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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 11, 2011
XYLEM INC.
(Exact name of registrant as specified in its charter)
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Indiana
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001-35229
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45-2080495 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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1133 Westchester Avenue, Suite 2000
White Plains, New York
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10604 |
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(Address of principal executive offices)
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(Zip Code) |
(914) 323-5700
(Registrants telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
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ITEM 5.02 |
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. |
Departure of Certain Directors; Election of Directors
On October 11, 2011, the Board of Directors of Xylem Inc. (Xylem or the Company)
determined to increase the size of the Board of Directors of the Company (the Board) from three
directors to four directors effective as of 11:59 p.m. on October 12, 2011. The Board elected
Curtis Crawford to the Board effective upon the increase of the Board size. Effective on his
appointment to the Board, Mr. Crawford will serve as a member of the Audit Committee. The Board
appointed each of Mr. Crawford, Gretchen McClain and Aris Chicles to serve as a member of the Audit
Committee until immediately prior to the occurrence of the effective time (the Effective Time) of
the planned spin-off of Xylem by way of a distribution of all of the issued and outstanding shares
of Xylem common stock to be made, on a pro rata basis, to the holders of the common stock of ITT
Corporation (the Spin-off). In addition, the Board appointed each of Mr. Crawford, Mr. Chicles
and Frank Jimenez to serve as a member of each of the Leadership Development and Compensation
Committee and the Nominating and Governance Committee until immediately prior to the Effective
Time.
Mr. Chicles and Mr. Jimenez tendered their resignations from the Board, conditioned on the
occurrence of the Spin-off and effective immediately prior to the Effective Time, and the Board
determined to further increase the size of the Board to nine directors effective immediately after
the Effective Time. Each of John Hamre, Victoria Harker, Sten Jakobsson, Steven Loranger, Edward
Ludwig, Surya Mohapatra and Markos Tambakeras has been elected as a Director of Xylem, conditioned
on the occurrence of the Spin-off and effective immediately after the Effective Time. Each of Mr.
Tambakeras and Ms. Harker is to be in, and Ms. McClain is in, the first class of Directors and to
hold such office until the annual meeting of the shareholders of the Company to be held in 2012 and
until his or her successor shall have been duly elected and qualified, or until his or her earlier
death, retirement, resignation or removal from such position. Each of
Dr. Hamre and Mr. Mohaptra is to
be in, and Mr. Crawford is in, the second class of Directors and to hold such office until the
annual meeting of the shareholders of the Company to be held in 2013 and until his successor shall
have been duly elected and qualified, or until his earlier death, retirement, resignation or
removal from such position. Each of Mr. Jakobsson, Mr. Ludwig and Mr. Loranger is to be in the
third class of Directors and to hold such office until the annual meeting of the shareholders of
the Company to be held in 2014 and until his successor shall have been duly elected and qualified,
or until his earlier death, retirement, resignation or removal from such position.
Mr. Jakobsson, age 62, is the former President and Chief Executive Officer of ABB Sweden. He
also previously served as Executive Vice President of Asea Brown BoveriAB, Sweden and Business Area
Manager of BusinessArea Cables. He served as the President of ABB CablesAB and President of Asea
Cylinda. He also served as Production Manager of Asea Low Voltage Division. Mr. Jakobsson is
chairman of the board of Power Wind Partners AB, a privately held Swedish firm. He also sits on
the boards of Stena Metall AB, SAAB AB and FLSmidth&Co A/S. Mr. Jakobsson holds a master of science
degree in mechanical engineering from The Royal Technical Institute of Stockholm. Mr. Jakobsson brings extensive global
experience in manufacturing and sales.
Biographical
information for each of Mr. Crawford, Ms. McClain, Dr. Hamre, Ms. Harker, Mr.
Loranger, Mr. Ludwig, Mr. Mohapatra and Mr. Tambakeras can be found in the information statement
attached to the Registration Statement on Form 10 (the Registration Statement) of Xylem filed
with the Securities and Exchange Commission under the section entitled Management, which is
incorporated by reference herein.
Conditioned on the occurrence of the Spin-off and effective immediately after the Effective
Time, (1) Mr. Tambakeras will serve as non-executive Chairman of the Board, (2) Mr. Loranger will
serve as Chairman Emeritus of the Board, (3) Ms. Harker (Chair), Mr. Crawford, Mr. Jakobsson, Mr.
Ludwig and Mr. Mohapatra will serve as members of the Audit Committee, (4) Mr. Mohaptra (Chair),
Mr. Jakobsson, Dr. Hamre and Mr. Loranger will serve as members of the Nominating and Governance
Committee and (5) Mr. Crawford (Chair), Mr. Ludwig, Ms. Harker and Mr. Tambakeras will serve as
members of the Leadership Development and Compensation Committee.
For service from the Effective Time until the next annual meeting of shareholders, each
non-employee director shall (A) receive one-half of the annual director fees of (i) $100,000 per
annual tenure in cash and (ii) an additional annual cash retainer of $15,000 if such non-employee
director serves as the chairman of the Audit Committee, and (B) be granted one-half of the annual
director grant of $90,000 in restricted stock units, which grant will vest the business day prior
to the 2012 annual meeting of the Company, each to be granted or paid promptly on or following the
Effective Time.
For service from the Effective Time until the next annual meeting of shareholders, the
non-employee director who serves as the non-executive Chairman of the Board shall (A) receive
one-half of the additional director fees of $62,500 per year in cash and (B) be granted one-half of
the additional director grant of $62,500 per year in restricted stock units, which grant will vest
on the business day prior to the 2012 annual meeting of the Company. The additional annual
incremental pay until the next annual meeting of shareholders is as follows: $31,250 in cash and
$31,250 in restricted stock units, each to be paid or granted promptly on or following the
Effective Time.
Appointment of Chief Accounting Officer
On October 11, 2011, John Connolly was appointed as Vice President and Chief Accounting
Officer of the Company, effective immediately after the Effective Time.
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ITEM 5.03 |
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Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year |
On October 11, 2011, the Board recommended for approval by its sole shareholder the Amended
and Restated Articles of Incorporation of the Company, which was approved on October 11, 2011. On
October 11, 2011, the Board adopted and approved the Amended and Restated By-laws of the Company,
to be effective upon the Amended and Restated Articles of Incorporation becoming effective. The
Amended and Restated Articles of Incorporation of the Company and the Amended and Restated By-laws
of the Company each became effective as of 11:59 p.m. on October 12, 2011. A summary of the Amended
and Restated Articles of Incorporation and the Amended and Restated By-laws can be found in the
information statement attached to the Registration Statement under the sections entitled
Management and Description of Capital Stock, which are incorporated by reference herein.
The Amended and Restated Articles of Incorporation and the Amended and Restated By-laws are
filed as Exhibit 3.1 and Exhibit 3.2 hereto, respectively.
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ITEM 7.01 |
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Regulation FD Disclosure. |
The following information is furnished pursuant to Item 7.01 Regulation FD Disclosure. This
information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the Exchange Act) or incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing. Executives from Xylem will present an overview of the Company
and information related to the Companys separation from ITT Corporation at the Companys investor
day on October 13, 2011. A copy of the presentation is attached and incorporated by reference
herein as Exhibit 99.1.
Caution Concerning Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the Act):
Certain material presented herein includes forward-looking statements intended to qualify for the
safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, but are not limited to, statements about the separation
of Xylem from ITT Corporation, the terms and the effect of the separation, the nature and impact of
such a separation, capitalization of the Company, future strategic plans and other statements that
describe the Companys business strategy, outlook, objectives, plans, intentions or goals, and any
discussion of future operating or financial performance. Whenever used, words such as anticipate,
estimate, expect, project, intend, plan, believe, target and other terms of similar
meaning are intended to identify such forward-looking statements. Forward-looking statements are
uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and
other important factors that could cause actual results to differ materially from those expressed
or implied in, or reasonably inferred from, such forward-looking statements. Factors that could
cause results to differ materially from those anticipated include, but are not limited to:
economic, political and social conditions in the countries in which we conduct our businesses;
changes in U.S. or International government budgets; decline in consumer spending; sales and
revenues mix and pricing levels; availability of adequate labor, commodities, supplies and raw
materials; interest and foreign currency exchange rate fluctuations and changes in local government
regulations; competition, industry capacity & production rates; ability of third parties, including
our commercial partners, counterparties, financial institutions and insurers, to comply with their
commitments to us; our ability to borrow or to refinance our existing indebtedness and availability
of liquidity sufficient to meet our needs; changes in the value of goodwill or intangible assets;
our ability to achieve stated synergies or cost savings from acquisitions or divestitures; the number of
personal injury claims filed against or the
Company or degree of liability; our ability to effect restructuring and cost reduction programs and
realize savings from such actions; government regulations and compliance therewith, including
Dodd-Frank legislation; changes in technology; intellectual property matters; governmental
investigations; potential future employee benefit plan contributions and other employment and
pension matters; contingencies related to actual or alleged environmental contamination, claims and
concerns; changes in generally accepted accounting principles; and other factors set forth in the
Registration Statement and the Companys other filings with the Securities and Exchange Commission.
In addition, there are risks and uncertainties relating to the separation including whether those
transactions will result in any tax liability, the operational and financial profile of the Company
or any of its businesses after giving effect to the separation, and the ability of the Company to
operate as an independent entity.
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ITEM 9.01 |
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Financial Statements and Exhibits |
(d) Exhibits.
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Exhibit |
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No. |
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Description |
3.1
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Amended and Restated Articles of Incorporation of Xylem Inc. |
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3.2
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Amended and Restated By-laws of Xylem Inc. |
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99.1
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Presentation slides issued by Xylem Inc. on October 13, 2011 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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XYLEM INC.
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Date: October 13, 2011 |
By: |
/s/ Frank R. Jimenez
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Frank R. Jimenez |
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Its: |
Vice President, General Counsel and
Corporate Secretary
(Authorized Officer of Registrant) |
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EXHIBIT INDEX
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Exhibit |
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No. |
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Description |
3.1
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Amended and Restated Articles of Incorporation of Xylem Inc. |
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3.2
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Amended and Restated By-laws of Xylem Inc. |
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99.1
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Presentation slides issued by Xylem Inc. on October 13, 2011 |
exv3w1
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
of
XYLEM INC.
ARTICLE FIRST
The name of the corporation is Xylem Inc. (the Corporation).
ARTICLE SECOND
The address of the registered office of the Corporation in the State of Indiana is 251 East
Ohio Street, Suite 1100, Indianapolis, Indiana 46204. The name of the registered agent of
the Corporation at such address is The Corporation Trust Company.
ARTICLE THIRD
The purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Indiana Business Corporation Law (IBCL).
ARTICLE FOURTH
(a) The aggregate number of shares of stock that the Corporation shall have authority to issue
is 800,000,000 shares, consisting of 750,000,000 shares designated Common Stock and 50,000,000
shares designated Preferred Stock. The shares of Common Stock shall have a par value of $0.01 per
share, and the shares of Preferred Stock shall not have any par or stated value, except that,
solely for the purpose of any statute or regulation imposing any fee or tax based upon the
capitalization of the Corporation, the shares of Preferred Stock shall be deemed to have a par
value of $.01 per share.
(b) The Board of Directors of the Corporation shall have the full authority permitted by law,
at any time and from time to time, to divide the authorized and unissued shares of Preferred Stock
into classes or series, or both, and to determine the preferences, limitations and relative voting
and other rights of any such class or series of Preferred Stock, with such divisions and
determinations to be accomplished by an amendment to these Amended and Restated Articles of
Incorporation (Articles of Incorporation) which amendment may, except as otherwise provided by
law, be made solely by action of the Board of Directors, which shall have the full authority
permitted by law to make such divisions and determinations.
(c) Each holder of shares of Common Stock shall be entitled to one vote for each share of
Common Stock held of record on all matters on which the holders of shares of Common Stock are
entitled to vote. No holder of shares of Common Stock will be permitted to cumulate votes at any
election of directors.
(d) Subject to all the rights of the holders of the Preferred Stock, the holders of shares of
Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out
of funds legally available for the payment thereof, dividends payable in cash, stock or otherwise.
Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, and subject to the rights of the holders of the Preferred Stock, the remaining assets
of the Corporation available for distribution shall be distributed to the holders of the Common
Stock ratably according to the number of shares of Common Stock held by such holder.
ARTICLE FIFTH
(a) The number of directors constituting the Board of Directors of the Corporation shall be
not less than three nor more than twenty-five, with the exact number to be fixed from time to time
solely by resolution of the Board of Directors acting by not less than a majority of the directors
in office. The Board of Directors shall be divided into three (3) classes, as nearly equal in
number as possible, with the term of office of one class expiring
each year. Directors of the first class are to be elected for a term expiring at the annual
meeting of shareholders to be held in 2012, directors of the second class are to be elected for a
term expiring at the annual meeting of shareholders
to be held in 2013, and directors of the third
class are to be elected for a term expiring at the annual meeting of shareholders to be held in
2014, with each director to hold office until his or her successor is elected and qualified.
Commencing with the annual meeting of shareholders in 2012, each class of directors whose term
shall then expire shall be elected to hold office for a three-year term.
(b) In the case of any vacancy on the Board of Directors, including a vacancy created by an
increase in the number of directors, the vacancy shall be filled by the Board of Directors with the
director so elected to serve for the remainder of the term of the director being replaced or, in
the case of an additional director, for the remainder of the term of the class to which the
director has been assigned. When the number of directors is changed, any newly created
directorships or any decrease in directorships shall be so assigned among the classes by a majority
of the directors then in office, though less than a quorum, as to make all classes as nearly equal
in number as possible. No decrease in the number of directors shall have the effect of shortening
the term of any incumbent director.
(c) In a contested election of directors (i.e. any election where the number of nominees
exceeds the number of directors to be elected), directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which a quorum is
present. In an uncontested election of directors, directors shall be elected by a majority of the
votes cast by the shares entitled to vote in the election at a meeting at which a quorum is
present. Any director or directors may be removed from office at any time, but only for cause and
only upon the affirmative vote of at least a majority of the shares then entitled to vote at a
meeting called, and notice provided, in accordance with the IBCL, these Articles of Incorporation
and the By-Laws of the Corporation.
(d) Special meetings of shareholders of the Corporation may be called only by the Chairman of
the Board of Directors or by a majority vote of the entire Board of Directors.
(e) Holders of the Common Stock of the Corporation shall not have any preemptive rights to
subscribe for additional issues of shares of Common Stock of the Corporation except as may be
agreed from time to time by the Corporation and any such shareholder.
(f) Notwithstanding the foregoing, whenever the holders of any one or more classes or series
of Preferred Stock issued by the Corporation, if any, shall have the right, voting separately by
class or series, to elect directors at an annual or special meeting of shareholders, the election,
term of office, filling of vacancies and other features of such directorships shall be governed by
the terms of such class or series of Preferred Stock.
ARTICLE SIXTH
To the fullest extent permitted by applicable law as then in effect, no director or officer
shall be personally liable to the Corporation or any of its shareholders for damages for any action
taken as a director or officer, or any failure or omission to take any action, regardless of the
nature of the breach or alleged breach, including any breach or alleged breach of the duty of care,
the duty of loyalty or the duty of good faith. Any repeal or modification of this ARTICLE SIXTH
shall not adversely affect any right or protection of a director or officer of the Corporation
existing at the time of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
ARTICLE SEVENTH
The holders of the capital stock of the Corporation shall not be personally liable for the
payment of the Corporations debts and the private property of the holders of the capital stock of
the Corporation shall not be subject to the payment of debts of the Corporation to any extent
whatsoever.
