<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
_____________
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 1-5683
______
USLIFE Corporation
______________________________________________________________________
(Exact name of registrant as specified in its charter)
New York 13-2578598
___________________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Maiden Lane, New York, New York 10038
___________________________________ ___________________
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (212) 709-6000
_______________
NONE
______________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by checkmark 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
_______ _______
The number of shares outstanding of the Registrant's Common Stock as
of August 1, 1996 was 34,332,466.
<PAGE>2
USLIFE Corporation
INDEX
Page No.
________
Part I - Financial Information:
Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995.................... 3
Summary Statements of Consolidated Net Income -
For the Six Months and Three Months Ended
June 30, 1996 and 1995................................. 5
Statements of Consolidated Cash Flows -
For the Six Months Ended June 30, 1996 and 1995........ 6
Notes to Financial Statements.......................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 12
Other Financial Information............................ 28
Part II - Other Information.............................. 29
Signatures............................................... 33
<PAGE>3
<TABLE>
USLIFE Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
June 30, 1996 and December 31, 1995
(Dollar amounts in thousands except per share data)
<CAPTION>
June 30, 1996 December 31, 1995
_____________ _________________
<S> <C> <C>
Assets
______
Cash:
On hand and in demand accounts.............. $ 53,691 $ 63,914
Restricted funds held in escrow, etc. ...... 1,789 1,821
__________ __________
55,480 65,735
__________ __________
Invested assets:
Fixed maturities available for sale, at fair
value (cost, June 30, 1996, $5,690,339;
December 31, 1995, $5,559,322)............. 5,776,937 6,006,864
Equity securities, at fair value (cost,
June 30, 1996, $4,418; December
31, 1995, $4,918).......................... 4,071 4,717
Mortgage loans.............................. 275,997 296,045
Policy loans................................ 283,140 282,179
Real estate................................. 30,953 29,205
Other long term investments................. 19,836 6,241
Short term investments...................... 82,904 69,560
__________ __________
Total invested assets..................... 6,473,838 6,694,811
__________ __________
Total cash and invested assets............ 6,529,318 6,760,546
__________ __________
Deferred policy acquisition costs............. 789,960 718,439
Other receivables (net)....................... 356,724 350,593
Property and equipment (net of accumulated
depreciation of $37,106 at June 30, 1996
and $38,695 at December 31, 1995)........... 10,113 10,495
Prepaid expenses, deferred charges and
other assets............................. 90,807 90,431
__________ __________
Total assets............................. $7,776,922 $7,930,504
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
June December
30, 1996 31, 1995
__________ __________
<S> <C> <C>
Liabilities and Equity Capital
______________________________
Liabilities:
Future policy benefits................................... $1,681,341 $1,638,427
Policyholder account balances............................ 3,783,938 3,787,546
Supplementary contracts without life contingencies....... 38,793 28,775
Policyholder dividend accumulations...................... 20,348 20,419
Policy and contract claims............................... 185,530 177,739
Other policy and contract liabilities.................... 32,122 32,435
Notes payable............................................ 311,400 222,900
Long term debt........................................... 299,562 349,493
Federal income taxes (current and deferred).............. 14,518 118,956
Accounts payable and accrued liabilities................. 271,109 239,642
__________ __________
Total liabilities................................... 6,638,661 6,616,332
__________ __________
Deferred income.......................................... 5,369 5,918
__________ __________
Equity Capital:
Preferred stock, $4.50 Series A Convertible, $1.00
par value; authorized and outstanding, 4,406
shares (December 31, 1995, 4,480 shares)........... 441 448
Preferred stock, $5.00 Series B Convertible, $1.00
par value; authorized and outstanding, 1,788
shares (December 31, 1995, 1,852 shares)........... 89 93
Preferred stock, undesignated, $1.00 par value;
authorized 10,793,806 shares, issued; none
(December 31, 1995; none).......................... 0 0
Common stock, par value $1.00 per share, authorized
120,000,000 shares, issued: 57,470,534 shares
(December 31, 1995, authorized 60,000,000 shares,
issued 57,468,882 shares........................... 57,471 57,469
Paid-in surplus.......................................... 119,193 117,512
Net unrealized gains on securities....................... 17,877 195,450
Retained earnings........................................ 1,290,364 1,284,306
__________ __________
1,485,435 1,655,278
Less: Treasury stock, at cost - June 30, 1996:
23,156,284 Common shares; December 31, 1995:
22,997,693 Common shares........................ 346,876 339,662
Deferred compensation............................. 5,667 7,362
__________ __________
Total Equity Capital..................................... 1,132,892 1,308,254
__________ __________
Total liabilities and Equity Capital..................... $7,776,922 $7,930,504
========== ==========
Equity Capital per share................................. $32.53 $37.47
====== ======
</TABLE>
<PAGE>5
<TABLE>
USLIFE Corporation and Subsidiaries
Summary Statements of Consolidated Net Income (Unaudited)
For the Six Months and Three Months Ended June 30, 1996 and 1995
(Amounts in thousands except per share)
<CAPTION>
Six Months Ended June 30 Three Months Ended June 30
____________________________ ____________________________
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES:
Premiums.................................................. $ 512,229 $ 489,221 $ 267,259 $ 256,485
Other considerations...................................... 110,738 114,514 56,037 56,630
Net investment income..................................... 249,253 242,148 125,107 121,810
Realized gains (losses) on investments.................... (570) 467 (1,136) 70
Other income.............................................. 23,915 15,670 12,896 8,196
__________ __________ __________ __________
Total revenues......................................... 895,565 862,020 460,163 443,191
__________ __________ __________ __________
BENEFITS AND EXPENSES:
Benefits to policyholders and beneficiaries (Note 6)...... 393,630 356,428 203,157 175,901
Commissions, net of deferred expenses..................... 83,613 74,127 39,834 36,725
Other expenses and taxes, net of deferred expenses........ 99,445 92,259 51,412 46,702
Increase in liability for future policy benefits.......... 43,269 56,091 29,743 39,985
Interest credited to policyholder account balances........ 100,459 103,280 50,174 52,327
Amortization of deferred policy acquisition costs (Note 6) 120,577 81,726 81,460 40,743
Interest expense.......................................... 19,598 19,631 9,831 9,960
Dividends to policyholders................................ 1,823 1,694 920 833
__________ __________ __________ __________
Total benefits and expenses............................ 862,414 785,236 466,531 403,176
__________ __________ __________ __________
Income (loss) before Federal income taxes.................... 33,151 76,784 (6,368) 40,015
Provision for income taxes................................... 11,030 26,327 (2,298) 13,848
__________ __________ __________ __________
Net income (loss)............................................ $ 22,121 $ 50,457 $ (4,070) $ 26,167
========== ========== ========== ==========
Net income (loss) per share................................. $ .63 $ 1.46 $ (.12) $ .76
========== ========== ========== ==========
Dividends per share:
Common................................................... $ .46666 $ .44 $ .23333 $ .22
=========== ========== =========== ==========
Preferred Series A....................................... $ 2.25 $ 2.25 $ 1.125 $ 1.125
=========== ========== =========== ==========
Preferred Series B....................................... $ 2.50 $ 2.50 $ 1.25 $ 1.25
=========== ========== =========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>6
<TABLE>
USLIFE Corporation and Subsidiaries
Statements of Consolidated Cash Flows (Unaudited)
For the Six Months Ended June 30, 1996 and 1995
(Amounts in Thousands)
<CAPTION>
Six Months Ended June 30
____________________________
1996 1995
____ ____
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 22,121 $ 50,457
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in liability for future policy benefits........ 41,761 48,114
Interest credited to policyholder account balances.... 100,459 103,280
Amounts assessed from policyholder account balances... (87,807) (79,683)
Additions to deferred policy acquisition costs........ (113,724) (116,432)
Amortization of deferred policy acquisition costs..... 120,577 81,726
Additions to deferred charges......................... (3,114) (3,001)
Deferred Federal income taxes......................... (10,944) (2,284)
Depreciation and amortization......................... 6,188 6,482
Change in amounts due policyholders................... 20,334 4,613
Change in other liabilities and amounts receivable.... 33,206 (6,236)
Net realized capital losses (gains)................... 570 (467)
Change in restricted cash............................. 32 (875)
Change in current Federal income tax liability........ 2,123 341
Other, net............................................ (1,822) (4,101)
___________ ___________
Total adjustments................................ 107,839 31,477
___________ ___________
Net cash provided by operating activities... 129,960 81,934
___________ ___________
Cash flows from investing activities:
Change in policy loans.................................. (961) (969)
Proceeds from investments sold, redeemed or matured:
Fixed maturities.................................... 276,201 230,045
Equity securities................................... 480 291
Mortgage loan principal receipts.................... 24,524 26,236
Real estate......................................... 178 8,276
Other long term investments......................... 754 583
Expenditures for property and equipment................. (2,077) (1,893)
Cost of investments purchased:
Fixed maturities.................................... (403,126) (461,103)
Mortgage loans...................................... (7,915) (5,706)
Real estate......................................... (390) (814)
Other long term investments......................... (15,019) (15)
Net sales or (purchases) of short term investments.. (13,344) 44,346
Other, net............................................ 96 1,736
___________ ___________
Net cash used in investing activities....... (140,599) (158,987)
___________ ___________
Cash flows from financing activities:
Increase in notes payable............................. 88,500 31,200
Repayment of long term debt........................... (50,000) --
Dividends to shareholders............................. (16,063) (15,110)
Acquisition of treasury stock......................... (9,139) (4,548)
Change in policyholder account balances............... (16,360) 58,988
Other, net............................................ 3,478 4,199
___________ ___________
Net cash provided by financing activities... 416 74,729
___________ ___________
Net change in cash.................................. (10,223) (2,324)
Cash at beginning of year............................. 63,914 51,878
___________ ___________
Cash at end of period................................. $ 53,691 $ 49,554
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>7
USLIFE Corporation and Subsidiaries
Notes to Financial Statements
Note 1. New Accounting Principle
Effective as of January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The Statement requires that long-lived assets
such as property and equipment, and certain intangible assets, be
reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be recoverable. When
recoverability standards specified in the Statement are not met,
a writedown of the covered assets may be required. The Statement
does not apply to various classes of assets including the
Company's investment securities and deferred policy acquisition
costs, which will continue to be evaluated based on previously
established accounting standards. The adoption of this Statement
did not have a material impact on the Company's reported
financial position or results of operations.
Note 2. Investments
The Company's investment management policies include continual
monitoring and evaluation of securities market conditions and
circumstances relating to its investment holdings which may
result in the selection of investments for sale prior to
maturity. Securities may also be sold as part of the Company's
asset/liability management strategy in response to changes in
interest rates, resultant prepayment risk, and similar factors.
Accordingly, the Company's entire fixed maturity portfolio (bonds
and redeemable preferred stocks) is classified as "available for
sale" and is carried in the accompanying consolidated balance
sheets at fair value. The Company's investments in non-
redeemable preferred stocks and common stocks ("equity
securities") are carried at fair value in the accompanying
consolidated balance sheets. Unrealized gains and losses on
available-for-sale securities, other than those relating to a
reduction in value determined to be other than temporary, are
recorded through direct charges or credits to Equity Capital.
<PAGE>8
Equity Capital at June 30, 1996 and December 31, 1995 includes
net unrealized gains and losses on available-for-sale securities
as follows:
<TABLE>
<CAPTION>
June 30, December
1996 31, 1995
_________ __________
(Amounts in Thousands)
<S> <C> <C>
Fixed maturities:
Fair value..................................... $5,776,937 $6,006,864
Adjusted cost.................................. 5,690,339 5,559,322
__________ __________
Unrealized gain................................ 86,598 447,542
__________ __________
Equity securities:
Fair value..................................... 4,071 4,717
Adjusted cost.................................. 4,418 4,918
__________ __________
Unrealized loss................................ (347) (201)
__________ __________
Total unrealized gain............................ 86,251 447,341
__________ __________
Related adjustments:
Deferred policy acquisition costs.............. (57,552) (135,926)
Policyholder liabilities....................... (1,195) (10,721)
Deferred federal income tax liability.......... (9,627) (105,244)
__________ __________
(68,374) (251,891)
__________ __________
Net unrealized gain on securities included
in Equity Capital.............................. $ 17,877 $ 195,450
========== ==========
</TABLE>
Short term investments are carried at cost, which approximates
fair value. Real estate is carried at the lower of depreciated
cost or net realizable value. Depreciation is calculated on a
straight line basis with useful lives varying based on the type
of building. Policy loans and mortgages, other than those with a
decline in value determined to be other than temporary, are
stated at the aggregate of unpaid principal balances. Other long
term investments are stated at the lower of cost or estimated net
realizable value.
At June 30, 1996, consolidated invested assets included $268
million (at fair value; adjusted cost $275 million) of less than
investment grade corporate securities, based on ratings assigned
by recognized rating agencies and insurance regulatory
authorities. Based on fair value, these securities represent 3%
of consolidated total assets at that date. Approximately $5
million of these investments (at fair value; adjusted cost $4
million) are in default at June 30, 1996. Also at June 30, 1996,
the book value of mortgage loans included in consolidated total
assets which were 60 days or more delinquent or in foreclosure
was approximately $4 million, and the book value of property
acquired through foreclosure of mortgage loans was approximately
$21 million.
<PAGE>9
Note 3. Equity Capital Per Share
Equity Capital per share was determined by dividing total Equity
Capital by the number of common shares and common equivalent
shares outstanding at the end of the period. The number of
common shares and common equivalent shares for this purpose has
been determined on the same basis as that for income per share
(see Note 4 of Notes to Financial Statements), except amounts are
based on the number of shares outstanding at the end of the
period. As of June 30, 1996 and December 31, 1995, the number of
such shares used for this purpose was 34.830 million and 34.918
million, respectively.
Note 4. Income Per Share
Income per share was computed by dividing the income applicable
to common and common equivalent shares by the weighted average
number of common and common equivalent shares outstanding during
each period. The weighted average number of common and common
equivalent shares was determined by using the average number of
common shares outstanding during each period, net of reacquired
(treasury) shares from the date of acquisition; by converting the
shares of the Series A and Series B Preferred Stock to their
equivalent common shares, and (in periods for which net income is
reported) by calculating the number of shares issuable on
exercise of those common stock options with exercise prices lower
than the market price of the common stock, reduced by the number
of shares assumed to have been purchased with the proceeds from
the exercise of the options. Fully diluted income per share is
the same as income per share data indicated. The following table
sets forth the computations of net income (loss) per share for
the six and three month periods ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
__________________ __________________
1996 1995 1996 1995
____ ____ ____ ____
(Shares and Amounts in Thousands
except Per Share data)
<S> <C> <C> <C> <C>
Net income (loss).................................. $ 22,121 $ 50,457 $ (4,070) $ 26,167
======== ======== ======== ========
Weighted average common shares
outstanding, net of treasury shares.............. 34,383 34,307 34,321 34,342
Add - common share equivalents of:
Preferred Stock - Series A....................... 53 54 53 54
Preferred Stock - Series B....................... 21 22 21 22
Outstanding stock options - treasury stock method 441 276 -- 231
______ ______ ______ ______
Total common shares and common equivalent shares... 34,898 34,659 34,395 34,649
====== ====== ====== ======
Net income (loss) per share........................ $ .63 $ 1.46 $ (.12) $ .76
====== ====== ====== ======
</TABLE>
<PAGE>10
Note 5. Reinsurance
The Company's life insurance subsidiaries reinsure with other
companies portions of the risks they underwrite and assume
portions of risks on policies underwritten by other companies.
The life insurance subsidiaries generally reinsure risks over
$1.5 million as well as selected risks of lesser amounts.
Amounts paid for or recoverable under reinsurance contracts are
included in total assets as reinsurance receivable or recoverable
amounts. The cost of reinsurance related to long-duration
contracts is accounted for over the life of the underlying
reinsured policies using assumptions consistent with those used
to account for the underlying policies. Reinsurance contracts do
not relieve the Company from its obligations to policyholders,
and the Company is contingently liable with respect to insurance
ceded in the event any reinsurer is unable to meet the
obligations which have been assumed. Reinsurance receivable and
recoverable amounts included in "Other receivables" in the
accompanying consolidated balance sheets are as follows:
June 30, December
1996 31, 1995
_________ _________
(Amounts in Thousands)
Reinsurance receivables - paid claims... $ 6,255 $ 8,568
Other reinsurance recoverable amounts... 137,083 138,146
________ ________
$143,338 $146,714
======== ========
The effect of reinsurance on premiums, other considerations, and
benefits to policyholders and beneficiaries, is as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30 Three Months Ended June 30
___________________________ ___________________________
1996 1995 1996 1995
________ ________ ________ ________
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Premiums, before reinsurance ceded......... $551,145 $526,276 $288,005 $275,480
Premiums ceded............................. 38,916 37,055 20,746 18,995
________ ________ ________ ________
Net premiums............................... $512,229 $489,221 $267,259 $256,485
======== ======== ======== ========
Other considerations, before reinsurance
ceded................................... $120,088 $122,429 $ 60,763 $ 60,515
Other considerations ceded................. 9,350 7,915 4,726 3,885
________ ________ ________ ________
Net other considerations................... $110,738 $114,514 $ 56,037 $ 56,630
======== ======== ======== ========
Benefits to policyholders and beneficiaries,
before reinsurance recoveries............ $417,858 $379,926 $217,938 $186,984
Reinsurance recoveries..................... 24,228 23,498 14,781 11,083
________ ________ ________ ________
Benefits to policyholders and beneficiaries,
net of reinsurance recoveries............ $393,630 $356,428 $203,157 $175,901
======== ======== ======== ========
</TABLE>
<PAGE>11
Note 6. Charge Relating to Traditional Indemnity Group
Major Medical and Related Products
On January 29, 1996, the Company announced that its subsidiary,
The United States Life Insurance Company, would discontinue new
sales of traditional indemnity major medical products. Further,
it would only offer major medical coverage through managed care
plans in selected markets where it has both a significant
presence and an appropriate managed care network in place, while
continuing to provide full support and service to all existing
indemnity customers regardless of location. Concurrently, the
Company announced that it would carefully monitor persistency
experience of its group insurance lines in order to determine
whether financial statement adjustments would become necessary.
Recoverability of deferred policy acquisition costs depends on
future revenues and gross profits from the business to which it
relates. Evaluation of this asset, as well as the reserve for
policy benefits, requires assumptions as to the amount and timing
of these future revenues and gross profits. The Company's
continuing study disclosed that persistency on this business
deteriorated to a point that a revision in assumptions was
necessary.
As announced by the Company on May 22, 1996, USLIFE's financial
statements for the second quarter of 1996 reflect a pre-tax
charge of $49.6 million to recognize revised assumptions
reflecting current experience on its traditional indemnity group
major medical and related products. The charge includes a $37.2
million writedown of deferred policy acquisition costs on this
block of business and a related adjustment of the reserve for
policy benefits amounting to $12.4 million which is included in
"Benefits to policyholders and beneficiaries" in the accompanying
statements of consolidated net income. The charge, on an after-
tax basis, amounts to $32.3 million or 93 cents per share.
Note 7. Refinancing Transaction
In June 1996, the Company redeemed its $50 million issue of 9.15%
Notes due 1999, without penalty. The issue was initially
refinanced utilizing $50 million of short term bank borrowings
under a revolving credit agreement which expires in February
1997.
<PAGE>12
USLIFE Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition
___________________
The liquidity requirements of the Company are met primarily
by cash flows from operations of the life insurance
subsidiaries and accumulated funds at the subsidiary level.
These internal sources of liquidity are complemented by such
external sources as available bank lines of credit and
revolving credit agreements and the ability of the Company
to utilize capital markets for intermediate and long-term
financing.
Premium and investment income as well as maturities and
sales of invested assets provide the primary sources of cash
available for liquidity requirements at the life insurance
subsidiaries, while cash is applied by such subsidiaries to
payment of policy benefits and loans, costs of acquiring new
business (principally commissions), and operating expenses,
as well as purchases of new investments. Excluding the
impact of changes in accounts payable and receivable and
amounts due policyholders, all of which are subject to
random fluctuations from the timing of securities
transaction settlements, claims payments and similar
matters, net cash provided by operating activities of the
life insurance subsidiaries for the first half of 1996 was
$96 million.
On a consolidated basis, net cash provided by operating
activities amounted to $130 million for the first half of
1996, compared to $82 million for the corresponding period
of 1995. As indicated above, these amounts reflect changes
in accounts that are subject to random timing fluctuations.
Excluding the impact of changes in these accounts, net cash
provided by consolidated operating activities amounted to
$76 million in the first half of 1996 versus $84 million in
the corresponding 1995 period.
Cash flows from operating activities for the first half of
1996 included $42 million from the change in liability for
future policy benefits, versus $48 million in the
corresponding 1995 period. The decrease reflected reduced
levels of sales for traditional individual life insurance
products and single premium immediate annuities during the
1996 period, in comparison to the first half of 1995. These
factors more than offset the impact of greater written
premiums on credit life and disability products in the first
<PAGE>13
half of 1996 versus the comparable year-ago period. The
reduction of the liability for future policy benefits
resulting from attrition of traditional indemnity group
major medical business during the first half of 1996 was
approximately offset by reserve strengthening for the
remaining policies in force. See Note 6 of Notes to
Financial Statements for further information.
Interest credited to policyholder account balances amounted
to $100 million in the first half of 1996, versus $103
million reported for the corresponding 1995 period. The
decrease resulted primarily from surrenders of single
premium deferred annuities sold in 1991 that reached the end
of their surrender charge period in 1996, together with
reductions in credited rates of interest on the Company's
deferred annuities in force. As a result of these
surrenders, which were generally consistent with expected
levels, the portion of policyholder account balances
relating to individual annuities declined $125 million, from
$1.82 billion at June 30, 1995 to $1.69 billion at June 30,
1996. The portion of policyholder account balances relating
to universal life insurance contracts increased
approximately $185 million during that same one year period.
The impact of this increase in the base of universal life
insurance in force was essentially offset by reductions in
rates of interest credited that were implemented during 1995
and continuing into 1996, as discussed under "Results of
Operations."
Interest rates credited on universal life and individual
deferred annuity contracts may be adjusted periodically by
the Company. Subject to any applicable surrender charges,
the Company's universal life insurance products and
individual deferred annuities may be surrendered by the
holder. A cash surrender value, based on contractual terms,
is also available to the policyholder upon surrender of many
of the Company's traditional individual life insurance
policies under which cash values are accumulated. Such
surrenders are influenced by various factors including
economic conditions, available alternative investment
returns, competition for investment and insurance funds, and
perceived financial strength of the insurer. These
contracts are generally supported by the Company's
investment portfolios, which are primarily comprised of
investment grade, publicly traded corporate bonds.
Substantially all of the Company's interest sensitive life
insurance and annuity contracts provide for imposition of a
surrender charge in the event of policy surrender during a
specified initial period commencing with contract inception,
typically ten to fifteen years for universal life insurance
and five to seven years for individual annuities, with the
significance of this charge generally subject to reduction
<PAGE>14
over the applicable period or during the later portion
thereof.
The Company's investment portfolios are continually
monitored to determine whether the distribution of
investment maturities is considered appropriate for expected
levels of policy surrenders. The Company's fixed maturity
investments may be sold prior to maturity as part of the
Company's asset/liability management strategy and are
classified as "available for sale." Adjustments to the
investment maturity distribution, if necessary, may also be
accomplished by actions concerning the investment of
incoming funds and/or reinvestment of the proceeds of
securities matured or redeemed.
The Company monitors its surrenders on a monthly basis. Any
material deviation or emerging trend is traced to the
product line and agency of record, and remedial action is
taken where appropriate. If an acceleration of surrenders
were experienced, the cash flow requirements associated with
such surrenders could require the Company to liquidate a
portion of the underlying security investments prior to
maturity, at then-prevailing market prices. The sources of
liquidity described earlier would be applied toward any
further cash flow requirements.
For the first half of 1996, amortization of deferred policy
acquisition costs amounted to $121 million, reflecting the
impact of a charge relating to traditional indemnity group
major medical products as discussed in Note 6 of Notes to
Financial Statements. Absent the impact of this charge, net
additions to deferred policy acquisition costs amounted to
$30 million in the first half of 1996 versus $35 million in
the corresponding 1995 period. The decrease reflects
various factors including a lower level of individual life
insurance sales during the 1996 period. New annualized
premiums from individual life insurance sales amounted to
$64 million for the first half of 1996 versus $71 million in
the corresponding 1995 period.
Net cash used in investing activities amounted to $141
million in the first half of 1996, compared to $159 million
in the corresponding 1995 period. Individual annuity
surrenders, which have a negative impact on net funds
available to invest, amounted to $146 million during the
first half of 1996 versus $118 million during the
corresponding 1995 period. The major portion of these
surrenders related to annuities for which deferred policy
acquisition costs were substantially amortized, or resulted
in the imposition of a surrender charge by the Company as
contractually permitted. Consequently, these surrenders did
not have an adverse impact upon consolidated results of
operations.
