<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-2384
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TRW Inc.
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(Exact name of registrant as specified in its charter)
Ohio 34-0575430
- --------------------------------------------- ------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1900 Richmond Road, Cleveland, Ohio 44124
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(216) 291-7000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of May 2, 1997, there were 124,495,918 shares of
TRW Common Stock, $0.625 par value, outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Statements of Earnings (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Quarter ended
March 31
In millions except per share data 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Sales $2,660 $2,514
Cost of sales 2,178 2,051
- -------------------------------------------------------------------------
Gross profit 482 463
Administrative and selling expenses 159 163
Research and development expenses 106 100
Interest expense 20 19
Other (income) expense-net 2 16
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Earnings from continuing operations before income taxes 195 165
Income taxes 76 62
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Earnings from continuing operations 119 103
Discontinued operations -- 14
- -------------------------------------------------------------------------
Net earnings $ 119 $ 117
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- -------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Fully diluted
Continuing operations $ .92 $ .76
Discontinued operations -- .10
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Net earnings per share $ .92 $ .86
- -------------------------------------------------------------------------
Primary
Continuing operations $ .93 $ .76
Discontinued operations -- .11
- -------------------------------------------------------------------------
Net earnings per share $ .93 $ .87
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Shares used in computing per share amounts
Fully diluted 129.4 135.6
Primary 128.4 134.2
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- -------------------------------------------------------------------------
Dividends declared $ .00 $ .00
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</TABLE>
<PAGE> 3
Balance Sheets (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
March 31 December 31
In millions 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 59 $ 386
Accounts receivable 1,567 1,378
Inventories 542 524
Prepaid expenses 77 69
Deferred income taxes 354 424
- -------------------------------------------------------------------------
Total current assets 2,599 2,781
Property, plant and equipment-on the basis of cost 6,051 5,880
Less accumulated depreciation and amortization 3,425 3,400
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Total property, plant and equipment-net 2,626 2,480
Intangible assets
Intangibles arising from acquisitions 499 258
Other 39 31
- -------------------------------------------------------------------------
538 289
Less accumulated amortization 85 78
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Total intangible assets-net 453 211
Other assets 472 427
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$ 6,150 $ 5,899
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Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 303 $ 52
Accounts payable 799 781
Current portion of long-term debt 73 72
Other current liabilities 1,225 1,252
- -------------------------------------------------------------------------
Total current liabilities 2,400 2,157
Long-term liabilities 775 767
Long-term debt 472 458
Deferred income taxes 213 272
Minority interests in subsidiaries 100 56
Capital stock 78 81
Other capital 444 437
Retained earnings 2,098 1,978
Cumulative translation adjustments (16) 47
Treasury shares-cost in excess of par value (414) (354)
- -------------------------------------------------------------------------
Total shareholders' investment 2,190 2,189
- -------------------------------------------------------------------------
$ 6,150 $ 5,899
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</TABLE>
<PAGE> 4
Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Quarter ended
March 31
In millions 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net earnings $ 119 $ 117
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Discontinued operations -- (14)
Depreciation and amortization 127 112
Deferred income taxes 5 (1)
Other-net 5 (5)
Changes in assets and liabilities, net of effects of
businesses acquired or sold:
Accounts receivable (156) (150)
Inventories and prepaid expenses 7 (20)
Accounts payable and other accruals (43) 122
Other-net (13) (15)
- ---------------------------------------------------------------------
Net cash provided by operating activities 51 146
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Investing activities
Capital expenditures (99) (83)
Acquisitions, net of cash acquired (415) --
Other-net 16 2
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Net cash used in investing activities (498) (81)
- ---------------------------------------------------------------------
Financing activities
Increase in short-term debt 223 8
Proceeds from debt in excess of 90 days 10 17
Principal payments on debt in excess of 90 days (11) (25)
Reacquisition of common stock (72) (50)
Dividends paid (39) (36)
Other-net 13 20
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Net cash provided by(used in) financing activities 124 (66)
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Effect of exchange rate changes on cash (4) 2
- ---------------------------------------------------------------------
Increase(decrease) in cash and cash equivalents (327) 1
Cash and cash equivalents at beginning of quarter 386 59
- ---------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 59 $ 60
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 5
Results by Business Segments (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Quarter ended
March 31
In millions 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales
Automotive $ 1,793 $ 1,681
Space & Defense 867 833
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Sales $ 2,660 $ 2,514
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Operating profit
Automotive $ 167 $ 140
Space & Defense 77 60
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Operating profit 244 200
Company Staff and other (24) (11)
Minority interest in earnings of consolidated subsidiaries (6) (3)
Interest expense (20) (19)
Earnings(loss) from affiliates 1 (2)
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Earnings from continuing operations before income taxes $ 195 $ 165
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</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of the Company and its
subsidiaries except for two insurance subsidiaries. The wholly-owned insurance
subsidiaries and the majority of investments in affiliated companies, which are
not significant individually or in the aggregate, are accounted for by the
equity method.
Environmental Costs
- -------------------
During the first quarter of 1997, the Company adopted the provisions of AICPA
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities". There
was no financial statement effect of the adoption as the Company's previous
method of accounting for environmental costs was in accordance with SOP 96-1.
Discontinued Operations
- -----------------------
In September 1996, the Company sold substantially all of the businesses of its
Information Systems and Services segment. The financial statements for the first
quarter of 1996 reflect as discontinued operations that segment's operating
results of $14 million. Sales of the discontinued operations were $156 million
for the first quarter of 1996.
Acquisition
- -----------
In February 1997, the Company completed its purchase of an eighty percent equity
interest in the air bag and steering wheel business of Magna International. The
purchase price of approximately $450 million has been tentatively allocated to
the net assets acquired based on their fair values.
Inventories
- -----------
Inventories consist of the following:
(In millions)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
---- ----
<S> <C> <C>
Finished products and work in process $289 $295
Raw materials and supplies 253 229
---- ----
$542 $524
---- ----
</TABLE>
<PAGE> 7
Long-Term Liabilities
- ---------------------
For balance sheet purposes, long-term liabilities at March 31, 1997 and
December 31, 1996, include $690 million and $681 million, respectively, relating
to postretirement benefits other than pensions.
Other (Income)Expense-Net
- -------------------------
Other (income)expense included the following:
(In millions)
<TABLE>
<CAPTION>
Quarter ended
March 31
---------------------
1997 1996
---- ----
<S> <C> <C>
Other income $(16) $ (6)
Other expense 16 20
Foreign currency translation 2 2
---- ----
$ 2 $ 16
---- ----
</TABLE>
Earnings Per Share
- ------------------
Fully diluted earnings per share have been computed based on the weighted
average number of shares of Common Stock outstanding during each period,
including common stock equivalents and assuming the conversion of the Serial
Preference Stock II--Series 1 and 3. Primary earnings per share have been
computed based on the weighted average number of shares of Common Stock
outstanding during each period including common stock equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in a $.02 per
share increase in primary earnings per share for the first quarter ended March
31, 1997 and March 31, 1996. There is no impact of Statement 128 on the
calculation of fully diluted earnings per share for these quarters.
In April, 1997, the number of authorized shares of TRW Common Stock was
increased from 250,000,000 to 500,000,000 shares.
Supplemental Cash Flow Information
- ----------------------------------
<TABLE>
<CAPTION>
Quarter ended
(In millions) March 31
--------------------
1997 1996
---- ----
<S> <C> <C>
Interest paid (net of amount capitalized) $ 20 $ 15
Income taxes paid (net of refunds) $(37) $ 8
</TABLE>
<PAGE> 8
Supplemental Cash Flow Information (continued)
- ----------------------------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
Other Contingencies
- -------------------
During 1996, the Company was advised by the Department of Justice ("DOJ") that
it had been named as a defendant in two lawsuits brought by a former employee
and filed under seal in 1994 and 1995, respectively, in the United States
District Court for the Central District of California under the QUI TAM
provisions of the civil False Claims Act. The Act permits an individual to bring
suit in the name of the United States and share in any recovery. The allegations
in the lawsuit relate to the classification of costs incurred by the Company
that were charged to certain of its federal contracts. Under the law, the
government must investigate the allegations and determine whether it wishes to
intervene and take responsibility for the lawsuits. The actions remain under
seal until the government completes its investigations and determines whether to
intervene. However, permission from the court has been obtained by the Company
to make the disclosures contained herein. The Company is cooperating with the
DOJ's investigation and is engaged in ongoing discussions with them regarding
the allegations. The Company cannot presently predict the outcome of these
matters, although management believes that the Company would have meritorious
defenses if either the government decides to pursue the lawsuits or the former
employee decides to do so without government participation.
The Environmental Protection Agency has informed TRW that it may issue one or
more notices of violation to the Company under the Clean Air Act with respect to
operations at the former Izumi Industries, Corporation, Inc. facility in
Yaphank, New York, which operations TRW acquired in November, 1996. TRW could,
upon such issuance, be liable for civil penalties and fines which, if imposed,
are not expected to have a material effect on TRW's financial position.
Interim Statements
- ------------------
The financial statements are based in part on approximations and are subject to
adjustments that may develop, such as unsettled contract and renegotiation
matters and matters that arise in connection with the annual audit of the
financial statements; however, in the opinion of management, all adjustments
(which consist of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented have been included.
Results of operations for any interim period are not necessarily indicative of
the results to be expected for the full year.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
RESULTS OF OPERATIONS
(In millions except per share data)
<TABLE>
<CAPTION>
First Quarter
----------------------------------
Percent
1997 1996 Inc(Dec)
---- ---- --------
<S> <C> <C> <C>
Sales $2,660 $2,514 6%
Operating Profit 244 200 22%
Earnings from Continuing Operations 119 103 16%
Fully Diluted Earnings Per Share -
Continuing Operations .92 .76 21%
Effective Tax Rate 38.7% 37.8%
</TABLE>
The increase in sales resulted primarily from the acquisitions of the air bag
and steering wheel operations of Magna International and Izumi Corporation, and
from higher volume in the Automotive and Space and Defense segments. The higher
operating profit was due to the acquisitions, continued cost-reduction efforts
and higher sales volume in the Space and Defense segment partially offset by the
effect of a strong U.S. dollar and lower pricing in the Automotive Segment.
First quarter 1996 earnings from continuing operations included a $12 million
benefit from an insurance claim settlement primarily relating to previously
divested businesses, offset by a $13 million noncash charge related to the
initial application of Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."
Interest expense was $20 million for the first quarter of 1997, compared to $19
million for the first quarter of 1996.