ARTICLE EIGHTH
Subject to any express provision of the laws of the State of Indiana, these Articles of
Incorporation or the By-laws of the Corporation, the By-laws of the Corporation may from time to
time be supplemented, amended or
repealed, or new By-laws may be adopted, by the Board of Directors at any regular or special
meeting of the Board
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of Directors, if such supplement, amendment, repeal or adoption is approved by
a majority of the entire Board of Directors.
ARTICLE NINTH
The Corporation reserves the right to supplement, amend or repeal any provision contained in
these Articles of Incorporation, in the manner now or hereafter prescribed by the laws of the State
of Indiana, and all rights conferred on shareholders herein are granted subject to this
reservation.
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exv3w2
Exhibit 3.2
BY-LAWS
of
Xylem Inc.
1. SHAREHOLDERS.
1.1. Place of Shareholders Meetings. All meetings of the shareholders of Xylem Inc. (the
Corporation) shall be held at such place or places, within or outside the state of Indiana, as
may be fixed by the Corporations Board of Directors (the Board, and each member thereof a
Director) from time to time or as shall be specified in the respective notices thereof.
1.2. Day and Time of Annual Meetings of Shareholders. An annual meeting of shareholders shall be
held at such place (within or outside the state of Indiana), date and hour as shall be determined
by the Board and designated in the notice thereof. Failure to hold an annual meeting of
shareholders at such designated time shall not affect otherwise valid corporate acts or work a
forfeiture or dissolution of the Corporation.
1.3. Purposes of Annual Meetings. (a) At each annual meeting, the shareholders shall elect the
members of the Board for the succeeding term. At any such annual meeting any business properly
brought before the meeting may be transacted.
(b) To be properly brought before an annual meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction of the Board, (ii)
otherwise properly brought before the meeting by or at the direction of the Board or (iii)
otherwise properly brought before the meeting by a shareholder. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given written notice thereof,
either by personal delivery or by United States mail, postage prepaid, to the Secretary, received
at the principal executive offices of the Corporation, not less than 90 calendar days nor more than
120 calendar days prior to the date of the Corporations proxy statement released to shareholders
in connection with the previous years annual meeting; provided, however, that in
the event that no annual meeting was held in the previous year or the date of the annual meeting
was changed by more than 30 days from the anniversary date of the previous years annual meeting,
notice by the shareholder must be so received not earlier than 120 calendar days prior to such
annual meeting and not later than 90 calendar days prior to such annual meeting or 10 calendar days
following the date on which public announcement of the date of the meeting is first made. In no
event shall the public announcement of an adjournment or postponement of a meeting commence a new
time period, or extend any time period, for the giving of written notice. Any such notice shall set
forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the meeting and the reasons for conducting
such business at the meeting and, in the event that such business includes a proposal to amend
either the Articles of Incorporation or By-laws of the Corporation, the language of the proposed
amendment, (ii) the name and address of the shareholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is made, (iii) a representation that the shareholder is
a holder of record of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business, (iv) any material interest of
the shareholder, and the beneficial owner, if any, on whose behalf the proposal is made, in such
business, (v) if the shareholder or beneficial owner, if any, intends or is part of a group that
intents to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage
of the Corporations outstanding capital stock required to approve or adopt the proposal or (y)
otherwise solicit proxies or votes in support of such shareholders proposal, a representation to
that effect, (vi) any other information relating to such shareholder and beneficial owner, if any,
required to be disclosed in a proxy statement or other filings required to be made in connection
with solicitations of proxies for the proposal, pursuant to and in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, (vii) a description of any
agreement, arrangement or understanding with respect to the proposal and/or the voting of shares of
any class or series of stock of the Corporation between or among the shareholder giving the notice,
the beneficial owner, if any, on whose behalf the proposal is made, any of their respective
affiliates or associates and/or any others acting in concert with any of the foregoing
(collectively, Proponent Persons, which term, for purposes of Section 2.2 herein, shall
include each nominee (and his or her respective affiliates or associates and/or any others acting
in concert with such nominee) and shall be defined as if the foregoing clause had, in each case,
replaced the word proposal with the word nomination); and (viii) a description of any
agreement, arrangement or understanding (including without limitation any swap or other derivative
or short position, profits interest, hedging transaction, borrowed or loaned
shares, any contract to purchase or sell, acquisition or grant of any option, right or warrant
to purchase or sell, or other instrument) to which any Proponent Person is a party, the intent or
effect of which may be (x) to transfer to or from any Proponent Person, in whole or in part, any of
the economic consequences of ownership of any security of the Corporation, (y) to increase or
decrease the voting power of any Proponent Person with respect to shares of any class or series of
capital stock of the Corporation and/or (z) to provide any Proponent Person, directly or
indirectly, with the opportunity to profit or share in any profit derived from, or to otherwise
benefit economically from, or to mitigate any loss resulting from, the value (or any increase or
decrease in the value) of any security of the Corporation. A shareholder providing notice of
business proposed to be brought before a meeting shall update and supplement such notice from time
to time to the extent necessary so that the information provided or required to be provided in such
notice shall be true and correct as of the record date for the meeting and as of the date that is
fifteen calendar days prior to the meeting or any adjournment or postponement thereof; such update
and supplement shall be delivered in writing to the Secretary of the Corporation at the principal
executive offices of the Corporation not later than five (5) days after the record date for the
meeting (in the case of any update and supplement required to be made as of the record date), and
not later than ten calendar days prior to the date for the meeting or any adjournment or
postponement thereof (in the case of any update and supplement required to be made as of fifteen
calendar days prior to the meeting or any adjournment or postponement thereof). The foregoing
notice requirements shall be deemed satisfied by a shareholder if the shareholder has notified the
Corporation of his or her intention to present a proposal at an annual meeting and such
shareholders proposal has been included in a proxy statement that has been prepared by management
of the Corporation to solicit proxies for such annual meeting; provided, however, that, if such
shareholder does not appear or send a qualified representative to present such proposal at such
annual meeting, the Corporation need not present such proposal for a vote at such meeting,
notwithstanding that proxies in respect of such vote may have been received by the Corporation. No
business shall be conducted at an annual meeting of shareholders except in accordance with this
Section 1.3(b), and the chairman of any annual meeting of shareholders may refuse to permit any
business to be brought before an annual meeting without compliance with the foregoing procedures or
if the shareholder solicits proxies in support of such shareholders proposal without such
shareholder having made the representation required by clause (v) of the preceding sentence.
1.4. Special Meetings of Shareholders. (a) Except as otherwise expressly required by applicable
law, special meetings of the shareholders or of any class or series entitled to vote may be called
for any purpose or purposes by the Chairman or by a majority vote of the entire Board in accordance
with these By-Laws and the Corporations Articles of Incorporation to be held at such place (within
or outside the state of Indiana), date and hour as shall be determined by the Board and designated
in the notice thereof. Only such business as is specified in the notice of any special meeting of
the shareholders shall come before such meeting.
(b) Special meetings shall be held at such date, time and place as may be fixed by the Board
in accordance with these by-laws.
1.5. Notice of Meetings of Shareholders. Except as otherwise expressly required or permitted by
applicable law, not less than ten days nor more than sixty days before the date of every
shareholders meeting the Secretary shall give to each shareholder of record entitled to vote at
such meeting written notice stating the place, day and time of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called and indication that notice
is being issued by or at the direction of the person or persons calling the meeting. Except as
provided in Section 1.6(d) or as otherwise expressly required by applicable law, notice of any
adjourned meeting of shareholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken. Any notice, if mailed, shall be deemed to be given
when deposited in the United States mail, postage prepaid, addressed to the shareholder at the
address for notices to such shareholder as it appears on the records of the Corporation.
1.6. Quorum of Shareholders. (a) Unless otherwise expressly required by applicable law, at any
meeting of the shareholders, the presence in person or by proxy of shareholders entitled to cast a
majority of votes thereat shall constitute a quorum. Shares of the Corporations stock belonging to
the Corporation or to another corporation, if a majority of the shares entitled to vote in an
election of the directors of such other corporation is held by the Corporation, shall neither be
counted for the purpose of determining the presence of a quorum nor entitled to vote at any meeting
of the shareholders.
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(b) At any meeting of the shareholders at which a quorum shall be present, a majority of those
present in person or by proxy may adjourn the meeting from time to time without notice other than
announcement at the meeting. In the absence of a quorum, the officer presiding thereat shall have
power to adjourn the meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting other than announcement at the meeting shall not be required to be given, except
as provided in Section 1.6(d) below and except where expressly required by applicable law.
(c) At any adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting originally called, but only those
shareholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof unless a new record date is fixed by the Board.
(d) If a new date, time and place of an adjourned meeting is not announced at the original
meeting before adjournment, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given in the manner specified in
Section 1.5 to each shareholder of record entitled to vote at the meeting.
1.7. Chairman and Secretary of Meeting. The Chairman or, in his or her absence, another officer of
the Corporation designated by the Chairman, shall preside at meetings of the shareholders. The
Secretary shall act as secretary of the meeting, or in the absence of the Secretary, an Assistant
Secretary shall so act, or if neither is present, then the presiding officer may appoint a person
to act as secretary of the meeting.
1.8. Voting by Shareholders. (a) Except as otherwise expressly required by applicable law, at
every meeting of the shareholders each shareholder shall be entitled to the number of votes
specified in the Articles of Incorporation, in person or by proxy, for each share of stock standing
in his or her name on the books of the Corporation on the date fixed pursuant to the provisions of
Section 5.6 of these By-laws as the record date for the determination of the shareholders who shall
be entitled to receive notice of and to vote at such meeting.
(b) When a quorum is present at any meeting of the shareholders, action on a matter (other
than the election of directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless express provision of
law or the Articles of Incorporation require a greater number of affirmative votes.
(c) Except as required by applicable law, the vote at any meeting of shareholders on any
question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by
ballot, each ballot shall be signed by the shareholder voting, or by his or her proxy, if there be
such proxy, and shall state the number of shares voted.
1.9. Proxies. Any shareholder entitled to vote at any meeting of shareholders may vote either in
person or by proxy. A shareholder may authorize a person or persons to act for the shareholder as
proxy by (i) the shareholder or the shareholders designated officer, director, employee or agent
executing a writing by signing it or by causing the shareholders signature or the signature of the
designated officer, director, employee or agent of the shareholder to be affixed to the writing by
any reasonable means, including by facsimile signature; (ii) the shareholder transmitting or
authorizing the transmission of an electronic submission which may be by any electronic means,
including data and voice telephonic communications and computer network to (a) the person who will
be the holder of the proxy; (b) a proxy solicitation firm; or (c) a proxy support service
organization or similar agency authorized by the person who will be the holder of the proxy to
receive the electronic submission, which electronic submission must either contain or be
accompanied by information from which it can be determined that the electronic submission was
transmitted by or authorized by the shareholder; or (iii) any other method allowed by law.
1.10. Inspectors. (a) The election of Directors and any other vote by ballot at any meeting of the
shareholders shall be supervised by at least two inspectors. Such inspectors may be appointed by
the Chairman before or at the meeting. If the Chairman shall not have so appointed such inspectors
or if one or both inspectors so appointed shall refuse to serve or shall not be present, such
appointment shall be made by the officer presiding at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or her ability.
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(b) The inspectors shall (i) ascertain the number of shares of the Corporation outstanding and
the voting power of each, (ii) determine the shares represented at any meeting of shareholders and
the validity of the proxies and ballots, (iii) count all proxies and ballots, (iv) determine and
retain for a reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all proxies and ballots. The inspectors may appoint
or retain other persons or entities to assist the inspectors in the performance of their duties.
1.11. List of Shareholders. (a) At least five business days before every meeting of shareholders,
the Corporation shall cause to be prepared and made a complete list of the shareholders entitled to
vote at the meeting, arranged in alphabetical order by voting group, if any, and showing the
address of each shareholder and the number of shares registered in the name of each shareholder.
(b) During ordinary business hours for a period of at least five business days prior to the
meeting, such list shall be open to examination by any shareholder for any purpose germane to the
meeting, either at the Corporations principal office or a place identified in the meeting notice
in the city where the meeting will be held.
(c) The list shall also be produced and kept at the time and place of the meeting, and it may
be inspected during the meeting by any shareholder or the shareholders agent or attorney
authorized in writing.
(d) The stock ledger shall be the only evidence as to who are the shareholders entitled to
examine the stock ledger, the list required by this Section 1.11 or the books of the Corporation,
or to vote in person or by proxy at any meeting of shareholders.
1.12. Confidential Voting. (a) Proxies and ballots that identify the votes of specific
shareholders shall be kept in confidence by the tabulators and the inspectors of election unless
(i) there is an opposing solicitation with respect to the election or removal of Directors, (ii)
disclosure is required by applicable law, (iii) a shareholder expressly requests or otherwise
authorizes disclosure, or (iv) the Corporation concludes in good faith that a bona fide dispute
exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of
any tabulation of such proxies, ballots or votes.
(b) The tabulators and inspectors of election and any authorized agents or other persons
engaged in the receipt, count and tabulation of proxies and ballots shall be advised of this By-law
and instructed to comply herewith.
(c) The inspectors of election shall certify, to the best of their knowledge based on due
inquiry, that proxies and ballots have been kept in confidence as required by this Section 1.12.
2. DIRECTORS.
2.1. Powers of Directors. The business and affairs of the Corporation shall be managed by or under
the direction of the Board, which may exercise all the powers of the Corporation except such as are
by applicable law, the Articles of Incorporation or these By-laws required to be exercised or
performed by the shareholders.
2.2. Number, Method of Election, Terms of Office of Directors. The number of Directors which shall
constitute the whole Board shall be such as set forth in, and as determined in accordance with, the
Articles of Incorporation. The directors shall be divided into three classes as nearly equal in
number as possible as provided in the Articles of Incorporation. Except as provided in Article
Fifth of the Articles of Incorporation fixing one, two, and three year terms for the initial
classified board, each class of directors shall be elected for a term of three (3) years and until
his or her successor is elected and qualified or until his or her earlier death, retirement,
resignation or removal. Directors need not be shareholders of the Corporation or citizens of the
United States of America.