<PAGE>15
As of June 30, 1996, approximately 14% of the Company's
deferred annuity contracts (versus 9% at December 31, 1995),
based on policyholder account balances, were beyond the
contractual period during which a significant charge could
be imposed in the event of termination. Based on the
Company's significant 1991 sales of individual annuities
with five year surrender charge periods, with gross deposits
that year totalling approximately $500 million, a further
increase in the proportion of annuity contracts beyond the
surrender charge period is anticipated during the balance of
1996. The Company's asset / liability management strategies
have contemplated the expected surrender pattern for these
annuities, and based on cash flow testing the Company
believes that its distribution of investments is appropriate
for the cash requirements associated with the expected level
of surrenders.
Disposals of fixed maturity investments included in cash
flows from investing activities for the first half of 1996
and 1995 totalled $276 million and $230 million,
respectively. These disposals included, respectively, $64
million and $37 million (at cost) of securities which were
called for redemption by the respective issuers prior to
maturity. Fixed maturity disposals also reflected sales of
certain securities as part of the Company's asset/liability
management strategy with objectives including maintenance of
an appropriate relationship of asset yields and maturities
to current policy liabilities, as well as maintenance of
issuer diversification. Substantially all of the proceeds
from fixed maturities sold or redeemed and available for
reinvestment were directed to investment grade fixed
maturity investments.
Net cash flows provided by consolidated financing activities
amounted to $416 thousand in the first half of 1996 versus
$75 million in the corresponding 1995 period, reflecting a
variance of approximately $75 million from policyholder
account balance activity included therein. The primary
causes of this variance were a decline in single premium
deferred annuity gross deposits from $73 million in the
first half of 1995 to $13 million in the 1996 period, and
the impact of increased annuity surrenders in the 1996
period as previously discussed. The decrease in annuity
deposits is attributed to various factors including the
negative impact on sales of lower interest rates offered on
these contracts during the 1996 period versus a year ago.
During the first half of 1996, the Company acquired
approximately 312,000 shares of its common stock (including
232,000 shares purchased under a repurchase program at a
total cost of $7 million and the remainder relating to
benefit plans). The purchases were financed primarily by
selective sales of bonds in the parent company investment
portfolio.
<PAGE>16
The increase in notes payable for the first half of 1996
includes $50 million of short term bank borrowings relating
to the June 1996 refinancing of the Company's $50 million
issue of 9.15% notes due 1999 as discussed in Note 7 of
Notes to Financial Statements. The remainder of the 1996
period increase in notes payable, as well as the $31 million
increase for the 1995 period, related primarily to working
capital requirements. Cash dividends are typically remitted
by the life insurance subsidiaries to the parent company
during the fourth quarter. Historically, a major portion of
these dividends has been applied toward reduction of short
term debt incurred for working capital purposes during the
earlier part of the year.
At June 30, 1996, the Company had lines of credit with seven
banks amounting to $60 million, all of which was unused.
However, at that date, the Company had outstanding short
term borrowings with five banks, negotiated independently of
such lines to take advantage of more favorable interest
rates, in the aggregate amount of $111 million. The
Company's short term borrowings also include $150 million
outstanding under a revolving credit agreement with The Bank
of New York (as agent) and $50 million outstanding under a
revolving credit agreement with Chemical Bank.
The Bank of New York credit agreement, which was renewed in
April 1996, provides for term borrowings in segments of up
to six months with interest indexed to the LIBOR borrowing
rate or based on certain alternative interest rates at the
option of the Company. USLIFE has the option to prepay
amounts borrowed under the credit agreement, in whole or in
part, and to reborrow loans thereunder provided the total
amount of outstanding borrowings does not exceed $150
million. All borrowings under the revolving credit
agreement must mature no later than April 10, 1999. The
Chemical Bank revolving credit agreement expires in February
1997 and provides for borrowings up to $100 million.
The Company's short term borrowings are utilized primarily
for working capital requirements.
Long term debt at June 30, 1996 includes a $150 million non-
callable issue of 6.75% Notes due 1998 and a $150 million
non-callable issue of 6.375% Notes due 2000. The Company
has filed a shelf registration statement which permits the
issuance of up to $150 million principal amount of debt
securities subject to management's discretion as to timing
and amount of issues thereunder.
While it is currently anticipated that the major portion of
the Company's outstanding debt will be repaid using bank
borrowings or the net proceeds of debt and/or equity or
combination securities to be issued at future dates,
<PAGE>17
determination of the timing and amount of such repayments,
borrowings and securities issues will be dependent upon
future market conditions, future cash flows, and other
unforeseen circumstances.
Results of Operations
_____________________
Six Months Ended June 30, 1996 compared to
Six Months Ended June 30, 1995
For the six months ended June 30, 1996, net income amounted
to $22.1 million versus $50.5 million for the comparable
period of 1995.
Net income for the first half of 1996 reflects a pre-tax
charge of $49.6 million, equivalent to $32.3 million on an
after-tax basis, to recognize revised assumptions reflecting
current experience on the Company's traditional indemnity
group major medical and related products as discussed in
Note 6 of Notes to Financial Statements. The Company's
group insurance product lines are discussed further below.
Net income for the first half of 1996 also included net
capital losses with an after-tax impact of $371 thousand,
while first half 1995 net income included net capital gains
with an after-tax impact of $303 thousand. Capital gains
and losses during the first half of 1996 reflect the
disposal of non-performing securities and real estate
properties with adjusted cost of approximately $3 million.
Capital gains and losses during the first half of 1995
reflect disposals of non-performing securities with adjusted
cost of approximately $12 million, as well as several real
estate properties that were acquired through foreclosure,
with aggregate cost of approximately $19 million. Reserves
had been previously recorded to recognize reduction in value
of these investments.
Excluding the charge relating to traditional indemnity group
major medical products, and capital gains and losses as
discussed above, consolidated after-tax income amounted to
$54.8 million for the first half of 1996 versus $50.2
million for the corresponding 1995 period. On a similar
basis, after-tax income of the life insurance subsidiaries
other than the aforementioned items was $76.6 million in the
1996 period compared to $71.0 million in the first half of
1995. Also on a similar basis, after-tax corporate charges
(including the operating results of USLIFE's servicing
units) amounted to $21.8 million in the first half of 1996
versus $20.9 million for the comparable 1995 period.
<PAGE>18
Before capital gains and losses and the pre-tax charge of
$49.6 million discussed above, the life insurance
subsidiaries reported a pre-tax profit of $116.4 million for
the first half of 1996, versus $107.9 million in the
corresponding 1995 period. This comparison of first half
results benefited from an increase of $4.2 million in pre-
tax profits from the individual life insurance and annuity
product line. Also, apart from the impact of the charge
discussed above, results from traditional indemnity and
related products for the second quarter of 1996 were
approximately at a break-even level. With the curtailment
of losses from traditional indemnity products and actions
taken to move from traditional indemnity major medical
products to current generation group insurance products,
pre-tax results of operations from the Employer /
Association Group lines had a favorable impact of $1.9
million on the latter comparison.
A discussion of the Company's various product lines,
excluding the impact of the previously discussed charge for
traditional indemnity major medical and related business and
capital gains and losses, follows.
Individual life and annuity pre-tax profits, including
income attributable to capital and surplus, amounted to
$107.2 million for the first half of 1996 versus $103.0
million for the corresponding 1995 period. The increase of
approximately $4 million or 4% came primarily from greater
gains from investment income, reflecting reductions in rates
of interest credited on interest sensitive policies in force
as well as an increased base of individual life insurance
business. Mortality experience was favorable during the
first half of 1996 and contributed to the overall pre-tax
profit reported for the period, but this contribution was to
a lesser degree than the first half of 1995.
Written premiums from credit life insurance products
increased from $35 million in the first half of 1995 to $41
million in the 1996 period, reflecting increased sales
through financial institutions. Pre-tax profits on credit
insurance products are anticipated to be realized when
currently written premiums are earned in future periods
rather than during the period of sale. A pre-tax profit of
$295 thousand was reported for credit life insurance
coverages for the first half of 1996, versus $215 thousand
in the corresponding 1995 period. It should be noted that
credit life insurance coverages are often sold in
conjunction with credit disability insurance and/or other
credit-related products.
Written premiums on credit disability products increased
from $35 million in the first half of 1995 to $42 million in
the 1996 period. Pre-tax income from credit disability
products amounted to $3.7 million in the 1996 period, versus
<PAGE>19
$2.9 million in the comparable 1995 period, reflecting more
favorable morbidity experience as well as an increased base
of earned premiums.
The Company's group health insurance lines include
employer/association group health insurance, mortgage
disability insurance, and specialty group health and
disability products.
Historically, the majority of the Company's employer /
association group insurance premium revenues were derived
from indemnity major medical coverages, which were often
sold together with group life insurance. A change in market
emphasis toward managed care products resulted both in a
reduction of new sales of the Company's indemnity major
medical products and an erosion of business in force over
the past several years. The Company has taken a number of
actions to adapt to the changing market conditions,
including refinement of "ancillary" group products such as
long-term disability and dental insurance, with goals
including an increase in the proportion of group business
from non-major medical lines. Additionally, the Company has
introduced new managed care products in several states
(using provider networks made available through unrelated
companies).
As indicated in Note 6 of Notes to Financial Statements, the
Company discontinued new sales of traditional indemnity
major medical products in January 1996 and subsequently
recorded a charge as noted above to recognize revised
assumptions on the discontinued business. The "continuing"
employer / association group business consists of long-term
disability, accidental death and dismemberment, dental,
standalone life, association group life and health, and
managed care major medical coverages. Premiums from these
"continuing" products constitute about 75% of total employer
/ association group premiums for the second quarter of 1996.
The employer / association group health line reported a pre-
tax loss for the first half of 1996 of $627 thousand,
comprised of a first quarter pre-tax loss of $1.5 million
and a second quarter pre-tax profit (before the charge
discussed above) of $895 thousand. This second quarter
profit reflects the contribution of continuing products
included in this line. Pre-tax losses on this line for the
first half of 1995 were $1.7 million, reflecting experience
on the now-discontinued traditional indemnity products.
Premium revenues on employer / association group health
insurance products declined from $181 million in the first
half of 1995 to $173 million in the 1996 period. The
decline in premiums resulted from a high level of
terminations on the discontinued traditional indemnity
<PAGE>20
business which more than offset increased revenues from non-
major medical and managed care products.
The other group health and disability coverages reported a
pre-tax profit of $588 thousand for the first half of 1996,
versus a loss of $329 thousand for the corresponding 1995
period, with the favorable variance primarily attributed to
improved results from specialty group health and disability
products marketed through retailers and financial
institutions.
Profitability of the Company's group health insurance lines
is dependent upon various factors including the ability of
the Company to match premiums charged to benefit costs and
to maintain underwriting standards so that premium charged
is consistent with risk assumed on an overall basis. Market
acceptance of products currently offered and those being
introduced is also a key factor in the prospective
profitability of these product lines.
The Company's group life insurance lines include
employer/association group life insurance, mortgage life
insurance, and certain specialty coverages.
The employer / association group life line reported a pre-
tax profit of $3.7 million for the first half of 1996,
versus $2.9 million in the corresponding 1995 period,
reflecting the increased profit contribution from continuing
products included in this line. Premium revenues for this
line were $62 million in the first half of 1996 versus $61
million a year ago.
The other group life insurance lines reported a pre-tax
profit of $1.2 million for the first half of 1996, versus
$724 thousand for the corresponding 1995 period, with the
favorable variance primarily attributed to improved
mortality on group mortgage life insurance coverages.
Total revenues of the life insurance subsidiaries in the
first half of 1996 amounted to $882 million, an increase of
$30 million or 4% over the same period of 1995, primarily on
increases of $19 million (or 3%) and $7 million (or 3%) in
premiums and considerations and net investment income,
respectively. Additionally, "other income" of the life
insurance subsidiaries increased from $10 million to $15
million, reflecting increased volume on certain credit
insurance related products.
The increase in premiums and considerations came primarily
from the individual life insurance and annuity product line
and the credit life and disability lines. A decrease in
employer / association group health premiums, as previously
discussed, was a partial offset.
<PAGE>21
Premiums and other considerations from individual life
insurance and annuity products amounted to $259 million in
the first half of 1996, compared to $246 million in the 1995
period, with the increase from both interest sensitive and
traditional products and reflecting a larger base of in-
force life insurance business. This increase was
accompanied by greater written premiums on credit insurance
products, reflecting increased sales through financial
institution sources of business as noted above.
The $7 million increase in net investment income of the life
insurance subsidiaries reflected a larger investment base in
the 1996 period. The pre-tax annualized yield was 7.83% in
the first half of 1996 versus 7.94% for the corresponding
1995 period. The decline in yield reflects redemptions of
securities by the respective issuers, totalling $115 million
(at cost) for the year 1995 and $64 million during the first
half of 1996. An intentional shortening of maturities on
investments associated with individual annuity contracts, in
anticipation of annuities nearing the end of their surrender
charge period, was also a factor.
The Company's interest sensitive life insurance and annuity
contracts are subject to periodic adjustment of credited
interest rates which are determined by management based on
factors including available market interest rates and
portfolio rates of return. Recent rate actions are
discussed below.
Total benefits and expenses of the life insurance
subsidiaries increased $72 million versus the first half of
1995, to $816 million, reflecting the impact of the $49.6
million charge relating to traditional indemnity group major
medical products as previously discussed. Excluding this
charge, total benefits and expenses increased $23 million or
3%.
Benefits to policyholders and beneficiaries amounted to $393
million in the first half of 1996. The $37 million increase
versus the corresponding 1995 period reflects the inclusion
of $12 million in the first half 1996 amount relating to the
aforementioned charge. The remainder of the increase is
attributed primarily to greater volume of individual life
insurance and credit life and disability insurance products.
Interest credited to policyholder account balances amounted
to $100 million in the first half of 1996, versus $103
million in the corresponding 1995 period. As noted under
"Financial Condition," the decrease reflects surrenders of
single premium deferred annuities that reached the end of
their surrender charge period in 1996 as well as reductions
in rates of interest credited on interest sensitive
contracts.
<PAGE>22
Interest rates credited on the Company's deferred annuity
contracts, exclusive of first year bonuses on certain
products, typically ranged from 4-3/4% to 5-1/2% during the
first half of 1995, depending on type of contract and period
of issue. During the year 1995, the Company implemented a
series of rate reductions on newly issued annuities together
with credited rate reductions on renewing contracts. As a
result of actions taken during the fourth quarter of 1995
affecting the major portion of the Company's deferred
annuities in force, credited rate reductions of 25 to 50
basis points were implemented on January 1, 1996 for
calendar year contracts and are being implemented on policy
anniversary dates during 1996 for other contracts. Interest
rates credited on these contracts during the first half of
1996 typically ranged from 4-1/4% to 5-1/2%.
Interest rates credited on the Company's universal life
insurance contracts typically ranged from 6% to 7% during
the first half of 1995. Reductions in credited interest
rates, generally amounting to 25 basis points, were
implemented during the third quarter of 1995 with respect to
the major portion of the Company's universal life insurance
policies in force as well as certain newly issued policies.
Additional rate reductions of 25 to 50 basis points were
implemented during the first quarter of 1996. Following
these actions, current credited rates on the Company's
universal life insurance contracts generally range from 5-
1/4% to 6-1/2%.
The prospective impact of rate adjustments for interest
sensitive products on reported results will be dependent
upon future sales, surrender levels, and investment
portfolio yield.
An increase in future policy benefits of $43 million was
recorded for the first half of 1996, versus $56 million for
the corresponding 1995 period. The decrease reflected
reduced levels of sales for traditional individual life
insurance products and single premium immediate annuities
during the 1996 period as previously discussed.
Amortization of deferred policy acquisition costs was $121
million for the first half of 1996, versus $82 million for
the corresponding 1995 period, with the $39 million increase
primarily attributed to inclusion of $37 million in the
first half 1996 amount relating to the aforementioned charge
for traditional indemnity products.
Aggregate commissions, general expenses, and insurance taxes
and licenses increased from $144 million in the first half
of 1995 to $156 million in the 1996 period. The $12 million
increase is primarily associated with the 1996 period
increase in credit insurance written premiums and increased
<PAGE>23
volume on individual life insurance and credit insurance
related products.
At June 30, 1996, consolidated invested assets included
approximately $268 million (at fair value) of less than
investment grade corporate securities, based on ratings
assigned by recognized rating agencies and insurance
regulatory authorities. These investments represent about
3% of consolidated total assets at that date. See Note 2 of
Notes to Financial Statements for further information.
These securities generally involve greater risk of loss from
borrower default than investment grade securities because
their issuers typically have higher levels of indebtedness
and are more vulnerable to adverse economic conditions than
other issuers. The Company's results of operations
historically have not reflected a material adverse impact
from investments in such securities.
In October 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 123, entitled "Accounting for Stock-Based Compensation."
This Statement, which must be adopted in 1996, establishes
financial accounting and reporting standards for stock
option plans and other stock-based forms of compensation.
Under previously established accounting standards, stock
options such as those granted by the Company (with option
price set equal to market price at date of grant) do not
require income statement charges, although the outstanding
options are considered in earnings per share calculations.
FASB 123 introduces standards for computing "fair value" of
these stock options using a mathematical model, as well as
expense charges over the related service period based on
this calculated value. However, companies can elect to
report the pro-forma impact of these computed charges on net
income and earnings per share in a footnote rather than
actually recording the computed income statement charges.
USLIFE Corporation intends to provide footnote disclosure of
the pro-forma impact of the calculated stock option expense
charges, commencing with its year end 1996 financial
statements (indicating comparative data for 1995), rather
than record these charges in its income statement.
Three Months Ended June 30, 1996 compared to
Three Months Ended June 30, 1995
A net loss of $4.1 million was reported for the three months
ended June 30, 1996. This net loss reflects a pre-tax
charge of $49.6 million, equivalent to $32.3 million on an
after-tax basis, to recognize revised assumptions reflecting
current experience on the Company's traditional indemnity
group major medical and related products as discussed in
<PAGE>24
Note 6 of Notes to Financial Statements. Net income for the
comparable period of 1995 was $26.2 million.
The net loss for the second quarter of 1996 also included
net capital losses with an after-tax impact of $738
thousand. These capital losses reflect the disposal of non-
performing securities with adjusted cost of approximately $2
million. Capital gains and losses had no material impact on
reported results of operations for the second quarter of
1995.
Excluding the charge relating to traditional indemnity group
major medical products, and capital gains and losses as
discussed above, consolidated after-tax income amounted to
$28.9 million for the second quarter of 1996 versus $26.1
million for the corresponding 1995 period. On a similar
basis, after-tax income of the life insurance subsidiaries
other than the aforementioned items was $40.0 million in the
1996 period compared to $36.8 million in the second quarter
of 1995. Also on a similar basis, after-tax corporate
charges (including the operating results of USLIFE's
servicing units) amounted to $11.0 million in the second
quarter of 1996 versus $10.7 million for the comparable 1995
period.
Before capital gains and losses and the pre-tax charge of
$49.6 million discussed above, the life insurance
subsidiaries reported a pre-tax profit of $61.2 million for
the second quarter of 1996, versus $56.1 million in the
corresponding 1995 period. This comparison of second
quarter results benefited from an increase of $1.4 million
in pre-tax profits from the individual life insurance and
annuity product line. Also, apart from the impact of the
aforementioned charge, results from traditional indemnity
and related products for the second quarter of 1996 were
approximately at a break-even level. With the curtailment
of losses from traditional indemnity products and actions
taken to move from traditional indemnity major medical
products to current generation group insurance products,
pre-tax results of operations from the Employer /
Association Group lines had a favorable impact of $3.0
million on the latter comparison.
A discussion of the Company's various product lines,
excluding the impact of the previously discussed charge for
traditional indemnity major medical and related business and
capital gains and losses, follows.
Individual life and annuity pre-tax profits, including
income attributable to capital and surplus, amounted to
$55.0 million for the second quarter of 1996 versus $53.6
million for the corresponding 1995 period. The increase of
$1.4 million came primarily from greater gains from
investment income, reflecting reductions in rates of
<PAGE>25
interest credited on interest sensitive policies in force as
well as an increased base of individual life insurance
business. Mortality experience was favorable during the
second quarter of 1996 and contributed to the overall pre-
tax profit reported for the period, but this contribution
was to a lesser degree than same period a year ago.
A pre-tax profit of $623 thousand was reported for credit
life insurance coverages for the second quarter of 1996,
versus $780 thousand in the corresponding 1995 period, with
less favorable mortality experience in the 1996 period.
Pre-tax income from credit disability products amounted to
$1.4 million in the 1996 period, versus $1.2 million in the
comparable 1995 period, reflecting more favorable morbidity
experience as well as an increased base of earned premiums.
The Company's group health insurance lines include
employer/association group health insurance, mortgage
disability insurance, and specialty group health and
disability products.
The employer / association group health line reported a pre-
tax profit (before the charge discussed above) of $895
thousand. This second quarter profit reflects the
contribution of continuing products included in this line.
Pre-tax losses on this line for the second quarter of 1995
were $1.3 million, reflecting experience on the now-
discontinued traditional indemnity products.
Premium revenues on employer / association group health
insurance products were $90 million in the second quarter of
1996 versus $89 million in the corresponding 1995 period.
Although a high level of terminations from the discontinued
products negatively impacted revenues, overall revenues were
up as a result of increased sales of non-major medical and
managed care products.
The other group health and disability coverages reported a
pre-tax profit of $508 thousand for the second quarter of
1996, versus a loss of $68 thousand for the corresponding
1995 period, with the favorable variance primarily
attributed to improved results from specialty group health
and disability products marketed through retailers and
financial institutions.
The Company's group life insurance lines include
employer/association group life insurance, mortgage life
insurance, and certain specialty coverages.
The employer / association group life line reported a pre-
tax profit of $1.7 million for the second quarter of 1996,
versus approximately $1 million in the corresponding 1995
<PAGE>26
period, reflecting the increased profit contribution from
continuing products included in this line.
The other group life insurance lines reported a pre-tax
profit of $937 thousand for the second quarter of 1996,
versus $812 thousand for the corresponding 1995 period, with
the favorable variance primarily attributed to improved
mortality on group mortgage life insurance coverages.
Total revenues of the life insurance subsidiaries in the
second quarter of 1996 amounted to $453 million, an increase
of $16 million or 4% over the same period of 1995, primarily
on increases of $10 million (or 3%) and $3 million (or 3%)
in premiums and considerations and net investment income,
respectively. Additionally, "other income" of the life
insurance subsidiaries increased approximately $3 million,
to $9 million, reflecting increased volume on certain credit
insurance related products.
The increase in premiums and considerations came primarily
from the individual life insurance and annuity product line
and the credit life and disability lines.
Premiums and other considerations from individual life
insurance and annuity products amounted to $133 million in
the second quarter of 1996, compared to $126 million in the
1995 period, with the increase from both interest sensitive
and traditional products and reflecting a larger base of in-
force life insurance business. This increase was
accompanied by greater written premiums on credit insurance
products, reflecting increased sales through financial
institution sources of business as noted above.
Net investment income of the life insurance subsidiaries
increased $3 million, as noted above, reflecting a larger
investment base in the 1996 period.
Total benefits and expenses of the life insurance
subsidiaries increased $61 million versus the second quarter
of 1995, to $443 million, reflecting the impact of the $49.6
million charge relating to traditional indemnity group major
medical products as previously discussed. Excluding this
charge, total benefits and expenses increased $12 million or
3%.
Benefits to policyholders and beneficiaries amounted to $203
million in the second quarter of 1996. The $27 million
increase versus the corresponding 1995 period reflects the
inclusion of $12 million in the second quarter 1996 amount
relating to the aforementioned charge. The remainder of the
increase is attributed primarily to greater volume of
individual life insurance and credit life and disability
insurance products.
<PAGE>27
Interest credited to policyholder account balances amounted
to $50 million in the second quarter of 1996, versus $52
million in the corresponding 1995 period. As previously
discussed, the decrease reflects surrenders of single
premium deferred annuities that reached the end of their
surrender charge period in 1996 as well as reductions in
rates of interest credited on interest sensitive contracts.
An increase in future policy benefits of $30 million was
recorded for the second quarter of 1996, versus $40 million
for the corresponding 1995 period. The decrease reflected
factors including reduced levels of sales for traditional
individual life insurance products and single premium
immediate annuities during the 1996 period as previously
discussed.
Amortization of deferred policy acquisition costs was $81
million for the second quarter of 1996, versus $41 million
for the corresponding 1995 period, with the increase
primarily attributed to inclusion of $37 million in the
second quarter 1996 amount relating to the aforementioned
charge for traditional indemnity products.
Aggregate commissions, general expenses, and insurance taxes
and licenses increased from $72 million in the second
quarter of 1995 to $78 million in the 1996 period. The $6
million increase is primarily associated with increased
volume on individual life insurance and credit insurance
related products.