Automotive
(In millions)
<TABLE>
<CAPTION>
First Quarter
------------------------------------------
Percent
1997 1996 Inc(Dec)
---- ---- --------
<S> <C> <C> <C>
Sales $1,793 $1,681 7%
Operating Profit $ 167 $ 140 19%
</TABLE>
The increase in sales and operating profit resulted primarily from the
acquisitions of the air bag and steering wheel operations of Magna
International and Izumi Corporation, and from higher volume in the air bag,
seat belt, steering, and engine businesses. Partially offsetting the increase
was the effect of a strong U.S. dollar and lower pricing, principally in the
occupant restraint business. Operating profit in 1996 included a $15 million
before tax charge related to the initial application of SFAS No. 121.
<PAGE> 10
Space & Defense
(In millions)
<TABLE>
<CAPTION>
First Quarter
---------------------------------------
Percent
1997 1996 Inc(Dec)
---- ---- --------
<S> <C> <C> <C>
Sales $867 $833 4%
Operating Profit $ 77 $ 60 27%
</TABLE>
The sales and operating profit improvement was due primarily to strong program
performance and the successful conversion of recent contract awards into revenue
growth.
LIQUIDITY AND FINANCIAL POSITION
In the first quarter of 1997, cash flow provided by operating activities of $51
million, a net increase in debt of $222 million and a net increase of $25
million in other items, were used to fund business acquisitions of $415 million,
capital expenditures of $99 million, reacquisition of common stock of $72
million and dividend payments of $39 million. As a result, cash and cash
equivalents decreased by $327 million.
Net debt (short-term debt, the current portion of long-term debt and long-term
debt less cash and cash equivalents) was $789 million at March 31, 1997,
compared to $196 million at December 31, 1996. The ratio of net debt to total
capital (net debt, minority interests and shareholders' investment) was 26
percent at March 31, 1997, compared to 8 percent at December 31, 1996.
During April, 1997, the Company issued $50 million in medium-term notes under
its shelf registration statements. The notes were used to refinance short-term
debt. After this issuance, $450 million remains available for borrowing under
the Company's shelf registration statements.
During the first quarter of 1997, 1,470,200 shares of TRW Common Stock were
repurchased for approximately $77 million, of which approximately $5 million was
settled in April.
Management believes that funds generated from operations and existing borrowing
capacity will be adequate to fund the Company's current share repurchase
program and to support and finance planned growth, capital expenditures,
company-sponsored research and development programs and dividend payments to
shareholders.
OTHER MATTERS
During 1996, the Company was advised by the Department of Justice that it had
been named as a defendant in two lawsuits brought by a former employee and filed
under seal under the QUI TAM provisions of the civil False Claims Act. See
"Other Contingencies" note in the Notes to Financial Statements for further
information.
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
The United States Environmental Protection Agency and the New York State
Department of Environmental Conservation have informed TRW that either or both
may issue one or more notices of violation to the Company or initiate
administrative or judicial proceedings against the Company under the Clean Air
Act with respect to operations at the former Izumi Industries, Corporation,
Inc. facility in Yaphank, New York, which operations TRW acquired in November,
1996. TRW could, upon such issuance, be liable for civil penalties and fines
and other relief which, if imposed, are not expected to have a material effect
on TRW's financial position.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits:
3(a) Amended Articles of Incorporation as amended May 5, 1997.
11 Computation of Earnings Per Share -- Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3
Registration Statements of the Company: No. 33-61711, filed
August 10, 1995, and No. 33-42870, filed September 20, 1991).
(b) Reports on Form 8-K:
Current Report on Form 8-K dated February 5, 1997 as to a resolution
adopted by the Directors of TRW regarding the Rights Agreement.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRW Inc.
Date: May 13, 1997 By: /s/ Martin A. Coyle
-------------------
Martin A. Coyle
Executive Vice President
and Secretary
Date: May 13, 1997 By: /s/ Carl G. Miller
------------------
Carl G. Miller
Executive Vice President and
Chief Financial Officer
<PAGE> 13
FORM 10-Q
Quarterly Report for Quarter Ended March 31, 1997
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
3(a) Amended Articles of Incorporation as amended May 5, 1997.
11 Computation of Earnings Per Share --Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3 Registration
Statements of the Company: No. 33-61711, filed August 10, 1995, and
No. 33-42870, filed September 20, 1991).
<PAGE> 1
EXHIBIT 3(a)
LOGO
TRW INC.
Amended Articles of Incorporation
---------------------
EFFECTIVE MAY 5, 1997
================================================================================
<PAGE> 2
AMENDED ARTICLES OF INCORPORATION
OF
TRW INC.
------------------------------------
First: The name of the Corporation shall be TRW Inc.
Second: The principal office of the Corporation shall be located in
Lyndhurst, Cuyahoga County, Ohio.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under the General Corporation Law
of the State of Ohio.
Fourth: The number of shares which the Corporation is authorized to have
outstanding is 505,099,536, which shall be classified as follows:
99,536 shares of Serial Preference Stock without par value (hereinafter
called "Serial Preference Stock");
5,000,000 shares of Serial Preference Stock II without par value
(hereinafter called "Serial Preference Stock II"); and
500,000,000 shares of Common Stock of the par value of $0.625 each
(hereinafter called "Common Stock").
The shares of such classes of stock shall have the following express terms:
DIVISION A
Express Terms of Cumulative Preferred Stock
[All outstanding shares of the Cumulative Preferred Stock were
redeemed on June 15, 1979. The provisions of this Division A, together with
other references to the Cumulative Preferred Stock in these Amended
Articles of Incorporation, were deleted by action of the Directors of the
Corporation on July 18, 1979.]
DIVISION B
Express Terms of Serial Preference Stock
SECTION 1. The Serial Preference Stock may be issued from time to
time in one or more series. All shares of Serial Preference Stock shall be
of equal rank and shall be identical, except in respect of the particulars
that may be fixed and determined by the Board of Directors as hereinafter
provided, and each share of each series shall be identical in all respects
with all other shares of such series, except as to the date from which
dividends are cumulative. All shares of Serial Preference Stock shall also
be of equal rank and shall be identical with shares of Serial Preference
Stock II except in respect of (1) the particulars that may be fixed and
determined by the Board of Directors as hereinafter provided, (2) the
amount which the holders of Serial Preference Stock of any series are
entitled to receive in case of involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, as fixed and determined by
Section 5(a)(ii) of this Division, and (3) the voting rights and provisions
for consents relating to Serial Preference Stock, as fixed and determined
by Section 6 of this Division. Subject to the provisions of Sections 2
through 8, inclusive, of this Division, which provisions shall apply to all
Serial Preference Stock, the Board of Directors hereby is empowered to
cause the same to be issued in one or more series and with respect to each
such series prior to the issuance thereof to fix and determine:
(a) the designation of the series, which may be by distinguishing
number, letter or title;
1
<PAGE> 3
(b) the number of shares of the series, which number may be
increased (except where otherwise provided by the Board of Directors in
creating the series) or decreased (but not below the number of shares
thereof then outstanding) by like action of the Board of Directors;
(c) the annual dividend rate of the series;
(d) the dates at which dividends, if declared, shall be payable;
(e) the redemption rights and price or prices, if any, for shares
of the series;
(f) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of any
voluntary liquidation, dissolution or winding up of the affairs of the
Corporation;
(h) whether the shares of the series shall be convertible into
Common Stock, and, if so, the conversion price or prices and the
adjustments thereof, if any, and all other terms and conditions upon
which such conversion may be made; and
(i) restrictions (in addition to those set forth in Section 6(b)
and 6(c) of this Division) on the issuance of shares of the same series
or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Articles of Incorporation of the Corporation, fixing and
determining, with respect to each such series, the matters described in
clauses (a) through (i), inclusive, of this Section 1.
SECTION 2. The holders of the Serial Preference Stock of each series,
in preference to the holders of Common Stock and of any other class of
shares ranking junior to the Serial Preference Stock, shall be entitled to
receive out of any funds legally available for Serial Preference Stock and
Serial Preference Stock II and when and as declared by the Board of
Directors dividends in cash at the rate for such series fixed in accordance
with the provisions of Section 1 of this Division and no more, payable
quarterly on the dates fixed for such series. Such dividends shall be
cumulative, in the case of shares of each particular series, from and after
the date of issuance thereof. No dividends may be paid upon or declared or
set apart for any of the Serial Preference Stock for any quarterly dividend
period unless at the same time (i) a like proportionate dividend for the
same quarterly dividend period, ratably in proportion to the respective
annual dividend rates fixed therefor, shall be paid upon or declared or set
apart for all Serial Preference Stock of all series then issued and
outstanding and entitled to receive such dividend, and (ii) the dividend
payable during the same quarterly dividend period upon all Serial
Preference Stock II of all series then issued and outstanding at the rate
and upon the date as fixed and determined by the Board of Directors as
provided in Section 1 of Division C hereof shall be paid upon or declared
or set apart for all such Serial Preference Stock II entitled to receive
such dividend.
SECTION 3. In no event so long as any Serial Preference Stock shall
be outstanding shall any dividends, except a dividend payable in Common
Stock or other shares ranking junior to the Serial Preference Stock, be
paid or declared or any distribution be made except as aforesaid on the
Common Stock or any other shares ranking junior to the Serial Preference
Stock, nor shall any Common Stock or any other shares ranking junior to the
Serial Preference Stock be purchased, retired or otherwise acquired by the
Corporation (except out of the proceeds of the sale of Common Stock or
other shares ranking junior to the Serial Preference Stock received by the
Corporation subsequent to January 1, 1964):
(a) unless all accrued and unpaid dividends on Serial Preference
Stock, including the full dividends for the current quarterly dividend
period, shall have been declared and paid or a sum sufficient for
payment thereof set apart; and
(b) unless there shall be no arrearages with respect to the
redemption of Serial Preference Stock of any series from any sinking
fund provided for shares of such series in accordance with the
provisions of Section 1 of this Division.
2
<PAGE> 4
SECTION 4.
(a) Subject to the express terms of each series, the Corporation may
from time to time redeem all or any part of the Serial Preference Stock of
any series at the time outstanding (i) at the option of the Board of
Directors at the applicable redemption price for such series fixed in
accordance with the provisions of Section 1 of this Division, or (ii) in
fulfillment of the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price fixed in
accordance with the provisions of Section 1 of this Division, together in
each case with accrued dividends to the redemption date.
