elect in his Notice of Termination to receive the payment provided for pursuant to Section 6(d)(i)(C) hereof (the "Severance Payment") in installments. If the Executive elects the installment method, one-quarter of the Severance Payment shall be paid to the Executive on the Payment Date and one-quarter of the severance payment shall be paid to the Executive on each of the next three anniversaries thereof and, in the case of the latter three payments, the amounts to be paid shall include interests from the Payment Date on the remaining unpaid balance of the Severance Payment calculated at the Morgan Guaranty Trust Company prime rate as in effect from time to time. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Corporation or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Corporation or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to IV-31 receive under any plan or program of the Corporation or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan or program. 8. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof or as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement, plus in each case interest at the Federal Rate (as defined below). 9. Gross-up. (a) In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Corporation to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. IV-32 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen & Co. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for an individual, entity or group effecting the change in ownership or effective control (within the meaning of Section 280G of the Code), Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Corporation to Executive within five (5) days after the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Corporation and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 9(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of Executive. (c) Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable IV-33 but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim; (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation; (iii) cooperate with the Corporation in good faith in order to effectively contest such claim; and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in IV-34 a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute of limitations to enable the Corporation to contest such claim, Executive may limit this extension solely to such contested amount. (d) If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Corporation's complying with the requirements of Section 9(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret or confidential information, knowledge or data relating to the Corporation or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliated companies and which shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Corporation, the Executive shall not, without the prior written consent of the Corporation, IV-35 communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IV-36 If to the Executive: Guy J. Jordan 9020 South Blackjack Road #D P.O. Box 8091 Alta, UT 84124 If to the Corporation: C. R. BARD, INC. 730 Central Avenue Murray Hill, New Jersey 07974 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Corporation and the Executive with respect to the subject matter hereof. (g) The Executive and the Corporation acknowledge that the employment of the Executive by the Corporation is "at will", IV-37 and, prior to the Effective Date, may be terminated by either the Executive or the Corporation at any time. Upon a termination of the Executive's employment or upon the Executive's ceasing to be an officer of the Corporation, in each case, prior to the Effective Date, there shall be no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Guy J. Jordan Guy J. Jordan C. R. BARD, INC. By:/s/ William H. Longfield Name: William H. Longfield Title: Chairman and Chief Executive Officer Attest:/s/ Jean F. Miller Assistant Secretary IV-38 EX-10 4 Exhibit 10aa AGREEMENT AGREEMENT by and between C. R. BARD, INC., a New Jersey corporation (the "Corporation"), and Charles P. Grom (the "Executive"), dated as of the 11th day of December, 1996. WHEREAS, the Corporation, on behalf of itself and its shareholders, wishes to assure that the Corporation will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Corporation. The Board of Directors of the Corporation (the "Board") believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, to encourage his attention and dedication to his assigned duties currently and in the event of any threatened or pending Change of Control, and to provide the Executive with competitive compensation arrangements; therefore, the Board has caused the Corporation to enter into this Agreement (i) to ensure the Executive of individual financial security in the event of a Change of Control, and (ii) to provide such protection in a manner which is competitive with that of other corporations. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section l(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Corporation is terminated prior to the date on which a Change of Control occurs, and the Executive can reasonably demonstrate that such termination (1) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (2) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (i) the third anniversary of such date or (ii) the first day of the month next following the Executive's normal retirement date IV-39 "Normal Retirement Date") under the Corporation's retirement plan; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be auto- matically extended so as to terminate on the earlier of (x) two years from such Renewal Date or (y) the first day of the month coinciding with or next following the Executive's Normal Retirement Date, unless at least 60 days prior to the Renewal Date the Corporation shall give notice that the Change of Control Period shall not be so extended. 