Nominations of persons for election as Directors may be made by the Board or by any
shareholder who is a shareholder of record at the time of giving of the notice of nomination
provided for in this Section 2.2 and who is entitled to vote for the election of Directors. Any
shareholder of record entitled to vote for the election of Directors at a meeting may nominate a
person or persons for election as Directors only if written notice of such shareholders
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intent to make such nomination is given in accordance with the procedures for bringing
business before the meeting set forth in Section 1.3(b) of these By-Laws, either by personal
delivery or by United States mail, postage prepaid, to the Secretary, received at the principal
executive offices of the Corporation, not later than (i) with respect to an election to be held at
an annual meeting of shareholders, not less than 90 calendar days nor more than 120 calendar days
prior to the date of the Corporations proxy statement released to shareholders in connection with
the previous years annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting was changed by more than 30 days from
the anniversary date of the previous years annual meeting, notice by the shareholder must be so
received not earlier than 120 calendar days prior to such annual meeting and not later than 90
calendar days prior to such annual meeting or 10 calendar days following the date on which public
announcement of the date of the meeting is first made, and (ii) with respect to an election to be
held at a special meeting of shareholders for the election of Directors, not earlier than 120
calendar days prior to such special meeting and not later than 90 calendar days prior to such
special meeting or 10 calendar days following the date on which public announcement of the date of
the special meeting is first made and of the nominees to be elected at such meeting. In no event
shall the public announcement of an adjournment or postponement of a meeting commence a new time
period, or extend any time period, for the giving of written notice. Any such notice shall set
forth: (a) the name and address of the shareholder who intends to make the nomination and the
beneficial owner, if any, on whose behalf the nomination is made and of the person or persons to be
nominated; (b) a representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder, any beneficial owner on whose behalf the
nomination is made and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other
information regarding each shareholder, the beneficial owner, if any, on whose behalf the
nomination is made and nominee proposed by such shareholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission in connection with solicitations of proxies for the election of directors in an election
contest; (e) the consent of each nominee to serve as a Director if so elected;(f) if the
shareholder or beneficial owner, if any, intends to (x) deliver a proxy statement and/or form of
proxy to the holders of at least the percent of the Corporations outstanding capital stock
required to elect the nominee and/or (y) otherwise solicit proxies of votes from shareholders in
support of such shareholders nominee(s), a representation to that effect; (g) a description of any
agreement, arrangement or understanding with respect to the nomination and/or the voting of shares
of any class or series of stock of the Corporation between or among the Proponent Persons; and
(viii) a description of any agreement, arrangement or understanding (including without limitation
any swap or other derivative or short position, profits interest, hedging transaction, borrowed or
loaned shares, any contract to purchase or sell, acquisition or grant of any option, right or
warrant to purchase or sell or other instrument) to
which any Proponent Person is a party, the
intent or effect of which may be (x) to transfer to or from any Proponent Person, in whole or in
part, any of the economic consequences of ownership of any security of the Corporation, (y) to
increase or decrease the voting power of any Proponent Person with respect to shares of any class
or series of capital stock of the Corporation and/or (z) to provide any Proponent Person, directly
or indirectly, with the opportunity to profit or share in any profit derived from, or to otherwise
benefit economically from, or to mitigate any loss resulting from, the value (or any increase or
decrease in the value) of any security of the Corporation. A shareholder providing notice of a
proposed nomination shall update and supplement such notice from time to time to the extent
necessary so that the information provided or required to be provided in such notice shall be true
and correct as of the record date for the meeting and as of the date that is fifteen calendar days
prior to the meeting or any adjournment or postponement thereof; such update and supplement shall
be delivered in writing to the Secretary of the Corporation at the principal executive offices of
the Corporation not later than five calendar days after the record date for the meeting (in the
case of any update and supplement required to be made as of the record date), and not later than
ten calendar days prior to the date for the meeting or any adjournment or postponement thereof (in
the case of any update and supplement required to be made as of fifteen calendar days prior to the
meeting or any adjournment or postponement thereof).The chairman of any meeting of shareholders to
elect Directors and the Board may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedures or if the shareholder solicits proxies in support of such
shareholders nominee(s) without such shareholder having made the representation required by (f) of
the preceding sentence. The Corporation may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such proposed nominee to
serve as a director of the Corporation.
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In an uncontested election (i.e. any election in which the number of nominees does not exceed
the number of Directors to be elected), Directors shall be elected by a majority of the votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is present. Any
Director nominee that does not receive the requisite votes shall not be elected. Any Director
nominee who fails to be elected but who is a Director at the time of the election shall promptly
provide a written resignation to the Chairman or the Secretary and remain a Director until a
successor shall have been elected and qualified (a Holdover Director).
The Nominating and Governance Committee (or the equivalent committee then in existence) shall
promptly consider the resignation and all relevant facts and circumstances concerning the vote and
the best interests of the Corporation and its shareholders. After consideration, the Nominating and
Governance Committee shall make a recommendation to the Board whether to accept or reject the
tendered resignation, or whether other action should be taken.
The Board will act on the Nominating and Governance Committees recommendation no later than
its next regularly scheduled Board Meeting or within 90 days after certification of the shareholder
vote, whichever is earlier.
The Board will promptly publicly disclose its decision (by a press release, a filing with the
Securities and Exchange Commission or other broadly disseminated means of communication) and the
reasons for its decision.
Any Holdover Director who tenders a resignation shall not participate in the Nominating and
Governance Committees recommendation or Board action regarding whether to accept the resignation
offer. If a Holdover Directors resignation is not accepted, such Holdover Director shall continue
to serve until his or her successor is duly elected and qualified or his or her earlier resignation
or removal. If a Holdover Directors resignation is accepted, then the Board may fill the resulting
vacancy, or decrease the size of the Board, pursuant to the provisions of Article Fifth of the
Articles of Incorporation.
If each member of the Nominating and Governance Committee receives less than a majority of the
votes cast at the same election, then the Board shall appoint a committee composed of three
independent Directors (with an independent Director being a Director that has been determined by
the Board to be independent under such criteria as it deems applicable, including, without
limitation, applicable New York Stock Exchange rules and regulations and other applicable law) who
received more than a majority of the votes cast to consider the resignation offers and recommend to
the Board whether to accept the offers. However, if there are fewer than three independent
Directors who receive a majority or more of the votes cast in the same election then the Board will
promptly consider the resignation and all relevant facts and circumstances concerning the vote and
the best interests of the Corporation and its shareholders and act no later than its next regularly
scheduled Board Meeting or within 90 days after certification of the shareholder vote, whichever is
earlier. If all Directors receive less than a majority of the votes cast at the same election, the
election shall be treated as a contested election and the majority vote requirement shall be
inapplicable.
2.3. Vacancies on Board. (a) Any Director may resign from office at any time by delivering a
written resignation to the Chairman or the Secretary. The resignation will take effect at the time
specified therein, or, if no time is specified, at the time of its receipt by the Corporation. The
acceptance of a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
(b) Any vacancy resulting from the death, retirement, resignation, or removal of a Director
and any newly created Directorship resulting from any increase in the authorized number of
Directors may be filled by vote of a majority of the Directors then in office, though less than a
quorum, and any Director so chosen shall hold office for the balance of the term of the class of
the director he or she succeeds or, in the event of an increase in the number of directors, of the
class to which he or she is assigned and until a successor is duly elected and qualified or until
his or her earlier death, retirement, resignation or removal. If there are no Directors in office,
then an election of Directors may be held in the manner provided by applicable law.
2.4. Meetings of the Board. (a) The Board may hold its meetings, both regular and special, either
within or outside the state of Indiana, at such places as from time to time may be determined by
the Board or as may be designated in the respective notices or waivers of notice thereof.
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(b) Regular meetings of the Board shall be held at such times and at such places as from time
to time shall be determined by the Board.
(c) The first meeting of each newly elected Board shall be held as soon as practicable after
the annual meeting of the shareholders and shall be for the election of officers and the
transaction of such other business as may come before it.
(d) Special meetings of the Board shall be held whenever called by direction of the Chairman
or at the request of Directors constituting one-third of the number of Directors then in office.
(e) Members of the Board or any Committee of the Board may participate in a meeting by means
of conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall constitute presence
in person at such meeting.
(f) The Secretary shall give notice to each Director of any meeting of the Board by mailing
the same at least two days before the meeting or by telegraphing or delivering the same not later
than the day before the meeting. Such notice need not include a statement of the business to be
transacted at, or the purpose of, any such meeting. Any and all business may be transacted at any
meeting of the Board. No notice of any adjourned meeting need be given. No notice to or waiver by
any Director shall be required with respect to any meeting at which the Director is present.
2.5. Quorum and Action. Except as otherwise expressly required by applicable law, the Articles of
Incorporation or these By-laws, at any meeting of the Board, the presence of at least one-third of
the entire Board shall constitute a quorum for the transaction of business; but if there shall be
less than a quorum at any meeting of the Board, a majority of those present may adjourn the meeting
from time to time. Unless otherwise provided by applicable law, the Articles of Incorporation or
these By-laws, the vote of a majority of the Directors present (and not abstaining) at any meeting
at which a quorum is present shall be necessary for the approval and adoption of any resolution or
the approval of any act of the Board.
2.6. Presiding Officer and Secretary of Meeting. The Chairman or, in the absence of the Chairman,
a member of the Board selected by the members present, shall preside at meetings of the Board. The
Secretary shall act as secretary of the meeting, but in the Secretarys absence the presiding
officer may appoint a secretary of the meeting.
2.7. Action by Consent without Meeting. Any action required or permitted to be taken at any
meeting of the Board or of any Committee thereof may be taken without a meeting if all members of
the Board or Committee, as the case may be, consent thereto in writing and the writing or writings
are filed with the minutes of their proceedings.
2.8. Standing Committees. By resolution adopted by a majority of the entire Board, the Board may,
from time to time, establish such Standing Committees (including, without limitation, an Audit
Committee, a Compensation and Personnel Committee and a Nominating and Governance Committee) with
such powers of the Board as it may consider appropriate, consistent with applicable law, the
Articles of Incorporation and these By-laws and which are specified by resolution or by committee
charter approved by a majority of the entire Board. By resolution adopted by a majority of the
entire Board, the Board shall elect, from among its members, individuals to serve on such Standing
Committees established by this Section 2.8.
2.9. Other Committees. By resolution passed by a majority of the entire Board, the Board may also
appoint from among its members such other Committees as it may from time to time deem desirable and
may delegate to such Committees such powers of the Board as it may consider appropriate, consistent
with applicable law, the Articles of Incorporation and these By-laws. Except to the extent
inconsistent with the resolutions creating a Committee, Sections 2.4, 2.5, 2.7 and 10 of these
By-laws, which govern meetings, action without meetings, notice and waiver of notice, quorum and
voting requirements and telephone participation in meetings of the Board, shall apply to each
Committee (including any Standing Committee) and its members as well.
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2.10. Compensation of Directors. Unless otherwise restricted by the Articles of Incorporation or
these By-laws, Directors shall receive for their services on the Board or any Committee thereof
such compensation and benefits, including the granting of options, together with expenses, if any,
as the Board may from time to time determine. The Directors may be paid a fixed sum for attendance
at each meeting of the Board or Committee thereof and/or a stated annual sum as a Director,
together with expenses, if any, of attendance at each meeting of the Board or Committee thereof.
Nothing herein contained shall be construed to preclude any Director from serving the Corporation
in any other capacity and receiving compensation therefor.
2.11. Mandatory Classified Board Structure. The provisions of IC 23-1-33-6(c) shall not apply to
the Corporation.
3. OFFICERS.
3.1. Officer, Titles, Elections, Terms. (a) The Board may from time to time elect a Chairman, a
Chief Executive, a Vice Chairman, a President, one or more Executive Vice Presidents, one or more
Senior Vice Presidents, one or more Vice Presidents, a Chief Financial Officer, a Chief Accounting
Officer, a Controller, a Treasurer, a Secretary, a General Counsel, one or more Assistant
Controllers, one or more Assistant Treasurers, one or more Assistant Secretaries, and one or more
Deputy General Counsels, to serve at the pleasure of the Board or otherwise as shall be specified
by the Board at the time of such election and until their successors are elected and qualified or
until their earlier death, retirement, resignation or removal.
(b) The Board may elect or appoint at any time such other officers or agents with such duties
as it may deem necessary or desirable. Such other officers or agents shall serve at the pleasure of
the Board or otherwise as shall be specified by the Board at the time of such election or
appointment and, in the case of such other officers, until their successors are elected and
qualified or until their earlier death, retirement, resignation or removal. Each such officer or
agent shall have such authority and shall perform such duties as may be provided herein or as the
Board may prescribe. The Board may from time to time authorize any officer or agent to appoint and
remove any other such officer or agent and to prescribe such persons authority and duties.
(c) No person may be elected or appointed an officer who is not a citizen of the United States
of America if such election or appointment is prohibited by applicable law or regulation.
(d) Any vacancy in any office may be filled for the unexpired portion of the term by the
Board. Each officer elected or appointed during the year shall hold office until the next annual
meeting of the Board at which officers are regularly elected or appointed and until his or her
successor is elected or appointed and qualified or until his or her earlier death, retirement,
resignation or removal.
(e) Any officer or agent elected or appointed by the Board may be removed at any time by the
affirmative vote of a majority of the entire Board.
(f) Any officer may resign from office at any time. Such resignation shall be made in writing
and given to the President or the Secretary. Any such resignation shall take effect at the time
specified therein, or, if no time is specified, at the time of its receipt by the Corporation. The
acceptance of a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
3.2. General Powers of Officers. Except as may be otherwise provided by applicable law or in
Article 6 or Article 7 of these By-laws, the Chairman, any Vice Chairman, the President, any
Executive Vice President, any Senior Vice President, any Vice President, the Chief Financial
Officer, the General Counsel, the Chief Accounting Officer, the Controller, the Treasurer and the
Secretary, or any of them, may (i) execute and deliver in the name of the Corporation, in the name
of any Division of the Corporation or in both names any agreement, contract, instrument, power of
attorney or other document pertaining to the business or affairs of the Corporation or any Division
of the Corporation, including without limitation agreements or contracts with any government or
governmental department, agency or instrumentality, and (ii) delegate to any employee or agent the
power to execute and deliver any such agreement, contract, instrument, power of attorney or other
document.
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3.3. Powers of the Chairman or Chief Executive. The Chairman shall be the Chief Executive (as
defined in Section 3.11) of the Corporation unless the Board specifically elects the President to
be Chief Executive of the Corporation, in which case the President shall be the Chief Executive. If
either the Chairman or the President is the Chief Executive, then he or she shall report directly
to the Board. Except in such instances as the Board may confer powers in particular transactions
upon any other officer, and subject to the control and direction of the Board, the Chief Executive
shall manage and direct the business and affairs of the Corporation and shall communicate to the
Board and any Committee thereof reports, proposals and recommendations for their respective
consideration or action. He or she may do and perform all acts on behalf of the Corporation. The
Chairman (whether or not the Chief Executive) shall preside at meetings of the Board and the
shareholders.
3.4. Powers and Duties of a Vice Chairman. A Vice Chairman shall have such powers and perform such
duties as the Board or the Chairman may from time to time prescribe or as may be prescribed in
these By-laws.
3.5. Powers and Duties of the President. Unless the President is Chief Executive, the President
shall have such powers and perform such duties as the Board or the Chairman may from time to time
prescribe or as may be prescribed in these By-laws. If the President is the Chief Executive, then
Section 3.3 shall be applicable.
3.6. Powers and Duties of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents.
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents shall have such powers and
perform such duties as the Board, the Chairman, or the Chief Executive may from time to time
prescribe or as may be prescribed in these By-laws.
3.7. Powers and Duties of the Chief Financial Officer. The Chief Financial Officer shall have such
powers and perform such duties as the Board, the Chairman, Chief Executive, or any Vice Chairman
may from time to time prescribe or as may be prescribed in these By-laws. The Chief Financial
Officer shall cause to be prepared and maintained (i) a stock ledger containing the names and
addresses of all shareholders and the number of shares of each class and series held by each and
(ii) the list of shareholders for each meeting of the shareholders as required by Section 1.11 of
these By-laws. The Chief Financial Officer shall be responsible for the custody of all stock books
and of all unissued stock certificates.
3.8. Powers and Duties of the Chief Accounting Officer, Controller and Assistant Controllers. (a)
The Chief Accounting Officer, Controller or the Vice President, Finance, as determined by the Chief
Financial Officer, shall be responsible for the maintenance of adequate accounting records of all
assets, liabilities, capital and transactions of the Corporation. The Chief Accounting Officer,
Controller, or the Vice President, Finance as determined by the Chief Financial Officer, shall
prepare and render such balance sheets, income statements, budgets and other financial statements
and reports as the Board or the Chairman or the Chief Executive may require, and shall perform such
other duties as may be prescribed or assigned pursuant to these By-laws and all other acts incident
to the position of the Chief Accounting Officer, Controller, or the Vice President, Finance.