(b) Notice of every such redemption shall be mailed, postage prepaid,
to the holders of record of the Serial Preference Stock to be redeemed at
their respective addresses then appearing on the books of the Corporation,
and shall be published at least once in a newspaper of general circulation
in the City of New York, New York, not less than thirty (30) days nor more
than sixty (60) days prior to the date fixed for such redemption. At any
time before or after notice has been given as above provided, the
Corporation may deposit the aggregate redemption price of the shares of
Serial Preference Stock to be redeemed with any bank or trust company in
the City of Cleveland, Ohio, or the City of New York, New York, having
capital and surplus of more than Five Million Dollars ($5,000,000), named
in such notice, directed to be paid to the respective holders of the shares
of Serial Preference Stock so to be redeemed, in amounts equal to the
redemption price of all shares of Serial Preference Stock so to be
redeemed, on surrender of the stock certificate or certificates held by
such holders, and upon the making of such deposit such holders shall cease
to be shareholders with respect to such shares, and after such notice shall
have been given and such deposit shall have been made such holders shall
have no interest in or claim against the Corporation with respect to such
shares and shall be entitled only to receive such moneys from such bank or
trust company without interest. In case less than all of the outstanding
shares of Serial Preference Stock are to be redeemed, the Corporation shall
select by lot the shares so to be redeemed in such manner as shall be
prescribed by its Board of Directors.
If the holders of shares of Serial Preference Stock which shall have
been called for redemption shall not, within six years after such deposit,
claim the amount deposited for the redemption thereof, any such bank or
trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company and the
Corporation shall be relieved of all responsibility in respect thereof and
to such holders.
(c) Any shares of Serial Preference Stock which are redeemed by the
Corporation pursuant to the provisions of this Section 4 and any shares of
Serial Preference Stock which are purchased and delivered in satisfaction
of any sinking fund requirements provided for shares of such series and any
shares of Serial Preference Stock which are converted in accordance with
the express terms thereof shall be cancelled and not reissued. Any shares
of Serial Preference Stock otherwise acquired by the Corporation shall
resume the status of authorized and unissued shares of Serial Preference
Stock without serial designation.
SECTION 5.
(a) The holders of the Serial Preference Stock of any series shall, in
case of liquidation, dissolution or winding up of the affairs of the
Corporation, be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be paid or
distributed among the holders of the Common Stock or any other shares
ranking junior to the Serial Preference Stock:
(i) in the event of any voluntary liquidation, dissolution or
winding up of the affairs of the Corporation, the amounts fixed with
respect to shares of such series in accordance with Section 1 of this
Division; or
(ii) in the event of any involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, $100 per share;
plus in either event an amount equal to all dividends accrued and unpaid
thereon to the date of payment of the amount due pursuant to such
liquidation, dissolution or winding up of the affairs of the Corporation.
In case the net assets of the Corporation legally available therefor are
insufficient to permit
3
<PAGE> 5
the payment upon all outstanding shares of Serial Preference Stock and
Serial Preference Stock II of the full preferential amount to which they
are respectively entitled, then such net assets shall be distributed
ratably to all outstanding shares of Serial Preference Stock and Serial
Preference Stock II in proportion to the full preferential amount to which
each such share is entitled.
After payment to holders of Serial Preference Stock of the full
preferential amounts as aforesaid, holders of Serial Preference Stock, as
such, shall have no right or claim to any of the remaining assets of the
Corporation.
(b) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property of the
Corporation, shall not be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this Section 5.
SECTION 6.
(a) The holders of Serial Preference Stock shall be entitled at all
times to two votes for each share, and, except as otherwise provided herein
or required by law, the holders of the Serial Preference Stock, the holders
of Serial Preference Stock II and the holders of Common Stock of the
Corporation shall vote together as one class on all matters, subject,
however, to the special voting rights conferred upon the holders of Serial
Preference Stock II as hereinafter provided in Section 6 of Division C
hereof.
If, and so often as, the Corporation shall be in default in the
payment of the equivalent of six (6) full quarterly dividends on all shares
of all series of Serial Preference Stock at the time outstanding, whether
or not earned or declared, the holders of Serial Preference Stock of all
series, voting separately as a class and in addition to all other rights to
vote for Directors, shall be entitled to elect as herein provided, three
(3) members of the Board of Directors of the Corporation; provided,
however, that the holders of shares of Serial Preference Stock shall not
have or exercise such special class voting rights except at meetings of the
shareholders for the election of Directors at which the holders of not less
than thirty-five per cent (35%) of the outstanding shares of Serial
Preference Stock of all series then outstanding are present in person or by
proxy; and provided, further, that the special class voting rights provided
for herein when the same shall have become vested, shall remain so vested
until all accrued unpaid dividends on the Serial Preference Stock of all
series then outstanding shall have been paid, whereupon the holders of the
Serial Preference Stock shall be divested of their special class voting
rights in respect of subsequent elections of Directors, subject to the
revesting of such special class voting rights in the event hereinabove
specified in this Section.
In the event of default entitling the holders of Serial Preference
Stock to elect three (3) Directors as above specified, a special meeting of
the shareholders for the purpose of electing such Directors shall be called
by the Secretary of the Corporation upon written request of, or may be
called by, the holders of record of at least ten per cent (10%) of the
shares of Serial Preference Stock of all series at the time outstanding,
and notice thereof shall be given in the same manner as that required for
the annual meeting of shareholders; provided, however, that the Corporation
shall not be required to call such special meeting if the annual meeting of
shareholders shall be held within ninety (90) days after the date of
receipt of the foregoing written request from the holders of Serial
Preference Stock. At any meeting at which the holders of the Serial
Preference Stock shall be entitled to elect Directors, the holders of
thirty-five per cent (35%) of the then outstanding shares of Serial
Preference Stock of all series, present in person or by proxy, shall be
sufficient to constitute a quorum, and the vote of the holders of a
majority of such shares so present at any such meeting at which there shall
be such a quorum shall be sufficient to elect the members of the Board of
Directors which the holders of the Serial Preference Stock are entitled to
elect as hereinabove provided.
(b) The consent of the holders of at least two-thirds of the number of
shares of Serial Preference Stock at the time outstanding given in person
or by proxy, either in writing or at a meeting called for the purpose at
which the holders of the Serial Preference Stock shall vote separately as a
class, shall be
4
<PAGE> 6
necessary to effect any one or more of the following (but so far as the
holders of Serial Preference Stock are concerned, such action may be
effected with such consent):
(i) any amendment, alteration or repeal of any of the provisions of
these Articles of Incorporation, as the same may at any time be amended,
or of the Regulations of the Corporation which affects adversely the
voting powers, rights or preferences of the holders of Serial Preference
Stock or reduces the time for any notice to which the holders of Serial
Preference Stock may be entitled; provided, however, that, for the
purpose of this clause (i) only, neither the amendment of these Articles
of Incorporation, as the same may at any time be amended, so as to
authorize or create, or to increase the authorized amount of, Serial
Preference Stock or of any shares of any class ranking on a parity with
or junior to the Serial Preference Stock, nor the amendment of the
provisions of the Regulations so as to increase the number of Directors
of the Corporation, shall be deemed to affect adversely the voting
powers, rights or preferences of the holders of the Serial Preference
Stock; and provided further, that if such amendment, alteration or
repeal affects adversely the rights or preferences of one or more but
not all series of Serial Preference Stock at the time outstanding, only
the consent of the holders of at least two-thirds of the number of the
shares of the series so affected shall be required;
(ii) the authorization or creation of, or the increase in the
authorized amount of, any shares of any class, or any security
convertible into shares of any class, ranking prior to the Serial
Preference Stock; or
(iii) the purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Serial Preference Stock then
outstanding except in accordance with a stock purchase offer made to all
holders of record of Serial Preference Stock, unless all dividends upon
all Serial Preference Stock then outstanding for all previous quarterly
dividend periods shall have been declared and paid or funds therefor set
apart and all accrued sinking fund obligations applicable thereto shall
have been complied with.
(c) The consent of the holders of at least a majority of the number of
shares of Serial Preference Stock at the time outstanding, given in person
or by proxy either in writing or at a meeting called for the purpose at
which the holders of the Serial Preference Stock shall vote separately as a
class, shall be necessary to effect any one or more of the following (but
so far as the holders of Serial Preference Stock are concerned, such action
may be effected with such consent):
(i) the sale, lease or conveyance by the Corporation of all or
substantially all of its property or business or the voluntary parting
with the control thereof, or its consolidation with or merger into any
other corporation, unless the corporation resulting from such
consolidation or merger will have after such consolidation or merger no
class of shares either authorized or outstanding ranking prior to or on
a parity with the Serial Preference Stock except the same number of
shares ranking prior to or on a parity with the Serial Preference Stock
and having the same rights and preferences as the shares of the
Corporation authorized and outstanding immediately preceding such
consolidation or merger, and each holder of Serial Preference Stock
immediately preceding such consolidation or merger shall receive the
same number of shares, with the same rights and preferences, of the
resulting corporation; or
(ii) The authorization of any shares ranking on a parity with the
Serial Preference Stock or an increase in the authorized number of
shares of Serial Preference Stock.
(d) Neither the consent of, nor any adjustment of the voting rights
of, holders of shares of Serial Preference Stock shall be required for an
increase in the number of shares of Common Stock authorized or issued or
for stock splits of the Common Stock or for stock dividends on any class of
stock payable solely in Common Stock, and none of the foregoing actions
shall be deemed to affect adversely the voting powers, rights or
preferences of Serial Preference Stock within the meaning and for the
purpose of this Division B.
5
<PAGE> 7
SECTION 7. The holders of the Serial Preference Stock shall have no
pre-emptive right to purchase or have offered to them for purchase any
shares or other securities of the Corporation, whether now or hereafter
authorized.
SECTION 8. For the purposes of this Division B:
Whenever reference is made to shares "ranking prior to the Serial
Preference Stock", such reference shall mean and include all shares of the
Corporation in respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of an involuntary
liquidation, dissolution or winding up of the Corporation are given
preference over the rights of the holders of Serial Preference Stock;
whenever reference is made to shares "on a parity with the Serial
Preference Stock", such reference shall mean and include all shares of
Serial Preference Stock II and all other shares of the Corporation in
respect of which the rights of the holders thereof as to the payment of
dividends and as to distributions in the event of an involuntary
liquidation, dissolution or winding up of the Corporation rank on an
equality (except as to the amounts fixed therefor) with the rights of the
holders of Serial Preference Stock; and whenever reference is made to
shares "ranking junior to the Serial Preference Stock" such reference shall
mean and include all shares of the Corporation in respect of which the
rights of the holders as to the payment of dividends and as to
distributions in the event of an involuntary liquidation, dissolution or
winding up of the Corporation are junior and subordinate to the rights of
the holders of the Serial Preference Stock.
DIVISION B-1
Express Terms of $4.25 Cumulative Preference Stock,
Series A, Convertible on or before June 15, 1979
[All outstanding shares of the $4.25 Cumulative Preference Stock,
Series A, were redeemed on June 15, 1979. The provisions of this Division
B-1 were deleted by action of the Directors of the Corporation on July 18,
1979.]
DIVISION B-2
Express Terms of $5.00 Cumulative Preference Stock,
Series B, Convertible on or before June 15, 1982
[All outstanding shares of the $5.00 Cumulative Preference Stock,
Series B, were redeemed on June 15, 1979. The provisions of this Division
B-2 were deleted by action of the Directors of the Corporation on July 18,
1979.]