2. Change of Control. (a) For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if a change of control of the nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K as in effect on the date hereof pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") occurs, provided that, without limitation, a "Change of Control" shall be deemed to have occurred if (i) the beneficial ownership at any time hereafter by any person, as defined herein, of capital stock of the Corporation, constitutes 20 percent or more of the general voting power of all of the Corporation's outstanding capital or (ii) individuals who, as of the date hereof, constitute the Board (as of the date hereof, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a Director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three-quarters of the Directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board. No sale to underwriters or private placement of its capital stock by the Corporation, nor any acquisition initiated by the Corporation, through merger, purchase of assets or IV-40 otherwise, effected in whole or in part by issuance or reissuance of shares of its capital stock, shall constitute a Change of Control. (b) For purposes of the definition of "Change of Control", the following definitions shall be applicable: (i) The term "person" shall mean any individual, corporation or other entity and any group as such term is used in Section 13(d)(3) or 14(d)(2) of the Exchange Act. (ii) Any person shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation: A. which that person owns directly, whether or not of record, or B. which that person has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise, or C. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by an "affiliate" or "associate" (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933, as amended) of that person, or D. which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by any other person with which that person or his "affiliate" or "associate" (defined as aforesaid) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the Corporation. IV-41 (iii) The outstanding shares of capital stock of the Corporation shall include shares deemed owned through application of clauses (ii) (B), (C) and (D), above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise, but which are not actually outstanding. (iv) Shares of capital stock, if any, held by The Chase Manhattan Bank N.A. under the Indenture and the Escrow Agreement dated as of November 1, 1971 between International Paper Corporation and said bank shall not be deemed owned by International Paper Corporation or by said bank for purposes of this definition, so long as they are held by said bank under said Escrow Agreement, but said shares shall be deemed outstanding for the purpose of determining the aggregate number of outstanding shares of capital stock of the Corporation. 3. Employment Period. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation, for the period commencing on the Effective Date and ending on the earlier to occur of (a) the third anniversary of such date or (b) the first day of the month coinciding with or next following the Executive's Normal Retirement Date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location. IV-42 (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the highest monthly base salary paid to the Executive by the Corporation during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be consistent with increases in base salary awarded in the ordinary course of business to other key executives of the Corporation. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. IV-43 (ii) Annual Bonus. In addition to Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (an "Annual Bonus") in cash at least equal to the average bonus received by the Executive from the Corporation in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs. (iii) Incentive, Savings and Retirement Plans. In addition to Base Salary and Annual Bonus payable as hereinabove provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans and programs, whether qualified or non-qualified, then applicable to other key executives of the Corporation and its affiliates (including the Corporation's 1981 Stock Option Plan, the Long-Term Performance Incentive Plan, the 1986 Stock Award Plan, the 1981 Employee Stock Appreciation Rights Plan, the Employees' Stock Ownership Plan and the Employees' Retirement Savings Plan, in each case to the extent then in effect or as subsequently amended); provided, however, that such plans and programs, in the aggregate, shall provide the Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable such compensation benefits and reward opportunities provided by the Corporation for the Executive under such plans and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans provided by the Corporation (including, without limitation, medical, prescription, dental, disability, salary continuance, executive life, group life, accidental death and travel accident insurance plans and programs), at least comparable to those in effect at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. IV-44 (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies and procedures of the Corporation and its affiliates in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, in accordance with the most favorable policies of the Corporation and its affiliates in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to those provided to the Executive at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable policies of the Corporation and its affiliates as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. 5. Termination. (a) Death or Disability. This Agreement shall terminate automatically upon the Executive's death. The Corporation may terminate this Agreement, after having established the Executive's Disability (pursuant to the definition of "Disability" set forth below), by giving to the Executive written notice of its intention to terminate the Executive's IV-45 employment. In such a case, the Executive's employment with the Corporation shall terminate effective on the 180th day after receipt of such notice (the "Disability Effective Date"), provided that, within 180 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means disability which, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Corporation may terminate the Executive's employment for "Cause." For purposes of this Agreement, "Cause" means (i) an act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Corporation, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement which are demonstrably willful and deliberate on the Executive's part and which are not remedied after the receipt of notice from the Corporation or (iii) the conviction of the Executive of a felony. (c) Termination by Executive for Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means (i) (A) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or (B) any other action by the Corporation which results in a diminution in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; IV-46 (ii) any failure by the Corporation to comply with any of the provisions of Section 4(b) of this Agreement, other than an insubstantial and inadvertent failure which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (iii) the Corporation's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof, except for travel reasonably required in the performance of the Executive's responsibilities; (iv) any purported termination by the Corporation of the Executive's employment otherwise than as permitted by this Agreement; or (v) any failure by the Corporation to comply with and satisfy Section 11(c) of this Agreement. Anything in this Agreement to the contrary notwithstanding, any termination by the Executive for any reason whatsoever during the six month period immediately following the first anniversary of the date of a Change of Control shall be a termination for "Good Reason". For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Corporation for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the termination date is other IV-47 than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice). (e) Date of Termination. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be. If the Executive's employment is terminated by the Corporation other than for Cause or Disability, the Date of Termination shall be the date on which the Corporation notifies the Executive of such termination. 6. Obligations of the Corporation upon Termination. (a) Death. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than those obligations accrued or earned by the Executive hereunder at the date of the Executive's death. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Corporation to surviving families of executives of the Corporation under such plans, programs and policies relating to family death benefits, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other key executives and their families. (b) Disability. If the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive, other than those obligations accrued or earned by the Executive hereunder as of the Disability Effective Date. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Corporation to disabled employees and/or their families in accordance with such plans, programs and policies relating to disability, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more IV-48 favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other key executives and their families. (c) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment other than for Good Reason, the Corporation shall pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and shall have no further obligations to the Executive under this Agreement. (d) Termination by Executive for Good Reason; Termination by Corporation Other Than for Cause or Disability. If, during the Employment Period, the Corporation shall terminate the Executive's employment other than for Cause or Disability, or the employment of the Executive shall be terminated by the Executive for Good Reason: (i) the Corporation shall pay to the Executive in a lump sum in cash within 10 days after the Date of Termination (the "Payment Date") the aggregate of the following amounts: A. to the extent not theretofore paid, the Executive's Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time within the three year period preceding the Effective Date (the "Highest Base Salary"); and B. the product of (x) the average of the annual bonuses paid, or payable to the extent deferred, to the Executive for the three full fiscal years prior to the Effective Date (the "Recent Bonus") and (y) the fraction obtained by dividing (i) the number of days between the Date of Termination and the last day of the last full fiscal year and (ii) 365; and IV-49 C. the product of (x) three and (y) the sum of the Highest Base Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by the Executive, all amounts previously deferred and not yet paid by the Corporation; and (ii) for one year after the Date of Termination, the Corporation shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated, including health insurance and life insurance, if and as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives and their families and for purposes of eligibility for retiree benefits pursuant to such plans, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period. Anything herein to the contrary notwithstanding, the Executive may elect in his Notice of Termination to receive the payment provided for pursuant to Section 6(d)(i)(C) hereof (the "Severance Payment") in installments. If the Executive elects the installment method, one-quarter of the Severance Payment shall be paid to the Executive on the Payment Date and one-quarter of the severance payment shall be paid to the Executive on each of the next three anniversaries thereof and, in the case of the latter three payments, the amounts to be paid shall include interests from the Payment Date on the remaining unpaid balance of the Severance Payment calculated at the Morgan Guaranty Trust Company prime rate as in effect from time to time. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan IV-50 or program provided by the Corporation or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Corporation or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Corporation or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan or program. 8. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof or as a result of any contest by the Executive about the amount of any payment pursuant to Section 9 of this Agreement, plus in each case interest at the Federal Rate (as defined below). 9. Gross-up. (a) In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Corporation to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be IV-51 entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen & Co. (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for an individual, entity or group effecting the change in ownership or effective control (within the meaning of Section 280G of the Code), Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Corporation to Executive within five (5) days after the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Corporation and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 9(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the IV-52 Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of Executive. (c) Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim; (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation; (iii) cooperate with the Corporation in good faith in order to effectively contest such claim; and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions IV-53 of this Section 9(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute of limitations to enable the Corporation to contest such claim, Executive