(b) Each Assistant Controller shall perform such duties as from time to time may be assigned
by the Controller or by the Board. In the event of the absence, incapacity or inability to act of
the Controller, then any Assistant Controller may perform any of the duties and may exercise any of
the powers of the Controller.
3.9. Powers and Duties of the Treasurer and Assistant Treasurers. (a) The Treasurer shall have
the care and custody of all the funds and securities of the Corporation except as may be otherwise
ordered by the Board, and shall cause such funds (i) to be invested or reinvested from time to time
for the benefit of the Corporation as may be designated by the Board, the Chairman, any Vice
Chairman, the President, the Chief Financial Officer or the Treasurer or (ii) to be deposited to
the credit of the Corporation in such banks or depositories as may be designated by the Board, the
Chairman, any Vice Chairman, the President, the Chief Financial Officer or the Treasurer, and shall
cause such securities to be placed in safekeeping in such manner as may be designated by the Board,
the Chairman, any Vice Chairman, the President, the Chief Financial Officer or the Treasurer.
(b) The Treasurer, any Assistant Treasurer or such other person or persons as may be
designated for such purpose by the Board, the Chairman, any Vice Chairman, the President, the Chief
Financial Officer or the Treasurer may endorse in the name and on behalf of the Corporation all
instruments for the payment of money, bills of lading, warehouse receipts, insurance policies and
other commercial documents requiring such endorsement.
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(c) The Treasurer, any Assistant Treasurer or such other person or persons as may be
designated for such purpose by the Board, the Chairman, any Vice Chairman, the President, the Chief
Financial Officer or the Treasurer (i) may sign all receipts and vouchers for payments made to the
Corporation, (ii) shall render a statement of the cash account of the Corporation to the Board as
often as it shall require the same; and (iii) shall enter regularly in books to be kept for that
purpose full and accurate account of all moneys received and paid on account of the Corporation and
of all securities received and delivered by the Corporation.
(d) The Treasurer shall perform such other duties as may be prescribed or assigned pursuant to
these By-laws and all other acts incident to the position of Treasurer. Each Assistant Treasurer
shall perform such duties as may from time to time be assigned by the Treasurer or by the Board. In
the event of the absence, incapacity or inability to act of the Treasurer, then any Assistant
Treasurer may perform any of the duties and may exercise any of the powers of the Treasurer.
3.10. Powers and Duties of the Secretary and Assistant Secretaries. (a) The Secretary shall keep
the minutes of all proceedings of the shareholders, the Board and the Committees of the Board. The
Secretary shall attend to the giving and serving of all notices of the Corporation, in accordance
with the provisions of these By-laws and as required by applicable law. The Secretary shall be the
custodian of the seal of the Corporation. The Secretary shall affix or cause to be affixed the seal
of the Corporation to such contracts, instruments and other documents requiring the seal of the
Corporation, and when so affixed may attest the same and shall perform such other duties as may be
prescribed or assigned pursuant to these By-laws and all other acts incident to the position of
Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time to time be assigned by
the Secretary or by the Board. In the event of the absence, incapacity or inability to act of the
Secretary, then any Assistant Secretary may perform any of the duties and may exercise any of the
powers of the Secretary.
3.11. Applicable Definition. As used in these By-laws, the term Chief Executive shall refer to
the Chairman unless the President is elected to be the Chief Executive, pursuant to Section 3.3, in
which case the term Chief Executive shall refer to the President.
4. INDEMNIFICATION.
4.1.(a) Right to Indemnification. The Corporation, to the fullest extent permitted by
applicable law as then in effect, shall indemnify any person who is or was a Director or officer of
the Corporation and who is or was involved in any manner (including, without limitation, as a party
or a witness) or is threatened to be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or proceeding by or in the right of
the Corporation to procure a judgment in its favor) (a Proceeding) by reason of the fact that
such person is or was a Director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise (including, without
limitation, any employee benefit plan) (a Covered Entity), against all expenses (including
attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such Proceeding; provided, however, that the foregoing shall not
apply to a Director or officer of the Corporation with respect to a Proceeding that was commenced
by such Director or officer prior to a Change in Control (as defined in Section 4.4(e)(i) of this
Article 4). Any Director or officer of the Corporation entitled to indemnification as provided in
this Section 4.1(a) is hereinafter called an Indemnitee. Any right of an Indemnitee to
indemnification shall be a contract right and shall include the right to receive, prior to the
conclusion of any Proceeding, payment of any expenses incurred by the Indemnitee in connection with
such Proceeding, consistent with the provisions of applicable law as then in effect and the other
provisions of this Article 4.
(b) Effect of Amendments. Neither the amendment or repeal of, nor the adoption of a provision
inconsistent with, any provision of this Article 4 (including, without limitation, this Section
4.1(b)) shall adversely affect the rights of any Director or officer under this Article 4 (i) with
respect to any Proceeding commenced or threatened prior to such amendment, repeal or adoption of an
inconsistent provision or (ii) after the occurrence of a Change in Control, with respect to any
Proceeding arising out of any action or omission occurring prior to such
10
amendment, repeal or adoption of an inconsistent provision, in either case without the written
consent of such Director or officer.
4.2. Insurance, Contracts and Funding. The Corporation may purchase and maintain insurance to
protect itself and any indemnified person against any expenses, judgments, fines and amounts paid
in settlement as specified in Section 4.1(a) or Section 4.5 of this Article 4 or incurred by any
indemnified person in connection with any Proceeding referred to in such Sections, to the fullest
extent permitted by applicable law as then in effect. The Corporation may enter into contracts with
any Director, officer, employee or agent of the Corporation or any director, officer, employee,
fiduciary or agent of any Covered Entity in furtherance of the provisions of this Article 4 and may
create a trust fund or use other means (including, without limitation, a letter of credit) to
ensure the payment of such amounts as may be necessary to effect indemnification as provided in
this Article 4.
4.3. Indemnification; Not Exclusive Right. The right of indemnification provided in this Article 4
shall not be exclusive of any other rights to which any indemnified person may otherwise be
entitled, and the provisions of this Article 4 shall inure to the benefit of the heirs and legal
representatives of any indemnified person under this Article 4 and shall be applicable to
Proceedings commenced or continuing after the adoption of this Article 4, whether arising from acts
or omissions occurring before or after such adoption.
4.4. Advancement of Expenses; Procedures; Presumptions and Effect of Certain Proceedings; Remedies.
In furtherance, but not in limitation, of the foregoing provisions, the following procedures,
presumptions and remedies shall apply with respect to the advancement of expenses and the right to
indemnification under this Article 4:
(a) Advancement of Expenses. All reasonable expenses incurred by or on behalf of the
Indemnitee in connection with any Proceeding shall be advanced to the Indemnitee by the Corporation
within 20 days after the receipt by the Corporation of a statement or statements from the
Indemnitee requesting such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Any such statement or statements shall reasonably evidence the
expenses incurred by the Indemnitee and shall include any written affirmation or undertaking
required by applicable law in effect at the time of such advance.
(b) Procedures for Determination of Entitlement to Indemnification. (i) To obtain
indemnification under this Article 4, an Indemnitee shall submit to the Secretary of the
Corporation a written request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine whether and to what extent the
Indemnitee is entitled to indemnification (the Supporting Documentation). The determination of
the Indemnitees entitlement to indemnification shall be made not later than 60 days after receipt
by the Corporation of the written request for indemnification together with the Supporting
Documentation. The Secretary of the Corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that the Indemnitee has requested indemnification.
(ii) The Indemnitees entitlement to indemnification under this Article 4 shall be
determined in one of the following ways: (A) by a majority vote of the Disinterested
Directors (as hereinafter defined), if they constitute a quorum of the Board; (B) by a
written opinion of Independent Counsel (as hereinafter defined) if (x) a Change in Control
(as hereinafter defined) shall have occurred and the Indemnitee so requests or (y) a quorum
of the Board consisting of Disinterested Directors is not obtainable or, even if obtainable,
a majority of such Disinterested Directors so directs; (C) by the shareholders of the
Corporation (but only if a majority of the Disinterested Directors, if they constitute a
quorum of the Board, presents the issue of entitlement to indemnification to the
shareholders for their determination); or (D) as provided in Section 4.4(c) of this Article
4.
(iii) In the event the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 4.4(b)(ii), a majority of the Disinterested
Directors shall select the Independent Counsel, but only an Independent Counsel to which the
Indemnitee does not reasonably object; provided, however, that if a Change in Control shall
have occurred, the Indemnitee shall select such Independent Counsel, but only an Independent
Counsel to which a majority of the Disinterested Directors does not reasonably object.
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(c) Presumptions and Effect of Certain Proceedings. Except as otherwise expressly provided in
this Article 4, if a Change in Control shall have occurred, the Indemnitee shall be presumed to be
entitled to indemnification under this Article 4 (with respect to actions or failures to act
occurring prior to such Change in Control) upon submission of a request for indemnification
together with the Supporting Documentation in accordance with Section 4.4(b) of this Article 4, and
thereafter the Corporation shall have the burden of proof to overcome that presumption in reaching
a contrary determination. In any event, if the person or persons empowered under Section 4.4(b) of
this Article 4 to determine entitlement to indemnification shall not have been appointed or shall
not have made a determination within 60 days after receipt by the Corporation of the request
therefor together with the Supporting Documentation, the Indemnitee shall be deemed to be, and
shall be, entitled to indemnification unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. The termination of any Proceeding
described in Section 4.1 of this Article 4, or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, adversely affect the right of the Indemnitee to indemnification or create a presumption
that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe that his or her conduct
was unlawful.
(d) Remedies of Indemnitee. (i) In the event that a determination is made pursuant to
Section 4.4(b) of this Article 4 that the Indemnitee is not entitled to indemnification under this
Article 4, (A) the Indemnitee shall be entitled to seek an adjudication of his or her entitlement
to such indemnification either, at the Indemnitees sole option, in (x) an appropriate court of the
state of Indiana or any other court of competent jurisdiction or (y) an arbitration to be conducted
by a single arbitrator pursuant to the rules of the American Arbitration Association; (B) any such
judicial proceeding or arbitration shall be de novo and the Indemnitee shall not be prejudiced by
reason of such adverse determination; and (C) if a Change in Control shall have occurred, in any
such judicial proceeding or arbitration the Corporation shall have the burden of proving that the
Indemnitee is not entitled to indemnification under this Article 4 (with respect to actions or
failures to act occurring prior to such Change in Control).
(ii) If a determination shall have been made or deemed to have been made, pursuant to
Section 4.4(b) or (c) of this Article 4, that the Indemnitee is entitled to indemnification,
the Corporation shall be obligated to pay the amounts constituting such indemnification
within five days after such determination has been made or deemed to have been made and
shall be conclusively bound by such determination unless (A) the Indemnitee misrepresented
or failed to disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by law. In the event that
(x) advancement of expenses is not timely made pursuant to Section 4.4(a) of this Article 4
or (y) payment of indemnification is not made within five days after a determination of
entitlement to indemnification has been made or deemed to have been made pursuant to Section
4.4(b) or (c) of this Article 4, the Indemnitee shall be entitled to seek judicial
enforcement of the Corporations obligation to pay to the Indemnitee such advancement of
expenses or indemnification. Notwithstanding the foregoing, the Corporation may bring an
action, in an appropriate court in the state of Indiana or any other court of competent
jurisdiction, contesting the right of the Indemnitee to receive indemnification hereunder
due to the occurrence of an event described in Subclause (A) or (B) of this Clause (ii) (a
Disqualifying Event); provided, however, that in any such action the Corporation shall
have the burden of proving the occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any judicial proceeding or
arbitration commenced pursuant to this Section 4.4(d) that the procedures and presumptions
of this Article 4 are not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Corporation is bound by all the provisions of
this Article 4.
(iv) In the event that the Indemnitee, pursuant to this Section 4.4(d), seeks a
judicial adjudication of or an award in arbitration to enforce his or her rights under, or
to recover damages for breach of, this Article 4, the Indemnitee shall be entitled to
recover from the Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by the Indemnitee if the Indemnitee prevails in
such judicial adjudication or arbitration. If it shall be determined in such judicial
adjudication or arbitration that the Indemnitee is entitled to receive part but not all of
the indemnification or
12
advancement of expenses sought, the expenses incurred by the Indemnitee in connection
with such judicial adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Article 4:
(i) Change in Control means a change in control of the Corporation of a nature that
would be required to be reported in response to Item 6(e) (or any successor provision) of
Schedule 14A of Regulation 14A (or any amendment or successor provision thereto) promulgated
under the Securities Exchange Act of 1934 (the Act), whether or not the Corporation is
then subject to such reporting requirement; provided that, without limitation, such a change
in control shall be deemed to have occurred if (A) any person (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the voting power of all outstanding shares of stock of the
Corporation entitled to vote generally in an election of Directors without the prior
approval of at least two-thirds of the members of the Board in office immediately prior to
such acquisition; (B) the Corporation is a party to any merger or consolidation in which the
Corporation is not the continuing or surviving corporation or pursuant to which shares of
the Corporations common stock would be converted into cash, securities or other property,
other than a merger of the Corporation in which the holders of the Corporations common
stock immediately prior to the merger have the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, (C) there is a sale, lease,
exchange or other transfer (in one transaction or a series of related transactions) of all,
or substantially all, the assets of the Corporation, or liquidation or dissolution of the
Corporation; (D) the Corporation is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members of the Board in
office immediately prior to such transaction or event constitute less than a majority of the
Board thereafter; or (E) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this purpose any new Director
whose election or nomination for election by the shareholders was approved by a vote of at
least two-thirds of the Directors then still in office who were Directors at the beginning
of such period) cease for any reason to constitute at least a majority of the Board.
(ii) Disinterested Director means a Director who is not or was not a party to the
proceeding in respect of which indemnification is sought by the Indemnitee.
(iii) Independent Counsel means a law firm or a member of a law firm that neither
presently is, nor in the past five years has been, retained to represent: (a) the
Corporation or the Indemnitee in any matter material to either such party or (b) any other
party to the Proceeding giving rise to a claim for indemnification under this Article 4.
Notwithstanding the foregoing, the term Independent Counsel shall not include any person
who, under applicable standards of professional conduct, would have a conflict of interest
in representing either the Corporation or the Indemnitee in an action to determine the
Indemnitees rights under this Article 4.
4.5. Indemnification of Employees and Agents. Notwithstanding any other provision of this Article
4, the Corporation, to the fullest extent permitted by applicable law as then in effect, may
indemnify any person other than a Director or officer of the Corporation who is or was an employee
or agent of the Corporation and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved in any threatened,
pending or completed Proceeding by reasons of the fact that such person is or was an employee or
agent of the Corporation or, at the request of the Corporation, a director, officer, employee,
fiduciary or agent of a Covered Entity against all expenses (including attorneys fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such person in connection
with such Proceeding. The Corporation may also advance expenses incurred by such employee,
fiduciary or agent in connection with any such Proceeding, consistent with the provisions of
applicable law as then in effect.