DIVISION C
Express Terms of Serial Preference Stock II
SECTION 1. The Serial Preference Stock II may be issued from time to
time in one or more series. All shares of Serial Preference Stock II shall
be of equal rank and shall be identical, except in respect of the
particulars that may be fixed and determined by the Board of Directors as
hereinafter provided, and each share of each series shall be identical in
all respects with all other shares of such series, except as to the date
from which dividends are cumulative. All shares of Serial Preference Stock
II shall also be of equal rank and shall be identical with shares of Serial
Preference Stock except in respect of (1) the particulars that may be fixed
and determined by the Board of Directors as hereinafter provided, and (2)
the voting rights and provisions for consents relating to Serial Preference
Stock II, as fixed and determined by Section 6 of this Division. Subject to
the provisions of Sections 2 through 8, inclusive, of this Division, which
provisions shall apply to all Serial Preference Stock II, the Board of
Directors hereby is empowered to cause the same to be issued in one or more
series and with respect to each such series prior to the issuance thereof
to fix and determine:
(a) the designation of the series, which may be by distinguishing
number, letter or title;
6
<PAGE> 8
(b) the number of shares of the series, which number may be
increased (except where otherwise provided by the Board of Directors in
creating the series) or decreased (but not below the number of shares
thereof then outstanding) by like action of the Board of Directors;
(c) the annual dividend rate of the series;
(d) the dates at which dividends, if declared, shall be payable and
the dates from which dividends shall be cumulative;
(e) the redemption rights and price or prices, if any, for shares
of the series;
(f) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(g) the amounts payable on shares of the series in the event of any
liquidation, dissolution or winding up of the affairs of the
Corporation;
(h) whether the shares of the series shall be convertible into
Common Stock, and, if so, the conversion price or prices and the
adjustments thereof, if any, and all other terms and conditions upon
which such conversion may be made; and
(i) restrictions (in addition to those set forth in Section 6(b)
and 6(c) of this Division) on the issuance of shares of the same series
or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Articles of Incorporation of the Corporation fixing and
determining, with respect to each such series, the matters described in
clauses (a) through (i), inclusive, of this Section 1.
SECTION 2. The holders of the Serial Preference Stock II of each
series, in preference to the holders of Common Stock and of any other class
of shares ranking junior to the Serial Preference Stock II, shall be
entitled to receive out of any funds legally available for Serial
Preference Stock II and Serial Preference Stock and when and as declared by
the Board of Directors dividends in cash at the rate for such series fixed
in accordance with the provisions of Section 1 of this Division and no
more, payable quarterly on the dates fixed for such series. Such dividends
shall be cumulative, in the case of shares of each particular series, from
and after the date of issuance thereof or from and after such other date or
dates as may be fixed and determined by the Board of Directors by amendment
to the Articles of Incorporation of the Corporation as provided in Section
1 of this Division. No dividends may be paid upon or declared or set apart
for any of the Serial Preference Stock II for any quarterly dividend period
unless at the same time (i) a like proportionate dividend for the same
quarterly dividend period, ratably in proportion to the respective annual
dividend rates fixed therefor, shall be paid upon or declared or set apart
for all Serial Preference Stock II of all series then issued and
outstanding and entitled to receive such dividend and (ii) the dividend
payable during the same quarterly dividend period upon all Serial
Preference Stock of all series then issued and outstanding at the rate and
upon the date as fixed and determined by the Board of Directors as provided
in Section 1 of Division B hereof shall be paid upon or declared or set
apart for all such Serial Preference Stock entitled to receive such
dividend.
SECTION 3. In no event so long as any Serial Preference Stock II
shall be outstanding shall any dividends, except a dividend payable in
Common Stock or other shares ranking junior to the Serial Preference Stock
II, be paid or declared or any distribution be made except as aforesaid on
the Common Stock or any other shares ranking junior to the Serial
Preference Stock II, nor shall any Common Stock or any other shares ranking
junior to the Serial Preference Stock II be purchased, retired or otherwise
acquired by the Corporation (except out of the proceeds of the sale of
Common Stock or other shares ranking junior to the Serial Preference Stock
II received by the Corporation subsequent to January 1, 1964):
(a) unless all accrued and unpaid dividends on Serial Preference
Stock II, including the full dividends for the current quarterly
dividend period, shall have been declared and paid or a sum sufficient
for payment thereof set apart; and
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<PAGE> 9
(b) unless there shall be no arrearages with respect to the
redemption of Serial Preference Stock II of any series from any sinking
fund provided for shares of such series in accordance with the
provisions of Section 1 of this Division.
SECTION 4.
(a) Subject to the express terms of each series, the Corporation may
from time to time redeem all or any part of the Serial Preference Stock II
of any series at the time outstanding (i) at the option of the Board of
Directors at the applicable redemption price for such series fixed in
accordance with the provisions of Section 1 of this Division, or (ii) in
fulfillment of the requirements of any sinking fund provided for shares of
such series at the applicable sinking fund redemption price fixed in
accordance with the provisions of Section 1 of this Division, together in
each case with accrued dividends to the redemption date.
(b) Notice of every such redemption shall be mailed, postage prepaid,
to the holders of record of the Serial Preference Stock II to be redeemed
at their respective addresses then appearing on the books of the
Corporation, and shall be published at least once in a newspaper of general
circulation in the City of New York, New York, not less than thirty (30)
days nor more than sixty (60) days prior to the date fixed for such
redemption. At any time before or after notice has been given as above
provided, the Corporation may deposit the aggregate redemption price of the
shares of Serial Preference Stock II to be redeemed with any bank or trust
company in the City of Cleveland, Ohio, or the City of New York, New York,
having capital and surplus of more than Five Million Dollars ($5,000,000),
named in such notice, directed to be paid to the respective holders of the
shares of Serial Preference Stock II so to be redeemed, in amounts equal to
the redemption price of all shares of Serial Preference Stock II so to be
redeemed, on surrender of the stock certificate or certificates held by
such holders, and upon the making of such deposit such holders shall cease
to be shareholders with respect to such shares, and after such notice shall
have been given and such deposit shall have been made, such holders shall
have no interest in or claim against the Corporation with respect to such
shares and shall be entitled only to receive such moneys from such bank or
trust company without interest. In case less than all of the outstanding
shares of Serial Preference Stock II are to be redeemed, the Corporation
shall select by lot the shares so to be redeemed in such manner as shall be
prescribed by its Board of Directors.
If the holders of shares of Serial Preference Stock II which shall
have been called for redemption shall not, within six years after such
deposit, claim the amount deposited for the redemption thereof, any such
bank or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company and the
Corporation shall be relieved of all responsibility in respect thereof and
to such holders.
(c) Any shares of Serial Preference Stock II which are redeemed by the
Corporation pursuant to the provisions of this Section 4 and any shares of
Serial Preference Stock II which are purchased and delivered in
satisfaction of any sinking fund requirements provided for shares of such
series and any shares of Serial Preference Stock II which are converted in
accordance with the express terms thereof shall be cancelled and not
reissued. Any shares of Serial Preference Stock II otherwise acquired by
the Corporation shall resume the status of authorized and unissued shares
of Serial Preference Stock II without serial designation.
SECTION 5.
(a) The holders of the Serial Preference Stock II of any series shall,
in case of liquidation, dissolution or winding up of the affairs of the
Corporation, be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be paid or
distributed among the holders of the Common Stock or any other shares
ranking junior to the Serial Preference Stock II, the amounts fixed with
respect to shares of such series in accordance with Section 1 of this
Division, plus an amount equal to all dividends accrued and unpaid thereon
to the date of payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the Corporation. In case the
net assets of the Corporation legally available therefor are insufficient
to permit the payment upon all outstanding shares of Serial Preference
Stock and Serial Preference Stock II of the full preferential amount to
which they
8
<PAGE> 10
are respectively entitled, then such net assets shall be distributed
ratably to all outstanding shares of Serial Preference Stock and Serial
Preference Stock II in proportion to the full preferential amount to which
each such share is entitled.
After payment to holders of Serial Preference Stock II of the full
preferential amounts as aforesaid, holders of Serial Preference Stock II,
as such, shall have no right or claim to any of the remaining assets of the
Corporation.
(b) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property of the
Corporation, shall not be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this Section 5.
SECTION 6.
(a) The holders of Serial Preference Stock II shall be entitled at all
times to one vote for each share, and, except as otherwise provided herein
or required by law, the holders of the Serial Preference Stock II, the
holders of Serial Preference Stock and the holders of Common Stock shall
vote together as one class on all matters, subject, however, to the special
voting rights conferred upon the holders of Serial Preference Stock as
hereinabove provided in Section 6 of Division B hereof.
If, and so often as, the Corporation shall be in default in the
payment of the equivalent of six (6) full quarterly dividends on all shares
of all series of Serial Preference Stock II at the time outstanding,
whether or not earned or declared, the holders of Serial Preference Stock
II of all series, voting separately as a class and in addition to all other
rights to vote for Directors, shall be entitled to elect, as herein
provided, three (3) members of the Board of Directors of the Corporation;
provided, however, that the holders of shares of Serial Preference Stock II
shall not have or exercise such special class voting rights except at
meetings of the shareholders for the election of Directors at which the
holders of not less than thirty-five per cent (35%) of the outstanding
shares of Serial Preference Stock II of all series then outstanding are
present in person or by proxy; and provided further that the special class
voting rights provided for herein when the same shall have become vested
shall remain so vested until all accrued unpaid dividends on the Serial
Preference Stock II of all series then outstanding shall have been paid,
whereupon the holders of the Serial Preference Stock II shall be divested
of their special class voting rights in respect of subsequent elections of
Directors, subject to the revesting of such special class voting rights in
the event hereinabove specified in this Section.
In the event of default entitling the holders of Serial Preference
Stock II to elect three (3) Directors as above specified, a special meeting
of the shareholders for the purpose of electing such Directors shall be
called by the Secretary of the Corporation upon written request of, or may
be called by, the holders of record of at least ten per cent (10%) of the
shares of Serial Preference Stock II of all series at the time outstanding,
and notice thereof shall be given in the same manner as that required for
the annual meeting of shareholders; provided, however, that the Corporation
shall not be required to call such special meeting if the annual meeting of
shareholders shall be held within ninety (90) days after the date of
receipt of the foregoing written request from the holders of Serial
Preference Stock II. At any meeting at which the holders of the Serial
Preference Stock II shall be entitled to elect Directors, the holders of
thirty-five per cent (35%) of the then outstanding shares of Serial
Preference Stock II of all series, present in person or by proxy, shall be
sufficient to constitute a quorum, and the vote of the holders of a
majority of such shares so present at any such meeting at which there shall
be such a quorum shall be sufficient to elect the members of the Board of
Directors which the holders of the Serial Preference Stock II are entitled
to elect as hereinabove provided.