may limit this extension solely to such contested amount. (d) If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Corporation's complying with the requirements of Section 9(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all secret or confidential information, knowledge or data relating to IV-54 the Corporation or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliated companies and which shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Corporation, the Executive shall not, without the prior written consent of the Corporation, communicate or divulge any such information, knowledge or data to anyone other than the Corporation and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not IV-55 be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Charles P. Grom 9 Glen Ridge Drive Long Valley, NJ 07853 If to the Corporation: C. R. BARD, INC. 730 Central Avenue Murray Hill, New Jersey 07974 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Corporation may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. IV-56 (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Corporation and the Executive with respect to the subject matter hereof. (g) The Executive and the Corporation acknowledge that the employment of the Executive by the Corporation is "at will", and, prior to the Effective Date, may be terminated by either the Executive or the Corporation at any time. Upon a termination of the Executive's employment or upon the Executive's ceasing to be an officer of the Corporation, in each case, prior to the Effective Date, there shall be no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Charles P. Grom Charles P. Grom C. R. BARD, INC. By: /s/ William H. Longfield Name: William H. Longfield Title: Chairman and Chief Executive Officer Attest:/s/ Jean F. Miller Jean F. Miller Assistant Secretary IV-57 EX-12 5 Exhibit 12.1
Computation of Ratio of Earnings to Fixed Charges For The Twelve Month Period Ending December 31, 1996 1996 1995 1994 1993 1992 1991 Earnings before taxes $102,700 $123,500 $104,100 $101,400 $120,200 $ 88,700 Add(Deduct) Fixed Charges 33,500 31,500 23,200 18,700 19,900 21,200 Undistributed earnings of less than 50% owned companies carried at equity (700) (800) (400) (200) (500) (500) Interest capitalized 0 0 (200) 0 (300) (900) Earnings available for fixed charges $135,500 $154,200 $126,700 $119,900 $139,300 $108,500 Fixed charges: Interest, including amounts capitalized 26,400 24,200 16,500 12,500 13,700 14,800 Proportion of rent expense deemed to represent interest factor 7,100 7,300 6,700 6,200 6,200 6,400 Fixed Charges $ 33,500 $ 31,500 $ 23,200 $ 18,700 $ 19,900 $ 21,200 Ratio of earnings to fixed charges 4.04 4.89 5.46 6.41 7.00 5.12
EX-21 6 C. R. BARD, INC. AND SUBSIDIARIES Exhibit 21 Parents and Subsidiaries of Registrant The following table lists, as of December 31, 1996, the company and its significant subsidiaries and indicates the jurisdiction of organization of each subsidiary and the percentage of voting securities owned by the immediate parent of each subsidiary. Where % of Incorporated Voting Stock C. R. Bard, Inc. New Jersey (Registrant) Bard Access Systems, Inc. Utah 100 Bard Canada Inc. Canada 100 Purchaseco Inc. Canada 100 Vas-Cath Holdings Ltd. Canada 100 Vas-Cath, Inc. Canada 100 Med-Pro Design Inc. Canada 100 Bard Cardiopulmonary, Inc. Delaware 100 Bard Devices, Inc. Delaware 100 Davol Inc. Delaware 100 American Hydro-Surgical Instruments, Inc. Maryland 100 Bard Diagnostic Sciences, Inc. Washington 100 Bard Fiberoptic Technologies, Inc. Michigan 100 Bard Holdings Limited England 100 Bard Limited England 100 Bard Sendirian Berhad Malaysia 100 Angiomed UK Limited England 100 Bard Implants, Inc. Delaware 100 Bard International, Inc. Delaware 100 Bard Japan Limited Japan 100 Productos Bard de Mexico S.A. de C.V. Mexico 100 Bard Shannon Limited Ireland 100 Angiomed GmbH Germany 100 Angiomed Netherlands Netherlands 100 Bard Benelux N.V. Belgium 100 Bard Dublin Ireland 100 Bard de Espana, S.A. Spain 100 Bard Portugal LDA Portugal 100 Bard Galway Limited Ireland 100 Bard Connaught Limited Ireland 100 Bard S.P.A. Italy 100 Angiomed Italy S.P.A. Italy 100 C. R. Bard GmbH Germany 100 Angiomed KG Germany 100 IV-58 C. R. BARD, INC. AND SUBSIDIARIES Exhibit 21 Parents and Subsidiaries of Registrant (continued) Where % of Incorporated Voting Stock C. R. Bard Ireland Limited Ireland 100 Laboratories Bard S.A. France 100 Cardial S.A. France 100 BCP Puerto Rico, Inc. Delaware 100 BCR Delaware, Inc Delaware 100 Catalina Acquisition Corp. Delaware 100 IMPRA, Inc. Arizona 100 Impra Canada, Inc. Arizona 100 Impra Foreign Sales Corporation Arizona 100 Impra Medica GmbH Arizona 100 Impra Medica S.A. Arizona 100 Impra Medica S.A.R.L. Arizona 100 Impra (UK) Ltd. Arizona 100 Laboratoires Bard, Inc. Delaware 100 Bard Nice S.N.C. France 100 Laparoscopic Devices Acquisition Corp. Delaware 100 MedChem Products, Inc. Massachusetts 100 Gesco International, Inc. Massachusetts 100 Pilot Cardiovascular Systems, Inc. Delaware 100 Roberts Laboratories, Inc. Arizona 100 The Consolidated Financial Statements include the accounts of the Registrant and all its wholly-owned subsidiaries. IV-59 EX-23 7 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To C. R. Bard, Inc.: As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 24, 1997, included in this Form 10-K, into C. R. Bard, Inc.'s previously filed Registration Statements (i) on Form S-8 for its Employees' Retirement Savings Plan of C. R. Bard, Inc., Registration No. 2-86291, the 1990 Employee Stock Option Plan, as amended, Registration No. 33-35544 and the C. R. Bard, Inc. 1988 Directors Stock Award Plan, as amended, the 1993 Long Term Incentive Plan of C. R. Bard, Inc., Registration No. 33-64874, and the 1993 Long Term Incentive Plan of C. R. Bard, Inc., Registration No. 333-07189 and the MedChem Products, Inc. 1994 Stock Option Plan, MedChem Products, Inc. 1993 Stock Option Plan, MedChem Products, Inc. 1993 Spin-off Stock Option Plan, MedChem Products, Inc. 1993 Director Stock Option Plan, MedChem Products, Inc. Amended and Restated Stock Option Plan all formerly maintained by MedChem Products, Inc., Registration No 33-63147, and (ii) on Form S-3, Registration No. 333-05997. ARTHUR ANDERSEN LLP Roseland, New Jersey March 24, 1997 IV-60 EX-27 8
5 1000 YEAR DEC-31-1996 DEC-31-1996 11,300 66,700 245,400 10,200 245,000 576,900 364,600 138,500 1,332,500 336,200 342,800 0 0 14,300 584,200 1,332,500 1,194,400 1,194,400 581,300 1,024,400 40,900 0 26,400 102,700 10,200 92,500 0 0 0 92,500 1.62 1.62
-----END PRIVACY-ENHANCED MESSAGE-----