<PAGE>28
OTHER FINANCIAL INFORMATION
The management of USLIFE believes that all adjustments
(consisting only of normal recurring accruals and adjustments)
necessary to present fairly the consolidated financial position
of USLIFE Corporation and subsidiaries as of June 30, 1996 and
December 31, 1995, the consolidated results of operations for the
six and three month periods ended June 30, 1996 and 1995, and
consolidated cash flows for the six month periods ended June 30,
1996 and 1995, have been included in the accompanying financial
statements.
<PAGE>29
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
The Annual Meeting of Shareholders of USLIFE Corporation was held
on May 21, l996 at Schimmel Center, Pace University, New York,
New York. Gordon E. Crosby, Jr., Chairman of the Board,
presided.
The shares represented at the meeting, either in person or by
proxy, amounted to 28,884,137 or approximately 83.9% of the total
shares of common and preferred stock outstanding as of the record
date of March 29, l996.
The following actions were taken by the shareholders at the
meeting:
(a) Election of Directors:
The nominees listed below were elected as directors of the
Corporation:
Abstentions
Votes Votes and Broker
Name For Withheld Non-Votes
____ _____ ___________ ___________
William C. Freund 28,676,365 207,772 *
Greer F. Henderson 28,687,362 196,775 *
Robert H. Osborne 28,689,815 194,322 *
Franklin R. Saul 28,704,988 179,149 *
Robert L. Shafer 28,691,634 192,503 *
* Pursuant to New York Law, abstentions and broker non-votes are not counted
toward the election of directors.
In addition to the directors listed above, the term of office of
the following directors continued after the Shareholders meeting:
Kenneth Black, Jr., William J. Catacosinos, Gordon E. Crosby,
Jr., Austin L. D'Alton, Charles A. Davis, John R. Galvin, Robert
E. Grant, John W. Riehm, Christopher S. Ruisi, William G.
Sharwell, William A. Simpson and Beryl W. Sprinkel.
<PAGE>30
(b) Amendment of the Corporation's Certificate of Incorporation
to increase the number of authorized shares of common stock from
60,000,000 to 120,000,000:
Votes Abstentions
Votes Against and Broker
For or Withheld Non-Votes
_____ ___________ ___________
26,267,735 2,377,047 239,355
(c) Ratification of KPMG Peat Marwick LLP as the Company's
Independent Auditor for the Year 1996:
Votes Abstentions
Votes Against and Broker
For or Withheld Non-Votes
_____ ___________ ___________
28,642,907 69,986 171,244
<PAGE>31
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
3 (i)(a) - Restated Certificate of Incorporation, as amended.
(i)(b) - Certificate of Amendment of the Certificate of
Incorporation.
10 (i) - Ninth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Gordon E. Crosby, Jr.
(ii) - Eighth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Greer F. Henderson.
(iii) - Eighth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Christopher S. Ruisi.
(iv) - Seventh Amendment dated as of May 1, 1996 to an
employment contract dated as of April 16, 1990, as amended,
between USLIFE Corporation and William A. Simpson.
(v) - Employment and Key Executive Employment Protection
Agreement dated May 1, 1996 between USLIFE Corporation and
Michael LeFante.
(vi) - Key Executive Employment Protection Agreement dated
May 23, 1996 between USLIFE Corporation and Ronald M.
Chernoff.
(vii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and A. Scott Bushey.
(viii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Arnold A. Dicke.
(ix) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Wesley E. Forte.
<PAGE>32
(x) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and John D. Gavrity.
(xi) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and James M. Schlomann.
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
During the quarter ended June 30, 1996, the Registrant filed
one report on Form 8-K dated May 22, 1996, incorporated
herein by reference to SEC File No. 1-5683. The Report
referenced the Registrant's announcement that its financial
statements for the second quarter of 1996 would reflect a
special pre-tax charge of $49.6 million to recognize revised
assumptions reflecting current experience on its traditional
indemnity group major medical products. The charge, on an
after-tax basis, amounts to $32.3 million or 93 cents per
share, and includes a writedown of deferred policy
acquisition costs on this block of business and a related
adjustment of the reserve for policy benefits.
<PAGE>33
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.
USLIFE Corporation
__________________________________
(Registrant)
August 8, 1996 By /s/ James M. Schlomann
____________________ __________________________________
Date James M. Schlomann
Executive Vice President - Finance
(Principal Financial Officer and
Duly Authorized Officer)
<PAGE>1
USLIFE Corporation
Form 10-Q for the Quarterly Period Ended June 30, 1996
Exhibit Index
Exhibit Number
Per Item 601 of
Regulation S-K
_______________
3 (i)(a) - Restated Certificate of Incorporation, as amended.
(i)(b) - Certificate of Amendment of the Certificate of
Incorporation.
10 (i) - Ninth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Gordon E. Crosby, Jr.
(ii) - Eighth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Greer F. Henderson.
(iii) - Eighth Amendment dated as of May 1, 1996 to an
employment contract dated as of April 1, 1989, as amended,
between USLIFE Corporation and Christopher S. Ruisi.
(iv) - Seventh Amendment dated as of May 1, 1996 to an
employment contract dated as of April 16, 1990, as amended,
between USLIFE Corporation and William A. Simpson.
(v) - Employment and Key Executive Employment Protection
Agreement dated May 1, 1996 between USLIFE Corporation and
Michael LeFante.
(vi) - Key Executive Employment Protection Agreement dated
May 23, 1996 between USLIFE Corporation and Ronald M.
Chernoff.
(vii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and A. Scott Bushey.
(viii) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Arnold A. Dicke.
(ix) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and Wesley E. Forte.
(x) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and John D. Gavrity.
(xi) - First Amendment to Employment and Key Executive
Employment Protection Agreement dated as of May 1, 1996, to
the Agreement dated November 14, 1995, between USLIFE
Corporation and James M. Schlomann.
27 Financial Data Schedule (electronic filing only)
<PAGE>1
Exhibit 3(i)(a)
_______________
RESTATED CERTIFICATE OF INCORPORATION
OF
USLIFE CORPORATION, AS AMENDED
Under Section 807 of the Business Corporation Law
We, the undersigned, Gordon E. Crosby, Jr., and Richard G.
Hohn, being respectively the Chairman of the Board and the
Corporate Secretary of USLIFE Corporation, hereby certify that:
1. The name of the Corporation is USLIFE Corporation.
(Originally USLIFE Holding Corp.)
2. The Certificate of Incorporation of said Corporation
was filed by the Department of State on November 15,
1966.
3. The text of the Certificate of Incorporation as amended
theretofore is hereby restated without further
amendment or change to read as herein set forth in
full:
FIRST: The name of the Corporation is USLIFE
Corporation.
SECOND: The purposes of the Corporation are as
follows:
To engage any commercial, mercantile, industrial,
manufacturing, marine, exploration, mining,
agricultural, research, licensing, servicing,
agency, securities or brokerage business not
prohibited by law, and any, some or all of the
foregoing.
To acquire, hold, create interests in, or dispose
of real or personal property, tangible or
intangible, of any kind in any manner.
THIRD: Its office in the state of New York is
located in the City of New York, County of New York.
FOURTH: The aggregate number of shares which the
Corporation shall have the authority to issue is
130,800,000, of which 120,000,000 shares of the par
value of one dollar ($1) per share shall be designated
as Common Stock and 10,800,000 shares of the par value
of one dollar ($1) per share shall be designated as
Preferred Stock.
The holders of the Common Stock shall be entitled
to one vote per share on all matters upon which
shareholders are entitled to vote and shall not be
entitled to any preference in the distribution of
dividends or assets.
The Preferred Stock may be issued from time to
time in series. Each share of a series shall be equal
to every other share of the same series. The Board of
<PAGE>2
Directors is vested with the authority to establish and
designate series and to fix the number of shares and
the relative rights, preferences and limitations as
between series, subject to such limitations as may be
prescribed by law. In particular, the Board of
Directors may establish, designate and fix the
following with respect to each series of Preferred
Stock:
(1) The distinctive serial designation of the
shares of the series which shall distinguish those
shares from the shares of all other series;
(2) The number of shares included in the series,
which may be increased or decreased from time to time
unless otherwise provided by the Board of Directors in
creating the series;
(3) The annual dividend rate for the shares of
the series and the date or dates upon which such
dividends shall be payable;
(4) Whether dividends on the shares of the series
shall be cumulative and, on the shares of any series
having cumulative dividend rights, the date or dates
or method of determining the date or dates from which
dividends on the shares of the series shall be
cumulative;
(5) The amount or amounts which shall be paid out
of the assets of the Corporation to the holders of the
shares of the series upon the involuntary liquidation,
dissolution or winding up of the Corporation and upon
the voluntary liquidation, dissolution or winding up of
the Corporation;
(6) The price or prices at which, the period or
periods within which and the terms and conditions upon
which the shares of the series may be redeemed, in
whole or in part, at the option of the Corporation;
(7) The obligation, if any, of the Corporation to
purchase or redeem shares of the series pursuant to a
sinking fund and the price or prices at which, the
period or periods within which and the terms and
conditions upon which the shares of the series shall be
redeemed in whole or in part, pursuant to such sinking
fund;
(8) The period or periods within which and the
terms and conditions, if any, including the price or
prices or the rate or rates of conversion and the terms
and conditions of any adjustments thereof, upon which
the shares of the series shall be convertible at the
option of the holder into shares of any class of stock
or into shares of any other series of Preferred Stock,
except into a class of shares having rights or
preferences as to dividends or distribution of assets
<PAGE>3
upon liquidation which are prior or superior in rank to
those of the shares being converted;
(9) The voting rights, if any, of the shares of
the series in addition to those required by law,
including the number of votes per share and the
transaction of any business or of any specified item of
business in connection with which the shares of the
series shall vote as a class; and
(10) Any other relative rights, preferences or
limitations of the shares of the series not
inconsistent herewith or with applicable law.
The Corporation may make pro rata distributions of
the authorized but unissued shares of any series of the
Preferred Stock to holders of another class or series
of its outstanding shares.
The aggregate amount which may be paid out of the
assets of the Corporation to the holders of the
outstanding shares of all of the series of Preferred
Stock upon the involuntary liquidation, dissolution or
winding up of the Corporation shall not exceed $100
times the number of such shares, plus accrued unpaid
dividends on such shares.
SERIES A
________
(i) The distinctive serial designation of the
initial series shall be "$4.50 Series A Convertible
Preferred Stock, par value one dollar ($1) per share"
(hereinafter for convenience called "Series A"). Each
share of Series A shall be identical in all respects
with the other shares of Series A except as to the
dates from and after which dividends shall be
cumulative thereon.
(ii) The number of shares included in Series A
shall initially be 112,466 shares, which number from
time to time may be increased or decreased (but not
decreased beyond the number of shares of the Series
then outstanding) by the Board of Directors. Shares of
Series A redeemed, purchased by the Corporation or
converted into Common Stock shall be cancelled and
shall revert to authorized but unissued shares of
Preferred Stock undesignated as to series.
(iii) The annual rate of dividends payable on
shares of Series A shall be $4.50 per year and no more,
payable quarterly on the first days of March, June,
September and December, respectively, in each year with
respect to the quarterly dividend period (or portion
thereof) ending on the day preceding such dividend
payment date.
(iv) Dividends on the initial 40,000 shares of
Series A shall be cumulative from the date of issue
thereof. Dividends on each other share of Series A
<PAGE>4
shall be cumulative from the first day of the quarterly
dividend period during which such share was issued
except that if any such shares shall be issued after
the record date for payment of a dividend in respect of
the then current dividend period and prior to the
payment date for such dividend, such shares shall not
participate in such dividend and dividends thereon
shall be cumulative only from such dividend payment
date. The holders of Series A, in preference to the
holders of any junior stock, shall be entitled to
receive, as and when declared by the Board of Directors
out of any funds legally available therefor, cash
dividends at the rate fixed in subdivision (iii)
hereof. No dividends shall be paid upon, or declared
or set apart for, any shares of any class or series of
stock of the Corporation ranking on a parity with the
Series A in the payment of dividends for any quarterly
dividend period unless at the same time 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 and set apart for, all shares of Series A then
issued and outstanding and entitled to receive such
dividend.
In no event, so long as any shares of Series A
shall be outstanding, shall any dividend, whether in
cash or property, be paid or declared, nor shall any
distribution be made, on any junior stock, nor shall
any shares of any junior stock be purchased, redeemed
or otherwise acquired for value by the Corporation or
by any subsidiary of the Corporation, unless all
dividends on the Series A for all past quarterly
dividend periods and for the then current quarterly
period shall have been paid or declared and a sum
sufficient for the payment thereof set apart. The
provisions of this paragraph shall not, however, apply
to a dividend payable in any junior stock, or to the
acquisition of shares of any junior stock in exchange
for shares of any other junior stock.
Subject to the foregoing and to any further
limitations prescribed in accordance with the
provisions of Article Fourth of the Certificate of
Incorporation, the Board of Directors may declare, out
of any funds legally available therefor, dividends upon
the then outstanding shares of any junior stock, and no
holders of shares of Series A shall be entitled to
share therein.
(v) In the event of any voluntary liquidation,
dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment
shall be made to the holders of any junior stock, the
holders of Series A shall be entitled to be paid in
<PAGE>5
full the redemption price in effect at the time of the
distribution or payment date as provided in subdivision
(vi) hereof, together with accrued dividends to such
distribution or payment date whether or not earned or
declared. In the event of any involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment
shall be made to the holders of any junior stock, the
holders of Series A shall be entitled to be paid in
full an amount equal to $100 per share, together with
accrued dividends to such distribution or payment date
whether or not earned or declared.
If such payment shall have been made in full to
the holders of Series A, the remaining assets and funds
of the Corporation shall be distributed among the
holders of the junior stock, according to their
respective rights and preferences and in each case
according to their respective shares. If, upon any
liquidation, dissolution or winding up of the affairs
of the Corporation, the amounts so payable are not paid
in full to the holder of all outstanding shares of
Series A, the holders of Series A and of all other
classes or series of stock of the Corporation ranking
on a parity therewith in the distribution of assets
shall share ratably in any distribution of assets in
proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the
consolidation or merger of the Corporation, nor the
sale, lease or conveyance of all or a part of its
assets, shall be deemed a liquidation, dissolution or
winding up of the affairs of the Corporation within the
meaning of the foregoing provisions of this subdivision
(v).
(vi) Series A may be redeemed, as a whole or in
part, at the option of the Corporation, by vote of its
Board of Directors, at any time or from time to time,
at the redemption price in effect at the redemption
date as provided in this subdivision (vi), together
with accrued dividends to the redemption date. The
redemption price for shares of Series A shall be $150
per share if the date designated for redemption is on
or before September 1, 1970, $133 per share if
thereafter and on or before September 1, 1973, $103 per
share if thereafter and on or before September 1, 1974,
$102.70 if thereafter and on or before September 1,
1975, $102.40 if thereafter and on or before September
1, 1976, $102.10 if thereafter and on or before
September 1, 1977, $101.80 if thereafter and on or
before September 1, 1978, $101.50 if thereafter and on
or before September 1, 1979, $101.20 if thereafter and
on or before September 1, 1980, $100.90 if thereafter
and on or before September 1, 1981, $100.60 if
<PAGE>6
thereafter and on or before September 1, 1982, $100.30
if thereafter and on or before September 1, 1983, and
$100.00 if thereafter.
If less than all the outstanding shares of Series
A are to be redeemed, the shares to be redeemed shall
be determined by lot or pro rata in such manner as the
Board of Directors may prescribe; provided, however,
that if all shares of Series A are held of record by
not more than ten persons the shares to be redeemed
shall be determined pro rata. Notice of every
redemption of shares of Series A shall be mailed by
first class mail, postage prepaid, addressed to the
holders of record of the shares to be redeemed at their
respective last addresses as they shall appear on the
stock books of the Corporation. Such mailing shall be
at least thirty days and not more than sixty days prior
to the date fixed for redemption. Any notice which is
mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether
or not the shareholder receives such notice, and
failure duly to give such notice by mail, or any defect
in such notice, to any holder of shares of Series A
designated for redemption shall not affect the validity
of the proceedings for the redemption of any other
shares of Series A.
If notice of redemption shall have been duly
mailed, and if, on or before the redemption date
specified in the notice, the redemption price, together
with accrued dividends to the date fixed for
redemption, shall have been set aside by the
Corporation, separate and apart from its other funds,
in trust for the pro rata benefit of the holders of the
shares so called for redemption, so as to be and
continue to be available therefor, then, from and after
the date of redemption so designated, notwithstanding
that any certificate for shares of Series A so called
for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no
longer be deemed outstanding, the dividends thereon
shall cease to accumulate, and all rights with respect
to the shares of Series A so called for redemption
shall forthwith on the redemption date cease and
terminate, except only the right of the holders thereof
to receive the redemption price of the shares so
redeemed, including accrued dividends to the redemption
date, but without interest.
The Corporation may also, at any time prior to the
redemption date, deposit in trust, for the account of
the holder of the shares of Series A to be redeemed,
with a bank or trust company in good standing,
organized under the laws of the United States of
America or of the State of New York, doing business in
<PAGE>7
the Borough of Manhattan, The City of New York, having
capital, surplus and undivided profits aggregating at
least Five Million Dollars ($5,000,000), designated in
the notice of redemption, the redemption price,
together with accrued dividends to the date fixed for
redemption, and, unless the notice of redemption herein
provided for has previously been duly mailed, deliver
irrevocable written instructions directing such bank or
trust company, on behalf and at the expense of the
Corporation, to cause notice of redemption specifying
the date of redemption to be duly mailed as herein
provided promptly upon receipt of such irrevocable
instructions. Upon such deposit in trust, whether
after due mailing of the notice of redemption or
accompanied by irrevocable instructions as provided
above, and notwithstanding that any certificate for
shares of Series A so called for redemption shall not
have been surrendered for cancellation, all shares of
Series A with respect to which the deposit shall have
been made shall no longer be deemed to be outstanding,
and all rights with respect to such shares of Series A
shall forthwith cease and terminate except only the
right of the holders thereof to receive from such bank
or trust company, at any time after the time of the
deposit, the redemption price, including accrued
dividends to the redemption date, but without interest,
of the shares so to be redeemed, and the right to
exercise conversion privileges on or before the date
fixed for redemption.
Any moneys deposited by the Corporation pursuant
to this subdivision (vi) which shall not be required
for the redemption because of the exercise of any such
right of conversion subsequent to the date of the
deposit shall be repaid to the Corporation forthwith.
Any other moneys deposited by the Corporation pursuant
to this subdivision (vi) and unclaimed at the end of
six years from the date fixed for redemption shall be
repaid to the Corporation upon its request expressed in
a resolution of its Board of Directors, after which
repayment the holders of the shares so called for
redemption shall look only to the Corporation for the
payment thereof.
(vii) The holders of shares of Series A shall
have the right, at their option, to convert such shares
into shares of Common Stock of the Corporation at any
time on and subject to the following terms and
conditions:
(1) The shares of Series A shall be convertible
at the principal office of the Corporation, and at such
other office or offices, if any, as the Board of
Directors may designate, into full paid and non-
assessable shares (calculated as to each conversion to
<PAGE>8
the nearest 1/100th of a share) of Common Stock of the
Corporation, at the conversion price, determined as
hereinafter provided, in effect at the time of
conversion, each share of Series A being taken at $100
for the purpose of such conversion. The price at which
shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall
be initially $39 per share of Common Stock. The
conversion price shall be reduced in certain instances
as provided in paragraphs (3), (4), (9) and (10) below,
and shall be increased in certain instances as provided
in paragraphs (4) and (10) below.
(2) In order to convert shares of Series A into
Common Stock the holder thereof shall surrender at the
office hereinabove mentioned the certificate or
certificates therefor, duly endorsed or assigned to the
Corporation or in blank, and give written notice to the
Corporation at said office that he elects to convert
such shares. No payment or adjustment shall be made
upon any conversion on account of any dividends accrued
on the shares of Series A surrendered for conversion or
on account of any dividends on the Common Stock issued
upon conversion.
Shares of Series A shall be deemed to have been
converted immediately prior to the close of business on
the day of the surrender of such shares for conversion
in accordance with the foregoing provisions, and the
person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such Common
Stock at such time. As promptly as practicable on or
after the conversion date, the Corporation shall issue
and shall deliver at said office a certificate or
certificates for the number of full shares of Common
Stock issuable upon such conversion, together with
payment in lieu of any fraction of a share, as
hereinafter provided, to the person or persons entitled
to receive the same. In case shares of Series A are
called for redemption, the right to convert such shares
shall cease and terminate at the close of business on
the date fixed for redemption, unless default shall be
made in payment of the redemption price.
(3) In case the conversion price in effect
immediately prior to the close of business on any day
shall exceed by 25 cents or more the amount determined
at the close of business on such day by dividing:
(i) a sum equal to 3,343,771 multiplied by
$39 (being the initial conversion price), plus (b)
the aggregate of the amounts of all consideration
received by the Corporation upon the issuance of
Additional Shares of Common Stock (as hereinafter
defined), minus (c) the aggregate of the amounts
<PAGE>9
of all dividends and other distributions which
have been paid or made after October 1, 1968 on
Common Stock of the Corporation, other than in
cash out of its earned surplus or in Common Stock
of the Corporation, by
(ii) the sum of (a) 3,343,771 and (b) the
number of Additional Shares of Common Stock which
shall have been issued, the conversion price shall
be reduced, effective immediately prior to the
opening of business on the next succeeding day, by
an amount equal to the amount by which such
conversion price shall exceed the amount so
determined. The foregoing amount of 25 cents (or
such amount as theretofore adjusted) shall be
subject to adjustment as provided in paragraphs
(9) and (10) below, and such amount (or such
amount as theretofore adjusted) is referred to in
such paragraphs as the "Differential Amount".
(4) The term "Additional Shares of Common Stock"
as used herein shall mean all shares of Common Stock
issued by the Corporation after October 1, 1968
(including shares deemed to be "Additional Shares of
Common Stock" pursuant to paragraph (10) below),
whether or not subsequently reacquired or retired by
the Corporation, other than:
(i) shares issued upon conversion of shares
of Series A;
(ii) shares issued upon exercise of options
granted or to be granted pursuant to any stock
option plan or distributed as compensation
pursuant to any restricted stock plan from time
to time in effect but only to the extent that the
aggregate of all such shares issued subsequent to
October 1, 1968 does not exceed 5% of the Common
Stock outstanding on the respective dates of
issuance;
(iii) not exceeding 223,709 shares issued in
connection with the acquisition by the Corporation
of Reliance Life Insurance Company of Illinois, an
Illinois stock insurance corporation, or the
acquisition by a subsidiary of the Corporation of
Regency Life Insurance Company, a California
corporation; and
(iv) shares issued by way of dividend or
other distribution on shares of Common Stock
excluded from the definition of Additional Shares
of Common Stock by the foregoing clauses (i), (ii)
or (iii) or this clause (iv) or on shares of
Common Stock resulting from any subdivision or
combination of shares of Common Stock so excluded.
<PAGE>10
The sale or other disposition of any shares of
Common Stock or other securities held in the treasury
of the Corporation shall not be deemed an issuance
thereof.
In case the Corporation shall issue any security
convertible into Additional Shares of Common Stock or
any right, option or warrant to purchase Additional
Shares of Common Stock, the Corporation shall be deemed
to have issued the maximum number of shares of Common
Stock into which such convertible security may be
converted or the maximum number of shares of Common
Stock issuable upon the exercise of such right, option
or warrant immediately prior to the close of business
on the later of the date of issuance of such
convertible security, right, option or warrant or the
date as of which the conversion right or purchase right
to which such security is entitled first became
exercisable and for a consideration determined as
provided in paragraphs (5), (6), (7) and (8) below on
the assumption that such shares of Common Stock are all
issued at the minimum conversion price or at the
minimum purchase price and that the Corporation
received any consideration payable in connection
therewith. If no minimum price is specified in any
right, option or warrant and such shares of Common
Stock are to be issued at a purchase price related to
the market value of the Common Stock the purchase price
shall be deemed to be the market value of the Common
Stock at the later of the date such right, option or
warrant is granted or the date it first became
exercisable. On the termination of the right to
convert any security convertible into Additional Shares
of Common Stock or the expiration of any right, option
or warrant to purchase Additional Shares of Common
Stock the conversion price shall be readjusted to such
conversion price as would have obtained had the
adjustments made upon the issuance of such convertible
security, right, option or warrant been made upon the
basis of the issuance, and on the dates and for the
prices at which issued, of only the number of shares of
Common Stock actually issued upon the conversion of
such convertible security or the exercise of such
right, option or warrant. Except as provided in the
next preceding sentence, no adjustment of the
conversion price shall be made as a result of the
actual issuance of such shares of Common Stock.