4.6. Severability. If any of this Article 4 shall be held to be invalid, illegal or unenforceable
for any reason whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Article 4 (including, without limitation, all portions of any Section of this
Article 4 containing any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby;
and (ii) to the fullest extent possible, the provisions of this Article 4 (including,
13
without limitation, all portions of any Section of this Article 4 containing any such
provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
5. CAPITAL STOCK.
5.1. Stock Certificates. (a) Shares of stock of each class of the Corporation may be issued in
book-entry form or evidenced by certificates. Every certificate shall state on its face (or in the
case of book-entry shares, the statement evidencing ownership of such shares shall state) the name
of the Corporation and that it is organized under the laws of the State of Indiana, the name of the
person to whom the certificate (or bookentry statement) was issued, and the number and class of
shares and the designation of the series, if any, the certificate (or book-entry statement)
represents, and shall state conspicuously on its front or back that the Corporation will furnish
the shareholder, upon his written request and without charge, a summary of the designations,
relative rights, preferences, and limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series (and the authority of the Board of
Directors to determine variations for future series), which certificate, if any, shall otherwise be
in such form as the Board shall prescribe and as provided in Section 5.1(d).
(b) If a certificate is countersigned by a transfer agent other than the Corporation or its
employee, or by a registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles, and, if permitted by applicable law, any other
signature on the certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if such person were such officer at the date of
issue.
(d) Any certificates of stock shall be issued in such form not inconsistent with the Articles
of Incorporation. They shall be numbered and registered in the order in which they are issued. No
certificate shall be issued until fully paid.
(e) All certificates surrendered to the Corporation shall be cancelled (other than treasury
shares) with the date of cancellation and shall be retained by or under the control of the Chief
Financial Officer, together with the powers of attorney to transfer and the assignments of the
shares represented by such certificates, for such period of time as such officer shall designate.
5.2. Record Ownership. A record of the name of the person, firm or corporation and address of each
holder of stock, the number of shares of each class and series represented thereby and the date of
issue thereof shall be made on the Corporations books. The Corporation shall be entitled to treat
the holder of record of any share of stock as the holder in fact thereof, and accordingly shall not
be bound to recognize any equitable or other claim to or interest in any share on the part of any
person, whether or not it shall have express or other notice thereof, except as required by
applicable law.
5.3. Transfer of Record Ownership. Transfers of stock shall be made on the books of the
Corporation only by direction of the person named in the certificate (or book-entry statement) or
such persons attorney, lawfully constituted in writing, and only upon the surrender of the
certificate, if any, therefor and a written assignment of the shares evidenced thereby. Whenever
any transfer of stock shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer if, when the certificates, if any, are presented to the
Corporation for transfer, both the transferor and transferee request the Corporation to do so.
5.4. Lost, Stolen or Destroyed Certificates. New certificates or uncertificated shares
representing shares of the stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed in such manner and on such terms and conditions as
the Board from time to time may authorize in accordance with applicable law.
14
5.5. Transfer Agent; Registrar; Rules Respecting Certificates. The Corporation shall maintain one
or more transfer offices or agencies where stock of the Corporation shall be transferable. The
Corporation shall also maintain one or more registry offices where such stock shall be registered.
The Board may make such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of stock certificates (or book-entry statements) in accordance with
applicable law.
5.6. Fixing Record Date for Determination of Shareholders of Record. (a) The Board may fix, in
advance, a date as the record date for the purpose of determining the shareholders entitled to
notice of, or to vote at, any meeting of the shareholders or any adjournment thereof, which record
date shall not precede the date upon which the resolution fixing the record date is adopted by the
Board, and which record date shall not be more than sixty days nor less than ten days before the
date of a meeting of the shareholders. If no record date is fixed by the Board, the record date for
determining the shareholders entitled to notice of or to vote at a shareholders meeting shall be
at the close of business on the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day on which the meeting is held.
A determination of shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting and shall fix a new record date if such adjourned
meeting is more than 120 days after the date of the original meeting. (b) The Board may fix, in
advance, a date as the record date for the purpose of determining the shareholders entitled to
receive payment of any dividend or other distribution or the allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of stock, or in order to
make a determination of the shareholders for the purpose of any other lawful action, which record
date shall not precede the date upon which the resolution fixing the record date is adopted by the
Board, and which record date shall not be more than sixty days prior to such action. If no record
date is fixed by the Board, the record date for determining the shareholders for any such purpose
shall be at the close of business on the day on which the Board adopts the resolution relating
thereto.
6. SECURITIES HELD BY THE CORPORATION.
6.1. Voting. Unless the Board shall otherwise order, the Chairman, any Vice Chairman, the
President, any Executive Vice President, any Senior Vice President, any Vice President, the Chief
Financial Officer, the Chief Accounting Officer, the Controller, the Treasurer or the Secretary
shall have full power and authority, on behalf of the Corporation, (i) to attend, act and vote at
any meeting of the shareholders of any corporation in which the Corporation may hold stock and at
such meeting to exercise any or all rights and powers incident to the ownership of such stock, and
to execute on behalf of the Corporation a proxy or proxies empowering another or others to act as
aforesaid, and (ii) to delegate to any employee or agent such power and authority.
6.2. General Authorization to Transfer Securities Held by the Corporation. (a) Any of the
following officers, to wit: the Chairman, any Vice Chairman, the President, any Executive Vice
President, any Senior Vice President, any Vice President, the Chief Financial Officer, the Chief
Accounting Officer, the Controller, the Treasurer, any Assistant Controller, any Assistant
Treasurer, and each of them, hereby is authorized and empowered (i) to transfer, convert, endorse,
sell, assign, set over and deliver any and all shares of stock, bonds, debentures, notes,
subscription warrants, stock purchase warrants, evidences of indebtedness, or other securities now
or hereafter standing in the name of or owned by the Corporation and to make, execute and deliver
any and all written instruments of assignment and transfer necessary or proper to effectuate the
authority hereby conferred, and (ii) to delegate to any employee or agent such power and authority.
(b) Whenever there shall be annexed to any instrument of assignment and transfer executed
pursuant to and in accordance with the foregoing Section 6.2(a), a certificate of the Secretary or
any Assistant Secretary in office at the date of such certificate setting forth the provisions
hereof, stating that they are in full force and effect, setting forth the names of persons who are
then officers of the corporation, and certifying as to the employees or agents, if any, to whom any
such power and authority have been delegated, all persons to whom such instrument and annexed
certificate shall thereafter come shall be entitled, without further inquiry or investigation and
regardless of the date of such certificate, to assume and to act in reliance upon the assumption
that (i) the shares of stock or other securities named in such instrument were theretofore duly and
properly transferred, endorsed, sold, assigned, set over and delivered by the Corporation, and (ii)
with respect to such securities, the authority of these provisions of these Bylaws and of such
officers, employees and agents is still in full force and effect.
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7. DEPOSITARIES AND SIGNATORIES.
7.1. Depositaries. The Chairman, any Vice Chairman, the President, the Chief Financial Officer,
and the Treasurer are each authorized to designate depositaries for the funds of the Corporation
deposited in its name or that of a Division of the Corporation, or both, and the signatories with
respect thereto in each case, and from time to time, to change such depositaries and signatories,
with the same force and effect as if each such depositary and the signatories with respect thereto
and changes therein had been specifically designated or authorized by the Board; and each
depositary designated by the Board or by the Chairman, any Vice Chairman, the President, the Chief
Financial Officer, or the Treasurer shall be entitled to rely upon the certificate of the Secretary
or any Assistant Secretary of the Corporation or of a Division of the Corporation setting forth the
fact of such designation and of the appointment of the officers of the Corporation or of the
Division or of both or of other persons who are to be signatories with respect to the withdrawal of
funds deposited with such depositary, or from time to time the fact of any change in any depositary
or in the signatories with respect thereto.
7.2. Signatories. Unless otherwise designated by the Board or by the Chairman, any Vice Chairman,
the President, the Chief Financial Officer or the Treasurer, each of whom is authorized to execute
any of such items individually, all notes, drafts, checks, acceptances, orders for the payment of
money and all other negotiable instruments obligating the Corporation for the payment of money,
including any form of guaranty by the Corporation with respect to any such item entered into by any
direct or indirect subsidiary of the Corporation, shall be (a) signed by any Assistant Treasurer
and (b) countersigned by the Chief Accounting Officer, Controller or any Assistant Controller, or
(c) either signed or countersigned by any Executive Vice President, any Senior Vice President or
any Vice President in lieu of either the officers designated in Clause (a) or the officers
designated in Clause (b) of this Section 7.2.
8. SEAL.
The seal of the Corporation shall be in such form and shall have such content as the Board
shall from time to time determine.
9. FISCAL YEAR.
The fiscal year of the Corporation shall end on December 31 in each year, or on such other
date as the Board shall determine.
10. WAIVER OF OR DISPENSING WITH NOTICE.
(a) Whenever any notice of the time, place or purpose of any meeting of the shareholders is
required to be given by applicable law, the Articles of Incorporation or these By-laws, a written
waiver of notice, signed by a shareholder entitled to notice of a shareholders meeting, whether by
pdf, facsimile, telegraph, cable or other form of recorded communication, whether signed before or
after the time set for a given meeting, shall be deemed equivalent to notice of such meeting. The
waiver must be included in the minutes or filed with the corporate records. Attendance of a
shareholder in person or by proxy at a shareholders meeting shall constitute a waiver of notice to
such shareholder of such meeting, except when (i) the shareholder attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction of any business
because the meeting was not lawfully called or convened, or (ii) the shareholder objects to
consideration of a particular matter at the meeting at the time such matter is presented because it
is not within the purpose or purposes described in the meeting notice.
(b) Whenever any notice of the time or place of any meeting of the Board or Committee of the
Board is required to be given by applicable law, the Articles of Incorporation or these By-laws, a
written waiver of notice signed by a Director, whether by pdf, facsimile, telegraph, cable or other
form of recorded communication, whether signed before or after the time set for a given meeting,
shall be deemed equivalent to notice of such meeting. Unless the Director is deemed to have waived
notice by attending the meeting, the waiver must be in writing, signed by the Director entitled to
the notice and filed with the minutes or corporate records. Attendance of a Director at a meeting
shall constitute a waiver of notice to such Director of such meeting, unless the Director at the
beginning of the
16
meeting (or promptly upon the Directors arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent to action taken at
the meeting.
(c) No notice need be given to any person with whom communication is made unlawful by any law
of the United States or any rule, regulation, proclamation or executive order issued under any such
law.
11. POLITICAL NONPARTISANSHIP OF THE CORPORATION.
The Corporation shall not make, directly or indirectly, any contributions or expenditures in
connection with the election of any candidate for federal, state or local political office, or any
committee campaigning for such a candidate, except to the extent necessary to permit in the United
States the expenditure of corporate assets for the payment of expenses for establishing,
registering and administering any political action committee and of soliciting contributions
thereto, all as may be authorized by federal or state laws.
12. AMENDMENT OF BY-LAWS.
These By-laws, or any of them, may from time to time be supplemented, amended or repealed, or
new By-laws may be adopted, by the Board at any regular or special meeting of the Board, if such
supplement, amendment, repeal or adoption is approved by a majority of the entire Board.
13. OFFICES AND AGENT.
(a) Registered Office and Agent. The registered office of the Corporation in the State of
Indiana shall be 251 East Ohio Street, Suite 1100, Indianapolis, Indiana 46204. The name of the
registered agent is The Corporation Trust Company.
(b) Other Offices. The Corporation may also have offices at other places, either within or
outside the State of Indiana, as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
17
exv99w1
Exhibit 99.1
Investor & Analyst Day
October 13, 2011
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Agenda
Welcome Phil De Sousa, IRO 1:30 pm
Introduction to Xylem Gretchen McClain, CEO & President 1:45 pm
Financial Review Michael Speetzen, CFO 2:30 pm
Break Product Displays 3:00 pm
Application Leadership Gretchen McClain 3:15 pm
Transport & Treatment Michael Kuchenbrod, President Water Solutions
Test Chris McIntire, President Analytics
Building Services Ken Napolitano, President Residential & Commercial Water
Industrial Water & Irrigation Bob Wolpert, President Flow Control
Closing Remarks / Q&A Gretchen McClain / All 4:30 pm
Meeting End 5:00 pm
2
|
Forward Looking Statements
3
The Company undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise.
Economic, political and social conditions in the countries in which we conduct our businesses;
Changes in U.S. or International government budgets;
Decline in consumer spending;
Sales and revenues mix and pricing levels;
Availability of adequate labor, commodities, supplies and raw materials;
Interest and foreign currency exchange rate fluctuations and changes in local government regulations;
Competition, industry capacity & production rates;
Ability of third parties, including our commercial partners, counterparties, financial institutions and insurers, to comply with their commitments to us;
Our ability to borrow or to refinance our existing indebtedness and availability of liquidity sufficient to meet our needs;
Changes in the value of goodwill or intangible assets;
Our ability to achieve stated synergies or cost savings from acquisitions or divestitures;
The number of personal injury claims filed against the Company or the degree of liability;
Our ability to effect restructuring and cost reduction programs and realize savings from such actions; Government regulations and compliance therewith, including Dodd-Frank legislation;
Changes in technology;
Intellectual property matters;
Governmental investigations;
Potential future employee benefit plan contributions and other employment and pension matters;
Contingencies related to actual or alleged environmental contamination, claims and concerns;
Changes in generally accepted accounting principles; and
Other factors set forth in our Registration Statement on Form 10 and our other filings with the Securities and Exchange Commission.
In addition, there are risks and uncertainties relating to the separation, including whether those transactions will result in any tax liability, the operational and financial profile of the Company or any of its businesses after giving effect to the separation, and the ability of the Company to operate as an independent entity.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the "Act"): Certain material presented herein includes forward-
looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, statements about the separation of Xylem Inc. (the "Company") from ITT Corporation, the
terms and the effect of the separation, the nature and impact of such a separation, capitalization of the Company, future strategic plans and other
statements that describe the Company's business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or
financial performance. Whenever used, words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target" and other terms
of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent
unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially
from those expressed or implied in, or reasonably inferred from, such forward-looking statements. Factors that could cause results to differ
materially from those anticipated include, but are not limited to:
|
Introduction to Xylem
Gretchen McClain, CEO & President
|
Overview
5
~$3.8B Company Uniquely Positioned... in the attractive water industry
Leading Brands and Technologies... in a water-focused portfolio
Diverse Customer Base... across industries and geographies
World-Class Distribution Channels... reaching 150+ countries
Large Installed Base... driving recurring aftermarket revenues
Operational and Commercial Excellence... performance track record
Strong Growth Opportunities... organic and external growth expertise
Ability to Deliver Strong & Consistent Financial Performance
|
Global Water Industry: $500B
6
Building
Services
10% of Use
Industrial
Water
20% of Use
Irrigation
70% of Use
Applied Water
Water Treatment
Water
Transport
Water Sources
Wastewater Treatment
Wastewater
Transport
Water Infrastructure
Test
Test
Depleting Water Supply
Tightening Regulation
Aging Infrastructure
Population
Growth
Urbanization
Sustainability
Energy
Efficiency
Drivers
Drivers
Water
Transport
Water
Transport
A Fundamental Need...Favorable Conditions for XYL
|
$500B Global Water Industry: Value Chain View
7
Public
Utility
~250,000
Utilities
Globally
Water Infrastructure
~5%-10%
EBIT
Margin
Design
& Build
~8,000 EPC
Firms Globally
~2%-5%
EBIT
Margin
Equipment
& Services
~20,000
Companies
Globally
Fragmented industry
Installed base important
Customers rely on expertise
~5%-20+%
EBIT Margin
$280B
XYL Focused on Sweet Spots in Equipment & Services
End Use
Applications
Farms, Power
Plants, Homes
Applied Water
$220B
Source: GWI, Company Estimates
|
Equipment & Services: $280B...Growing 3-5%
8
Xylem
Focus
Predominately Commodity-like
Equipment & Service
Pipes, valves, fittings and low
value pumps
Low-value services
Low or no differentiation
Generally either capital or
labor intensive
Generally single-digit margins...
some pockets of higher profitability
Technology Intensive
Higher value equipment
Energy efficiency, perform
in harsh conditions, high reliability
Knowledge-based services
Analytics, energy audits
Differentiated solutions
~10-20%+ margins
$250B
$30B
XYL has Strong Positions in Most Attractive Segments
|
Xylem Serves Diverse Growing Markets
9
? Europe 39%
? US 35%
? Asia Pac 11%
? Other 15%
End Market Mix*
Geographical Mix*
Mkt Growth Rates '10 -'15
Developed 1 - 3%
Emerging 8 - 10+%
Global 3 - 5%
? Public Utility 40%
? Industrial 35%
? Commercial 13%
? Residential 9%
? Agricultural 3%
Global Markets... Attractive Growth Rates
Xylem Emerging
Market Revenue
= 18% in 2010
*2010 Revenues
|
Balanced End Markets ...