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<PAGE> 11
(b) The consent of the holders of at least two-thirds of the number of
shares of Serial Preference Stock II at the time outstanding given in
person or by proxy, either in writing or at a meeting called for the
purpose at which the holders of the Serial Preference Stock II shall vote
separately as a class, shall be necessary to effect any one or more of the
following (but so far as the holders of Serial Preference Stock II are
concerned, such action may be effected with such consent):
(i) any amendment, alteration or repeal of any of the provisions of
these Articles of Incorporation, as the same may at any time be amended,
or of the Regulations of the Corporation which affects adversely the
voting powers, rights or preferences of the holders of Serial Preference
Stock II or reduces the time for any notice to which the holders of
Serial Preference Stock II may be entitled; provided, however, that
neither the amendment of these Articles of Incorporation, as the same
may at any time be amended, so as to authorize or create, or to increase
the authorized amount of, Serial Preference Stock II or of any shares of
any class ranking on a parity with or junior to the Serial Preference
Stock II, nor the amendment of the provisions of the Regulations so as
to increase the number of Directors of the Corporation, shall be deemed
to affect adversely the voting powers, rights or preferences of the
holders of the Serial Preference Stock II; and provided, further, that
if such amendment, alteration or repeal affects adversely the rights or
preferences of one or more but not all series of Serial Preference Stock
II at the time outstanding, only the consent of the holders of at least
two-thirds of the number of the shares of the series so affected shall
be required;
(ii) the authorization or creation of, or the increase in the
authorized amount of, any shares of any class, or any security
convertible into shares of any class, ranking prior to the Serial
Preference Stock II; or
(iii) the purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Serial Preference Stock II then
outstanding except in accordance with a stock purchase offer made to all
holders of record of Serial Preference Stock II, unless all dividends
upon all Serial Preference Stock II then outstanding for all previous
quarterly dividend periods shall have been declared and paid or funds
therefor set apart and all accrued sinking fund obligations applicable
thereto shall have been complied with.
(c) The consent of the holders of at least a majority of the number of
shares of Serial Preference Stock II at the time outstanding, given in
person or by proxy either in writing or at a meeting called for the purpose
at which the holders of the Serial Preference Stock II shall vote
separately as a class, shall be necessary to effect any one or more of the
following (but so far as the holders of Serial Preference Stock II are
concerned, such action may be effected with such consent):
(i) the sale, lease or conveyance by the Corporation of all or
substantially all of its property or business or the voluntary parting
with the control thereof, or its consolidation with or merger into any
other corporation, unless the corporation resulting from such
consolidation or merger will have after such consolidation or merger no
class of shares either authorized or outstanding ranking prior to or on
a parity with the Serial Preference Stock II except the same number of
shares ranking prior to or on a parity with the Serial Preference Stock
II and having the same rights and preferences as the shares of the
Corporation authorized and outstanding immediately preceding such
consolidation or merger, and each holder of Serial Preference Stock II
immediately preceding such consolidation or merger shall receive the
same number of shares, with the same rights and preferences, of the
resulting corporation; or
(ii) the authorization of any shares ranking on a parity with the
Serial Preference Stock II or an increase in the authorized number of
shares of Serial Preference Stock II.
(d) Neither the consent of, nor any adjustment of the voting rights
of, holders of shares of Serial Preference Stock II shall be required for
an increase in the number of shares of Common Stock authorized or issued or
for stock splits of the Common Stock or for stock dividends on any class of
stock payable solely in Common Stock, and none of the foregoing actions
shall be deemed to affect adversely the voting powers, rights or
preferences of Serial Preference Stock II within the meaning and for the
purpose of this Division C.
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<PAGE> 12
SECTION 7. The holders of the Serial Preference Stock II shall have no
pre-emptive right to purchase or have offered to them for purchase any shares or
other securities of the Corporation, whether now or hereafter authorized.
SECTION 8. For the purposes of this Division C:
Whenever reference is made to shares "ranking prior to the Serial
Preference Stock II", such reference shall mean and include all shares of the
Corporation in respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of an involuntary
liquidation, dissolution or winding up of the Corporation are given preference
over the rights of the holders of Serial Preference Stock II; whenever reference
is made to shares "on a parity with the Serial Preference Stock II", such
reference shall mean and include all shares of Serial Preference Stock and all
other shares of the Corporation in respect of which the rights of the holders
thereof as to the payment of dividends and as to distributions in the event of
an involuntary liquidation, dissolution or winding up of the Corporation rank on
an equality (except as to the amounts fixed therefor) with the rights of the
holders of the Serial Preference Stock II; and whenever reference is made to
shares "ranking junior to the Serial Preference Stock II", such reference shall
mean and include all shares of the Corporation in respect of which the rights of
the holders as to the payment of dividends and as to distributions in the event
of an involuntary liquidation, dissolution or winding up of the Corporation are
junior and subordinate to the rights of the holders of the Serial Preference
Stock II.
DIVISION C-1
Express Terms of Cumulative Serial Preference Stock II,
$4.40 Convertible Series 1
There is hereby established a first series of Serial Preference Stock
II, to which the following provisions shall be applicable:
SECTION 1. Designation of Series. The series shall be designated
"Cumulative Serial Preference Stock II, $4.40 Convertible Series 1" (herein
called "Series 1").
SECTION 2. Number of Shares. The number of shares of Series 1 is
1,735,000, which number from time to time may be increased or decreased
(but not below the number of shares of the series then outstanding) by the
Directors.
SECTION 3. Dividend Rate. The dividend rate for Series 1 is $4.40 per
share per annum.
SECTION 4. Dividend Payment Dates; Cumulation Dates. The dates on
which dividends on shares of Series 1 shall be payable are March 15, June
15, September 15 and December 15 of each year. Dividends on shares of
Series 1 shall be cumulative as follows:
(a) in the case of shares of Series 1 issued on the effective date
of the mergers of IRC, Inc. and United-Carr Incorporated into the
Corporation, dividends shall be cumulative from such effective date;
(b) in the case of shares of Series 1 issued during the period
commencing immediately after the record date for a dividend on shares of
such series and terminating at the close of the payment date for such
dividend, dividends shall be cumulative from such last-mentioned
dividend payment date; and
(c) in all other cases, dividends shall be cumulative from the
dividend payment date next preceding the date of issue of such shares.
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<PAGE> 13
SECTION 5. Redemption Prices. The shares of Series 1 shall not be
redeemable by the Corporation prior to March 15, 1974. Thereafter the
redemption prices for shares of Series 1 shall be as follows:
<TABLE>
<CAPTION>
IF THE REDEMPTION DATE IF THE REDEMPTION DATE
IS DURING 12-MONTH IS DURING 12-MONTH
PERIOD BEGINNING REDEMPTION PERIOD BEGINNING REDEMPTION
MARCH 15 PRICE MARCH 15 PRICE
------------------------- ---------- ------------------------- ----------
<S> <C> <C> <C>
1974..................... $ 112.00 1977..................... $ 106.00
1975..................... 110.00 1978 and thereafter...... 104.00
1976..................... 108.00
</TABLE>
SECTION 6. Liquidation Rights. The amount payable on shares of Series
1 in the event of any voluntary liquidation, dissolution or winding up of
the affairs of the Corporation prior to March 15, 1974 shall be $112.00 per
share and thereafter shall be an amount equal to the redemption price for
shares of Series 1 in effect on the distribution date, and in the event of
any involuntary liquidation, dissolution or winding up of the Corporation
shall be $104.00 per share.
SECTION 7. Conversion Right.
(a) Subject to and upon compliance with the provisions of this Section
7, shares of Series 1 may, at the option of the holder at any time (or, in
the case of shares called for redemption, then until and including the
close of business on the date fixed for redemption but not thereafter if
payment of the redemption price has been duly provided for by the date
fixed for redemption), be converted into shares of Common Stock (as such
shares shall be constituted at the conversion date) at the conversion price
in effect at the conversion date.
(b) The holder of each share of Series 1 may exercise the conversion
privilege in respect thereof by delivering to any transfer agent of Series
1 the share to be converted, accompanied by written notice that the holder
elects to convert such share. Conversion shall be deemed to have been
effected immediately prior to the close of business on the date when such
delivery is made, and such date is referred to in this Section as the
"conversion date". On the conversion date or as promptly thereafter as
practicable, the Corporation shall issue and deliver to the holder of
shares of Series 1 surrendered for conversion, or on his written order, a
certificate for the number of full shares of Common Stock issuable upon the
conversion of such shares of Series 1 and a check or cash in respect of any
fraction of a share as provided in paragraph (c) of this Section 7. The
person in whose name the stock certificate is to be issued shall be deemed
to have become a holder of Common Stock of record on the conversion date.
No adjustment shall be made for any dividends on such shares of Series 1 or
for dividends on the shares of Common Stock issued on conversion.
(c) The Corporation shall not be required to issue fractional shares
of Common Stock upon conversion of shares of Series 1. If more than one
share of Series 1 shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number
of shares so surrendered. If any fractional interest in a share of Common
Stock would be deliverable upon the conversion of any shares of Series 1,
the Corporation shall, in lieu of delivering the fractional share therefor,
make an adjustment therefor in cash at the current market value thereof,
computed on the basis of the last reported sale price of the shares of
Common Stock on the New York Stock Exchange on the last business day before
the conversion date or, if there was no reported sale on that day, on the
basis of the mean of the closing bid and asked quotations on that Exchange
on that day, or, if the Common Stock is not then listed on that Exchange,
on the basis of the mean of the closing bid and asked quotations in the
over-the-counter market on that day, as reported by the National Quotation
Bureau, or similar reporting service.
(d) Unless and until an adjusted conversion price of the Common Stock
is required to be computed as hereinafter provided, the conversion price
for such Common Stock shall be $90.909 per share (this initial conversion
price being herein called the "base conversion price"). The number of
shares of
12
<PAGE> 14
Common Stock issuable upon conversion of one share of Series 1 shall be
determined by dividing $100 by the conversion price then in effect.
(e) The conversion price shall be adjusted from time to time as
follows:
(A) Except as provided in subparagraphs (C), (E) and (F) below,
whenever the Corporation shall issue or sell any Additional Shares as
hereinafter defined for a consideration per share less than the
conversion price then in effect, or without consideration, the
conversion price in effect immediately prior to such issuance shall
forthwith be adjusted as follows:
(1) multiply the base conversion price by the sum of (i) the
total number of shares of Common Stock outstanding (excluding shares
held in the Corporation's treasury) on November 16, 1967 and (ii) the
total number of shares of Common Stock issuable on November 16, 1967
upon conversion of any shares of Serial Preference Stock then
outstanding (the sum of such shares being herein called the "Base
Shares"), then
(2) add to the result so obtained the total consideration
received by the Corporation for all Additional Shares, and then
(3) divide such result by the sum of the number of Base Shares
and the number of Additional Shares, disregarding in the quotient so
obtained fractions of one cent;
provided, however, that such adjustment shall be made only if the
resulting quotient shall be less than the conversion price in effect
immediately prior to the issue or sale of such Additional Shares.