(5) In case of the issuance of Additional Shares
of Common Stock for a consideration part or all of
which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount
of cash received by the Corporation for such shares
(or, if such Additional Shares of Common Stock are
<PAGE>11
offered by the Corporation for subscription, the
subscription price, or, if such Additional Shares of
Common Stock are sold to underwriters or dealers for
public offering without a subscription offering, the
initial public offering price), without deducting
therefrom any compensation or discount in the sale,
underwriting or purchase thereof by underwriters or
dealers or others performing similar services or for
any expenses incurred in connection therewith.
(6) In case of the issuance (otherwise than as a
dividend or other distribution on any stock of the
Corporation or upon conversion or exchange of other
securities of the Corporation) of Additional Shares of
Common Stock for a consideration, part or all of which
shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed
to be the value of such consideration as determined by
the Board of Directors, irrespective of the accounting
treatment thereof. The reclassification of securities
other than Common Stock into securities including
Common Stock shall be deemed to involve the issuance
for a consideration other than cash of such Common
Stock immediately prior to the close of business on the
date fixed for the determination of stockholders
entitled to receive such Common Stock.
(7) Additional Shares of Common Stock issuable
by way of dividend or other distribution on any class
of capital stock of the Corporation shall be deemed to
have been issued without consideration, and, except as
otherwise provided in paragraph (9) below, shall be
deemed to have been issued immediately prior to the
close of business on the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution.
A dividend or other distribution in cash or in
property (including any dividend or other distribution
in securities other than Common Stock) shall be deemed
to have been paid or made immediately prior to the
close of business on the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution and the amount of such
dividend or other distribution in property shall be
deemed to be the value of such property as of the date
of the adoption of the resolution declaring such
dividend or other distribution, as determined by the
Board of Directors at or as of that date. In the case
of any such dividend or other distribution on Common
Stock which consists of securities which are
convertible into or exchangeable for shares of Common
Stock, such securities shall be deemed to have been
issued for a consideration equal to the value thereof
as so determined.
<PAGE>12
If, upon the payment of any dividend or other
distribution in cash or in property (excluding Common
Stock but including all other securities), outstanding
shares of Common Stock are cancelled or required to be
surrendered for cancellation, on a pro rata basis, the
excess of the number of shares of Common Stock
outstanding immediately prior thereto over the number
to be outstanding immediately thereafter (less that
portion of such excess attributable to the cancellation
of shares excluded from the definition of Additional
Shares of Common Stock by clauses (i), (ii), (iii) or
(iv) of paragraph (4) above), shall be deducted from
the sum computed pursuant to clause (ii) of paragraph
(3) above for the purposes of all determinations under
such paragraph (3) made immediately prior to the close
of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution and at any time thereafter.
The reclassification (including any reclassifica-
tion upon a consolidation or merger in which the
Corporation is the continuing corporation) of Common
Stock into securities including securities other than
Common Stock shall be deemed to involve (a) a
distribution on Common Stock of such securities other
than Common Stock made immediately prior to the close
of business on the effective date of the reclassifica-
tion, and (b) a combination or subdivision, as the case
may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification
into the number of shares of Common Stock outstanding
immediately thereafter.
The issuance by the Corporation of rights or
warrants to subscribe for or purchase securities of the
Corporation shall not be deemed to be a dividend or
distribution of any kind.
(8) In case of the issuance of Additional Shares
of Common Stock upon conversion or exchange of other
securities of the Corporation, the amount of the
consideration received by the Corporation for such
Additional Shares of Common Stock shall be deemed to be
the total of (a) the amount of the 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 (except in
adjustment of interest or dividends) upon such
conversion or exchange. In determining the amount of
the consideration received by the Corporation upon the
issuance of such other securities (i) the amount of the
consideration in cash and other than cash shall be
determined pursuant to paragraphs (5), (6) and (7)
above, and (ii) if securities of the same class or
<PAGE>13
series of a class as such other securities were issued
for different amounts of consideration, 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.
(9) In case Additional Shares of Common Stock
are issued as a dividend or other distribution on any
class of capital stock of the Corporation, the total
number of shares constituting which dividend or other
distribution exceeds five per cent of the total number
of shares of Common Stock outstanding at the close of
business on the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution, the conversion price and the Differential
Amount in effect at the opening of business on the day
following the date fixed following for such
determination shall be reduced by multiplying each of
them by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the
close of business on the date fixed for such
determination and the denominator shall be the sum of
such number of shares and the total number of shares
constituting such dividend or other distribution, such
reductions to become effective immediately after the
opening of business on the day following the date fixed
for such determination. In the event of any such
dividend or other distribution, the Additional Shares
of Common Stock issued in connection therewith shall be
deemed to have been issued immediately after the
opening of business on the day following the date fixed
for such determination. For the purposes of this
paragraph (9), the number of shares of Common Stock at
any time outstanding shall not include shares held in
the treasury of the Corporation but shall include
shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock (other
than shares of Common Stock which, upon issuance, would
not constitute Additional Shares of Common Stock). The
Corporation will not pay any dividend or make any
distribution on shares of Common Stock held in the
treasury of the Corporation.
(10) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock, the conversion price and the Differential
Amount in effect at the opening of business on the day
following the day upon which such subdivision becomes
effective shall each be proportionately reduced, and
conversely, in case outstanding shares of Common Stock
<PAGE>14
shall each be combined into a smaller number of shares
of Common Stock, the conversion price and the
Differential Amount in effect at the opening of
business on the day following the day upon which such
combination becomes effective shall each be
proportionately increased, such reductions or increases
as the case may be, to become effective immediately
after the opening of business on the day following the
day upon which such subdivision or combination becomes
effective. In the event of any such subdivision, the
number of shares of Common Stock outstanding
immediately thereafter, to the extent of the excess
thereof over the number outstanding immediately prior
thereto (less that portion of such excess attributable
to the subdivision of shares excluded from the
definition of Additional Shares of Common Stock by
clauses (i), (ii), (iii) or (iv) of paragraph (4)
above), shall be deemed to be "Additional Shares of
Common Stock" and to have been issued immediately after
the opening of business on the day following the day
upon which such subdivision shall have become effective
and without consideration. In the event of any such
combination, the excess of the number of shares of
Common Stock outstanding immediately prior thereto over
the number outstanding immediately thereafter (less
that portion of such excess attributable to the
combination of shares excluded from the definition of
Additional Shares of Common Stock by clauses (i), (ii),
(iii) or (iv) of paragraph (4) above) shall be deducted
from the sum computed pursuant to clause (ii) of
paragraph (3) above for the purposes of all
determinations under such paragraph (3) made on any day
after the day upon which such combination becomes
effective. Shares of Common Stock held in the treasury
of the Corporation and shares issuable in respect of
scrip certificates issued in lieu of fractions of
shares of Common Stock (other than shares of Common
Stock which, upon issuance, would not constitute
Additional Shares of Common Stock) shall be considered
outstanding for the purpose of this paragraph (10).
(11) Whenever the conversion price is adjusted as
herein provided:
(a) the Corporation shall compute the
adjusted conversion price in accordance with this
subdivision (vii) and shall prepare a certificate
signed by the Treasurer of the Corporation setting
forth the adjusted conversion price and showing in
reasonable detail the facts upon which such
adjustment is based, including a statement of the
consideration received or to be received by the
Corporation for, and the amount of, any Additional
Shares of Common Stock issued since the last such
<PAGE>15
adjustment, and such certificate shall forthwith
be held available for inspection by holders of
Series A at the principal office of the
Corporation; and
(b) a notice stating that the conversion
price has been adjusted and setting forth the
adjusted conversion price shall forthwith be
required, and as soon as practicable after it is
required, such notice shall be mailed to the
holders of record of the outstanding shares of
Series A; provided, however, that if within 10
days after the completion of mailing of such a
notice, an additional notice is required, such
additional notice shall be deemed to be required
pursuant to this clause (b) as of the opening of
business on the tenth day after such completion of
mailing and shall set forth the conversion price
as adjusted at such opening of business, and upon
the mailing of such additional notice no other
notice need be given of any adjustment in the
conversion price occurring at or prior to such
opening of business and after the time that the
next preceding notice given by mail became
required.
(12) In case:
(a) the Corporation shall declare a dividend
(or any other distribution) on its Common Stock
payable otherwise than in cash out of its earned
surplus; or
(b) the Corporation shall authorize the
granting to the holders of its Common Stock of
rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights;
or
(c) of any reclassification of the capital
stock of the Corporation (other than a subdivision
or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which
the Corporation is a party and for which approval
of any stockholders of the Corporation is
required, or of the sale or transfer of all or
substantially all of the assets of the
Corporation; or
(d) of the voluntary or involuntary
dissolution, liquidation or winding up of the
Corporation;
then the Corporation shall cause to be mailed to the
holders of record of the outstanding shares of Series
A, at least 20 days (or 10 days in any case specified
in clause (a) or (b) above) prior to the applicable
record date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the
<PAGE>16
purpose of such dividend, distribution or rights, or,
if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be
determined, or (y) the date on which such
reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which
it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.
(13) The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the shares of
Series A, the full number of shares of Common Stock
then deliverable upon the conversion of all shares of
Series A then outstanding.
(14) No fractional shares of Common Stock shall
be issued upon conversion, but, instead of any fraction
of a share which would otherwise be issuable, the
Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction
of the market price per share of Common Stock (as
determined by the Board of Directors) at the close of
business on the day of conversion.
(15) The Corporation will pay any and all taxes
that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of shares of
Series A pursuant hereto. 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 of Common Stock in a name
other than that in which the shares of Series A so
converted were registered, and no such issue or
delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been
paid.
(16) For the purpose of this subdivision (vii),
the term "Common Stock" shall include any stock of any
class of the Corporation which has no preference in
respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and which
is not subject to redemption by the Corporation.
However, shares issuable on conversion of shares of
Series A shall include only shares of the class
designated as Common Stock of the Corporation as of
<PAGE>17
October 1, 1968, or shares of any class or classes
resulting from any reclassification or
reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which
are not subject to redemption by the Corporation;
provided that if at any time there shall be more than
one such resulting class, the shares of each such class
then so issuable shall be substantially in the
proportion which the total number of shares of such
class resulting from all such reclassifications bears
to the total number of shares of all such classes
resulting from all such reclassifications.
(17) In case of any consolidation of the
Corporation with, or merger of the Corporation into,
any other corporation (other than a consolidation or
merger in which the Corporation is the continuing
corporation) and the agreement of merger or
consolidation shall provide that the holder of each
share of Series A then outstanding shall have the right
to convert such share of Series A into the kind and
amount of shares of stock and other securities and
property receivable upon such consolidation or merger
by a holder of the number of shares of Common Stock of
the Corporation into which such share of Series A might
have been converted immediately prior to such
consolidation or merger. Provision shall be made for
adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this
subdivision (vii). The above provisions of this
paragraph (17) shall similarly apply to successive
consolidations or mergers.
(viii) The holders of Series A shall be entitled
to one vote per share and shall, except as hereinafter
provided, vote together with the holders of the Common
Stock and of any other class or series of stock which
may similarly be entitled to vote with the holders of
the Common Stock as a single class upon all matters
upon which shareholders are entitled to vote.
If and whenever four quarterly dividends (whether
or not consecutive) payable on any series of Preferred
Stock shall be in arrears in whole or in part whether
or not earned or declared, the number of directors then
constituting the Board of Directors shall be increased
by two and the holders of the Series A, together with
the holders of each other series of Preferred Stock
similarly entitled to vote for the election of two
additional directors, voting separately as a class,
regardless of series, shall be entitled to elect the
two additional directors at any annual meeting of
<PAGE>18
shareholders or special meeting held in place thereof,
or at a special meeting of the holders of such series
of Preferred Stock called as hereinafter provided.
Whenever all arrears in dividends on the Preferred
Stock then outstanding shall have been paid and
dividends thereon for the current quarterly dividend
period shall have been paid or declared and set apart
for payment, then the right of the holders of such
series of Preferred Stock to elect such additional two
directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the
case of any similar future arrearages in dividends),
and the terms of office of all persons elected as
directors by the holders of such series of the
Preferred Stock shall forthwith terminate and the
number of the Board of Directors shall be reduced
accordingly. At any time after such voting power shall
have been so vested in the Series A or in any other
series of Preferred Stock, the Secretary of the
Corporation may, and upon the written request of any
holder of such series of Preferred Stock (addressed to
the Secretary at the principal office of the
Corporation) shall, call a special meeting of the
holders of such series of Preferred Stock for the
election of the two directors to be elected by them as
herein provided, such call to be made by notice similar
to that provided in the By-laws for a special meeting
of the shareholders or as required by law. If any such
special meeting required to be called as above provided
shall not be called by the Secretary within twenty days
after receipt of any such request, then any holder of
such series of Preferred Stock may call such meeting,
upon the notice above provided, and for that purpose
shall have access to the stock books of the
Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting
of the shareholders or special meeting held in place
thereof if such office shall not have previously
terminated as above provided. In case any vacancy
shall occur among the directors elected by the holders
of such series of Preferred Stock, a successor shall be
elected by the Board of Directors to serve until the
next annual meeting of the shareholders or special
meeting held in place thereof upon the nomination of
the then remaining director elected by the holders of
such series of Preferred Stock or the successor of such
remaining director.
(ix) So long as any shares of Series A are
outstanding, in addition to any other vote or consent
of shareholders required in the Certificate of
Incorporation or By-laws, the consent of the holders of
at least sixty-six and two-thirds per cent (66 2/3%) of
<PAGE>19
Series A at the time outstanding, given in person or by
proxy, either in writing without a meeting or by vote
at any meeting called for the purpose, shall be
necessary for effecting or validating:
(a) Any amendment, alteration or repeal of
any of the provisions of the Certificate of
Incorporation, or of the By-laws, of the
Corporation, which affects adversely the voting
powers, rights or preferences of the holders of
Series A; provided, however, that the amendment of
the provisions of the Certificate of Incorporation
so as the authorize or create, or to increase the
authorized amount of any junior stock or any stock
of any class ranking on a parity with Series A,
shall not be deemed to affect adversely the voting
powers, rights or preferences of the holders of
Series A;
(b) The authorization or creation of, or the
increase in the authorized amount of, any stock of
any class or any security convertible into stock
of any class, ranking prior to Series A in the
distribution of assets on any liquidation,
dissolution, or winding up of the Corporation or
in the payment of dividends;
(c) The merger or consolidation of the
Corporation with or into any other corporation,
unless the corporation resulting from such merger
or consolidation will have after such merger or
consolidation no class of stock and no other
securities either authorized or outstanding
ranking prior to Series A, in the distribution of
assets on any liquidation, dissolution or winding
up of the Corporation or in the payment of
dividends, except the same number of shares of
stock and the same amount of other securities with
the same rights and preferences as the stock and
securities of the Corporation respectively
authorized and outstanding immediately preceding
such merger or consolidation, and each holder of
Series A immediately preceding such merger or
consolidation shall receive the same number of
shares, with the same rights and preferences, of
stock of the resulting corporation; or
(d) The purchase or redemption of less than
all shares of Series A at the time outstanding
unless the full dividend on all shares of Series A
then outstanding shall have been paid or declared
and a sum sufficient for the payment thereof set
apart; provided, however, that no such consent of
the holders of Series A shall be required if, at
or prior to the time when such amendment,
alteration or repeal is to take effect or when the
<PAGE>20
issuance of any such prior stock or convertible
security is to be made, or when such consolidation
or merger, purchase or redemption is to take
effect, as the case may be, provision is made for
the redemption of all shares of Series A at the
time outstanding.
(x) So long as any shares of Series A are
outstanding, in addition to any other vote or consent
of shareholders required in the Certificate of
Incorporation or By-laws, the consent of the holders of
at least a majority of Series A and of all other series
of Preferred Stock similarly entitled to vote upon the
matters specified in this subdivision (x), at the time
outstanding, acting as a single class, regardless of
series, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or
validating any increase in the authorized amount of the
Preferred Stock, or the authorization or creation of,
or the increase in the authorized amount of, any stock
of any class or any security convertible into stock of
any class, ranking on a parity with the Series A in the
distribution of assets on any liquidation, dissolution,
or winding up of the Corporation or in the payment of
dividends; provided, however, that no such consent of
the holders of Series A shall be required if, at or
prior to the time such increase, authorization, or
creation of such parity stock is to be made, provision
is made for the redemption of all shares of Series A at
the time outstanding.
(xi) The holders of shares of Series A shall, as
such, have no preemptive right to purchase or otherwise
acquire shares of any class of stock or other
securities of the Corporation now or hereafter
authorized.
(xii) As used herein with respect to Series A,
the following terms shall have the following meanings:
(a) The term "junior stock" shall mean the
Common Stock and any other class or series of
stock of the Corporation hereafter authorized over
which Series A has preference or priority in the
payment of dividends or in the distribution of
assets on any liquidation, dissolution or winding
up of the Corporation.
(b) The term "accrued dividends", with
respect to any share of any class or series, shall
mean an amount computed at the annual dividend
rate for the class or series of which the
particular share is a part, from the date on which
dividends on such share became cumulative to and
including the date to which such dividends are to
<PAGE>21
be accrued, less the aggregate amount of all
dividends theretofore paid thereon.
(xiii) The shares of Series A shall not have any
relative, participating, optional or other special
rights and powers other than as set forth herein.
SERIES B
________
(i) The distinctive serial designation of the
second series shall be "$5.00 Series B Convertible
Preferred Stock, par value one dollar ($1) per share"
(hereinafter for convenience called "Series B"). Each
share of Series B shall be identical in all respects
with the other shares of Series B except as to the
dates from and after which dividends shall be
cumulative thereon.
(ii) The number of shares included in Series B
shall be 122,639 shares, which number, from time to
time, may be increased or decreased (but not decreased
beyond the number of shares of the Series then
outstanding) by the Board of Directors. Shares of
Series B redeemed, purchased by the Corporation or
converted into Common Stock shall be cancelled and
shall revert to authorized but unissued shares of
Preferred Stock undesignated as to series.
(iii) The annual rate of dividends payable on
shares of Series B shall be $5.00 per year and no more,
payable quarterly on the first days of March, June,
September and December, respectively, in each year with
respect to the quarterly dividend period (or portion
thereof) ending on the day preceding such dividend
payment date.
(iv) Dividends on the shares of Series B
initially issued prior to September 1, 1969 shall be
cumulative from the date or dates of issue thereof.
Dividends on each other share of Series B shall be
cumulative from the first day of the quarterly dividend
period during which such share was issued except that
if any such shares shall be issued after the record
date for payment of a dividend in respect of the then
current dividend period and prior to the payment date
for such dividend, such shares shall not participate in
such dividend and dividends thereon shall be cumulative
only from such dividend payment date. The holders of
Series B, in preference to the holders of any junior
stock, shall be entitled to receive, as and when
declared by the Board of Directors out of any funds
legally available therefor, cash dividends at the rate
fixed in subdivision (iii) hereof. No dividends shall
be paid upon, or declared or set apart for, any shares
of any class or series of stock of the Corporation
<PAGE>22
ranking on a parity with the Series B in the payment of
dividends for any quarterly dividend period unless at
the same time 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 and set apart for, all
shares of Series B then issued and outstanding and
entitled to receive such dividend.
In no event, so long as any shares of Series B
shall be outstanding, shall any dividend, whether in
cash or property, be paid or declared, nor shall any
distribution be made, on any junior stock, nor shall
any shares of any junior stock be purchased, redeemed
or otherwise acquired for value by the Corporation or
by any subsidiary of the Corporation, unless all
dividends on the Series B for all past quarterly
dividend periods and for the then current quarterly
period shall have been paid or declared and a sum
sufficient for the payment thereof set apart. The
provisions of this paragraph shall not, however, apply
to a dividend payable in any junior stock, or to the
acquisition of shares of any junior stock in exchange
for shares of any other junior stock.
Subject to the foregoing and to any further
limitations prescribed in accordance with the
provisions of Article Fourth of the Certificate of
Incorporation, the Board of Directors may declare, out
of any funds legally available therefor, dividends upon
the then outstanding shares of any junior stock, and no
holders of shares of Series B shall be entitled to
share therein.
(v) In the event of any voluntary liquidation,
dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment
shall be made to the holders of any junior stock, the
holders of Series B shall be entitled to be paid in
full the redemption price in effect at the time of the
distribution or payment date as provided in subdivision
(vi) hereof, together with accrued dividends to such
distribution or payment date whether or not earned or
declared. In the event of any involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment
shall be made to the holders of any junior stock, the
holders of Series B shall be entitled to be paid in
full an amount equal to $50 per share, together with
accrued dividends to such distribution or payment date
whether or not earned or declared.
If such payment shall have been made in full to
the holders of Series B, the remaining assets and funds
of the Corporation shall be distributed among the
holders of the junior stock, according to their
<PAGE>23
respective rights and preferences and in each case
according to their respective shares. If, upon any
liquidation, dissolution or winding up of the affairs
of the Corporation, the amounts so payable are not paid
in full to the holders of all outstanding shares of
Series B, the holders of Series B and of all other
classes or series of stock of the Corporation ranking
on a parity therewith in the distribution of assets
shall share ratably in any distribution of assets in
proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the
consolidation or merger of the Corporation, nor the
sale, lease or conveyance of all or a part of its
assets, shall be deemed a liquidation, dissolution or
winding up of the affairs of the Corporation within the
meaning of the foregoing provisions of this subdivision
(v).
(vi) Series B may be redeemed, as a whole or in
part, at the option of the Corporation by vote of its
Board of Directors, at any time or from time to time,
at the redemption price in effect at the redemption
date as provided in this subdivision (vi), together
with accrued dividends to the redemption date. The
redemption price for shares of Series B shall be $150
per share if the date designated for redemption is on
or before June 1, 1971, $133 per share if thereafter
and on or before June 1, 1974, $103 per share if
thereafter and on or before June 1, 1975, $102.70 if
thereafter and on or before June 1, 1976, $102.40 if
thereafter and on or before June 1, 1977, $102.10 if
thereafter and on or before June 1, 1978, $101.80 if
thereafter and on or before June 1, 1979, $101.50 if
thereafter and on or before June 1, 1980, $101.20 if
thereafter and on or before June 1, 1981, $100.90 if
thereafter and on or before June 1, 1982, $100.60 if
thereafter and on or before June 1, 1983, $100.30 if
thereafter and on or before June 1, 1984, and $100.00
if thereafter.
If less than all the outstanding shares of Series
B are to be redeemed, the shares to be redeemed shall
be determined by lot or pro rata in such manner as the
Board of Directors may prescribe; provided, however,
that if all shares of Series B are held of record by
not more than ten persons the shares to be redeemed
shall be determined pro rata. Notice of every
redemption of shares of Series B shall be mailed by
first class mail, postage prepaid, addressed to the
holders of record of the shares to be redeemed at their
respective last addresses as they shall appear on the
stock books of the Corporation. Such mailing shall be
at least thirty days and not more than sixty days prior
to the date fixed for redemption. Any notice which is
<PAGE>24
mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether
or not the shareholder receives such notice, and
failure duly to give such notice by mail, or any defect
in such notice, to any holder of shares of Series B
designated for redemption shall not affect the validity
of the proceedings for the redemption of any other
shares of Series B.
If notice of redemption shall have been duly
mailed, and if, on or before the redemption date
specified in the notice, the redemption price, together
with accrued dividends to the date fixed for
redemption, shall have been set aside by the
Corporation, separate and apart from its other funds,
in trust for the pro rata benefit of the holders of the
shares so called for redemption, so as to be and
continue to be available therefor, then, from and after
the date of redemption so designated, notwithstanding
that any certificate for shares of Series B so called
for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no
longer be deemed outstanding, the dividends thereon
shall cease to accumulate, and all rights with respect
to the shares of Series B so called for redemption
shall forthwith on the redemption date cease and
terminate, except only the right of the holders thereof
to receive the redemption price of the shares so
redeemed, including accrued dividends to the redemption
date, but without interest.
The Corporation may also, at any time prior to the
redemption date, deposit in trust, for the account of
the holder of the shares of Series B to be redeemed,
with a bank or trust company in good standing,
organized under the laws of the United States of
America or of the State of New York, doing business in
the Borough of Manhattan, The City of New York, having
capital, surplus and undivided profits aggregating at
least Five Million Dollars ($5,000,000), designated in
the notice of redemption, the redemption price,
together with accrued dividends to the date fixed for
redemption, and, unless the notice of redemption herein
provided for has previously been duly mailed, deliver
irrevocable written instructions directing such bank or
trust company, on behalf and at the expense of the
Corporation, to cause notice of redemption specifying
the date of redemption to be duly mailed as herein
provided promptly upon receipt of such irrevocable
instructions. Upon such deposit in trust, whether
after due mailing of the notice of redemption or
accompanied by irrevocable instructions as provided
above, and notwithstanding that any certificate for
shares of Series B so called for redemption shall not
<PAGE>25
have been surrendered for cancellation, all shares of
Series B with respect to which the deposit shall have
been made shall no longer be deemed to be outstanding,
and all rights with respect to such shares of Series B
shall forthwith cease and terminate except only the
right of the holders thereof to receive from such bank
or trust company, at any time after the time of the
deposit, the redemption price, including accrued
dividends to the redemption date, but without interest,
of the shares so to be redeemed, and the right to
exercise conversion privileges on or before the date
fixed for redemption.