10
.... With Strong Fundamentals
End Market % of Xylem Revenues* Cycle Fundamentals
Public
Utility 40% Non-Cyclical Tariffs protected & growing
~70% for maintenance capital
Strong aftermarket & replacement
Industrial 35% Less Cyclical/
Late Cycle Products critical to operations
Strong aftermarket & replacement
Commercial 13% Late Cycle Strong replacement
Green regulation
Residential 9% Early Cycle Strong replacement
Energy efficiency
Agriculture 3% Mid Cycle Growing demand
*2010 Revenues
|
A Global Leader...
11
.... With All the Tools Necessary to Continue Robust Growth
|
Industry Leading Positions
12
Transport & Treatment Applications
Test Applications
Building Services Applications
Industrial Applications
Irrigation Applications
#1
#2
#2
#2
#3
Revenue by Application*
? Transport 44%
? Building Services 22%
? Industrial Water 15%
? Treatment 12%
? Test 4%
? Irrigation 3%
Strong Presence Across the Board
*2010 Revenues
|
How Does Xylem Create Value?
13
Unique
Global
Assets
High
Performing
Culture
+
In-Depth
Customer
Knowledge
+
Premium application solutions company solving
our customers' most challenging water problems
|
Unique Global Assets...
14
Leading Brands
Diverse Product Portfolio
World-Class Distribution Channels
Diverse Customer Base
Robust Aftermarket Opportunities
Key Partnerships
.... Provide Unrivaled Advantage
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
|
Technology Partnerships
Industry Relationships
Key Partnerships...
15
.... Improve Capital Efficiency and Extend Our Reach
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Reduces capital required
Expands product offerings
Extends distribution
Influences regulators
Creates demand
|
Applications Expertise...
16
Water Infrastructure Water Infrastructure Water Infrastructure Applied Water Applied Water Applied Water
Water as %
of Total Revs Transport Treatment Test Res/Comm'l Industrial Irrigation
Xylem >90%
Danaher ~15%
Franklin ~85%
Grundfos ~85%
KSB ~25%
Pentair ~50%
Siemens ~5%
Sulzer (ABS) ~50%
Thermo ~5%
Wilo ~30%
A Genuine Water Company... With the Broadest Portfolio
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Source: Citi Investment Research and Xylem Company Estimates
|
A High Performing Culture...
17
Strong Leadership Team
& Management System
Accountability & Execution Excellence
Experience... Knowledge... Relentless Drive to Improve
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Innovative & Adaptive People
|
Xylem Management Team
18
Gretchen
McClain
CEO
& President
Operational Leaders
Mike
Kuchenbrod
President
Water
Solutions
Chris
McIntire
President
Analytics
Ken
Napolitano
President
Residential &
Commercial
Water
Bob
Wolpert
President
Flow
Control
Functional Leaders
Angela
Buonocore
Chief
Communications
Officer
Robyn
Mingle
Chief
Human
Resources
Officer
Board of Directors
Steven Loranger,
Chairman Emeritus
Curtis J. Crawford, Ph.D.
Victoria Harker
John Hamre, Ph.D.
Sten Jakobsson
Ed Ludwig
Surya N. Mohapatra, Ph.D.
Markos Tambakeras,
Chairman
Gretchen McClain
Colin
Sabol
Chief
Strategy
& Growth
Officer
Frank
Jimenez
General
Counsel &
Corporate
Secretary
Mike
Speetzen
Chief
Financial
Officer
Powerful Combination of Industry Experience & Innovation
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
|
Management System
Leadership Development
A Proven Management System
19
Monthly
Performance
Reviews
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Identify, recruit and retain top-tier talent
Current talent pool provides for strong
jump-off point
Focused investment on people
development
Set Ambitious Goals... Provide Talent, Tools and Processes to Achieve
|
People
Process
Initiatives
Commercial Excellence
20
Program Established... Significant Opportunities
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Competencies
& capabilities
Right people in
right jobs
Best practice sharing
Built playbook to
drive growth
Repeatable
commercial process
Growth
Price
Value proposition
Strategic accounts
|
Price Example
21
How We Drive Price
Sample Analysis
Drive change
Analysis
Leadership
priority
Dedicated
resources
Measure
results
Helping Us Achieve 1-2 Points of Price per Year
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
|
2011 Actions
Initiatives
Results
Operational Excellence
22
Well-Established Programs... Continue to Drive Results
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
On time delivery and
lead time improvement
Simplified / increased
supply chain penetration
Expanded low cost
region sourcing
Emerging market
capability investments
Targeted lean
transformation initiatives
Smart Sourcing
Lean/Six Sigma
productivity & growth
enabling initiatives
Footprint rationalization
320 bps expansion
Better operating
leverage
Improved productivity
and cash generation
|
In Depth Customer Knowledge
23
XYL Can Provide Unique Application Solutions
High
Performing
Culture
Unique
Global
Assets
In-Depth
Customer
Knowledge
Understand Customer's Value Chain
Case Studies We'll Discuss
Top Lift Station
Adaptive N Pump
Flygt Experior
UF Membranes
Advanced Oxidation Process
Energy Efficient Secondary Treatment
Water Sensor Networks
eSV
HVAC High Efficiency Circulators
Diaphragm Pumping Solutions
|
Positioned as the Water Applications Leader
24
Systems
Application
Solutions
Components
Issues Are Complex... Few Companies Can Address All
Water Scarcity
Environmental Protection
Infrastructure Needs
Population Growth
Urbanization
Unique Knowledge - Transport, Treatment, Test
|
Xylem has a Focused Growth Plan
25
Emerging
Markets
Xylem Growth Platforms
Organic Growth
Long-term market growth rate 3-5%
Developed market growth 1-3%
Emerging markets growth 8-10+%
Expand the core
Geographic expansion
Acquisition Strategy
Disciplined bolt-on approach
Build on existing growth platforms
XYL Target Organic Growth ~ 2 ppts Faster Than Markets
Aftermarket
|
Organic Growth Strategy
26
Replicate Leadership Positions Across Global & Local Footprint
Innovative Application Solutions
Leveraging Leading Brands
with Global Water Partners
Over 150 Countries
Over 4,500 Sales Reps
Established Leadership
U.S.
Europe
Focal Areas for Replication
Emerging Markets
Underpenetrated Developed
Markets
#1
Treatment
#2
Test
#1
Transport
Leading Positions in Core Applications
|
Growing Xylem Recurring Revenues
16% of Xylem revenue
Strong global presence
120+ owned service centers
600+ service employees
Extensive channel partner network
Revenue growth 8.5% CAGR '06-'10
despite economic downturn
$370
$382
$396
$433
$512
Approximately 22% of Xylem revenue
Installed base drives replacement sales
Brand loyalty drives like-for-like
replacement
Installed base provides opportunity for
upgrades, next generation and services
Aftermarket Parts & Service Revenues
Parts & Service
Replacement Equipment
27
Aftermarket Growing ... Approaching ~40% of Total Revenue
$M
|
Emerging Market Growth Strategy
28
Market drivers:
$47B Central Gov't investment in next 5 years
Westward & 2nd tier city expansion
Xylem focus:
WW treatment and flood control projects
Localized and decentralized treatment systems
Western Expansion
Market drivers:
India planning to add 30+ power plants by 2017
Large irrigation projects to divert rivers
Xylem focus:
~$70M in backlog
New state-of-the-art test and assembly facility
Opportunities in
China
Opportunities in
India
Growth Formula:
Units enter via new sales co. or distributor
Other business units leverage footprint
Example: Africa
Mining-based economies - large investments
by multinationals ... dewatering focus
....And
Beyond
Balanced & Focused Approach to Emerging Markets
Xylem
Presence in
Emerging
Markets
44 Sales Units
Spread Globally
2 Localized
R&D Centers
14 Production
Facilities
Projected Long-
Term Revenue
Growth 8-10+%
|
Analytics & Dewatering Growth Strategy
29
Strong Existing Business in Flygt
Dewatering pumps
Strategic Focus:
Infrastructure projects
Mining
Emerging markets
Emergency response services
Attractive & growing market
"Smart" technology
Strategic focus
Expand capabilities
Leverage distribution
Analytical Instrumentation
Step 1
~$300M of annual revenue
A leader in water and
wastewater analytics
$500M+ of annual revenue
A leader in dewatering rental
& services
Step 3
Step 2
Dewatering
Building Leadership Positions in Attractive Spaces
|
Xylem's Sustainable Infrastructure Initiatives...
Field surveys ? by over 50%
25% ? in plant opex from
energy savings
Environmental
Water Quality
Networks
Energy
Efficient
Secondary
Treatment
Measurable Sustainable Benefits
Shale Gas
Fracking
Water
Management
Trucking costs ? by 70%
Contaminant regulation
compliance
.... Support Our Ability To Continue To Grow Faster Than the Market
30
|
Xylem Growth Platforms
Xylem Acquisition Strategy
Future Acquisition Focus
Growth Platform Expansion Through Bolt-on Acquisitions
31
Bolt on acquisitions in growth
platforms
Product gap fillers
Channel build-out
Targeted deployment of up
to $300M / year
Strict financial & strategic filters
Focused on businesses with
high gross margin potential
Emerging
Markets
Aftermarket
|
Business Performance: Long-Term Targets
Top Line Growth
Gross margins > 40%
Segment margin expansion of 50 - 75 bps / yr
Organic growth of 4 - 6%
Acquisitions add 1 - 2 points of growth
Emerging market revenue >20% of sales
Free cash flow at ~100% of net income
ROIC in mid to upper teens
Earnings Growth
Return on Capital
Creating Value for Customers, Employees and Shareowners
32
|
Financial Review
Mike Speetzen, CFO
|
Strong Track Record of Financial Performance
34
Solid financial performance, well-positioned for the future
Track record of balancing growth & productivity
Well-capitalized ... Solid financial policies in place
Industry dynamics support stable and consistent growth
Solid pipeline of organic growth opportunities
Acquisitions exceeding expectations
Invested to fuel organic growth while expanding margins 250 bps ('08-'10)
Demonstrated ability to manage through economic downturn and emerge
as a stronger, improved business
Investment grade credit rating achieved
Completed $600M revolving credit facility & $1.2B bond placement at attractive rates
|
Strong Growth and Solid Margin Expansion
35
Revenues ($M)
Operating Income & Margin ($M)
Op Margin expands 250 bps
Operational & Commercial Excellence Initiatives
Price & Productivity more than offset Inflation
Includes restructuring costs $41M, $31M,
and $15M ('08 - '10)
Focused on Profitable Growth
(YOY) 2009 2010
Organic -8.8% 3.4%
Acquisitions 0.2% 9.2%
FX -4.8% -0.2%
Total -13.4% 12.4%
Revenue Growth
EBITDA $384 $356 $489
EBITDA % 11.7% 12.5% 15.3%
|
Demonstrated Consistent Margin Improvement
36
Gross Margin Up 320 bps...Execution Will Drive Further Expansion
Operational &
Commercial Excellence
Gross Margin Performance
Key Focus Areas
Expanded low cost
region manufacturing
& sourcing to ~30%
Leveraged procurement
scale effectively
Simplified supply chain
Implemented Lean at 14
key facilities
Trained 700+
commercial leaders in
price and value
Better operating leverage
Improved productivity
and cash generation
'08 '09 '10 LT Target
0.347 0.364 0.379 0 0.4
Leverage progress made
in operational efficiency
Increased Commercial
Excellence focus
Leverage investment
in high gross margin
platforms
Leverage installed base
and increased aftermarket
mix
|
Operating Margin Walk
37
Operating Margin Expansion of 250 bps...Resilient During Downturn
Organic Revenue up 3.4%
Organic Revenue down 8.8%
Operations:
Price 0.7%
Volume/Mix -3.9%
Cost Improvements
4.1%
2008 - 2009
2009 - 2010
Operations:
Price 0.5%
Volume/Mix 0.5%
Cost Improvements
4.0%
|
Segment Overview:
Water Infrastructure
38
(YOY) 2009 2010
Organic -3.6% 1.5%
Acquisitions -% 14.9%
FX -5.9% 0.5%
Total -9.5% 16.9%
Good Market Fundamentals ... Sustainable Business Performance
Revenues ($M)
Operating Income & Margin ($M)
Op Margin expands 220 bps
Operating productivity funds incremental
strategic investments
Includes restructuring costs $17M, $15M, and
$12M ('08 - '10)
Revenue Growth
Water
Infrastructure
59% *
*2010 Revenues
|
Segment Overview: Applied Water
39
Actions Taken ... Business Better Positioned
(YOY) 2009 2010
Organic -14.9% 5.8%
Acq/Div 0.5% 1.3%
FX -3.5% -1.3%
Total -17.9% 5.8%
Applied Water
41% *
Revenues ($M)
Operating Income & Margin ($M)
Op Margin expands 130 bps
Lower volume and restructuring expense drive
lower margin during downturn
Productivity actions drive higher margin despite
market softness
Includes restructuring costs $18M, $15M, and
$3M ('08 - '10)
Revenue Growth
*2010 Revenues
|
Strong Cash Flow Generation
40
1 Free Cash Flow = Net cash from operating activities - Capital expenditures
Free Cash Flow1 and Conversion ($M)
Operating Working Capital as % of Sales
2008 2009 2010
AR 608 599 690
Inv 342 301 389
AP 298 256 309
Working Capital 652 644 770
W/C as % Sales* 21% 22% 22%
2008 2009 2010
Capex 67 62 94
Depreciation 55 51 63
Reinvestment Ratio 1.2 1.2 1.5
Capex Reinvestment
Targeting 100% Conversion
* (AR+INV-AP) / TTM Sales (adjusted for acquisitions)
|
2011 1st Half Performance
41
Revenues ($M)
Operating Income and Margin ($M)
Jun'11
YTD
Organic 8.7%
Acquisitions 13.3%
FX 5.3%
Total 27.4%
12.7%*
* Ex. $21M of One-Time Separation Costs
Good Performance ... Challenging Environment
Operations:
Price 0.8%
Volume/Mix 1.1%
Cost Improvements 2.3%
Op Margin expands 110 bps*
Revenue Growth
$237*
EBITDA* $211 $310
EBITDA %* 14.4% 16.7%
$216
|
Summary Capital Structure & Liquidity Position
42
Capital Summary ($M)
As of June 30, 2011
Strong Liquidity Position
Targeted cash position of
$200M at 10/31/11
Placed $1.2B debt
5yr $600M at 3.55%
10yr $600M at 4.875%
4 yr $600M revolving credit
facility
Access to commercial paper
market anticipated
Strong cash generation
Healthy Balance Sheet...Strong Cash Flow...Gives Us Flexibility
*Includes assumed debt of $310M incurred in connection with the YSI acquisition
|
Financial Policies
43
Targeted Metrics
Maintain solid investment grade rating
Leverage position consistent with investment grade metrics
Free Cash Flow (Operating Cash Flow less Capex) conversion target of 100%
Dividend Policy
Initial dividend targeted in the peer range; Subject to Board vote
Q4 '11 dividend expected to be approximately $0.10
Foreign Exchange Management
Active netting of exposure
Appropriate use of forwards to manage net exposure
Commodity Price Management
Primary risk mitigation: supplier diversification, fixed price contracts and low-cost region sourcing
Liquidity and Cash Management
Access to revolver and commercial paper for short-term liquidity needs
Targeted working capital improvements
Acquisitions
Bolt on and close to core - targeted range of up to $300M per year
Strategic and financial filters, e.g.