(B) For the purposes of subparagraph (A) above, the following
provisions shall be applicable:
(1) The term "Additional Shares" shall mean all shares of Common
Stock issued by the Corporation (whether or not the consideration
therefor, if any, is less per share than the base conversion price)
in excess of the Base Shares, whether or not subsequently reacquired
or retired by the Corporation, other than:
(i) shares now or hereafter held in the Corporation's
treasury;
(ii) shares issued pursuant to any employees' stock purchase
plan or any employees' stock option plan heretofore or hereafter
adopted or approved by the shareholders of the Corporation and
shares issued pursuant to any employees' stock purchase plan or
employees' stock option agreement heretofore or hereafter assumed
by the Corporation, including in the case of any plan or
agreement covered by this clause (ii) shares of Common Stock
issued upon the conversion of convertible securities so issued;
(iii) except as provided in paragraph (4) below, shares of
Common Stock issued in connection with the acquisition by the
Corporation of the properties, assets and business of another
corporation, firm or other entity as a going concern (whether
such acquisition is by way of a merger, combination or majority
share acquisition or otherwise) and shares of Common Stock issued
upon conversion of any convertible securities issued by the
Corporation in connection with any such acquisition (as used
herein, the terms
"combination" and "majority share acquisition" shall have the
meanings set forth in Section 1701.01 of the Ohio Revised Code);
and
(iv) shares issued by way of dividend or other distribution
on shares of Common Stock excluded from the definition of
Additional Shares by the foregoing clauses (i), (ii) and (iii) or
this clause (iv) or on shares resulting from any subdivision or
combination of shares so excluded.
(2) In case of the issuance or sale of Additional Shares for
cash, the consideration therefor shall be deemed to be the amount of
cash received by the Corporation for such shares (or, if such
Additional Shares are offered by the Corporation for subscription,
the subscription price, or, if such Additional Shares are sold to
underwriters or dealers for public offering without a subscription
offering, the initial public offering price), without deducting
therefrom any
13
<PAGE> 15
compensation or discount in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar
services or for any expenses incurred by the Corporation in
connection therewith.
(3) Subject to the provisions of paragraph (4) below, in the
case of issuance or sale of Additional Shares for a consideration
other than cash, the amount of such consideration shall be deemed to
be the fair value thereof as determined by the Directors of the
Corporation, for purposes of this subparagraph (B), irrespective of
any accounting treatment.
(4) Subject to clause (iii) of this paragraph (4):
(i) any shares of Common Stock issued in connection with any
merger of IRC, Inc. into the Corporation shall constitute
Additional Shares and shall be deemed to have been issued for a
consideration equal to the conversion price in effect immediately
prior to the issuance of such Additional Shares;
(ii) in the case of the issuance of any shares of Preference
Stock II in connection with any merger of United-Carr
Incorporated or IRC, Inc. into the Corporation, any shares of
Common Stock into which such shares of Preference Stock II are
initially convertible shall constitute Additional Shares and
shall be deemed to have been issued at the time of the issuance
of such shares of Preference Stock II for a consideration equal
to the conversion price of Series 1 in effect immediately prior
to the issuance of such shares of Preference Stock II; and
(iii) no shares of Common Stock covered by clauses (i) or
(ii) of this paragraph (4) in excess of an aggregate of 1,221,569
shares (proportionately adjusted to reflect any split or
combination of, or stock dividend paid on, the Common Stock prior
to the effective dates of said mergers) shall at any time
constitute Additional Shares.
(5) In the case of issuance of Additional Shares as a stock
dividend of 15% or less, the shares shall be deemed to have been
issued without consideration at the close of business on the dividend
record date.
(6) Subject to the provisions of paragraph (4) above, in the
case of the issuance of Additional Shares upon conversion or exchange
of other securities of the Corporation, the amount of consideration
received by the Corporation shall be deemed to be the total of (a)
the amount of consideration, if any, received by the Corporation upon
the issuance of such other securities, plus (b) the amount of the
consideration, if any, other than such other securities, received by
the Corporation upon such conversion or exchange. In determining the
amount of the consideration received by the Corporation upon the
issuance of such other securities, the amount of the consideration in
cash and other than cash shall be determined pursuant to paragraphs
(2) and (3) above. If securities of the same class or series of a
class as such other securities were issued for different amounts of
consideration (determined as above provided), or if some were issued
for no consideration, then the amount of the consideration received
by the Corporation upon the issuance of each of the securities of
such class or series, as the case may be, shall be deemed to be the
average amount of the consideration received by the Corporation upon
the issuance of all the securities of such class or series, as the
case may be.
(C) If, at any time after November 16, 1967, the Corporation splits
or combines the outstanding shares of Common Stock, then as of the close
of business on the effective date of such split or combination the
conversion price shall be proportionately decreased in the case of a
split or increased in the case of a combination. A stock dividend of
more than 15% shall be considered a stock split, and the effective date
shall be deemed to be the close of business on the dividend record date.
(D) Whenever the conversion price is adjusted as herein provided,
the Corporation shall forthwith place on file with each transfer agent
of shares of Series 1 a statement signed by the President or a Vice
President of the Corporation and by its Treasurer or an Assistant
Treasurer
14
<PAGE> 16
showing in detail the facts requiring such adjustment and the conversion
price after such adjustment and shall exhibit the same from time to time
to any holder of shares of Series 1 desiring an inspection thereof. The
Corporation shall also cause a notice, stating that such adjustment has
been effected and setting forth the adjusted conversion price, to be
published at least once in a newspaper printed in the English language
and customarily published at least once a day for at least five days in
each calendar week, which shall be of general circulation in the Borough
of Manhattan, the City of New York (herein called an "Authorized
Newspaper").
(E) In the case of the issuance of Additional Shares upon
conversion or exchange of other securities of the Corporation as
provided in paragraph (6) of subparagraph (B) above, the conversion
price shall be adjusted to reflect the issuance of such Additional
Shares only on the 15th day of each calendar month to reflect all such
conversions or exchanges through the preceding calendar month. Upon the
redemption of any shares of Series 1, the conversion price shall be
adjusted to reflect the issuance of such Additional Shares as of a date
not earlier than the close of business on the fifth business day
preceding the mailing of the notice of redemption.
(F) No adjustment of the conversion price shall be made if the
amount of such adjustment shall be less than 50c, but in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment, which, together with all adjustments so
carried forward shall amount to not less than 50c. In case the
Corporation shall at any time split or combine the outstanding shares of
Common Stock, said amount of 50c (as theretofore decreased or increased)
shall forthwith be proportionately decreased in the case of a split or
increased in the case of a combination, so as to appropriately reflect
the same. For this purpose, a stock dividend of more than 15% shall be
considered a split of the outstanding shares.
(f) In case of any reclassification or change of outstanding shares of
Common Stock (except a split or combination, or a change in par value, or a
change from par value to no par value, or a change from no par value to par
value), or in case of any consolidation or merger to which the Corporation
is a party (other than a merger in which the Corporation is the surviving
corporation and which does not result in any reclassification or change of
the outstanding Common Stock of the Corporation except as stated above), or
in case of any sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, lawful
provision shall be made as part of the terms of such reclassification,
change, consolidation, merger, sale or conveyance that the holder of each
share of Series 1 then outstanding shall have the right to convert such
share into the same kind and amount of stock and other securities and
property as would be receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock into which such share might have been converted
immediately prior thereto.
As evidence of the kind and amount of stock or other securities or
property into which shares of Series 1 shall be convertible after any such
reclassification, change, consolidation, merger, sale or conveyance, or as
to the appropriate adjustments of the conversion price applicable with
respect thereto, the transfer agents may accept the certificate of any firm
of independent public accountants (who may be the regular auditors retained
by the Corporation) with respect thereto, who as to questions of law may
request and rely upon an opinion of counsel (who may be counsel for the
Corporation) and in the absence of bad faith upon the part of the transfer
agents, they may conclusively rely thereon, and shall not be responsible or
accountable to any holder of shares of Series 1 for any provision in
conformity therewith, or approved by such firm of independent public
accountants.
(g) The issue of stock certificates on conversions of shares of Series
1 shall be without charge to the converting shareholder for any tax in
respect of the issue thereof. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares in any name other than that of
the holder of the shares of Series 1 converted, and the Corporation shall
not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
15
<PAGE> 17
(h) The Corporation shall at all times reserve and keep available,
free from pre-emptive rights, out of its authorized and unissued stock or
out of shares held in its treasury, for the purpose of effecting the
conversion of shares of Series 1 such number of shares of its Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series 1.
(i) In case at any time:
(1) the Corporation shall pay any dividend upon its Common Stock
payable in shares of its Common Stock and such dividend shall be in
excess of five per cent (5%); or
(2) the Corporation shall authorize the granting to the holders of
its Common Stock of rights to subscribe for or purchase any shares of
any class or of any other rights;
then, in either of said cases, the Corporation shall give written notice,
by first class mail, postage prepaid, to each holder of record of shares of
Series 1 at his address then appearing on the books of the Corporation, of
the record date or of the date on which the transfer books of the
Corporation shall close with respect to such action. Such notice shall be
given at least twenty (20) days prior to the action in question and not
less than ten (10) days prior to the record date or the date on which the
Corporation's transfer books are closed with respect thereto.
(j) In case the Corporation shall pay in any quarter-annual period any
cash dividends upon its Common Stock which in total amount per share will
exceed by fifty per cent (50%) the total amount per share of the cash
dividends paid during the last preceding quarter-annual period, it shall
cause notice thereof to be published at least once in an Authorized
Newspaper.
DIVISION C-2
Express Terms of Cumulative Serial Preference Stock II,
$4.40 Convertible Series 2
[No shares of this series have been issued. The provisions of this
Division C-2 were deleted by action of the Directors of the Corporation on
October 22, 1968.]
DIVISION C-3
Express Terms of Cumulative Serial Preference Stock II,
$4.50 Convertible Series 3
There is hereby established a third series of Serial Preference Stock
II, to which the following provisions shall be applicable:
SECTION 1. Designation of Series. The series shall be designated
"Cumulative Serial Preference Stock II, $4.50 Convertible Series 3" (herein
called "Series 3").
SECTION 2. Number of Shares. The number of shares of Series 3 is
2,120,000, which number from time to time may be increased or decreased
(but not below the number of shares of the series then outstanding) by the
Directors.