Any moneys deposited by the Corporation pursuant
to this subdivision (vi) which shall not be required
for the redemption because of the exercise of any such
right of conversion subsequent to the date of the
deposit shall be repaid to the Corporation forthwith.
Any other moneys deposited by the Corporation pursuant
to this subdivision (vi) and unclaimed at the end of
six years from the date fixed for redemption shall be
repaid to the Corporation upon its request expressed in
a resolution of its Board of Directors, after which
repayment the holders of the shares so called for
redemption shall look only to the Corporation for the
payment thereof.
(vii) The holders of shares of Series B shall have
the right, at their option, to convert such shares into
shares of Common Stock of the Corporation at any time
on and subject to the following terms and conditions:
(1) The shares of Series B shall be
convertible at the principal office of the
Corporation, and at such other office or offices,
if any, as the Board of Directors may designate,
into full paid and non-assessable shares
(calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the
Corporation, at the conversion price, determined
as hereinafter provided, in effect at the time of
conversion, each share of Series B being taken at
$100 for the purpose of such conversion. The
price at which shares of Common Stock shall be
delivered upon conversion (herein called the
"conversion price") shall be initially $39 per
share of Common Stock. The conversion price shall
be reduced in certain instances as provided in
paragraph (3), (9) and (10) below, and shall be
increased in certain instances as provided in
paragraph (10) below.
(2) In order to convert shares of Series B
into Common Stock the holder thereof shall
<PAGE>26
surrender at the office hereinabove mentioned the
certificate or certificates therefor, duly
endorsed or assigned to the Corporation or in
blank, and give written notice to the Corporation
at said office that he elects to convert such
shares. No payment or adjustment shall be made
upon any conversion on account of any dividends
accrued on the shares of Series B surrendered for
conversion or on account of any dividends on the
Common Stock issued upon conversion.
Shares of Series B shall be deemed to have
been converted immediately prior to the close of
business on the day of the surrender of such
shares for conversion in accordance with the
foregoing provisions, and the person or persons
entitled to receive the Common Stock issuable upon
such conversion shall be treated for all purposes
as the record holder or holders of such Common
Stock at such time. As promptly as practicable on
or after the conversion date, the Corporation
shall issue and shall deliver at said office a
certificate or certificates for the number of full
shares of Common Stock issuable upon such
conversion, together with payment in lieu of any
fraction of a share, as hereinafter provided, to
the person or persons entitled to receive the
same. In case shares of Series B are called for
redemption, the right to convert such shares shall
cease and terminate at the close of business on
the date fixed for redemption, unless default
shall be made in payment of the redemption price.
(3) In case the conversion price in effect
immediately prior to the close of business on any
day shall exceed by 25 cents or more the amount
determined at the close of business on such day by
dividing:
(i) a sum equal to 4,072,683 multiplied
by $39 (being the initial conversion price),
plus (b) the aggregate of the amounts of all
consideration received by the Corporation
upon the issuance of Additional Shares of
Common Stock (as hereinafter defined), minus
(c) the aggregate of the amounts of all
dividends and other distributions which have
been paid or made after March 3, 1969 on
Common Stock of the Corporation, other than
in cash out of its earned surplus or in
Common Stock of the Corporation, by
(ii) the sum of (a) 4,072,683 and (b)
the number of Additional Shares of Common
<PAGE>27
Stock which shall have been issued, the
conversion price shall be reduced, effective
immediately prior to the opening of business
on the next succeeding day, by an amount
equal to the amount by which such conversion
price shall exceed the amount so determined.
The foregoing amount of 25 cents (or such
amount as theretofore adjusted) shall be
subject to adjustment as provided in
paragraphs (9) and (10) below, and such
amount (or such amount as theretofore
adjusted) is referred to in such paragraphs
as the "Differential Amount".
(4) The term "Additional Shares of Common
Stock" as used herein shall mean all shares of
Common Stock issued by the Corporation after March
3, 1969 (including shares deemed to be "Additional
Shares of Common Stock" pursuant to paragraph (10)
below), whether or not subsequently reacquired or
retired by the Corporation, other than:
(i) shares issued upon conversion of
shares of Series A or of Series B;
(ii) shares issued upon exercise of
options granted or to be granted pursuant to
any stock option plan or distributed as
compensation pursuant to any restricted stock
plan from time to time in effect but only to
the extent that the aggregate of all such
shares issued subsequent to March 3, 1969
does not exceed 5% of the Common Stock
outstanding on the respective dates of
issuance;
(iii) not exceeding 273,333 shares
issued in connection with the acquisition by
the Corporation of City Finance Company,
Inc., a Maryland corporation; the acquisition
by the Corporation of All-State Credit Plan,
Inc., a Louisiana corporation; or the
acquisition of the insurance agency business
conducted by Harry R. Lea and his associates;
and
(iv) shares issued by way of dividend
or other distribution on shares of Common
Stock excluded from the definition of
Additional Shares of Common Stock by the
foregoing clauses (i), (ii) or (iii) or this
clause (iv) or on shares of Common Stock
<PAGE>28
resulting from any subdivision or combination
of shares of Common Stock so excluded.
The sale or other disposition of any shares of
Common Stock or other securities held in the treasury
of the Corporation shall not be deemed an issuance
thereof.
(5) In case of the issuance of Additional Shares
of Common Stock for a consideration part or all of
which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount
of cash received by the Corporation for such shares
(or, if such Additional Shares of Common Stock are
offered by the Corporation for subscription, the
subscription price, or, if such Additional Shares of
Common Stock are sold to underwriters or dealers for
public offering without a subscription offering, the
initial public offering price), without deducting
therefrom any compensation or discount in the sale,
underwriting or purchase thereof by underwriters or
dealers or others performing similar services or for
any expenses incurred in connection therewith.
(6) In case of the issuance (otherwise than as a
dividend or other distribution on any stock of the
Corporation or upon conversion or exchange of other
securities of the Corporation) of Additional Shares of
Common Stock for a consideration part or all of which
shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed
to be the value of such consideration as determined by
the Board of Directors, irrespective of the accounting
treatment thereof. The reclassification of securities
other than Common Stock into securities including
Common Stock shall be deemed to involve the issuance
for a consideration other than cash of such Common
Stock immediately prior to the close of business on the
date fixed for the determination of stockholders
entitled to receive such Common Stock.
(7) Additional Shares of Common Stock issuable by
way of dividend or other distribution on any class of
capital stock of the Corporation shall be deemed to
have been issued without consideration, and, except as
otherwise provided in paragraph (9) below, shall be
deemed to have been issued immediately prior to the
close of business on the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution.
<PAGE>29
A dividend or other distribution in cash or in
property (including any dividend or other distribution
in securities other than Common Stock) shall be deemed
to have been paid or made immediately prior to the
close of business on the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution and the amount of such
dividend or other distribution in property shall be
deemed to be the value of such property as of the date
of the adoption of the resolution declaring such
dividend or other distribution, as determined by the
Board of Directors at or as of that date. In the case
of any such dividend or other distribution on Common
Stock which consists of securities which are
convertible into or exchangeable for shares of Common
Stock, such securities shall be deemed to have been
issued for a consideration equal to the value thereof
as so determined.
If, upon the payment of any dividend or other
distribution in cash or in property (excluding Common
Stock but including all other securities), outstanding
shares of Common Stock are cancelled or required to be
surrendered for cancellation, on a pro rata basis, the
excess of the number of shares of Common Stock
outstanding immediately prior thereto over the number
to be outstanding immediately thereafter (less that
portion of such excess attributable to the cancellation
of shares excluded from the definition of Additional
Shares of Common Stock by clauses (i), (ii), (iii) or
(iv) of paragraph (4) above), shall be deducted from
the sum computed pursuant to clause (ii) of paragraph
(3) above for the purposes of all determinations under
such paragraph (3) made immediately prior to the close
of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution and at any time thereafter.
The reclassification (including any
reclassification upon a consolidation or merger in
which the Corporation is the continuing corporation) of
Common Stock into securities including securities other
than Common Stock shall be deemed to involve (a) a
distribution on Common Stock of such securities other
than Common Stock made immediately prior to the close
of business on the effective date of the
reclassification, and (b) a combination or subdivision,
as the case may be, of the number of shares of Common
Stock outstanding immediately prior to such
reclassification into the number of shares of Common
Stock outstanding immediately thereafter.
<PAGE>30
The issuance by the Corporation of rights or
warrants to subscribe for or purchase securities of the
Corporation shall not be deemed to be dividend or
distribution of any kind.
(8) In case of the issuance of Additional Shares
of Common Stock upon conversion or exchange of other
securities of the Corporation, the amount of the
consideration received by the Corporation for such
Additional Shares of Common Stock shall be deemed to be
the total of (a) the amount of the 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 (except in
adjustment of interest or dividends) upon such
conversion or exchange. In determining the amount of
the consideration received by the Corporation upon the
issuance of such other securities (i) the amount of the
consideration in cash and other than cash shall be
determined pursuant to paragraphs (5), (6) and (7)
above, and (ii) if securities of the same class or
series of a class as such other securities were issued
for different amounts of consideration, 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.
(9) In case Additional Shares of Common Stock are
issued as a dividend or other distribution on any class
of capital stock of the Corporation, the total number
of shares constituting which dividend or other
distribution exceeds five per cent of the total number
of shares of Common Stock outstanding at the close of
business on the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution, the conversion price and the Differential
Amount in effect at the opening of business on the day
following the date fixed for such determination shall
be reduced by multiplying each of them by a fraction of
which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on
the date fixed for such determination and the
denominator shall be the sum of such number of shares
and the total number of shares constituting such
dividend or other distribution, such reductions to
become effective immediately after the opening of
business on the day following the date fixed for such
<PAGE>31
determination. In the event of any such dividend or
other distribution, the Additional Shares of Common
Stock issued in connection therewith shall be deemed to
have been issued immediately after the opening of
business on the day following the date fixed for such
determination. For the purposes of this paragraph (9),
the number of shares of Common Stock at any time
outstanding shall not include shares held in the
treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock (other than
shares of Common Stock which, upon issuance, would not
constitute Additional Shares of Common Stock). The
Corporation will not pay any dividend or make any
distribution on shares of Common Stock held in the
treasury of the Corporation.
(10) In case outstanding shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock, the conversion price and the Differential
Amount in effect at the opening of business on the day
following the day upon which such subdivision becomes
effective shall each be proportionately reduced, and
conversely, in case outstanding shares of Common Stock
shall each be combined into a smaller number of shares
of Common Stock, the conversion price and the
Differential Amount in effect at the opening of
business on the day following the day upon which such
combination becomes effective shall each be
proportionately increased, such reductions or increases
as the case may be, to become effective immediately
after the opening of business on the day following the
day upon which such subdivision or combination becomes
effective. In the event of any such subdivision, the
number of shares of Common Stock outstanding
immediately thereafter, to the extent of the excess
thereof over the number outstanding immediately prior
thereto (less that portion of such excess attributable
to the subdivision of shares excluded from the
definition of Additional Shares of Common Stock by
clauses (i), (ii), (iii) or (iv) of paragraph (4)
above), shall be deemed to be "Additional Shares of
Common Stock" and to have been issued immediately after
the opening of business on the day following the day
upon which such subdivision shall have become effective
and without consideration. In the event of any such
combination, the excess of the number of shares of
Common Stock outstanding immediately prior thereto over
the number outstanding immediately thereafter (less
that portion of such excess attributable to the
combination of shares excluded from the definition of
Additional Shares of Common Stock by clauses (i), (ii),
<PAGE>32
(iii) or (iv) of paragraph (4) above) shall be deducted
from the sum computed pursuant to clause (ii) of
paragraph (3) above for the purposes of all
determinations under such paragraph (3) made on any day
after the day upon which such combination becomes
effective. Shares of Common Stock held in the treasury
of the Corporation and shares issuable in respect of
scrip certificates issued in lieu of fractions of
shares of Common Stock (other than shares of Common
Stock which, upon issuance, would not constitute
Additional Shares of Common Stock) shall be considered
outstanding for the purposes of this paragraph (10).
(11) Whenever the conversion price is adjusted as
herein provided:
(a) the Corporation shall compute the
adjusted conversion price in accordance with this
subdivision (vii) and shall prepare a certificate
signed by the Treasurer of the Corporation setting
forth the adjusted conversion price and showing in
reasonable detail the facts upon which such
adjustment is based, including a statement of the
consideration received or to be received by the
Corporation for, and the amount of, any Additional
Shares of Common Stock issued since the last such
adjustment, and such certificate shall forthwith
be held available for inspection by holders of
Series B at the principal office of the
Corporation; and
(b) a notice stating that the conversion
price has been adjusted and setting forth the
adjusted conversion price shall forthwith be
required, and as soon as practicable after it is
required, such notice shall be mailed to the
holders of record of the outstanding shares of
Series B; provided, however, that if within 10
days after the completion of mailing of such a
notice, an additional notice is required, such
additional notice shall be deemed to be required
pursuant to this clause (b) as of the opening of
business on the tenth day after such completion of
mailing and shall set forth the conversion price
as adjusted at such opening of business, and upon
the mailing of such additional notice no other
notice need be given of any adjustment in the
conversion price occurring at or prior to such
opening of business and after the time that the
next preceding notice given by mail became
required.
<PAGE>33
(12) In case:
(a) the Corporation shall declare a dividend
(or any other distribution) on its Common Stock
payable otherwise than in cash out of its earned
surplus; or
(b) the Corporation shall authorize the
granting to the holders of its Common Stock of
rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights;
or
(c) of any reclassification of the capital
stock of the Corporation (other than a subdivision
or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which
the Corporation is a party and for which approval
of any stockholders of the Corporation is
required, or of the sale or transfer of all or
substantially all of the assets of the
Corporation; or
(d) of the voluntary or involuntary
dissolution, liquidation or winding up of the
Corporation;
then the corporation shall cause to be mailed to the
holders of record of the outstanding shares of Series
B, at least 20 days (or 10 days in any case specified
in clause (a) or (b) above) prior to the applicable
record date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the
purpose of such dividend, distribution or rights, or,
if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be
determined, or (y) the date on which such
reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which
it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.
(13) The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the shares of
Series B, the full number of shares of Common Stock
<PAGE>34
then deliverable upon the conversion of all shares of
Series B then outstanding.
(14) No fractional shares of Common Stock shall be
issued upon conversion, but, instead of any fraction of
a share which would otherwise be issuable, the
Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction
of the market price per share of Common Stock (as
determined by the Board of Directors) at the close of
business on the day of conversion.
(15) The Corporation will pay any and all taxes
that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of shares of
Series B pursuant hereto. 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 of Common Stock in a name
other than that in which the shares of Series B so
converted were registered, and no such issue or
delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been
paid.
(16) For the purpose of this subdivision (vii),
the term "Common Stock" shall include any stock of any
class of the Corporation which has no preference in
respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and which
is not subject to redemption by the Corporation.
However, shares issuable on conversion of shares of
Series B shall include only shares of the class
designated as Common Stock of the Corporation as of
March 3, 1969, or shares of any class or classes
resulting from any reclassification or
reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which
are not subject to redemption by the Corporation;
provided that if at any time there shall be more than
one such resulting class, the shares of each such class
then so issuable shall be substantially in the
proportion which the total number of shares of such
class resulting from all such reclassifications bears
to the total number of shares of all such classes
resulting from all such reclassifications.
<PAGE>35
(17) In case of any consolidation of the
Corporation with, or merger of the Corporation into,
any other corporation (other than a consolidation or
merger in which the Corporation is the continuing
corporation) the holder of each share of Series B then
outstanding shall have the right to convert such shares
of Series B into the kind and amount of shares of stock
and other securities and property receivable upon such
consolidation or merger by a holder of the number of
shares of Common Stock of the Corporation into which
such share of Series B might have been converted
immediately prior to such consolidation or merger, and
the agreement of merger or consolidation shall so
provide. Provision shall be made for adjustments which
shall be as nearly equivalent as may be practicable to
the adjustments provided for in this subdivision (vii).
The above provisions of this paragraph (17) shall
similarly apply to successive consolidations or
mergers.
(viii) The holders of Series B shall be entitled to one
vote per share and shall, except as hereinafter provided,
vote together with the holders of the Common Stock and of
any other class or series of stock which may similarly be
entitled to vote with the holders of the Common Stock as a
single class upon all matters upon which shareholders are
entitled to vote.
If and whenever four quarterly dividends (whether or
not consecutive) payable on any series of Preferred Stock
shall be in arrears in whole or in part whether or not
earned or declared, the number of directors then
constituting the Board of Directors shall be increased by
two and the holders of the Series B, together with the
holders of each other series of Preferred Stock similarly
entitled to vote for the election of two additional
directors, voting separately as a class, regardless of
series, shall be entitled to elect the two additional
directors at any annual meeting of shareholders or special
meeting held in place thereof, or at a special meeting of
the holders of such series of Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on
the Preferred Stock then outstanding shall have been paid
and dividends thereon for the current quarterly dividend
period shall have been paid or declared and set apart for
payment, then the right of the holders of such series of
Preferred Stock to elect such additional two directors shall
cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar
future arrearages in dividends), and the terms of office of
all persons elected as directors by the holders of such
series of the Preferred Stock shall forthwith terminate and
the number of the Board of Directors shall be reduced
<PAGE>36
accordingly. At any time after such voting power shall have
been so vested in the Series B or in any other series of
Preferred Stock, the Secretary of the Corporation may, and
upon the written request of any holder of such series of
Preferred Stock (addressed to the Secretary at the principal
office of the Corporation) shall, call a special meeting of
the holders of such series of Preferred Stock for the
election of the two directors to be elected by them as
herein provided, such call to be made by notice similar to
that provided in the By-laws for a special meeting of the
shareholders or as required by law. If any such special
meeting required to be called as above provided shall not be
called by the Secretary within twenty days after receipt of
any such request, then any holder of such series of
Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the
stock books of the Corporation. The directors elected at
any such special meeting shall hold office until the next
annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously
terminated as above provided. In case any vacancy shall
occur among the directors elected by the holders of such
series of Preferred Stock, a successor shall be elected by
the Board of Directors to serve until the next annual
meeting of the shareholders or special meeting held in place
thereof upon the nomination of the then remaining director
elected by the holders of such series of Preferred Stock or
the successor of such remaining director.
(ix) So long as any shares of Series B are outstanding,
in addition to any other vote or consent of shareholders
required in the Certificate of Incorporation or By-laws, the
consent of the holders of at least sixty-six and two-thirds
per cent (66 2/3%) of Series B at the time outstanding given
in person or by proxy, either in writing without a meeting
or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating:
(a) Any amendment, alteration or repeal of any of
the provisions of the Certificate of Incorporation, or
of the By-laws, of the Corporation, which affects
adversely the voting powers, rights or preferences of
the holders of Series B; provided, however, that the
amendment of the provisions of the Certificate of
Incorporation so as to authorize or create, or to
increase the authorized amount of any junior stock or
any stock of any class ranking on a parity with Series
B, shall not be deemed to affect adversely the voting
powers, rights or preferences of the holder of
Series B;
(b) The authorization or creation of, or the
increase in the authorized amount of, any stock of any
class or any security convertible into stock of any
<PAGE>37
class, ranking prior to Series B in the distribution of
assets on any liquidation, dissolution, or winding up
of the Corporation or in the payment of dividends;
(c) The merger or consolidation of the Corporation
with or into any other corporation, unless the
corporation resulting from such merger or consolidation
will have after such merger or consolidation no class
of stock and no other securities either authorized or
outstanding ranking prior to Series B, in the
distribution of assets on any liquidation, dissolution
or winding up of the Corporation or in the payment of
dividends, except the same number of shares of stock,
and the same amount of other securities with the same
rights and preferences as the stock and securities of
the Corporation respectively authorized and outstanding
immediately preceding such merger or consolidation, and
each holder of Series B immediately preceding such
merger or consolidation shall receive the same number
of shares, with the same rights and preferences, of
stock of the resulting corporation; or
(d) The purchase or redemption of less than all
shares of Series B at the time outstanding unless the
full dividend on all shares of Series B then
outstanding shall have been paid or declared and a sum
sufficient for the payment thereof set apart;
provided, however, that no such consent of the holders of
Series B shall be required if, at or prior to the time when
such amendment, alteration or repeal is to take effect or
when the issuance of any such prior stock or convertible
security is to be made, or when such consolidation or
merger, purchase or redemption is to take effect, as the
case may be, provision is made for the redemption of all
shares of Series B at the time outstanding.
(x) So long as any shares of Series B are outstanding,
in addition to any other vote or consent of shareholders
required in the Certificate of Incorporation or By-laws, the
consent of the holders of at least a majority of Series B
and of all other series of Preferred Stock similarly
entitled to vote upon the matters specified in this
subdivision (x), at the time outstanding, acting as a single
class, regardless of series, given in person or by proxy,
either in writing without a meeting or by vote at any
meeting called for the purpose, shall be necessary for
effecting or validating any increase in the authorized
amount of the Preferred Stock, or the authorization or
creation of, or the increase in the authorized amount of,
any stock of any class or any security convertible into
stock of any class, ranking on a parity with the Series B in
the distribution of assets on any liquidation, dissolution,
or winding up of the Corporation or in the payment of
dividends; provided, however, that no such consent of the
<PAGE>38
holders of Series B shall be required if, at or prior to the
time such increase, authorization, or creation of such
parity stock is to be made, provision is made for the
redemption of all shares of Series B at the time
outstanding.
(xi) The holders of shares of Series B shall, as such,
have no preemptive right to purchase or otherwise acquire
shares of any class of stock or other securities of the
Corporation now or hereafter authorized.
(xii) As used herein with respect to Series B, the
following terms shall have the following meanings:
(a) The term "junior stock" shall mean the Common
Stock and any other class or series of stock of the
Corporation hereafter authorized over which Series B
has preference or priority in the payment of dividends
or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(b) The term "accrued dividends", with respect to
any share of any class or series, shall mean an amount
computed at the annual dividend rate for the class or
series of which the particular share is a part, from
the date on which dividends on such share became
cumulative to and including the date to which such
dividends are to be accrued, less the aggregate amount
of all dividends theretofore paid thereon.
(xiii) The shares of Series B shall not have any
relative, participating, optional or other special rights
and powers other than as set forth herein.
SERIES C
________
(i) The distinctive serial designation of the third
series shall be "$3.33 Series C Cumulative Preferred Stock,
par value one dollar ($1.00) per share" (hereinafter for
convenience called "Series C"). Each share of Series C
shall be identical in all respects with the other shares of
Series C except as to the dates from and after which
dividends shall be cumulative thereon.
(ii) The number of shares included in Series C shall
initially be 262,343 shares, which number from time to time
may be increased or decreased (but not decreased below the
number of shares of the Series then outstanding) by the
Board of Directors. Shares of Series C redeemed or
purchased by the Corporation shall be cancelled and shall
revert to authorized but unissued shares of Preferred Stock
undesignated as to series.
<PAGE>39
(iii) The annual rate of dividends payable on shares
of Series C shall be $3.33 per year and no more, payable
quarterly on the first days of March, June, September and
December, respectively, in each year with respect to the
quarterly dividend period (or portion thereof) ending on the
day preceding such dividend payment date.
(iv) Dividends on the shares of Series C initially
issued prior to the record date for payment of the dividend
payable on September 1, 1979 shall accrue and be cumulative
from the date or dates of issue thereof. Dividends on each
other share of Series C shall accrue and be cumulative from
the first day of the quarterly dividend period during which
such share was issued except that if any such shares shall
be issued after the record date for payment of a dividend in
respect of the then current dividend period and prior to the
payment date for such dividend, such shares shall not
participate in such dividend and dividends thereon shall
accrue and be cumulative only from such dividend payment
date. The holders of Series C, in preference to the holders
of any junior stock, shall be entitled to receive, as and
when declared by the Board of Directors out of any funds
legally available therefor, cash dividends at the rate fixed
in subdivision (iii) hereof. No dividends shall be paid
upon, or declared or set apart for, any shares of any class
or series of stock of the Corporation ranking on a parity
with the Series C in the payment of dividends for any
quarterly dividend period unless at the same time 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 and set apart for, all shares of Series C then
issued and outstanding and entitled to receive such
dividend.