High gross margin; ROI > Risk Adjusted Cost of Capital
Established & Disciplined Policies
|
Capital Deployment
44
2.5% - 3.5% of sales
Dividend in line with peers
Up to $300M / year
Capital Deployment Strategy
Balance of organic & inorganic investment
Return value to shareholders
Maintain solid investment grade metrics
Debt & pension
Organic Growth
World Class Facilities
Cash return to
shareholders
Cash to meet key
obligations
Inorganic investment
to fuel growth
Capital Deployment Evaluation
Fold targeted performance into Operating plans
Quarterly / Annual investment review
Ensure targeted returns achieved
Disciplined Capital Deployment Strategy
|
Update on Separation Costs
45
Actively Managing
Recurring Costs
One-Time
$25-$35M Incremental to 2010
Cost Base
Public Company "stand-up"
IT Infrastructure
Timing of impact:
$5-10M beginning in 2011
Balance expected in 2012
~80 bps impact on operating
margin
Estimated one-time costs:
Professional services
Key employee retention
IT infrastructure
Branding
$21M incurred through June '11
Balance Pre-Spin: TBD
Post Spin costs: $20 - $30M
|
Financial Projections
46
Market growth of 3-5%...4-6% Xylem targeted growth
Acquisition strategy adds 1-2 % points of growth
Xylem is poised to achieve our long-term financial objectives
Revenue Growth Rates
Based on 2011 Range
of $3.7B to $3.8B
Operational & Commercial excellence expand margins 50-75 bps per year
Continued cash management discipline to achieve cash coversion of ~100%
Capital deployment strategy to drive ROIC: to mid-to-upper teens
Long-term effective tax rate 25% to 28%
2010 5 Year Target
Revenues $3.2B $4.5B to $5.0B
Operating Margin 12.1% ~14.5% to ~15.5%
Free Cash Flow Conversion 91.5% 100%
ROIC 13% Mid-to-Upper Teens
|
Water Application Leadership
Gretchen McClain, CEO & President
|
Participating in the Global Water Industry...
48
Applied Water
Water Treatment
Water
Transport
Water Sources
Wastewater Treatment
Wastewater
Transport
Water Infrastructure
Test
Test
Water
Transport
Water
Transport
.... Through Two Industry-Aligned Segments
|
Water Infrastructure Overview
49
Market Size: $16B
2010 Revenues: $1.9B
2010 Op Margin: 14%
Revenue by Application
Applications: Transport, Treatment and Test
Customers: Public Utilities and Industrial Facilities
Distribution: World-Class Global Direct & Indirect
Channels
Strong Aftermarket & Replacement Contributions
Transport 74%
Treatment 20%
Test 6%
Water
Infrastructure
59% *
Revenues ($M) & Operating Margin %
12.1%
13.7%
14.3%
Unique Position -- Only Provider of All Three "T's"
*2010 Revenues
|
The Public Utility Market ...
50
40% of Xylem Revenues related
to Public Utility spending - in 2010:
~$900M for Maintenance Capital
~$400M for New Projects
Public Utility spending grows
long term
U.S.: 6+% CAGR 1965 - 2010
Europe similar to U.S.
Asia Pacific growing faster
Funding of expenditures secure
~80% funded by tariffs
Tariffs growing 8%/yr in U.S.
European Tariffs typically higher
than U.S.
Funds typically can not be used for
other purposes
6+% CAGR 1965 - 2010
Only 2 years ('69, '83)
saw >10% drop
10% drop reduces Total
XYL Revs. by ~(1-2) ppts
U.S. Water and Sewer Construction Spending - $M
Strong Long-term Fundamentals...Xylem Provides Mission Critical Solutions
Source: U.S. Census Bureau
|
Transport
Michael Kuchenbrod
|
Transport Overview
52
Water
Dewatering
Wastewater
Revenue by Application
World's Largest Wastewater Pump Provider ... Large
Installed Base
World's Largest Dewatering Pumps & Services Company
Global Application Specialists
Dedicated Aftermarket & Service support team
Strong global sales organization
Industry Leading Positions in Profitable Pump Applications
Market Size: $11B
Market Growth: ^ Low Single Digits
2010 Xylem Revenues: $1,436M
|
Wastewater
Water
Dewatering
Transport Portfolio
53
35%
8%
57%
Products
Submersible Pumps
Dry Installed Pumps
Prefabricated Pump
Stations
Sludge Pumps
Monitoring & Controls
Customers
EPC's
Private & Public Utilities
Industrial Facilities
Products
Submersible Pumps
Prefabricated Pump
Stations
Monitoring & Controls
Customers
EPC's
Private & Public Utilities
Industrial Facilities
Water Parks
Installing contractors
Products
Dry-Prime Pumps
Submersible Pumps
Slurry Pumps
Pump Rentals
Dewatering Services
Customers
Construction
Mining/Quarry
Oil Refinery/Exploration
Public Utilities
Power
Emergency Flood Response
|
Case Study: N-Pump Evolution
54
Adaptive N-pump
N-pump
Benefits
Self cleaning design minimizes clogging
Reduced maintenance and service calls
Improved energy efficiency
Increased worker safety
Reduced wear and longer pump life
Benefits
Further improved efficiency and
non-clogging characteristics of
small N-pumps
Improved energy efficiency
Lower system maintenance costs
Longer service intervals
1947
1st
Submersible
Pump
1978
1st
Submersible
Propeller
Pump
1996
1st
Prefabricated
Self Cleaning
Pump Station
2009
1st LSPM
Premium
Efficiency Motor
1956
1st Submersible
Pump w/ Auto
Discharge
Connection
1994
World's Largest
Submersible
Sewage Pump
1997
Revolutionary
Flygt N-Pump
Technology
2009
Flygt Launches
Adaptive N-Pump
|
Transport Growth Strategy: Flygt Experior
55
Motors
IE3 compliant
motors
Hydraulics
Adaptive N extension
Controls
SmartRunTM intelligent control
with energy optimization and
cleaning cycles
Pre-programmed product and
application data
Superior reliability and energy efficiency with improved
simplicity in installation and operation by combining:
World class hydraulics with full Adaptive N range
Premium efficiency electrical motors
Intelligent controls with variable speed
Reliability
Energy Efficiency
Simplicity
Flygt Experior to be launched at WEFTEC in October '11
|
Transport Growth Strategy: Dewatering
Strong Existing Business
& Footprint
Proven model
Established customer base
Broad applications ranging
from public utility & industrial
water control to emergency
and flood control
Leverage over 138 depots
worldwide
Focused on core pumping
applications & expanding to
pumping services, system
supply and rental
Geographic Expansion Strategy
Leverage Xylem's Strong Position Globally
56
|
Treatment
Michael Kuchenbrod
|
Treatment Overview
58
Revenue by Application
Filtration
Biological
Disinfection
Strong Positions in Attractive Treatment Segments
Market Size: $3B
Membrane market adds: ~$500M
Market Growth: ^ Low Single Digit
Membrane market growth: high teens
2010 Xylem Revenues: $377M
Broad portfolio & understanding treatment techniques
Deep application & system expertise
Track record of energy efficiency innovation
Strong customer intimacy
Extensive global footprint
|
Treatment Plant Overview
59
PRIMARY
SECONDARY
TERTIARY
BIOSOLIDS MANAGEMENT
|
Treatment Portfolio
60
Biological
Disinfection
Filtration
11%
24%
65%
Products
Aeration Systems
Sequencing Batch
Reactors
Drum Filters
Monitoring & Controls
Mixers & Agitators
Customers
Public Utilities
Industrial Facilities
Products
Ultraviolet Disinfection
Ozone Disinfection
Advanced Oxidation
Customers
Public Utilities
Installing contractors
Power Plants
Pulp & Paper
Food Product
Products
Rapid Gravity Media
Filtration Systems
Clarification Systems
Enhanced nutrient
removal systems
Membrane systems
Customers
Public Utilities
Desalination Plants
|
Treatment Growth Strategy: Technology Expansion GE
Channel Agreement - UF Membranes
Channel Partner for UF Membranes - GE Water
UF Membranes a key offering in water and wastewater treatment
Partnership with GE gives Xylem a strong product offering to serve our customers
wanting membrane technologies
Offers XYL entry into a growing, profitable segment with low entry cost
Global channel partner with GE Water & Power for Zenon UF Membrane products
in key developed and emerging markets
61
Premier UF Membranes with Low Entry Cost
|
Treatment Growth Strategy: Sustainable Infrastructure
Advanced Oxidation Process (AOP) - MiPRO
Description
Drinking Water/ Water Reuse - Oxidation of
Micro pollutants
Integrated system containing the
components ozone, UV and H2O2-dosing.
Ensure removal performance for various
micro pollutants with the highest efficiency
Customer Value Creation
The right Advanced Oxidation Solution
for any kind of Micro pollutants
Lowest total life cycle cost
Flexible solution for individual
requirements
Utilizes the most efficient path of AOP
62
Tailored treatment for increasingly stringent regulations
|
Treatment Growth Strategy:
Sustainable Infrastructure EE Secondary Treatment
63
Experience allows system optimization better than competition
Key competitive advantages
Capability to provide energy audits to
understand baseline performance
Optimize performance by combining
in-depth process and product knowledge
across 3T's
Customer Value Creation
Up to 40% savings on energy costs, can
equal ~25% of a plant's operating costs
Improved process control and ability
to adjust process based on real-time
feedback
|
Test Overview
Revenue by Application
Industry Leading Platform in Water and Environment
65
Market Size: $2B
Market Growth: ^ Mid Single Digits
2010 Xylem Revenues: $117M
Well established brands delivering premium
products, globally
Full range of both state of the art technology
and robust applications
Demonstrated commitment to customer support
Application specialists ensure customer success
Xylem #2 with YSI Acquisition
Pro Forma for YSI Acquisition
Lab
Field
Ocean/Marine
Online
|
Evolution of Our Analytics Platform
66
Step 1
Step 2
Step 3
Sensor Technologies:
Electrochemistry
Optical
Total Organic Carbon
Acoustic Doppler
Annual Revenues
$300+M
|
Test Portfolio
67
Field
Products
Sensor Networks
Portable monitors
Photometers
Temperature equipment
Key Brands
Customers
Public Utilities
Government Agencies
Process engineers
Environmental researchers
Lab
Products
Electrochemistry systems
Titrators
Water quality analyzers
TOC analyzers
Key Brands
Customers
QA/QC laboratories
Food & Beverage
Environmental
Online
Products
Wastewater monitors
Drinking Water monitors
TOC analyzers
Key Brands
Customers
Public utilities
Process engineers
Industry
Ocean/Marine
Products
Water quality buoys
Current profilers
Water quality sensors
Key Brands
Customers
Oceanographers
Environmental
researchers
Government agencies
50%
30%
10%
10%
Pro Forma for YSI Acquisition
|
Wastewater Sensor Networks: IQ Sensornet
68
Water Quality system using a sensor network backbone with 17 parameters
available for measurement
Eases integration with plant control system and eliminates complicated installation
Littleton/Englewood WWTP in Colorado has enjoyed reduced operating costs,
additional data collection and high reliability
Installation has extended monitoring into winter months
Enabling Cost Effective Wastewater Treatment
|
Sensor Networks: Susquehanna River Basin
69
Sentinel Water Quality stations provide spill alert and validate
safety of groundwater and surface water supply
50 station monitoring network ensures data coverage across the basin
Monitoring the baseline parameters will show evidence of change over
the long term (before, during, and after drilling)
Protecting Drinking Water Supplies
|
Sensor Networks: Hudson River Projects
70
20 Water Quality Monitoring Systems
4 Buoy platforms to monitor turbidity dredging activities (PCB clean-up)
9 real time to monitoring water quality stations in the NYC area
Ensures rapid response to any permit violations, mitigating
environmental damage.
Monitoring Environmental Remediation
|
Sensor Networks: LaGuardia Airport
71
Protecting Natural Waters in Urban Areas
Port Authority, NY LaGuardia Airport
Continuous Dissolved Oxygen Monitoring to study impact of
de-icing fluid on Long Island Sound
YSI provides instrumentation and performs monthly service through
a maintenance contract
|
Creating the Future
72
Organic
Acquisitions
Global Mindset
Balanced M&A and
Organic
Global/Regional
Organization
Strong Customer
Relationships
Brand Growth
Today
Future
Globalization
(% of Total Revenues)
ROW
ROW
Europe
Europe
N. A.
North
America
ROW
Europe
North
America
Integrating Assets to Create a Global Analytics Leader
|
Participating in the Global Water Industry...
73
Applied Water
Water Treatment
Water
Transport
Water Sources
Wastewater Treatment
Wastewater
Transport
Water Infrastructure
Test
Test
Water
Transport
Water
Transport
.... Through Two Industry-Aligned Segments
|
Applied Water Overview
74
Revenue by Application
Applications: Building Services, Industrial Water, Irrigation
Customers: Residential & Commercial, Industrial Facilities,
Agriculture
Distribution: Primarily through World-Class Indirect Channels
Strong Aftermarket & Replacement Contributions
Building Svcs 55%
Industrial Water 38%
Irrigation 7%
Sales ($M)
10.6%
8.7%
11.9%
Large Installed Base, Growth Despite Slow New Construction
Market Size: $14B
2010 Revenues: $1.3B
2010 Op Margin: 12%
Applied Water
41%
|
Building Services
Ken Napolitano
|
Building Services Overview
76
Revenue by End Market
Residential
Commercial
Strong, longstanding brands & channels
Innovation in energy efficiency, reliability, life cycle cost
Industry leading customer training support
Application expertise drives enhanced solutions
Market Size: $8B
Market Growth: ^ Low Single Digits
2010 Xylem Revenues: $723M
|
Building Services Portfolio
77
Broad Offering, Large Installed Base, Application Expertise
Customers
Developers
Building Operators
Building Designers
HVAC Specialists
Contractors
Plumbers
HVAC - Heating
Pressure boosters
Fire protection
HVAC - Cooling
Wastewater
Zone Control
|
Building Services
78
Best in class efficiencies
Increasing Adoption
Appearance of Green Project
Specifications in the US (LEED)
High Efficiency Awareness
Consumer Interest In Life Cycle Cost
Energy Price Escalations
High Efficiency Legislation
Performance Standards for Pumps and Systems
Water Supply
eSV Multistage Pumps and Systems
HVAC, heating and cooling
EcoCirc Circulators
Wastewater removal
Impact Wastewater Pump Range
Global Green Building Macro Trend
|
Building Services Growth Strategy:
Multistage Pumps
Flygt N Pump
eSV Pump
Launched Q4 2010
Benefits
Best in class efficiency and product range
Available intelligent variable speed controller
delivers 10-50% energy savings
Lower maintenance costs from ability to replace
mechanical seal without removing the motor (<15
min vs. 60+min)
On board condition monitoring
Recognition
Singapore Green Building Council Pump Efficiency
Certification, first pump to earn
the certification
Growing 17% In a Flat Market
79
|
Building Services Growth Strategy:
HVAC Circulators
Acquired Q2'09
HVAC High Efficiency Circulators
30%+ CAGR in High Efficiency Segment
Global Large Circulator market $800M following
Expanding portfolio to take advantage of
legislated technology shift
Base
Laing GmbH
U.S.