SECTION 3. Dividend Rate. The dividend rate for Series 3 is $4.50 per
share per annum.
SECTION 4. Dividend Payment Dates; Cumulation Dates. The dates at
which dividends on Series 3 shall be payable are March 15, June 15,
September 15 and December 15 of each year, but the first dividend payment
date on shares of Series 3 shall be the first payment date occurring at
least 10 days after the date of the initial issue of shares of Series 3.
Dividends on shares of Series 3 shall be cumulative as follows:
(a) in the case of the initial issue of shares of Series 3
dividends shall be cumulative from the date of such initial issue;
16
<PAGE> 18
(b) in the case of shares of Series 3 issued during the period
commencing immediately after such initial issuance date and terminating
immediately after the record date for the first dividend on shares of
Series 3, dividends shall be cumulative from such initial issuance date;
and
(c) in all other cases, dividends shall be cumulative from the
dividend payment date next preceding the date of issue of such shares
unless the shares are issued during the period commencing immediately
after the record date for a dividend on shares of such series and
terminating at the close of the payment date for such dividend in which
case dividends shall be cumulative from the latter payment date.
SECTION 5. Redemption Prices. The shares of Series 3 shall not be
redeemable by the Corporation prior to January 1, 1976. Thereafter the
redemption prices for shares of Series 3 shall be as follows:
<TABLE>
<CAPTION>
IF THE REDEMPTION DATE IF THE REDEMPTION DATE
IS DURING 12-MONTH IS DURING 12-MONTH
PERIOD BEGINNING REDEMPTION PERIOD BEGINNING REDEMPTION
JANUARY 1 PRICE JANUARY 1 PRICE
------------------------- ---------- ------------------------- ----------
<S> <C> <C> <C>
1976..................... $ 105.00 1982..................... $ 102.00
1977..................... 104.50 1983..................... 101.50
1978..................... 104.00 1984..................... 101.00
1979..................... 103.50 1985..................... 100.50
1980..................... 103.00 1986 and thereafter...... 100.00
1981..................... 102.50
</TABLE>
SECTION 6. Liquidation Rights. The amount payable on shares of Series
3 in the event of any voluntary liquidation, dissolution or winding up of
the affairs of the Corporation prior to January 1, 1976 shall be $105 per
share and thereafter shall be an amount equal to the redemption price for
shares of Series 3 in effect on the distribution date, and in the event of
any involuntary liquidation, dissolution or winding up of the Corporation
shall be $40 per share.
SECTION 7. Conversion Right.
(a) Subject to and upon compliance with the provisions of this Section
7, shares of Series 3 may, at the option of the holder at any time (or, in
the case of shares called for redemption, then until and including the
close of business on the date fixed for redemption but not thereafter if
payment of the redemption price has been duly provided for by the date
fixed for redemption), be converted into fully paid and non-assessable
shares (calculated to the nearest 1/100th of a share) of Common Stock at
the rate of 1.862 shares of Common Stock for each share of Series 3.
(b) The holder of each share of Series 3 may exercise the conversion
privilege in respect thereof by delivering to any transfer agent of Series
3 the share to be converted accompanied by written notice that the holder
elects to convert such share. Conversion shall be deemed to have been
effected immediately prior to the close of business on the date when such
delivery is made, and such date is referred to in this Section 7 as the
"conversion date". On the conversion date or as promptly thereafter as
practicable the Corporation shall issue and deliver to the holder of shares
of Series 3 surrendered for conversion, or on his written order, a
certificate for the number of full shares of Common Stock issuable upon the
conversion of such shares of Series 3 and a check or cash in respect of any
fraction of a share as provided in subparagraph (E) of this Section 7. The
person in whose name the stock certificate is to be issued shall be deemed
to have become a holder of Common Stock of record on the conversion date.
No adjustment shall be made for any dividends on such shares of Series 3 or
for dividends on the shares of Common Stock issued on conversion.
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<PAGE> 19
(c) The number of shares of Common Stock and the number of shares of
other classes of stock of the Corporation, if any, into which each share of
Series 3 is convertible shall be subject to adjustment from time to time
only as follows:
(A) In case the Corporation shall at any time or times after June
10, 1968 (1) take a record of the holders of Common Stock for the
purpose of entitling them to receive a dividend declared payable in
shares of Common Stock and thereafter pay such dividend, (2) subdivide
or split the outstanding shares of Common Stock, (3) combine the
outstanding shares of Common Stock into a smaller number of shares or
(4) issue by reclassification of Common Stock any shares of the
Corporation, each holder of a share of Series 3 shall thereafter be
entitled upon the conversion of each share thereof held by him to
receive for each such share the number of shares of the Corporation
which he would have owned or have been entitled to receive in respect
thereof after the happening of the event or events described above which
shall have happened had such share of Series 3 been converted prior to
the happening of such event or events, the adjustment to become
effective immediately at the opening of business on the day next
following (x) the record date for purposes of clause (1), or (y) the day
upon which such subdivision, split, combination or reclassification
shall become effective for purposes of clauses (2), (3) and (4).
(B) In case the Corporation shall at any time or times after June
10, 1968 take a record of the holders of Common Stock for the purpose of
entitling them to receive a distribution of evidences of indebtedness or
stock or other securities or assets (excluding cash dividends payable
out of consolidated earnings or consolidated earned surplus and
distributions of the types specified in clauses (1), (2) and (4) of
subparagraph (A) of this Section 7) or rights or warrants to subscribe
thereto (excluding those referred to in subparagraph (C) of this Section
7), the number of shares of Common Stock into which each share of Series
3 shall thereafter be convertible shall be adjusted by multiplying the
number of shares of Common Stock into which such share of Series 3 was
theretofore convertible by a fraction, of which the numerator shall be
the current market price per share of Common Stock (as defined in
subparagraph (D) of this Section 7) at such record date and of which the
denominator shall be such current market price per share of Common Stock
less the fair market value (as determined by the Directors, whose
determination shall be conclusive) of that portion of such evidences of
indebtedness or stock or other securities or assets so distributed or of
such subscription rights or warrants applicable to one share of Common
Stock. Such adjustment shall be made whenever such distribution is made
or such rights or warrants are issued, as the case may be, and upon such
distribution or issuance shall become effective immediately after the
record date for the determination of shareholders entitled to receive
such distribution or rights or warrants. For purposes of this
subparagraph (B), consolidated earnings or consolidated earned surplus
shall be computed by adding thereto all charges against consolidated
earned surplus on account of dividends paid in shares of Common Stock in
respect of which an adjustment has been made pursuant to subparagraph
(A) of this Section 7, all as determined by the independent public
accountants then regularly auditing the accounts of the Corporation,
whose determination shall be conclusive.
(C) In case the Corporation shall at any time after June 10, 1968
issue rights or warrants to all holders of Common Stock entitling them
(for a period expiring within 60 days after the record date for
determination of shareholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share of Common Stock
(as defined in subparagraph (D) of this Section 7) at such record date,
the number of shares of Common Stock into which each share of Series 3
shall thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which such shares of Series 3 were
theretofore convertible by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase and of which the
denominator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares so offered would purchase at such current market price.
Such adjustment shall be made whenever such rights or warrants are
issued and upon such issuance shall
18
<PAGE> 20
become effective immediately after the record date for the determination
of shareholders entitled to receive such rights or warrants.
(D) For the purpose of any computation under subparagraph (B) or
(C) of this Section 7, the current market price per share of Common
Stock at any date shall be deemed to be the average of the daily closing
prices for the thirty consecutive business days commencing forty-five
business days before the day in question. The closing price for each day
shall be the last reported sales price regular way on the relevant
securities exchange or, if there is no reported sale on such day, the
mean of the reported closing bid and asked quotations on the relevant
securities exchange on the day, or, with respect to any such day when
the Common Stock is not listed on any national securities exchange, the
mean of the closing bid and asked quotations in the over-the-counter
market on such day as reported by the National Quotation Bureau or
similar reporting service. For purposes of this subparagraph (D) and
subparagraph (E) of this Section 7, "relevant securities exchange" shall
mean the New York Stock Exchange unless the Common Stock is not then
listed thereon, in which event it shall mean the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading as determined by the Corporation, which
determination shall be conclusive.
(E) The Corporation shall not be required to issue fractional
shares of Common Stock upon conversion of shares of Series 3. If more
than one share of Series 3 shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares so surrendered. If any fractional interest in
a share of Common Stock would be deliverable upon the conversion of any
shares of Series 3, the Corporation shall in lieu of delivering the
fractional share therefor make an adjustment therefor in cash at the
market value thereof. For such purpose, the market value of a share of
Common Stock shall be the last reported sale price regular way on the
relevant securities exchange on the last business day prior to the
conversion date when the relevant securities exchange is open, or, if
there is no reported sale on such day, the mean of the reported closing
bid and asked quotations on the relevant securities exchange on that
day, or, if the Common Stock is not then listed on any national
securities exchange, the mean of the closing bid and asked quotations in
the over-the-counter market on that day as reported by the National
Quotation Bureau or similar reporting service. This subparagraph (E)
shall not apply for purposes of making adjustments under subparagraphs
(A), (B) and (C) of this Section 7.
(F) No adjustment in the number of shares of Common Stock into
which each share of Series 3 is convertible shall be required unless
such adjustment would require an increase or decrease of at least
1/1000th of a share in the number of shares of Common Stock into which
such share is then convertible; provided, however, that any adjustments
which by reason of this subparagraph (F) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.
(G) Whenever any adjustment is required in the shares into which
each share of Series 3 is convertible, the Corporation shall forthwith
keep available at each of its transfer agencies at which Series 3 is
convertible a statement describing in reasonable detail the adjustment
and the method of calculation used. The Corporation shall also cause a
notice, stating that such adjustment has been effected and setting forth
the adjusted conversion price, to be published at least once in a
newspaper printed in the English language and customarily published at
least once a day for at least five days in each calendar week which
shall be of general circulation in the Borough of Manhattan, the City of
New York (herein called an "Authorized Newspaper").
(H) As evidence of the kind and amount of stock or other
securities, cash or property into which shares of Series 3 shall be
convertible, or as to the appropriate adjustments of the conversion rate
applicable with respect thereto, each transfer agent of Series 3 may
accept the certificate of any firm of independent public accountants
(who may be the regular auditors retained by the Corporation) with
respect thereto, who as to questions of law may request and rely upon an
opinion of counsel (who may be counsel for the Corporation) and in the
absence of bad faith upon the part
19
<PAGE> 21
of the transfer agent, it may conclusively rely thereon, and shall not
be responsible or accountable to any holder of shares of Series 3 for
any provision in conformity therewith, or approved by such firm of
independent public accountants.