In no event, so long as any shares of Series C shall be
outstanding, shall any dividend, whether in cash or
property, be paid or declared, nor shall any distribution be
made, on any junior stock, nor shall any shares of any
junior stock be purchased, redeemed or otherwise acquired
for value by the Corporation or by any subsidiary of the
Corporation, unless all dividends on the Series C for all
past quarterly dividend periods and for the then current
quarterly period shall have been paid or declared and a sum
sufficient for the payment thereof set apart. The
provisions of this paragraph shall not, however, apply to a
dividend payable in any junior stock, or to the acquisition
of shares of any junior stock in exchange for shares of any
other junior stock.
Subject to the foregoing and to any further limitations
prescribed in accordance with the provisions of Article
<PAGE>40
Fourth of the Certificate of Incorporation, the Board of
Directors may declare, out of any funds legally available
therefor, dividends upon the then outstanding shares of any
junior stock, and no holders of shares of Series C shall be
entitled to shares therein.
(v) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment shall
be made to the holders of any junior stock, the holders of
Series C shall be entitled to be paid in full an amount
equal to $36.00 per share, together with accrued dividends
to such distribution or payment date whether or not earned
or declared.
If such payment shall have been made in full to the
holders of Series C, the remaining assets and funds of the
Corporation shall be distributed among the holders of the
junior stock, according to their respective rights and
preferences, and in each case according to their respective
shares. If, upon any liquidation, dissolution or winding up
of the affairs of the Corporation, the amounts so payable
are not paid in full to the holders of all outstanding
shares of Series C, the holders of Series C and of all other
classes or series of stock of the Corporation ranking on a
parity therewith in the distribution of assets shall share
ratably in any distribution of assets in proportion to the
full amounts to which they would otherwise be respectively
entitled. Neither the consolidation or merger of the
Corporation, nor the sale, lease or conveyance of all or a
part of its assets, shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation
within the meaning of the foregoing provisions of this
subdivision (v).
(vi) On an after September 1, 1984, Series C may be
redeemed, as a whole or in part, at the option of the
Corporation by vote of its Board of Directors, at any time
or from time to time, at a redemption price of $36.00 per
share, together with accrued dividends to the redemption
date.
If less than all the outstanding shares of Series C are
to redeemed, the shares to be redeemed shall be determined
by lot or pro rata in such manner as the Board of Directors
may prescribe. Notice of every redemption of shares of
Series C shall be mailed by first class mail, postage
prepaid, addressed to the holders of record of the shares to
be redeemed at their respective last addresses as they shall
appear on the stock books of the Corporation. Such mailing
shall be at least thirty days and not more than sixty days
prior to the date fixed for redemption. Any notice which is
<PAGE>41
mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the
shareholder receives such notice, and failure duly to give
such notice by mail, or any defect in such notice, to any
holder of shares of Series C designated for redemption shall
not affect the validity of the proceedings for the
redemption of any other shares of Series C.
If notice of redemption shall have been duly mailed,
and if, on or before the redemption date specified in the
notice, the redemption price, together with accrued
dividends to the date fixed for redemption, shall have been
set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the
holders of the shares so called for redemption, so as to be
and continue to be available therefor, then, from and after
the date of redemption so designated, notwithstanding that
any certificate for shares of Series C so called for
redemption shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed
outstanding, the dividends thereon shall cease to accrue and
accumulate, and all rights with respect to the shares of
Series C so called for redemption shall forthwith on the
redemption date cease and terminate, except only the right
of the holders thereof to receive the redemption price of
the shares so redeemed, including accrued dividends to the
redemption date, but without interest.
The Corporation may also, at any time prior to the
redemption date, deposit in trust, for the account of the
holder of the shares of Series C to be redeemed, with a bank
or trust company in good standing, organized under the laws
of the United States of America or of the State of New York,
doing business in the Borough of Manhattan, The City of New
York, having capital, surplus and undivided profits
aggregating at least Five Million Dollars ($5,000,000)
designated in the notice of redemption, the redemption
price, together with accrued dividends to the date fixed for
redemption, and, unless the notice of redemption herein
provided for has previously been duly mailed, deliver
irrevocable written instructions directing such bank or
trust company, on behalf and at the expense of the
Corporation, to cause notice of redemption specifying the
date of redemption to be duly mailed as herein provided
promptly upon receipt of such irrevocable instructions.
Upon such deposit in trust, whether after due mailing of the
notice of redemption or accompanied by irrevocable
instructions as provided above, and notwithstanding that any
certificate for shares of Series C so called for redemption
shall not have been surrendered for cancellation, all shares
of Series C with respect to which the deposit shall have
been made shall no longer be deemed to be outstanding, and
<PAGE>42
all rights with respect to such shares of Series C shall
forthwith cease and terminate except only the right of the
holders thereof to receive from such bank or trust company,
at any time after the time of the deposit, the redemption
price, including accrued dividends to the redemption date,
but without interest, of the shares so to be redeemed.
Any moneys deposited by the Corporation pursuant to
this subdivision (vi) and unclaimed at the end of six years
from the date fixed for redemption shall be repaid to the
Corporation upon its request expressed in a resolution of
its Board of Directors, after which repayment the holders of
the shares so called for redemption shall look only to the
Corporation for the payment thereof.
(vii) Shares of Series C shall be entitled to the
benefits of a sinking fund as follows:
(a) So long as any shares of Series C are
outstanding, the Corporation shall, as a sinking fund
for the retirement of shares of Series C, redeem, out
of funds legally available therefor 26,234 shares of
Series C on September 1 in each of the years 1985
through 1994, inclusive, in each case at $36.00 per
share, together in each case with accrued dividends to
the redemption date.
(b) All redemptions pursuant to this subdivision
(vii) shall be made in accordance with the procedures
for redemption specified in subdivision (vi) hereof.
Shares of Series C redeemed at the option of the
Corporation pursuant to subdivision (vi) hereof or
otherwise purchased or acquired by the Corporation may
be credited to, and shall to the extent thereof relieve
the Corporation from, the sinking fund obligation set
forth in this subdivision (vii).
(c) So long as any shares of Series C shall remain
outstanding, in no event shall any dividends, whether
in cash or property, be paid or declared, or any
distribution made, on any junior stock nor shall any
shares of any junior stock be purchased, redeemed or
otherwise acquired for value by the Corporation or by
any subsidiary of the Corporation, unless the
Corporation shall have redeemed, pursuant to this
subdivision (vii) the number of shares of Series C
required to have been theretofore redeemed pursuant to
subdivision (vii)(a) (without reference to any
provision of said subdivision (vii)(a) which limits the
Corporation's obligation to make such redemption), but
a deficiency in sinking fund requirements shall have no
other consequence except as provided in subdivision
<PAGE>43
(vii)(d). The provisions of this subdivision (vii)(c)
shall not, however, apply to a dividend payable in any
junior stock, or to the acquisition of shares of any
junior stock in exchange for shares of any other junior
stock.
(d) In the event that, at a time when the holders
of shares of Series C do not have the right to elect
directors pursuant to subdivision (viii) hereof, the
Corporation shall have failed to have redeemed when
required (without regard to the availability of funds
legally available therefor) shares of Series C or
shares of any other series of Preferred Stock having a
similar right to elect directors by reason of a failure
of the Corporation to redeem shares of such Preferred
Stock pursuant to a mandatory sinking fund provision
(such other Preferred Stock together with Series C
being hereinafter referred to as Sinking Fund Preferred
Stock), the number of directors then constituting the
Board of Directors shall be increased by two
immediately prior to the next annual meeting of
shareholders or special meeting held in place thereof
and the holders of the then outstanding Sinking Fund
Preferred Stock, in addition to any right of holders of
any series of Sinking Fund Preferred Stock to vote with
the Common Stock at the election of other directors,
shall be entitled, voting separately as a class,
regardless of series, to elect such two additional
directors of the Corporation, such directors to be
elected by such holders at each annual meeting of
shareholders or special meeting held in place thereof
as long as the Sinking Fund Preferred Stock has special
voting rights pursuant to this subdivision (vii) (d).
Each share of Sinking Fund Preferred Stock shall have
one vote and the additional directors elected shall,
except as provided herein, hold office until the next
annual meeting of shareholders or special meeting held
in place thereof. Whenever the Corporation has
redeemed the shares of Sinking Fund Preferred Stock
which the Corporation is required by the terms thereof
to have redeemed or the holders of Preferred Stock
elect directors pursuant to subdivision (viii) hereof,
then the right of the holders of the Sinking Fund
Preferred Stock to elect two additional directors shall
cease (but subject always to the same provisions for
the vesting of such voting rights in the case of any
similar future failure to meet sinking fund
requirements), and the terms of office of all persons
elected as directors by the holders of Sinking Fund
Preferred Stock shall forthwith terminate and the
number of the Board of Directors shall be reduced
accordingly. In case any vacancy shall occur among the
<PAGE>44
directors elected by the holders of Sinking Fund
Preferred Stock, a successor shall be elected by the
Board of Directors to serve until the next annual
meeting or special meeting held in place thereof upon
the nomination of the then remaining director elected
by such holders or the successor of such remaining
director.
(viii) The holders of Series C shall be entitled to one
vote per share and shall, except as hereinafter provided,
vote together with the holders of the Common Stock and of
any other class or series of stock which may similarly be
entitled to vote with the holders of the Common Stock as a
single class upon all matters upon which shareholders are
entitled to vote.
If and whenever four quarterly dividends (whether or
not consecutive) payable on any series of Preferred Stock
shall be in arrears in whole or in part whether or not
earned or declared, the number of directors then
constituting the Board of Directors shall be increased by
two and the holders of the Series C, together with the
holders of each other series of Preferred Stock similarly
entitled to vote for the election of two additional
directors, voting separately as a class, regardless of
series, shall be entitled to elect the two additional
directors at any annual meeting of shareholders or special
meeting held in place thereof, or at a special meeting of
the holders of such series of Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on
the Preferred Stock then outstanding shall have been paid
and dividends thereon for the current quarterly dividend
period shall have been paid or declared and set apart for
payment, then the right of the holders of such series of
Preferred Stock to elect such additional two directors shall
cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar
future arrearages in dividends), and the terms of office of
all persons elected as directors by the holders of such
series of the Preferred Stock shall forthwith terminate and
the number of the Board of Directors shall be reduced
accordingly. At any time after such voting power shall have
been so vested in the Series C or in any other series of
preferred Stock, the Secretary of the Corporation may, and
upon the written request of any holder of such series of
Preferred Stock (addressed to the Secretary at the principal
office of the Corporation) shall, call a special meeting of
the holders of such series of Preferred Stock for the
election of the two directors to be elected by them as
herein provided, such call to be made by notice similar to
that provided in the By-Laws for a special meeting of the
shareholders or as required by law. If any such special
<PAGE>45
meeting required to be called as above provided shall not be
called by the Secretary within twenty days after receipt of
any such request, then any holder of such series of
Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the
stock books of the Corporation. The directors elected at
any such special meeting shall hold office until the next
annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously
terminated as above provided. In case any vacancy shall
occur among the directors elected by the holders of such
series of Preferred Stock, a successor shall be elected by
the Board of Directors to serve until the next annual
meeting of the shareholders or special meeting held in place
thereof upon the nomination of the then remaining director
elected by the holders of such series of Preferred Stock or
the successor of such remaining directors.
(ix) So long as any shares of Series C are outstanding,
in addition to any other vote or consent of shareholders
required in the Certificate of Incorporation or By-Laws, the
consent of the holders of at least sixty-six and two-thirds
per cent (66 2/3%) of Series C at the time outstanding given
in person or by proxy, either in writing without a meeting
or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating any amendment,
alteration or repeal of any of the provisions of the
Certificate of Incorporation, or of the By-Laws of the
Corporation, which affects adversely the voting powers,
rights or preferences of the holders of Series C; provided,
however, that the amendment of the provisions of the
Certificate of Incorporation so as to authorize or create,
or to increase the authorized amount of any junior stock or
any stock of any class ranking on a parity with Series C,
shall not be deemed to affect adversely the voting powers,
rights or preferences of the holders of Series C; provided,
however, that no such consent of the holders of Series C
shall be required if, at or prior to the time when such
amendment, alteration or repeal is to take effect or when
the issuance of any such prior stock or convertible security
is to be made, or when such consolidation or merger,
purchase or redemption is to take effect, as the case may
be, provision is made for the redemption of all shares of
Series C at the time outstanding.
(x) The holders of shares of Series C shall, as such,
have no preemptive right to purchase or otherwise acquire
shares of any class of stock or other securities of the
Corporation now or hereafter authorized.
(xi) As used herein with respect to Series C, the
following terms shall have the following meanings:
<PAGE>46
(a) The term "junior stock" shall mean the Common
Stock and other class or series of stock of the
Corporation hereafter authorized over which Series C
has preference or priority in the payment of dividends
or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
(b) The term "accrued dividends", with respect to
any share of any class or series, shall mean an amount
computed at the annual dividend rate for the class or
series of which the particular share is a part, from
the date on which dividends on such share became
cumulative to and including the date to which such
dividends are to be accrued, less the aggregate amount
of all dividends theretofore paid thereon.
(xii) The shares of Series C shall not have any
relative, participating, optional or other special rights
and powers other than as set forth herein.
SERIES D
________
(i) The distinctive serial designation of the fourth
series shall be "$2.25 Convertible Preferred Stock, Series
D, par value one dollar ($1.00) per share" (hereinafter for
convenience called "Series D Preferred Stock"). Each share
of Series D Preferred Stock shall be identical in all
respects with the other shares of Series D Preferred Stock
except as to the dates from and after which dividends shall
be cumulative thereon.
(ii) The number of shares included in Series D
Preferred Stock shall initially be 3,000,000 shares, which
number from time to time may be increased or decreased (but
not decreased below the number of shares of the Series then
outstanding) by the Board of Directors. Shares of Series D
Preferred Stock redeemed, purchased by the Corporation or
converted into Common Stock shall be cancelled and shall
revert to authorized but unissued shares of Preferred Stock
undesignated as to series.
(iii) The annual rate of dividends payable on shares of
Series D Preferred Stock shall be $2.25 per year and no
more, payable quarterly on the first days of March, June,
September and December, respectively, in each year with
respect to the quarterly dividend period (or portion
thereof) ending on the day preceding such dividend payment
date.
(iv) Dividends on the shares of Series D Preferred
Stock initially issued prior to the record date for payment
of the dividend payable on September 1, 1980 shall accrue
<PAGE>47
and be cumulative from the date or dates of issue thereof.
Dividends on each other share of Series D Preferred Stock
shall accrue and be cumulative from the first day of the
quarterly dividend period during which such share was
issued, except that if any such shares shall be issued after
the record date for payment of a dividend in respect of the
then current dividend period and prior to the payment date
for such dividend, such shares shall not participate in such
dividend and dividends thereon shall accrue and be
cumulative only from such dividend payment date. The
holders of Series D Preferred Stock, in preference to the
holders of any junior stock, shall be entitled to receive,
as and when declared by the Board of Directors out of any
funds legally available therefor, cash dividends at the rate
fixed in subdivision (iii) hereof. No dividends shall be
paid upon, or declared or set apart for, any shares of any
class or series of stock of the Corporation ranking on a
parity with the Series D Preferred Stock in the payment of
dividends for any quarterly dividend period unless at the
same time 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 and set apart for, all shares of
Series D Preferred Stock then issued and outstanding and
entitled to receive such dividend.
In no event, so long as any shares of Series D
Preferred Stock shall be outstanding, shall any dividend,
whether in cash or property, be paid or declared, nor shall
any distribution be made, on any junior stock, nor shall any
shares of any junior stock be purchased, redeemed or
otherwise acquired for value by the Corporation or by any
subsidiary of the Corporation, unless all dividends on the
Series D Preferred Stock for all past quarterly dividend
periods and for the then current quarterly period shall have
been paid or declared and a sum sufficient for the payment
thereof set apart. The provisions of this paragraph shall
not, however, apply to a dividend payable in any junior
stock, or to the acquisition of shares of any junior stock
in exchange for shares of any other junior stock.
Subject to the foregoing and to any further limitations
prescribed in accordance with the provisions of Article
Fourth of the Certificate of Incorporation, the Board of
Directors may declare, out of any funds legally available
therefor, dividends upon the then outstanding shares of any
junior stock, and no holders of shares of Series D Preferred
Stock shall be entitled to share therein.
(v) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, then, before any distribution or payment shall
<PAGE>48
be made to the holders of any junior stock, the holders of
Series D Preferred Stock shall be entitled to be paid in
full an amount equal to $25.00 per share, together with
accrued dividends to such distribution or payment date
whether or not earned or declared.
If such payment shall have been made in full to the
holders of Series D Preferred Stock, the remaining assets
and funds of the Corporation shall be distributed among the
holders of the junior stock, according to their respective
rights and preferences and in each case according to their
respective shares. If, upon any liquidation, dissolution or
winding up of the affairs of the Corporation, the amounts so
payable are not paid in full to the holders of all
outstanding shares of Series D Preferred Stock, the holders
of Series D and of all other classes or series of stock of
the Corporation ranking on a parity therewith in the
distribution of assets shall share ratably in any
distribution of assets in proportion to the full amounts to
which they would otherwise be respectively entitled.
Neither the consolidation or merger of the Corporation, nor
the sale, lease or conveyance of all or a part of its
assets, shall be deemed a liquidation, dissolution or
winding up of the affairs of the Corporation within the
meaning of the foregoing provisions of this subdivision (v).
(vi) Series D Preferred Stock may be redeemed, as a
whole or in part, at the option of the Corporation by vote
of its Board of Directors, at any time or from time to time,
at the redemption price in effect at the redemption date as
provided in this subdivision (vi), together with accrued
dividends to the redemption date. The redemption price for
shares of Series D Preferred Stock shall be $27.25 per share
if the date designated for redemption is on or before June
1, 1981, $27.03 per share if thereafter and on or before
June 1, 1982, $26.80 per share if thereafter and on or
before June 1, 1983, $26.58 if thereafter and on or before
June 1, 1984, $26.35 if thereafter and on or before June 1,
1985, $26.13 if thereafter and on or before June 1, 1986,
$25.90 if thereafter and on or before June 1, 1987, $25.68
if thereafter and on or before June 1, 1988, $25.45 if
thereafter and on or before June 1, 1989, $25.23 if
thereafter and on or before June 1, 1990, and $25.00 if
thereafter.
If less than all the outstanding shares of Series D
Preferred Stock are to be redeemed, the shares to be
redeemed shall be determined by lot or pro rata in such
manner as the Board of Directors may prescribe. Notice of
every redemption of shares of Series D Preferred Stock shall
be mailed by first class mail, postage prepaid, addressed to
the holders of record of the shares to be redeemed at their
<PAGE>49
respective last addresses as they shall appear on the stock
books of the Corporation. Such mailing shall be at least
thirty days and not more than sixty days prior to the date
fixed for redemption. Any notice which is mailed in the
manner herein provided shall be conclusively presumed to
have been duly given, whether or not the shareholder
receives such notice, and failure duly to give such notice
by mail, or any defect in such notice, to any holder of
shares of Series D Preferred Stock designated for redemption
shall not affect the validity of the proceedings for the
redemption of any other shares of Series D Preferred Stock.
If notice of redemption shall have been duly mailed and
if, on or before the redemption date specified in the
notice, the redemption price, together with accrued
dividends to the date fixed for redemption, shall have been
set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the
holders of the shares so called for redemption, so as to be
and continue to be available therefor, then, from and after
the date of redemption so designated, notwithstanding that
any certificate for shares of Series D Preferred Stock so
called for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no longer
be deemed outstanding, the dividends thereon shall cease to
accrue and accumulate, and all rights with respect to the
shares of Series D Preferred Stock so called for redemption
shall forthwith on the redemption date cease and terminate,
except only the right of the holders thereof to receive the
redemption price of the shares so redeemed, including
accrued dividends to the redemption date, but without
interest.
The Corporation may also, at any time prior to the
redemption date, deposit in trust, for the account of the
holders of the shares of Series D Preferred Stock to be
redeemed, with a bank or trust company in good standing,
organized under the laws of the United States of America or
of the State of New York, doing business in the Borough of
Manhattan, The City of New York, having capital, surplus and
undivided profits aggregating at least Five Million Dollars
($5,000,000), designated in the notice of redemption, the
redemption price, together with accrued dividends to the
date fixed for redemption, and, unless the notice of
redemption herein provided for has previously been duly
mailed, deliver irrevocable written instructions directing
such bank or trust company, on behalf and at the expense of
the Corporation, to cause notice of redemption specifying
the date of redemption to be duly mailed as herein provided
promptly upon receipt of such irrevocable instructions. Upon
such deposit in trust, whether after due mailing of the
notice of redemption or accompanied by irrevocable
<PAGE>50
instructions as provided above, and notwithstanding that any
certificate for shares of Series D Preferred Stock so called
for redemption shall not have been surrendered for
cancellation, all shares of Series D Preferred Stock with
respect to which the deposit shall have been made shall no
longer be deemed to be outstanding, and all rights with
respect to such shares of Series D Preferred Stock shall
forthwith cease and terminate except only the right of the
holders thereof to receive from such bank or trust company,
at any time after the time of the deposit, the redemption
price, including accrued dividends to the redemption date,
but without interest, of the shares so to be redeemed and
the right to exercise conversion privileges on or before the
third full business day prior to the date fixed for
redemption.
Any moneys deposited by the Corporation pursuant to
this subdivision (vi) which shall not be required for the
redemption because of the exercise of any right of
conversion subsequent to the date of the deposit shall be
repaid to the Corporation forthwith. Any other moneys
deposited by the Corporation pursuant to this subdivision
(vi) and unclaimed at the end of three years from the date
fixed for redemption shall be repaid to the Corporation upon
its request expressed in a resolution of its Board of
Directors, after which repayment the holders of the shares
so called for redemption shall look only to the Corporation
for the payment thereof.
(vii) The holders of shares of Series D Preferred Stock
shall have the right, at their option, to convert such
shares into shares of Common Stock of the Corporation at any
time on and subject to the following terms and conditions:
(a) Subject to the provisions for adjustment
hereinafter set forth, each share of Series D Preferred
Stock shall be convertible at the option of the holder
thereof, upon surrender to any Transfer Agent for such
Series D Preferred Stock or, if no such Transfer Agent
exists, to the Corporation at its principal office or
at such other office or offices as may be designated
for such purpose by the Board of Directors, of the
certificate for the share so to be converted, into
0.86957 of a fully paid and nonassessable share of
Common Stock of the Corporation. The right to convert
shares of Series D Preferred Stock called for
redemption shall terminate at the close of the third
full business day prior to the date fixed for
redemption. Upon conversion of any shares of Series D
Preferred Stock, no allowance or adjustment shall be
made for dividends on either class of stock.
<PAGE>51
(b) The number of shares of Common Stock and the
number of shares of other stock of the Corporation, if
any, into which each share of Series D Preferred Stock
is convertible, shall be subject to adjustment from
time to time as follows:
(1) In case the Corporation shall (A) pay a
dividend on its Common Stock in stock of the
Corporation, (B) subdivide its outstanding shares
of Common Stock, (C) combine the outstanding
shares of its Common Stock into a smaller number
of shares, or (D) issue by reclassification of its
Common Stock (whether pursuant to a merger or
consolidation or otherwise) any shares of stock of
the Corporation, then the holder of each share of
Series D Preferred Stock shall be entitled to
receive upon the conversion of such share, the
number of shares of stock of the Corporation which
he would have owned or have been entitled to
receive after the happening of any of the events
described above had such share been converted
immediately prior to the happening of such event.
Such adjustment shall be made whenever any of the
events listed above shall occur. An adjustment
made pursuant to this subparagraph (1) shall
become effective retroactively with respect to
conversions made subsequent to the record date in
the case of a dividend and shall become effective
on the effective date in the case of a
subdivision, combination or reclassification;
(2) In case the Corporation shall issue
rights or warrants to the holders of its Common
Stock which expire within the 45 days following
the record date for determining the shareholders
entitled to receive them and entitling such
holders to subscribe for or purchase shares of
Common Stock at a price per share less than the
current market price per share of the Common Stock
(as defined in subdivision (vii) (c) below) on the
record date for determination of shareholders
entitled to receive such rights or warrants, then
in each such case the number of shares of Common
Stock into which each share of Series D Preferred
Stock shall thereafter be convertible shall be
determined by multiplying the number of shares of
Common Stock into which such share of Series D
Preferred Stock was 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
<PAGE>52
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 which the aggregate offering
price of the total number of shares so offered
would purchase at such current market price. For
the purposes of this subparagraph (2), the
issuance of rights or warrants to subscribe for or
purchase stock or securities convertible into
shares of Common Stock shall be deemed to be the
issuance of rights or warrants to purchase the
shares of Common Stock into which such stock or
securities are convertible at an aggregate
offering price equal to the aggregate offering
price of such stock or securities plus the minimum
aggregate amount (if any) payable upon conversion
of such stock or securities into Common Stock.