Europe
Entry into
attractive segment
Small High-Eff.
Circulators
Source: Global Small Circulator Market
Goal: $100M by 2016
80
|
Strategic Partnership Agreement
81
Leading appliance retail chain in China
Revenue of more than $15B
1,000 chain stores in more than 300 cities
120,000 employees
Expansion into real estate development
100 Commercial Complexes
5 Star Hotels, Office, Residential, Retail
10 Year Plan
Green Building design standards
Premium Equipment Mindset
Shanghai skyline
Green Technology in Emerging Markets
|
Industrial Water
Bob Wolpert
|
Industrial Water Overview
Revenue by Application
Leisure
Marine
Food &
Beverage
General
Industrial
Core Technologies Leveraged Across Diverse Applications
83
Strong, longstanding brands & channels
Wide product offering
Global support
Innovation in energy efficiency
Application expertise
Market Size: $4B
Market Growth: ^ Low-mid Single Digits
2010 Xylem Revenues: $509M
|
Industrial Water Portfolio
84
General
Leisure Marine
Food & Beverage
9%
18%
73%
Products
Multistage Pumps
End Suction Pumps
Flexible Impeller Pumps
Air & Electrical Operated
Diaphragm Pumps
Valves
Heat Exchangers
Customers
All Industrial Plants
OEMs
Core Applications
Pressure Boosting
Cooling Water
Boilers
Wastewater
Products
Electric Diaphragm Pumps
Centrifugal Pumps
Flexible Impeller Pumps
Waste Systems
Customers
OEMs
Aftermarket Channels
Core Applications
Pressure Boosting
Engine Cooling Water
Bilge
Products
Flexible Impeller Pumps
Air & Electrical Operated
Diaphragm Pumps
Rotary Lobe Pumps
Membrane Filtration
Customers
Coca-Cola
PepsiCo
Wine Producers
F&B Processors
Core Applications
Beverage Dispensing
& Cooling
Fluid & Solids
Transfer
|
Core Technology Leverage: General Industry
Customer: Global Data Center, Singapore
Challenge: Design most efficient cooling system
against highly variable load
Solution: Install platform of 60 eSV pump sets
with intelligent variable speed controllers
Benefits: 22% energy savings
Increased system reliability
Reduced maintenance costs
85
|
Core Technology Leverage:
Diaphragm Pumping Solutions
Flojet G Series
Diaphragm Pumps
Patented design
Global strategic account process
Global supply chain
Irrigation
and agriculture
Construction
vehicles
Rainwater
harvesting
Chemical
dosing
86
Leading Expert In Beverage
Dispensing Pumps
Leveraging Technology in
Attractive Adjacent Segments
Beverage volume and scale provides advantaged cost position
Beverage COEs
Collaborative partnerships driving innovation & products
|
Irrigation Overview
Irrigation
Drivers
Population Increase
Water Availability
and Quality
Rising Energy Cost
Bio-fuel Demand
Products
Pumps
Mixed Flow Pumps
Boosting Systems
Customers
Farmers
OEM
Irrigation Strategy
Expanding the Core
Niche Player in Agriculture
Essence of Life Initiative
88
Market Size: $2B
Market Growth: ^ Mid-high Single Digits
2010 Xylem Revenues: $95M
|
"Essence of Life"
Affordable Irrigation Systems for Emerging Markets
Synergistic Emerging Market Focus
Hybrid Value Chain Partners
Differentiated Product Portfolio
Compelling Business Proposition
Sustainable Engagement Strategy
An innovative pilot to demonstrate
how Xylem can meet the water
needs of rural populations.
Stepper Pump
Low Cost
Solar Pumps
89
|
Closing and Q&A
Gretchen McClain, CEO & President
|
A Genuine Water Company
... with an Exciting Future
91
Water Infrastructure Water Infrastructure Water Infrastructure Applied Water Applied Water Applied Water
Water as %
of Total Revs Transport Treatment Test Res/Comm'l Industrial Irrigation
Xylem >90%
Danaher ~15%
Franklin ~85%
Grundfos ~85%
KSB ~25%
Pentair ~50%
Siemens ~5%
Sulzer (ABS) ~50%
Thermo ~5%
Wilo ~30%
|
Key Takeaways
93
Strong foundation set for launch as public company
A genuine water company with scale
Xylem is water's application solution leader
Tremendous opportunities for profitable growth
High-performing team delivering superior performance
Xylem ... Poised to Outperform
|
94
Thank you for your interest !
|
Xylem Management Team
96
Gretchen W. McClain
Chief Executive Officer & President
President of ITT's $5.7B Fluid & Motion Control Division
Member of the Strategic Council
Former President, ITT Residential and Commercial Water
Fortune 500 background (Honeywell, ITT)
Experience in Engineering, Aerospace, and diverse facets of business
As a member of the NASA Team, helped develop and launch the International
Space Station Program
BS in Mechanical Engineering from the University of Utah
Michael T. Speetzen
Chief Financial Officer
CFO of ITT's $5.7B Fluid & Motion Control Division
Private company CFO Experience
18 years of financial management experience in complex and highly
engineered manufacturing businesses
Fortune 500 background (GE, Honeywell, ITT)
Graduate of GE's Financial Management Program
BS in Management, emphasis in finance from Purdue University
MBA from Thunderbird's School of Global Management
|
Xylem Management Team
97
Colin Sabol
Chief Strategy and Growth Officer
VP of Marketing and Business Development for Fluid & Motion Control Division
Significant acquisition experience
10 years of experience in the water industry
23 years of experience in global industries
Fortune 500 background (GE, ITT)
BS in Materials Engineering from Alfred University
Robyn Mingle
Chief Human Resources Officer
VP of Human Resources for Fluid & Motion Control Division
More than 20 years of domestic and international human resources experience
across multiple industries
BS in Psychology/Industrial Relations from Bloomsburg University
Master's Degree in Industrial Psychology from the University of Baltimore
|
Xylem Management Team
98
Angela Buonocore
Chief Communications Officer
Senior Vice President and Chief Communications Officer for ITT Corp.
Member of the Strategic Council
Former Vice President, Corporate Communications for The Pepsi Bottling Group
Fortune 300 background (Pepsi, IBM, GE, ITT)
BS in Advertising from the University of Florida
Frank R. Jimenez
General Counsel & Secretary
VP and General Counsel for ITT Corp.
Diverse experience includes General Counsel of the Navy under
Presidents Bush and Obama
BS from University of Miami
Law Degree from Yale Law School
MBA from The Wharton School, University of Pennsylvania
|
Xylem Management Team
99
Mike Kuchenbrod
President, Water Solutions
President of ITT's China Operations
A 23 year veteran of ITT Corp., including leadership positions as President
of ITT's Interconnect Solutions, President & GM of Koni shock absorbers,
and VP & GM of Cannon
Leadership roles in General Management, Business Development and Integration,
Engineering and Operations.
B.S. in Chemical Engineering from Montana State University
Chris McIntire
President, Analytics
President of ITT's newly acquired and growing Analytics business
Prior President & COO of Nova Analytics
International experience includes CEO of WTW, a Munich-based company
Over 20 years of Analytics industry experience focusing on acquisitions
and turnarounds
MBA from Northeastern University
|
Xylem Management Team
100
Ken Napolitano
President, Residential & Commercial Water
Prior President of ITT's Industrial Process business
Leadership roles included VP Sales, designing product strategies,
and commercializing business technologies
Led manufacturing projects in India & Saudi Arabia
BS in Interdisciplinary Engineering and Management from Clarkson University
Bob Wolpert
President, Flow Control, China & India
VP & General Manager of ITT's Interconnect Solutions
Leadership experience includes Global VP of Six Sigma / Lean
(ITT, Lockheed Martin, DST Systems)
BS in Business from the University of Denver
MBA from Harvard University
|
Non-GAAP Measures
101
Management views key performance indicators including revenue, segment operating income and margins, orders
growth, and backlog, among others. In addition, we consider certain measures to be useful to management and
investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing
operations, liquidity and management of assets. This information can assist investors in assessing our financial
performance and measures our ability to generate capital for deployment among competing strategic alternatives and
initiatives. These metrics, however, are not measures of financial performance under GAAP and should not be
considered a substitute for revenues ,operating income, net income or net cash from continuing operations as
determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable
to similarly titled measures reported by other companies, to be key performance indicators:
"Organic revenue" defined as revenue excluding the impact of foreign currency fluctuations and contributions from
acquisitions and divestitures. Divestitures include sales of portion of our business that did not meet the criteria for
classification as a discontinued operation or insignificant portions of our business that we did not classify as a
discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change
in exchange rates from the prior period.
"EBITDA" defined as earnings before interest, taxes, depreciation and amortization expense. "Adjusted EBITDA"
reflects the adjustment to EBITDA to exclude for one-time separation costs associated with the Xylem spin-off from ITT
Corporation.
"Adjusted Operating Income" defined as operating income, adjusted to exclude one-time separation costs associated
with the Xylem spin-off from ITT Corporation.
"Free cash flow" defined as net cash from operating activities, as reported in the Statement of cash Flow, less capital
expenditures and other significant items that impact current results which management believes are not related to our
ongoing operations and performance. Our definition of free cash flows does not consider non-discretionary cash
payments, such as debt.
|
Non-GAAP Reconciliation: Organic Sales Revenues
102
Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation
Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales Reported vs. Organic Net Sales
($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions)
(As reported - GAAP) (As reported - GAAP) (As reported - GAAP) (As reported - GAAP) (As reported - GAAP) (As reported - GAAP) (As reported - GAAP) (As Adjusted - Organic) (As Adjusted - Organic) (As Adjusted - Organic) (As Adjusted - Organic) (As Adjusted - Organic) (As Adjusted - Organic) (As Adjusted - Organic)
(A) (B) (C) (D) (E) = B+C+D (F) = E/A
Years Ended 2009 & 2008
Net Sales Net Sales Change % Change Acquisitions / Divestitures FX Contribution Change % Change
2009 2008 2009 v. 2008 2009 v. 2008 2009 2008 Adj. 2009 v. 2008 Adj. 2009 v. 2008
Xylem Inc. - Combined 2,849 3,291 (442) -13.4% (7) 158 (291) -8.8%
Water infrastructure 1,651 1,824 (173) -9.5% - 108 (65) -3.6%
Applied Water 1,254 1,527 (273) -17.9% (7) 53 (227) -14.9%
Years Ended 2010 & 2009
Net Sales Net Sales Change % Change Acquisitions / Divestitures FX Contribution Change % Change
2010 2009 2010 v. 2009 2010 v. 2009 2010 2009 Adj. 2010 v. 2009 Adj. 2010 v. 2009
Xylem Inc. - Combined 3,202 2,849 353 12.4% (263) 6 96 3.4%
Water infrastructure 1,930 1,651 279 16.9% (247) (8) 24 1.5%
Applied Water 1,327 1,254 73 5.8% (16) 16 73 5.8%
Six Months Ended June 30, 2011 & 2010 Six Months Ended June 30, 2011 & 2010
Net Sales Net Sales Change % Change Acquisitions / Divestitures FX Contribution Change % Change
6M 2011 6M 2010 2011 v. 2010 2011 v. 2010 6M 2011 6M 2010 Adj. 2011 v. 2010 Adj. 2011 v. 2010
Xylem Inc. - Combined 1,861 1,461 400 27.4% (195) (78) 127 8.7%
Water infrastructure 1,153 820 333 40.6% (195) (62) 76 9.3%
Applied Water 740 669 71 10.6% - (18) 53 7.9%
|
103
Non-GAAP Reconciliation: Adjusted EBITDA
Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation Xylem, Inc. Non-GAAP Reconciliation
Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA Net Income vs. Adjusted EBITDA
For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008 For the Six Month Periods Ended June 30, 2011 and 2010 and Years ended 2010, 2009 & 2008
($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions)
6 Months Ended June 30 6 Months Ended June 30 6 Months Ended June 30 Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
2011 2010 2010 2009 2009 2008 2008
Net Income 150 141 329 263 263 224 224
Income Tax Expense 66 26 59 14 14 88 88
Depreciation & Amortization (1) 73 44 101 79 79 72 72
EBITDA 289 211 489 356 356 384 384
1x Spin-Related Costs 21 - - - - - -
Adjusted EBITDA 310 211 489 356 356 384 384
Revenues 1,861 1,461 3,202 2,849 2,849 3,291 3,291
Adjusted EBITDA Margin 16.7% 14.4% 15.3% 12.5% 12.5% 11.7% 11.7%
(1) Includes share-based compensation
|
Non-GAAP Reconciliation: Adjusted Operating Income
104
Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation
Operating Income vs. Adjusted Operating Income Operating Income vs. Adjusted Operating Income Operating Income vs. Adjusted Operating Income Operating Income vs. Adjusted Operating Income
Six Month Period Ended June 30, 2011 Six Month Period Ended June 30, 2011 Six Month Period Ended June 30, 2011 Six Month Period Ended June 30, 2011
($ Millions) ($ Millions) ($ Millions) ($ Millions)
Six Months Ended Six Months Ended
2011
Operating Income 216
One-Time Separation Costs 21
Adjusted Operating Income 237
Revenues 1,861
Adjusted Operating Margin 12.7%
|
Non-GAAP Reconciliation: Free Cash Flow
105
Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation Xylem Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow Net Cash - Operating Activities vs. Free Cash Flow
Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008 Years ended 2010, 2009 & 2008
($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions) ($ Millions)
Year Ended Year Ended Year Ended Year Ended Year Ended
2010 2009 2008
Net Cash - Operating Activities 395 370 408
Capital Expenditures (94) (62) (67)
Free Cash Flow 301 308 341
Income from Operations 329 263 224
Free Cash Flow Conversion 91.5% 117.1% 152.2%
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Quarterly Financial Performance
106
Q1'10 Q2'10 Q3'10 Q4'10 FY'10 Q1'11 Q2'11
Net Sales 686 775 806 935 3,202 890 971
COGS 431 484 497 576 1,988 553 592
Gross Profit 255 291 309 359 1,214 337 379
SG&A 164 170 183 220 737 213 237
R&D 18 17 18 21 74 24 26
Restructuring, net 4 3 1 7 15 - -
Op Income 69 101 107 111 388 100 116
Other Non-Op -2 -1 3 0 0 1 (1)
Income before Tax 67 100 110 111 388 101 115
Tax 11 15 19 14 59 23 43
Net Income 56 85 91 97 329 78 72
The quarterly financial performance illustrated above is considered preliminary until it has been filed as part of our Annual or
Quarterly Reports with the SEC. We plan to file a third quarter report on Form 10-Q in November 2011, which will contain
financial performance for the three months ended September 30, 2011 and 2010.
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