(d) The Corporation shall at all times reserve and keep available out
of the authorized but unissued shares of Common Stock the full number of
shares of Common Stock into which all shares of Series 3 from time to time
outstanding are convertible, but shares of Common Stock held in the
treasury of the Corporation may in its discretion be delivered upon any
conversion of shares of Series 3.
(e) The issue of stock certificates on conversions of shares of Series
3 shall be without charge to the converting shareholder for any tax in
respect of the issue thereof. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares in any name other than that of
the holder of the shares of Series 3 converted, and the Corporation shall
not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
(f) In case the total amount of cash dividends paid by the Corporation
in any quarter-annual period on the number of shares of Common Stock into
which each share of Series 3 shall be convertible at the time of such
payment exceeds $1.125, it shall cause notice thereof to be published at
least once in an Authorized Newspaper.
DIVISION C-4
Express Terms of Cumulative
Redeemable Serial Preference Stock II, Series 4
There is hereby established a fourth series of Serial Preference Stock II
to which the following provisions shall be applicable:
SECTION 1. Designation of Series. The series shall be designated
"Cumulative Redeemable Serial Preference Stock II, Series 4" (herein called
"Series 4").
SECTION 2. Number of Shares. The number of shares of Series 4 is
1,145,000, which number from time to time may be increased or decreased
(but not below the number of shares of the series then outstanding) by the
Directors.
SECTION 3. Dividends.
(a) The holders of record of shares of Series 4 shall be entitled to
receive, when and as declared by the Directors in accordance with the terms
hereof, out of funds legally available for the purpose, cumulative
quarterly dividends payable in cash on the first day of January, April,
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of any shares of Series 4 or
any fraction of a share of Series 4, in an amount per share (rounded to the
nearest cent) equal to the lesser of (i) $100.00 and (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions
(other than a dividend payable in shares of Common Stock, or a subdivision
of the outstanding shares of Common Stock, by reclassification or
otherwise), declared on the shares of Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any shares of
Series 4 or any fraction of a share of Series 4. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series 4
were entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of
20
<PAGE> 22
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series 4 from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series 4, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series 4 entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. No dividends shall be paid upon or
declared and set apart for any shares of Series 4 for any dividend period
unless at the same time a dividend for the same dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be
paid upon or declared and set apart for all Serial Preference Stock II of
all series then outstanding and entitled to receive such dividend. The
Directors of the Corporation may fix a record date for the determination of
holders of shares of Series 4 entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 40
days prior to the date fixed for the payment thereof.
SECTION 4. Redemption Rights. Subject to the provisions of Section
6(b)(iii) of Division C of Article Fourth hereof and in accordance with the
provisions of Section 4 of Division C of Article Fourth hereof, the shares
of Series 4 shall be redeemable from time to time at the option of the
Directors of the Corporation, as a whole or in part, at any time, at a
redemption price per share equal to 100 times the then applicable Purchase
Price as defined in that certain rights agreement, dated as of April 24,
1996 between the Corporation and its rights agent (the "Rights Agreement"),
as the same may be amended from time to time in accordance with its terms,
subject to adjustment from time to time as provided in the Rights
Agreement. Copies of the Rights Agreement are available from the
Corporation upon request. In the event less than all of the outstanding
shares of Series 4 are to be redeemed, the Corporation shall select by lot
the shares so to be redeemed in such manner as shall be prescribed by the
Directors of the Corporation.
SECTION 5. Liquidation Rights.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation (hereinafter
referred to as a "Liquidation"), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
Liquidation) to the shares of Series 4, unless, prior thereto, the holders
of shares of Series 4 shall have received at least an amount per share
equal to 100 times the then applicable Purchase Price as defined in the
Rights Agreement, as the same may be amended from time to time in
accordance with its terms, subject to adjustment from time to time as
provided in the Rights Agreement, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not earned or
declared, to the date of such payment, provided that the holders of shares
of Series 4 shall be entitled to receive at least an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share to holders of
shares of Common Stock (the "Series 4 Liquidation Preference").
(b) In the event, however, that the net assets of the Corporation are
not sufficient to pay in full the amount of the Series 4 Liquidation
Preference and the liquidation preferences of all other series of Serial
Preference Stock II, if any, which rank on a parity with the shares of
Series 4 as to distribution of assets in Liquidation, all shares of Series
4 and of such other series of Serial Preference Stock II shall share
ratably in the distribution of assets (or proceeds thereof) in Liquidation
in proportion to the full amounts to which they are respectively entitled.
(c) In the event the Corporation shall at any time declare or pay any
dividend on the shares of Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders
of shares of Series 4 were entitled
21
<PAGE> 23
immediately prior to such event pursuant to the proviso set forth in
paragraph (a) above, shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(d) The merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all of the property or
business of the Corporation, shall not be deemed to be a Liquidation for
the purposes of this Section 5.
SECTION 6. Conversion Right. The shares of Series 4 shall not be
convertible into shares of Common Stock.
DIVISION D
Express Terms of Common Stock
The Common Stock shall be subject to the express terms of the Serial
Preference Stock and any series thereof and to the express terms of the
Serial Preference Stock II and any series thereof. Each share of Common
Stock shall be equal to every other share of Common Stock; and the holders
thereof shall be entitled to one vote for each share of such stock on all
questions presented to the shareholders.
The holders of shares of Common Stock shall have no pre-emptive right
to purchase or have offered to them for purchase any shares of Common Stock
or other securities of the Corporation whether now or hereafter authorized.
Fifth: The Corporation may from time to time, pursuant to authorization by
its Board of Directors and without action by the shareholders, purchase or
otherwise acquire shares of the Corporation of any class; subject, however, to
such limitation or restriction, if any, as is contained in the express terms of
any class of shares of the Corporation outstanding at the time of such purchase
or acquisition.
Sixth: Any and every statute of Ohio hereafter enacted whereby the rights,
powers or privileges of corporations or of the shareholders of corporations
organized under the laws of Ohio are increased or diminished or in any way
affected, or whereby effect is given to the action taken by any number, less
than all, of the shareholders of any such corporation, shall apply to the
Corporation and shall be binding not only upon the Corporation but upon every
shareholder of the Corporation to the same extent as if such statute had been in
force on October 31, 1958, the time of merger of The Ramo-Wooldridge Corporation
into the Corporation.
Seventh: These Amended Articles of Incorporation shall supersede and take
the place of the heretofore existing Articles of Incorporation of the
Corporation and all amendments thereto.
22
<PAGE> 1
Exhibit 11
TRW Inc. and Subsidiaries
-------------------------
COMPUTATION OF EARNINGS PER SHARE - UNAUDITED
---------------------------------------------
(In Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
PRIMARY 1997 1996
- ------- ----- ----
<S> <C> <C>
Earnings from continuing operations $119.2 $102.7
Less preference dividend requirements 0.1 0.1
------- -------
Earnings applicable to common shares
and common share equivalents 119.1 102.6
Earnings from discontinued operations -- 14.3
------- -------
Net earnings applicable to common shares
and common share equivalents $119.1 $116.9
======= =======
Average common shares outstanding 125.2 131.2
Stock options and performance share rights, based on
the treasury stock method using average market price 3.2 3.0
------- -------
Average common shares and common share
equivalents 128.4 134.2
======= =======
Primary earnings per share from continuing operations $0.93 $0.76
Primary earnings per share from discontinued operations -- 0.11
------- -------
Primary earnings per share $0.93 $0.87
======= =======
FULLY DILUTED
- -------------
Earnings from continuing operations applicable
to common shares and common share equivalents $119.1 $102.6
Dividends assuming conversion of other
dilutive securities: (A)
Dilutive preference dividends 0.1 0.1
------- -------
Earnings from continuing operations applicable
to fully diluted shares 119.2 102.7
Earnings from discontinued operations -- 14.3
------- -------
Net earnings applicable to fully diluted shares $119.2 $117.0
======= =======
Average common shares outstanding 125.2 131.2
Common shares assuming conversion of
other dilutive securities: (A)
Dilutive preference shares 1.0 1.1
Stock options and performance share rights,
based on the treasury stock method using
closing market price if higher than
average market price 3.2 3.3
------- -------
Average fully diluted shares 129.4 135.6
======= =======
Fully diluted earnings per share from continuing operations $0.92 $0.76
Fully diluted earnings per share from discontinued operations -- 0.10
------- -------
Fully diluted earnings per share $0.92 $0.86
======= =======
<FN>
(A) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 1,567
<ALLOWANCES> 0
<INVENTORY> 542
<CURRENT-ASSETS> 2,599
<PP&E> 6,051
<DEPRECIATION> 3,425
<TOTAL-ASSETS> 6,150
<CURRENT-LIABILITIES> 2,400
<BONDS> 472
<COMMON> 78
0
0
<OTHER-SE> 2,112
<TOTAL-LIABILITY-AND-EQUITY> 6,150
<SALES> 2,660
<TOTAL-REVENUES> 2,660
<CGS> 2,178
<TOTAL-COSTS> 2,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 195
<INCOME-TAX> 76
<INCOME-CONTINUING> 119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119
<EPS-PRIMARY> .93
<EPS-DILUTED> .92
</TABLE>
<PAGE> 1
Exhibit 99
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
<TABLE>
<CAPTION>
Three Months Years Ended December 31
ended -------------------------------------------------------
March 31, 1997 1996 1995 1994 1993 1992
-------------- ---------- --------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income
taxes $194.6 $302.2(A) $625.5 $435.5 $289.2 $276.4
Unconsolidated affiliates (0.8) 1.4 1.3 (0.6) 0.7 (0.9)
Minority earnings 5.9 11.5 10.8 7.7 1.4 0.1
Fixed charges excluding
capitalized interest 31.5 129.0 137.2 145.3 177.5 208.1
------ ------ ------ ------ ------ ------
Earnings $231.2 $444.1 $774.8 $587.9 $468.8 $483.7
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest expense $19.7 $84.2 $94.7 $104.7 $137.4 $162.1
Capitalized interest 1.0 3.5 5.1 6.6 7.9 12.7
Portion of rents representa-
tive of interest factor 11.8 43.2 41.4 39.2 37.9 45.8
Interest expense of uncon-
solidated affiliates 0.0 1.6 1.1 1.4 2.2 0.2
------ ------ ------ ------ ------ ------
Total fixed charges $32.5 $132.5 $142.3 $151.9 $185.4 $220.8
------ ------ ------ ------ ------ ------
Ratio of earnings to fixed
charges 7.1x 3.4x 5.4x 3.9x 2.5x 2.2x
------ ------ ------ ------ ------ ------
<FN>
(A) The 1996 earnings from continuing operations before income taxes of
$302.2 million includes a charge of $384.8 million as a result of actions
taken in the automotive and space and defense businesses.
</TABLE>