Such adjustment shall be made whenever any such
rights or warrants are issued, and shall become
effective retroactively with respect to
conversions made subsequent to the record date for
the determination of stockholders entitled to
receive such rights or warrants; and
(3) In case the Corporation shall distribute
to holders of its Common Stock (whether pursuant
to a merger or consolidation or otherwise)
evidences of its indebtedness, shares of any class
of stock other than Common Stock, rights or
warrants to which subparagraph (2) above does not
apply, or other assets other than cash dividends
or distributions, then in each such case the
number of shares of Common Stock into which each
share of Series D Preferred Stock shall thereafter
be convertible shall be determined by multiplying
the number of shares of Common Stock into which
such share of Series D Preferred Stock was
theretofore convertible by a fraction of which the
numerator shall be the current market price per
share of the Common Stock (as defined in paragraph
(c) below) on the record date for determination of
shareholders entitled to receive such
distribution, and of which the denominator shall
be such current market price per share of the
Common Stock less the fair value (as determined by
the Board of Directors of the Corporation, whose
determination shall be conclusive, and described
in a statement filed with each Transfer Agent) of
the portion of the assets or evidences of
indebtedness so distributed or of such
subscription rights applicable to one share of the
<PAGE>53
Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall
become effective retroactively with respect to
conversions made subsequent to the record date for
the determination of shareholders entitled to
receive such distribution.
(c) For the purposes of any computation under
paragraph (b) above, the current market price per share
of Common Stock on any date shall be deemed to be the
average of the daily closing prices for the 30
consecutive trading days commencing 45 trading days
before the day in question. A trading day shall be any
day on which the Common Stock is able to be traded on
the New York Stock Exchange or any stock exchange or
organized securities market in the United States of
America, whether or not the Common Stock actually is
traded on such day. The closing price for each day
shall be the last sales price regular way or, in case
no sale takes place on such day, the average of the
closing bid and asked prices regular way, in either
case (A) as officially quoted by the New York Stock
Exchange, or (B) if, in the judgement of the Board of
Directors of the Corporation, the New York Stock
Exchange is no longer the principal United States
market for the Common Stock, then as quoted on the
principal United States stock exchange or market for
the Common Stock, as determined by the Board of
Directors of the Corporation, or (C) if, in the
judgement of the Board of Directors of the Corporation,
there exists no principal United States stock exchange
or market for the Common Stock, then as determined by
the Board of Directors of the Corporation.
(d) No adjustment in the conversion rate shall be
required unless such adjustment (plus any adjustments
not previously made by reason of this paragraph (d)
would require an increase or decrease of at least 1% in
the number of shares of Common Stock into which each
share of Series D Preferred Stock is then convertible;
provided, however, that any adjustment which by reason
of this paragraph (d) is not required to be made shall
be carried forward and taken into account in any
subsequent adjustment. All calculations under this
subdivision (vii) shall be made to the nearest one-
hundred thousandth of a share.
(e) In case of any consolidation of the
Corporation with, or merger of the Corporation into,
any other corporation (other than a consolidation or
merger in which the Corporation is the continuing
corporation) the agreement of merger or consolidation
<PAGE>54
shall provide that the holder of each share of Series D
Preferred Stock then outstanding shall have the right
to convert such share of Series D Preferred Stock into
the kind and amount of shares of stock and other
securities and property receivable upon such
consolidation or merger by a holder of the number of
shares of Common Stock of the Corporation into which
such share of Series D Preferred Stock might have been
converted immediately prior to such consolidation or
merger. Provisions shall be made for adjustments which
shall be as nearly equivalent as may be practicable to
the adjustments provided for in this subdivision (vii).
The above provisions of this paragraph (e) shall
similarly apply to successive consolidations or
mergers.
(f) Whenever any adjustment is required in the
stock into which each share of Series D Preferred Stock
is convertible, the Corporation shall forthwith (A)
file with each Transfer Agent of such Series D
Preferred Stock a statement describing in reasonable
detail the adjustment and the method of calculation
used, and (B) cause a copy of such statement to be
mailed to the holders of record of the Series D
Preferred Stock as of the effective date of such
adjustment.
(g) The Corporation shall at all times reserve and
keep available out of its authorized Common Stock the
full number of shares of stock into which all shares of
Series D Preferred Stock from time to time outstanding
are convertible.
(h) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion
of Series D Preferred Stock. If any such conversion
would otherwise require the issuance of a fractional
share, an amount equal to such fraction multiplied by
the closing price (determined as provided in paragraph
(c) above) of the Common Stock on the day of conversion
shall be paid to the holder in cash by the Corporation.
(i) The certificate of any independent firm of
public accountants of recognized standing selected by
the Board of Directors shall be evidence of the
correctness of any computation made under this
subdivision (vii).
(j) The Corporation shall be entitled to make such
increases in the conversion rate, in addition to those
required by this Section, as shall be determined by the
Board of Directors, as evidenced by a board resolution,
<PAGE>55
to be advisable in order to avoid taxation so far as
practicable of any dividend of stock or stock rights or
any event treated as such for federal income tax
purposes to the recipients.
(viii) The holders of Series D Preferred Stock shall
be entitled to one vote per share and shall, except as
hereinafter provided, vote together with the holders of the
Common Stock and of any other class or series of stock which
may similarly be entitled to vote with the holders of the
Common Stock as a single class upon all matters upon which
shareholders are entitled to vote.
If and whenever four quarterly dividends (whether or
not consecutive) payable on any series of Preferred Stock
shall be in arrears in whole or in part whether or not
earned or declared, the number of directors then
constituting the Board of Directors shall be increased by
two and the holders of the Series D Preferred Stock,
together with the holders of each other series of Preferred
Stock similarly entitled to vote for the election of two
additional directors, voting separately as a class,
regardless of series, shall be entitled to elect the two
additional directors at any annual meeting of shareholders
or special meeting held in place thereof, or at a special
meeting of the holders of such series of Preferred Stock
called as hereinafter provided. Whenever all arrears in
dividends on the Preferred Stock then outstanding shall have
been paid and dividends thereon for the current quarterly
dividend period shall have been paid or declared and set
apart for payment, then the right of the holders of such
series of Preferred Stock to elect such additional two
directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case
of any similar future arrearages in dividends), and the
terms of office of all persons elected as Directors by the
holders of such series of the Preferred Stock shall
forthwith terminate and the number of the Board of Directors
shall be reduced accordingly. At any time after such voting
power shall have been so vested in the Series D Preferred
Stock or in any other series of Preferred Stock, the
Secretary of the Corporation may, and upon the written
request of any holder of such series of Preferred Stock
(addressed to the Secretary at the principal office of the
Corporation) shall, call a special meeting of the holders of
such series of Preferred Stock for the election of the two
directors to be elected by them as herein provided, such
call to be made by notice similar to that provided in the
By-laws for a special meeting of the shareholders or as
required by law. If any such special meeting required to be
called as above provided shall not be called by the
Secretary within twenty days after receipt of any such
<PAGE>56
request, then any holder of such series of Preferred Stock
may call such meeting, upon the notice above provided, and
for that purpose shall have access to the stock books of the
Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting of
the shareholders or special meeting held in place thereof if
such office shall not have previously terminated as above
provided. In case any vacancy shall occur among the
directors elected by the holders of such series of Preferred
Stock, a successor shall be elected by the Board of
Directors to serve until the next annual meeting of the
shareholders or special meeting held in place thereof upon
the nomination of the then remaining director elected by the
holders of such series of Preferred Stock or the successor
of such remaining director.
(ix) So long as any shares of Series D Preferred Stock
are outstanding, in addition to any other vote or consent of
shareholders required in the Certificate of Incorporation or
by law, the consent of the holders of at least sixty-six and
two-thirds per cent (66 2/3%) of Series D Preferred Stock at
the time outstanding given in person or by proxy, either in
writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or
validating:
(a) Any amendment, alteration or repeal of any of
the provisions of the Certificate of Incorporation or
of the By-laws of the Corporation which affects
adversely the voting powers, rights or preferences of
the holders of Series D Preferred Stock; provided,
however, that the amendment of the provisions of the
Certificate of Incorporation so as to authorize or
create, or to increase the authorized amount of any
junior stock or any stock of any class ranking on a
parity with Series D Preferred Stock, shall not be
deemed to affect adversely the voting powers, rights or
preferences of the holders of Series D Preferred Stock;
(b) The authorization or creation of, or the
increase in the authorized amount of, any stock of any
class or any security convertible into stock of any
class, ranking prior to Series D Preferred Stock in the
distribution of assets on any liquidation, dissolution
or winding up of the Corporation or in the payment of
dividends;
(c) The merger or consolidation of the
Corporation with or into any other corporation, unless
the corporation resulting from such merger or
consolidation will have after such merger or
consolidation no class of stock and no other securities
either authorized or outstanding ranking prior to
<PAGE>57
Series D Preferred Stock, in the distribution of assets
on any liquidation, dissolution or winding up of the
Corporation or in the payment of dividends, except the
same number of shares of stock and the same amount of
other securities with the same rights and preferences
as the stock and securities of the Corporation
respectively authorized and outstanding immediately
preceding such merger or consolidation, and each holder
of Series D Preferred Stock immediately preceding such
merger or consolidation shall receive the same number
of shares, with the same rights and preferences, of
stock of the resulting corporation; or
(d) The purchase or redemption of less than all
shares of Series D Preferred Stock at the time
outstanding unless the full dividend on all shares of
Series D Preferred Stock then outstanding shall have
been paid or declared and a sum sufficient for the
payment thereof set apart;
provided, however, that no such consent of the holders of
Series D Preferred Stock shall be required if, at or prior
to the time when such amendment, alteration or repeal is to
take effect or when the issuance of any such prior stock or
convertible security is to be made, or when such
consolidation or merger, purchase or redemption is to take
effect, as the case may be, provision is made for the
redemption of all shares of Series D Preferred Stock at the
time outstanding.
(x) So long as any shares of Series D Preferred Stock
are outstanding, in addition to any other vote or consent of
shareholders required in the Certificate of Incorporation or
by law, the consent of the holders of at least a majority of
Series D Preferred Stock and of all other series of
Preferred Stock similarly entitled to vote upon the matters
specified in this subdivision (x), at the times outstanding,
acting as a single class, regardless of series, given in
person or by proxy, either in writing without a meeting or
by vote at any meeting called for the purpose, shall be
necessary for effecting or validating any increase in the
authorized amount of the Preferred Stock, or the
authorization or creation of, or the increase in the
authorized amount of, any stock of any class or any security
convertible into stock of any class, ranking on a parity
with the Series D Preferred Stock in the distribution of
assets on any liquidation, dissolution or winding up of the
Corporation or in the payment of dividends; provided,
however, that no such consent of the holders of Series D
Preferred Stock shall be required if, at or prior to the
time such increase, authorization, or creation of such
parity stock is to be made, provision is made for the
<PAGE>58
redemption of all shares of Series D Preferred Stock at the
time outstanding.
(xi) The holders of shares of Series D Preferred Stock
shall, as such, have no preemptive right to purchase or
otherwise acquire shares of any class of stock or other
securities of the Corporation now or hereafter authorized.
(xii) As used herein with respect to Series D Preferred
Stock the following terms shall have the following meanings:
(a) The term "junior stock" shall mean the Common
Stock and any other class or series of stock of the
Corporation hereafter authorized over which Series D
Preferred Stock has preference or priority in the
payment of dividends or in the distribution of assets
on any liquidation, dissolution or winding up of the
Corporation.
(b) The term "accrued dividends", with respect to
any share of any class or series, shall mean an amount
computed at the annual dividend rate for the class or
series of which the particular share is a part, from
the date on which dividends on such share became
cumulative to and including the date to which such
dividends are to be accrued, less the aggregate amount
of all dividends theretofore paid thereon.
(xiii) The shares of Series D Preferred Stock shall not
have any relative, participating, optional or other special
rights and powers other than as set forth herein.
FIFTH: The Secretary of State of the State of New York
is designated as the agent of the Corporation upon whom any
service in any action or proceeding against it may be
served. The address to which the Secretary of State shall
mail a copy of process in any action or proceeding against
the Corporation which may be served upon him is USLIFE
Corporation, 125 Maiden Lane, New York, NY 10038, Attention
of the Secretary.
SIXTH: No holder of shares of the Corporation of any
class now or hereafter authorized, shall have any
preferential or preemptive right to subscribe for, purchase
or receive any shares of the Corporation of any class, now
or hereafter authorized, or any options or warrants for such
shares, or any rights to subscribe to or purchase such
shares, or any securities convertible into or exchangeable
for such shares, which may at any time be issued, sold or
offered for sale by the Corporation.
<PAGE>59
SEVENTH: (a) Except as otherwise expressly provided in
paragraph (c) of this Article, the affirmative vote of the
holders of at least 80% of the outstanding shares of capital
stock of the Corporation regularly entitled to vote in the
election of directors (considered for the purposes of this
Article as one class) shall be required to authorize or
approve (i) any merger or consolidation of the Corporation
with or into any Related Person or any affiliate of a
Related Person or (ii) any sale, lease, exchange or other
disposition by the Corporation of assets constituting all or
substantially all of the assets of the Corporation to or
with any Related Person or any affiliate of a Related
Person, whether or not in connection with the dissolution of
the Corporation. Such affirmative vote shall be required
notwithstanding the fact that some lesser percentage may be
specified in law or any agreement or contract to which the
Corporation is a party (including, but not limited to, any
agreement with any securities exchange on which any of the
Corporation's capital stock may be listed) and shall be in
addition to any class or series vote to which any class or
series of capital stock of the Corporation may be entitled.
(b) As used in this Article Seventh, the following
terms shall have the following meanings:
(i) "Related Person" shall mean any corporation,
partnership, joint venture, trust or other entity
which, together with its affiliates and associated
persons, owns, as of the record date for the
determination of shareholders entitled to vote on the
transaction in question, of record or beneficially,
directly or indirectly, 10% or more of the outstanding
shares of capital stock of the Corporation entitled to
vote on such transaction;
(ii) An "affiliate" of a Related Person shall
mean any individual partnership, joint venture, trust,
corporation or other entity which, directly or
indirectly through one or more intermediaries,
controls, is controlled by, or is under common control
with, such Related Person; and
(iii) An "associated person" of a Related Person
shall mean any beneficial owner, directly or
indirectly, of 10% or more of any class of equity
security of, such Related Person or any of its
affiliates.
(c) The provisions of this Article Seventh shall not
apply to any transaction referred to in paragraph (a) of
this Article (1) with any corporate Related Person of which
a majority of the outstanding shares of all capital stock
regularly entitled to vote in the election of directors
(considered for this purpose as one class) is beneficially
owned by the Corporation and one or more of its subsidiaries
if the Board of Directors of the Corporation determines that
such transaction is not being carried out to circumvent the
<PAGE>60
requirements of this Article, or (2) if the Board of
Directors determines that the transaction is consistent in
all material respects with terms and conditions approved by
the Board of Directors of the Corporation prior to the time
the Related Person became a Related Person.
(d) Any determination made in good faith by the Board
of Directors of the Corporation, on the basis of information
at the time available to it, as to whether any person is a
Related Person or whether any person is an affiliate or an
associated person of a Related Person, or as to whether the
conditions described in paragraph (c) of this Article, for
the inapplicability of paragraph (a) of this Article to
certain transactions, are met, shall be conclusive and
binding for all purposes of this Article.
(e) In addition to any other vote that may be required
by statute, securities exchange regulations, the Certificate
of Incorporation or By-Laws of the Corporation, the
affirmative vote of the holders of at least 80% of the
outstanding shares of capital stock of the Corporation
regularly entitled to vote in the election of directors
(considered for this purpose as one class) shall be required
to amend, alter or repeal this Article Seventh or Section 3
of Article II or the first paragraph of Section 3 of Article
V of the By-Laws of the Corporation, or to adopt any
provision of the Certificate of Incorporation or By-Laws of
the Corporation inconsistent with any of such Provisions.
EIGHTH: No director of the Corporation shall be
personally liable to the Corporation or to the Corporation's
shareholders for damages for any breach of duty in such
director's capacity as a director except to the extent that
such elimination or limitation of liability is expressly
prohibited by the Business Corporation Law of the State of
New York as in effect on the date this provision is adopted
or as the Business Corporation Law may hereafter be amended.
No amendment, modification or repeal of this provision shall
adversely affect, limit or eliminate any right of any
director or any limitation or elimination of the liability
of any director that exists at the time of such amendment,
modification or repeal.
4. This Restatement of the Certificate of
Incorporation was authorized by the Board of
Directors.
<PAGE>61
IN WITNESS WHEREOF, we have made and subscribed this
Certificate, this 8th day of November, 1993.
/s/ Gordon E. Crosby,Jr.
________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Richhard G. Hohn
____________________
Richard G. Hohn
Corporate Secretary
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.
Richard G. Hohn, being duly sworn deposes and says,
that he is the Secretary of USLIFE Corporation, the corporation
named in and described in the foregoing instrument. That he has
read and signed the same and that the statements contained
therein are true.
/s/ Richard G. Hohn
___________________
Richard G. Hohn
Corporate Secretary
Sworn to before me this 8th day of November, 1993.
<PAGE>62
RESTATED CERTIFICATE OF INCORPORATION
OF
USLIFE CORPORATION
UNDER SECTION 807 OF THE
BUSINESS CORPORATION LAW
Richard G. Hohn
125 Maiden Lane
New York, NY 10038
<PAGE>1
Exhibit 3(i)(b)
_______________
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF
INCORPORATION OF USLIFE CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
We, the undersigned, Gordon E. Crosby, Jr. and Richard
G. Hohn, being respectively the Chairman of the Board and
the Corporate Secretary of USLIFE Corporation, hereby
certify that:
1. The name of the Corporation is USLIFE
Corporation (formerly USLIFE Holding
Corp.).
2. A Restated Certificate of Incorporation of
said Corporation was filed by the
Department of State on November 15, 1993.
3. In order to increase the aggregate number
of shares of common stock, par value of one
dollar ($1) per share, which the
Corporation shall have authority to issue
from 60,000,000 to 120,000,000, the first
paragraph of Article FOURTH of the
Certificate of Incorporation is hereby
amended to read as follows:
"FOURTH: The aggregate number of shares
which the Corporation shall have authority
to issue is 130,800,000, of which
120,000,000 shares of the par value of one
dollar ($1) per share shall be designated
as Common Stock and 10,800,000 shares of
the par value of one dollar ($1) shall be
designated as Preferred Stock."
4. The amendment of the Certificate of
Incorporation was authorized, pursuant to
Section 803(a) of the Business Corporation
Law, by vote of the Board of Directors at a
meeting duly convened and held on March 26,
1996, and by vote of the holders of a
majority of all outstanding shares of
common and preferred stock entitled to vote
thereon at a meeting of shareholders duly
convened and held on May 21, 1996.
IN WITNESS WHEREOF, the undersigned hereby affirm that
the statements made herein are true under the penalties of
perjury this 21st day of May, 1996.
/s/Gordon E. Crosby, Jr.
________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Richard G. Hohn
___________________
Richard G. Hohn
Secretary
P
<PAGE>1
Exhibit 10(i)
_____________
NINTH AMENDMENT TO EMPLOYMENT AGREEMENT
_______________________________________
This is an Ninth Amendment ("Ninth Amendment") dated as of May 1, 1996 to
an Employment Agreement ("Agreement") dated April 1, 1989 between USLIFE
Corporation, a New York Corporation ("Employer") and Gordon E. Crosby, Jr.
("Employee").
THE TERMS of this Ninth Amendment are:
1. Paragraph (2) of the Agreement, as amended by the First, Second,
Third, Fourth, Fifth, Sixth, Seventh and Eighth Amendments, is now further
amended to read, in its entirety, as follows:
"(2) Employer will pay Employee for his services under paragraph (1) of the
Agreement at the rate of $1,070,000 per annum during the term of the Agreement,
in equal monthly installments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by Employer's
Board of Directors and/or the Executive Compensation Committee or its
successors, in the sole and absolute discretion of said Board and/or Committee.
In addition, Employee is entitled to participate in the Annual Incentive Plan
adopted by Employer, under which Employee is entitled to receive a bonus equal
to a percentage of his "base salary", as further described in the letter to
Employee which is attached hereto and incorporated by reference herein, if the
applicable performance criteria are satisfied. For the purposes of the
preceding sentence, "base salary" shall mean Employee's base salary as in effect
on January 1 of a given year, but in no event shall base salary for such
purposes be deemed to exceed Employee's actual base salary as in effect on
January 1, 1994 increased at the rate of 15% per year. Nothing in this
Agreement shall be construed as precluding merit increases in salary or as
barring the Employee from such fringe benefits as the Employer may grant."
<PAGE>2
2. Except as specifically amended by this Ninth Amendment, all other
provisions of the Agreement, as amended by the First, Second, Third, Fourth,
Fifth, Sixth. Seventh and Eighth Amendments, shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Ninth Amendment to the
Agreement on the date first set forth above.
USLIFE Corporation
By: /s/ Christopher S. Ruisi
________________________
Christopher S. Ruisi
President
and Chief Operating Officer
/s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
<PAGE>1
Exhibit 10(ii)
______________
EIGHTH AMENDMENT TO EMPLOYMENT AGREEMENT
________________________________________
This is a Eighth Amendment ("Eighth Amendment") dated as of May 1, 1996 to
an Employment Agreement ("Agreement") dated April 1, 1989 between USLIFE
Corporation, a New York Corporation ("Employer") and Greer F. Henderson
("Employee").
THE TERMS of this Eighth Amendment are:
1. Paragraph (2) of the Agreement, as amended by the First, Second,
Third, Fourth, Fifth, Sixth and Seventh Amendments, is now further amended to
read, in its entirety, as follows:
"(2) Employer will pay Employee for his services under paragraph (1) of the
Agreement at the rate of $725,000 per annum during the term of the Agreement, in
equal monthly installments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by Employer's
Board of Directors and/or the Executive Compensation Committee or its
successors, in the sole and absolute discretion of said Board and/or Committee.
In addition, Employee is entitled to participate in the Annual Incentive Plan
adopted by Employer, under which Employee is entitled to receive a bonus equal
to a percentage of his "base salary", as further described in the letter to
Employee which is attached hereto and incorporated by reference herein, if the
applicable performance criteria are satisfied. For the purposes of the
preceding sentence, "base salary" shall mean Employee's base salary as in effect
on January 1 of a given year, but in no event shall base salary for such
purposes be deemed to exceed Employee's actual base salary as in effect on
January 1, 1994 increased at the rate of 15% per year. Nothing in this
Agreement shall be construed as precluding merit increases in salary or as
barring the Employee from such fringe benefits as the Employer may grant."
<PAGE>2
2. Except as specifically amended by this Eighth Amendment, all other
provisions of the Agreement, as amended by the First, Second, Third, Fourth,
Fifth, Sixth and Seventh Amendments, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment to the
Agreement on the date first set forth above.
USLIFE Corporation
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Greer F. Henderson
______________________
Greer F. Henderson
<PAGE>1
Exhibit 10(iii)
_______________
EIGHTH AMENDMENT TO EMPLOYMENT AGREEMENT
________________________________________
This is an Eighth Amendment ("Eighth Amendment") dated as of May 1, 1996 to
an Employment Agreement ("Agreement") dated April 1, 1989 between USLIFE
Corporation, a New York Corporation ("Employer") and Christopher S. Ruisi
("Employee").
THE TERMS of this Eighth Amendment are:
1. Paragraph (2) of the Agreement, as amended by the First, Second,
Third, Fourth, Fifth, Sixth and Seventh Amendments, is now further amended to
read, in its entirety, as follows:
"(2) Employer will pay Employee for his services under paragraph (1) of the
Agreement at the rate of $675,000 per annum during the term of the Agreement, in
equal monthly installments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by Employer's
Board of Directors and/or the Executive Compensation Committee or its
successors, in the sole and absolute discretion of said Board and/or Committee.
In addition, Employee is entitled to participate in the Annual Incentive Plan
adopted by Employer, under which Employee is entitled to receive a bonus equal
to a percentage of his "base salary", as further described in the letter to
Employee which is attached hereto and incorporated by reference herein, if the
applicable performance criteria are satisfied. For the purposes of the
preceding sentence, "base salary" shall mean Employee's base salary as in effect
on January 1 of a given year, but in no event shall base salary for such
purposes be deemed to exceed Employee's actual base salary as in effect on
January 1, 1994 increased at the rate of 15% per year. Nothing in this
Agreement shall be construed as precluding merit increases in salary or as
barring the Employee from such fringe benefits as the Employer may grant."
<PAGE>2
2. Except as specifically amended by this Eighth Amendment, all other
provisions of the Agreement, as amended by the First, Second, Third, Fourth,
Fifth, Sixth and Seventh Amendments, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment to the
Agreement on the date first set forth above.
USLIFE Corporation
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Christopher S. Ruisi
________________________
Christopher S. Ruisi
<PAGE>1
Exhibit 10(iv)
______________
SEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
__________________________________________
This is a Seventh Amendment ("Seventh Amendment") dated as of May 1, 1996
to an Employment Agreement ("Agreement") dated April 16, 1990 between USLIFE
Corporation, a New York Corporation ("Employer") and William A. Simpson
("Employee").
THE TERMS of this Seventh Amendment are:
1. Paragraph (2) of the Agreement, as amended by the First, Second,
Third, Fourth, Fifth and Sixth Amendments, is now further amended to read, in
its entirety, as follows:
"(2) Employer will pay Employee for his services under paragraph (1) of the
Agreement at the rate of $650,000 per annum during the term of the Agreement, in
equal monthly installments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by Employer's
Board of Directors and/or the Executive Compensation Committee or its successor,
in the sole and absolute discretion of said Board and/or Committee. In
addition, Employee shall be entitled to participate in the Annual Incentive Plan
adopted by Employer, under which Employee shall be entitled to receive a bonus
equal to a percentage of his "base salary", as further described in a letter to
Employee, which is attached hereto and incorporated by reference herein, if the
applicable performance criteria are satisfied. For the purposes of the
preceding sentence, "base salary" shall mean Employee's base salary as in effect
on January 1 of a given year, but in no event shall base salary for such
purposes be deemed to exceed Employee's actual base salary as in effect on
January 1, 1994 increased at the rate of 15% per year. Nothing in this
Agreement shall be construed as precluding merit increases in salary or as
barring the Employee from such fringe benefits as the Employer may grant."
<PAGE>2
2. Except as specifically amended by this Seventh Amendment, all other
provisions of the Agreement, as amended by the First, Second, Third, Fourth,
Fifth and Sixth Amendments, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment to the
Agreement on the date first set forth above.
USLIFE Corporation
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ William A. Simpson
______________________
William A. Simpson
<PAGE>1
Exhibit 10(v)
_____________
EMPLOYMENT AND KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
____________________________________________________________
THIS AGREEMENT between USLIFE Corporation, a New
York corporation (the "Company"), and Michael LeFante (the
"Executive"), dated as of this 1st day of May, 1996.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in
a key executive officer position and has determined that the
Executive holds a position of significant importance with
the Company;
WHEREAS, the Company deems it desirable and in its best
interests to make provision for the availability to the
Company, its subsidiaries, and their respective successors
and assigns in the future of the Executive's services on the
terms set forth herein;
WHEREAS, the Company further believes that, in the
event it is confronted with a situation that could result in
a change in ownership or control of the Company, continuity
of management will be essential to its ability to evaluate
and respond to such situation in the best interests of
shareholders;
WHEREAS, the Company also desires to assure itself of
the Executive's services during the period in which it is
confronting such a situation, and to provide the Executive
with certain financial assurances to enable the Executive to
perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to
his personal circumstances;
NOW, THEREFORE, in consideration of the premises
and mutual covenants herein contained, it is hereby agreed
by and between the Company and the Executive as follows:
1. Agreement to Employ. Except as otherwise
expressly provided herein, the Company agrees to employ the
Executive and the Executive agrees to perform services as an
employee of the Company or one of its subsidiaries for an
initial period commencing on the date hereof (the
"Commencement Date") and ending on the day immediately
preceding the third anniversary of the Commencement Date.
Upon each anniversary of the Commencement Date, the term of
this Agreement will be extended for one (1) additional year
without any action by the Company or the Executive, unless
either the Company or the Executive delivers written notice
(the "Notice") to the other party, during the 90 day period
immediately prior to any such anniversary date, stating that
it or he does not want the term of this Agreement further
<PAGE>2
extended; provided that, except as provided in the next
following sentence, if a Change of Control (as defined
below) occurs during the term of this Agreement, this
Agreement shall in all events continue in effect until the
third anniversary of the date upon which such Change of
Control occurs (the "Change of Control Date").
Notwithstanding the foregoing, if, prior to the occurrence
of a Potential Change of Control (as defined below) or a
Change of Control, the Executive is demoted to a lower
position than the position of Senior Vice President, the
additional protection afforded by this Agreement in respect
of a Change of Control shall be without force and effect.
2. Duties and Responsibilities. Executive shall
be initially employed as an Executive Vice President, and
shall serve in such other executive capacity or capacities
with the Company or its subsidiaries as its Board of
Directors from time to time may determine at any time prior
to the Change of Control Date. During the term of this
Agreement the Executive will devote all of his business time
and attention to the business and affairs of the Company and
its subsidiaries; provided that the Executive will not be
deemed to have violated his commitment hereunder by reason
of periods of vacation, sick leave and other leave to which
he is entitled.
Without limiting the generality of the foregoing,
following a Change of Control, the Executive's position
(including his titles, authority and responsibilities) shall
be at least commensurate with those held, exercised and
assigned immediately prior to the Change of Control Date.
Following a Change of Control, the Executive's services
shall be performed at the location where the Executive was
employed immediately preceding the Change of Control Date.
3. Annual Compensation. (a) Base Salary. The
Company will pay Executive for his services hereunder at the
rate of $170,000 per annum, in equal monthly installments,
plus any lump sum bonus payments, plus such periodic salary
increases and such additional compensation (if any) as may
from time to time be voted by the Company's Board of
Directors and/or the Executive Compensation Committee or its
successor, in the sole and absolute discretion of said Board
and/or Committee. Nothing in this Agreement shall be
construed as precluding merit increases in salary or barring
the Executive from such fringe benefits as the Company may
grant. During the term hereof, the Executive shall be
eligible to participate in each employee benefit plan or
program sponsored or maintained by the Company and in other
Company perquisites to the extent that he is eligible to
participate therein in accordance with the terms and
conditions generally applicable thereto. The Executive's
base salary, as it may be increased from time to time, shall
hereafter be referred to as "Base Salary".
<PAGE>3
Without limiting the generality of the foregoing,
following a Change of Control Date, the Executive shall
receive a Base Salary at a monthly rate at least equal to
the monthly salary paid to the Executive by the Company and
any of its affiliated companies immediately prior to such
Change of Control Date. Neither the Base Salary nor any
increase in Base Salary after the Change of Control Date
shall serve to limit or reduce any other obligation of the
Company hereunder.
(b) Annual Bonus. Following a Change of Control,
for each fiscal year of the Company ending during the term
of this Agreement, the Executive shall receive a bonus at
least equal to the greater of (i) the highest bonus amount
payable to the Executive in respect of either of the last
two fiscal years of the Company ending immediately prior to
the Change of Control Date or (ii) the amount that would
have been payable to the Executive as a target bonus for the
year in which the Change of Control occurs plus, long-term
incentive compensation opportunities on terms and conditions
no less favorable to the Executive than those applicable to
the Executive prior to the Change of Control Date. Any
amount payable hereunder as an annual bonus shall be paid as
soon as practicable following the year for which the amount
is payable, unless electively deferred by the Executive
pursuant to any deferral programs or arrangements that the
Company may make available to the Executive.
4. Definitions. (a) Change of Control. For
the purposes of this Agreement, a "Change of Control" shall
mean (i) a merger or consolidation to which the Company is a
party and for which the approval of any shareholders of the
Company is required; (ii) any "person" (as such term is used
in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended) becoming the beneficial owner,
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities or (iii) a sale or
transfer of substantially all of the assets of the Company.
(b) Potential Change of Control. For the
purposes of this Agreement, a Potential Change of Control
shall be deemed to have occurred if (i) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) commences a
tender offer for securities, which if consummated, would
result in such person owning 20% or more of the combined
voting power of the Company's then outstanding securities;
(ii) the Company enters into an agreement the consummation
of which would constitute a Change of Control; (iii) proxies
for the election of directors of the Company are solicited
by anyone other than the Company; or (iv) any other event
occurs which is deemed to be a Potential Change of Control
by the Board.
5. Termination. (a) Death, Disability or
Retirement. This Agreement shall terminate automatically
upon the Executive's death, termination due to "Disability"
(as defined below) or voluntary retirement under any of the
Company's retirement plans as in effect from time to time.
For purposes of this Agreement, Disability shall mean the
Executive's inability to perform the duties of his position,
as determined in accordance with the policies and procedures
<PAGE>4
applicable with respect to the Company's long-term
disability plan, as in effect from time to time, except
that, following a Change of Control, disability shall be
determined based on the policies and procedures in effect
immediately prior to the Change of Control Date.
(b) Voluntary Termination. Notwithstanding
anything in this Agreement to the contrary, following a
Change of Control the Executive may, upon not less than 30
days' written notice to the Company, voluntarily terminate
his employment for any reason (including early retirement
under the terms of any of the Company's retirement plans as
in effect from time to time), provided that any termination
by the Executive pursuant to Section 5(d) on account of Good
Reason (as defined therein) shall not be treated as a
voluntary termination under this Section 5(b).
(c) Cause. The Company may terminate the
Executive's employment for Cause. For purposes of this
Agreement, "Cause" means (i) the Executive's conviction or
plea of nolo contendere to a felony; (ii) an act or acts of
extreme dishonesty or gross misconduct on the Executive's
part which result or are intended to result in material
damage to the Company's business or reputation; or (iii)
repeated material violations by the Executive of his
obligations under Section 2 of this Agreement, provided
that, following a Change of Control Date, Cause shall not
exist due to such violations of his obligations unless such
violations are demonstrably willful and deliberate on the
Executive's part and result in material damage to the
Company's business or reputation and such violations must
have occurred following a Change of Control Date.
(d) Good Reason. Following the occurrence of a
Change of Control, the Executive may terminate his
employment for Good Reason. For purposes of this Agreement,
"Good Reason" means the occurrence of any of the following,
without the express written consent of the Executive, after
the occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any
duties inconsistent in any material adverse respect
with the Executive's position, authority or
responsibilities as contemplated by Section 2 of this
Agreement, or (B) any other material adverse change in
such position, including titles, authority or
responsibilities;
(ii) any failure by the Company to comply with
any of the provisions of Section 3 of this Agreement,
other than an insubstantial or inadvertent failure
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 50 miles from
that location at which he performed his services
specified under the provisions of Section 2 immediately
prior to the Change of Control, except for travel
reasonably required in the performance of the
Executive's responsibilities;
<PAGE>5
(iv) the failure by the Company to permit the
Executive to participate in all long-term incentive
compensation programs for key executives at a level
that is commensurate with the Executive's participation
in such plans immediately prior to the Change of
Control Date (or, if more favorable to the Executive,
at the level made available to the Executive or other
similarly situated officers at any time thereafter);
(v) the failure by the Company to permit the
Executive (and, to the extent applicable, his
dependents) to participate in or be covered under all
pension, retirement, deferred compensation, savings,
medical, dental, health, disability, group life,
accidental death and travel accident insurance plans
and programs of the Company and its affiliated
companies at a level that is commensurate with the
Executive's participation in such plans immediately
prior to the Change of Control Date (or, if more
favorable to the Executive, at the level made available
to the Executive or other similarly situated officers
at any time thereafter); or
(vi) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 11(b).
In no event shall the mere occurrence of a Change of
Control, absent any further impact on the Executive, be
deemed to constitute Good Reason.
(e) Notice of Termination. Any termination by
the Company for Cause or by the Executive for Good Reason
shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 12(f). For
purposes of this Agreement, a "Notice of Termination" means
a written notice given, in the case of a termination for
Cause, within 10 business days of the Company's having
actual knowledge of the events giving rise to such
termination, and in the case of a termination for Good
Reason, within 180 days of the Executive's having actual
knowledge of the events giving rise to such termination, and
which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the termination
date is other than the date of receipt of such notice,
specifies the termination date of this Agreement (which date
shall be not more than 15 days after the giving of such
notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive
from asserting such fact or circumstance in enforcing his
rights hereunder.
(f) Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the
case of a termination for which a Notice of Termination is
required, the date of receipt of such Notice of Termination
or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which
the Executive's employment terminates during the Employment
Period.
<PAGE>6
6. Obligations of the Company upon Termination.
(a) Death or Disability. If the Executive's employment is
terminated during the term hereof by reason of the
Executive's death or Disability, this Agreement shall
terminate without further obligations to the Executive or
the Executive's legal representatives under this Agreement
other than those obligations accrued hereunder at the Date
of Termination, and the Company shall pay to the Executive
(or his beneficiary or estate) (i) the Executive's full Base
Salary through the Date of Termination (the "Earned
Salary"), (ii) any vested amounts or benefits owing to the
Executive under the Company's otherwise applicable employee
compensation and benefit plans and programs, including any
compensation previously deferred by the Executive (together
with any accrued earnings thereon) and not yet paid by the
Company and any accrued vacation pay not yet paid by the
Company (the "Accrued Obligations"), and (iii) any other
benefits payable due to the Executive's death or Disability
under the Company's plans, policies or programs (the
"Additional Benefits").
Any Earned Salary shall be paid in cash in a
single lump sum as soon as practicable, but in no event more
than 10 business days (or at such earlier date required by
law), following the Date of Termination. Accrued
Obligations and Additional Benefits shall be paid in
accordance with the terms of the applicable plan, program or
arrangement.
(b) Cause and Voluntary Termination. If, during
the Employment Period, the Executive's employment shall be
terminated for Cause or voluntarily terminated by the
Executive in accordance with Section 5(b) other than during
the 90 day period described in Section 6(d)(i) below, the
Company shall pay the Executive (i) the Earned Salary in
cash in a single lump sum as soon as practicable, but in no
event more than 10 days, following the Date of Termination,
and (ii) the Accrued Obligations in accordance with the
terms of the applicable plan, program or arrangement.
(c) Termination by the Company Without Cause
Prior to a Change of Control. Except as otherwise expressly
provided in Section 6(d), in the event that the Company
terminates the Executive's employment during the term of
this Agreement without Cause prior to the occurrence of a
Change of Control, the Company's only obligation to the
Executive shall be to pay the Executive an amount equal to
his Base Salary (at the same time as the Executive would
have received his Base Salary had he continued to be
employed) for the period ending on the first to occur of
(i) the date on which the Executive obtains other
employment, (ii) the date on which the term of this
Agreement would have expired (but for such termination)
pursuant to Section 1 hereof, assuming that no further
renewals of such term occur after the Executive's Date of
Termination, and (iii) the date on which the Executive
breaches any of the provisions of Section 9.
(d) Certain Terminations In Connection With a
Change of Control.
(i) Lump Sum Payments. If, following a Change of
Control, (x) the Company terminates the Executive's
employment other than for Cause, (y) the Executive
terminates his employment at any time for Good Reason
<PAGE>7
or (z) the Executive voluntarily terminates his
employment without Good Reason during the 90 day period
beginning on the first anniversary of the Change of
Control Date, then the Company shall pay to the
Executive the following amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance
Amount") equal to three times the sum of
(1) the Executive's annual Base Salary;
and (2) the greater of (x) the highest
bonus amount payable to the Executive in
respect of either of the last two fiscal
years of the Company ending immediately
prior to the Change of Control Date or
(y) the amount that would have been
payable to the Executive as a target
bonus for the year in which the Change
of Control occurs; and
(C) the Accrued Obligations.
Notwithstanding the limitations contained in the
preceding sentence, if (i) the Executive's employment
is terminated by the Company without Cause after the
occurrence of a Potential Change of Control and prior
to the occurrence of a Change of Control and (ii) a
Change of Control occurs within one year of such
termination, the Executive shall be deemed, solely for
purposes of determining his rights under this
Agreement, to have remained employed until the date
such Change of Control occurs and to have been
terminated by the Company without Cause immediately
after the Change of Control Date.
The Earned Salary and Severance Amount shall
be paid in cash in a single lump sum as soon as
practicable, but in no event more than 10 business days
(or at such earlier date required by law), following
the later of the Change of Control Date or the Date of
Termination. Accrued Obligations shall be paid in
accordance with the terms of the applicable plan,
program or arrangement.
(ii) Continuation of Benefits. If, the Executive
is entitled to receive the Severance Amount, the
Executive (and, to the extent applicable, his
dependents) shall be entitled, after the Date of
Termination until the earlier of (1) the second
anniversary of the Date of Termination (the "End Date")
or (2) the date the Executive becomes eligible for
comparable benefits under a similar plan, policy or
program of a subsequent employer, to continue
participation in all of the Company's Executive and
executive welfare and fringe benefit plans (the
"Benefit Plans") and to receive such perquisites as
were generally provided to the Executive in accordance
with the Company's policies and practices immediately
prior to the Change of Control Date. To the extent any
such benefits or perquisites cannot be provided under
the terms of the applicable plan, policy or program,
the Company shall provide a comparable benefit under
another plan or from the Company's general assets. The
<PAGE>8
Executive's participation in the Benefit Plans and
eligibility for perquisites will be on the same terms
and conditions that would have applied had the
Executive continued to be employed by the Company
through the End Date.
(e) Discharge of the Company's Obligations.
Except as expressly provided in the last sentence of this
Section 6(e), the amounts payable to the Executive pursuant
to this Section 6 (whether or not reduced pursuant to
Section 6(f)) following termination of his employment shall
be in full and complete satisfaction of the Executive's
rights under this Agreement and any other claims he may
have in respect of his employment by the Company or any of
its subsidiaries. Such amounts shall constitute liquidated
damages with respect to any and all such rights and claims
and, upon the Executive's receipt of such amounts, the
Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement
or otherwise in connection with the Executive's employment
with the Company and its subsidiaries. Nothing in this
Section 6(e) shall be construed to release the Company from
its commitment to indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause
of action arising from or out of the Executive's performance
as an officer, director or Executive of the Company or any
of its subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive served at the
request of the Company to the maximum extent permitted by
applicable law and the Governing Documents.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid
or distributed to the Executive pursuant to this
Agreement, taken together with any amounts or benefits
otherwise paid or distributed to the Executive by the
Company or any affiliated company (collectively, the
"Covered Payments"), are or become subject to the tax
(the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
or any similar tax that may hereafter be imposed, the
Company shall pay to the Executive at the time
specified in Section 6(f)(v) below an additional amount
(the "Tax Reimbursement Payment") such that the net
amount retained by the Executive with respect to such
Covered Payments, after deduction of any Excise Tax on
the Covered Payments and any Federal, state and local
income or employment tax and Excise Tax on the Tax
Reimbursement Payment provided for by this Section
6(f), but before deduction for any Federal, state or
local income or employment tax withholding on such
Covered Payments, shall be equal to the amount of the
Covered Payments.
(ii) For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax
and the amount of such Excise Tax,
(A) such Covered Payments will be
treated as "parachute payments" within the
meaning of Section 280G of the Code, and all
"parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3)
<PAGE>9
of the Code) shall be treated as subject to
the Excise Tax, unless, and except to the
extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Change of
Control Date or tax counsel selected by such
accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such
Covered Payments (in whole or in part) either
do not constitute "parachute payments" or
represent reasonable compensation for
personal services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "base amount," or such
"parachute payments" are otherwise not
subject to such Excise Tax, and
(B) the value of any non-cash benefits
or any deferred payment or benefit shall be
determined by the Accountants in accordance
with the principles of Section 280G of the
Code.
(iii) For purposes of determining the amount of
the Tax Reimbursement Payment, the Executive shall be
deemed to pay:
(A) Federal income taxes at the highest
applicable marginal rate of Federal income
taxation for the calendar year in which the
Tax Reimbursement Payment is to be made, and
(B) any applicable state and local
income taxes at the highest applicable
marginal rate of taxation for the calendar
year in which the Tax Reimbursement Payment
is to be made, net of the maximum reduction
in Federal income taxes which could be
obtained from the deduction of such state or
local taxes if paid in such year.
(iv) In the event that the Excise Tax is
subsequently determined by the Accountants or pursuant
to any proceeding or negotiations with the Internal
Revenue Service to be less than the amount taken into
account hereunder in calculating the Tax Reimbursement
Payment made, the Executive shall repay to the Company,
at the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of such
prior Tax Reimbursement Payment that would not have
been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment,
plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion
of the Tax Reimbursement Payment to be refunded to the
Company has been paid to any Federal, state or local
tax authority, repayment thereof shall not be required
until actual refund or credit of such portion has been
made to the Executive, and interest payable to the
Company shall not exceed interest received or credited
to the Executive by such tax authority for the period
it held such portion. The Executive and the Company
<PAGE>10
shall mutually agree upon the course of action to be
pursued (and the method of allocating the expenses
thereof) if the Executive's good faith claim for refund
or credit is denied.
In the event that the Excise Tax is later
determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to exceed the amount taken into account
hereunder at the time the Tax Reimbursement Payment is
made (including, but not limited to, by reason of any
payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus
any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is
finally determined.
(v) The Tax Reimbursement Payment (or portion
thereof) provided for in Section 6(f)(i) above shall be
paid to the Executive not later than 10 business days
following the payment of the Covered Payments;
provided, however, that if the amount of such Tax
Reimbursement Payment (or portion thereof) cannot be
finally determined on or before the date on which
payment is due, the Company shall pay to the Executive
by such date an amount estimated in good faith by the
Accountants to be the minimum amount of such Tax
Reimbursement Payment and shall pay the remainder of
such Tax Reimbursement Payment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined,
but in no event later than 45 calendar days after
payment of the related Covered Payment. In the event
that the amount of the estimated Tax Reimbursement
Payment exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by
the Company to the Executive, payable on the fifth
business day after written demand by the Company for
payment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
7. Non-exclusivity of Rights. Except as
expressly provided herein, nothing in this Agreement shall
prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other
plan, program or perquisite provided by the Company or any
of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise
prejudice such rights as the Executive may have under any
other agreements with the Company or any of its affiliated
companies, including employment agreements or stock option
agreements. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
8. Full Settlement. Following a Change of
Control, the Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
<PAGE>11
Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or
otherwise.
9. Noncompetition. The Executive agrees that in
the event his employment is terminated, whether by him or by
the Company, prior to the Change of Control Date he will
not for a period of one (1) year after the Date of
Termination (i) acting alone or in conjunction with others,
directly or indirectly engage (either as owner, partner,
stockholder, employer or employee) in any business in which
he has been directly engaged during the last two (2) years
prior to such termination and which is directly in
competition with a business conducted by the Company or any
of its subsidiaries; (ii) acting alone or in conjunction
with others, directly or indirectly induce any customers of
the Company or any of its subsidiaries with whom the
Executive has had contacts or relationships, directly or
indirectly, during and within the scope of his employment
with the Company, to curtail or cancel their business with
such companies or any of them; (iii) acting alone or in
conjunction with others, directly or indirectly disclose to
any person, firm or corporation the names of any customers
of the Company or any of its subsidiaries; (iv) acting alone
or in conjunction with others, solicit or canvass business
from any person who was a customer of the Company or any of
its subsidiaries at or prior to termination of the
Executive's employment; or (v) acting alone or in
conjunction with others, directly or indirectly induce, or
attempt to influence, any executive of the Company or any of
its subsidiaries to terminate their employment. The
provisions of clauses (i), (ii), (iii), (iv), and (v) above
are separate and distinct commitments independent of each of
the other clauses. It is agreed that the ownership of not
more than 2% of the equity securities of any company having
securities listed on a registered exchange or regularly
traded in the over-the-counter market shall not, of itself,
be deemed inconsistent with clause (i).
10. Legal Fees and Expenses. If following a
Change of Control, the Executive asserts any claim in any
contest (whether initiated by the Executive or by the
Company) as to the validity, enforceability or
interpretation of any provision of this Agreement, the
Company shall pay the Executive's legal expenses (or cause
such expenses to be paid) including, without limitation, his
reasonable attorney's fees, on a quarterly basis, upon
presentation of proof of such expenses, provided that the
Executive shall reimburse the Company for such amounts, plus
simple interest thereon at the 90-day United States Treasury
Bill rate as in effect from time to time, compounded
annually, if the Executive shall not prevail, in whole or in
part, as to any material issue as to the validity,
enforceability or interpretation of any provision of this
Agreement.
11. Successors. (a) This Agreement is personal
to the Executive and, without the prior written consent of
the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors. The
Company shall require any successor to all or substantially
<PAGE>12
all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form
and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be
required to perform if no such succession had taken place.
12. Miscellaneous. (a) Applicable Law. This
Agreement shall be governed by and construed in accordance
with the laws of the State of New York, applied without
reference to principles of conflict of laws.
(b) Arbitration. Following the occurrence of a
Change of Control, any dispute or controversy arising under
or in connection with this Agreement shall be resolved by
binding arbitration. The arbitration shall be held in New
York, New York and except to the extent inconsistent with
this Agreement, shall be conducted in accordance with the
Expedited Employment Arbitration Rules of the American
Arbitration Association then in effect at the time of the
arbitration, and otherwise in accordance with principles
which would be applied by a court of law or equity. The
arbitrator shall be acceptable to both the Company and the
Executive. If the parties cannot agree on an acceptable
arbitrator, the dispute shall be heard by a panel of three
arbitrators, one appointed by each of the parties and the
third appointed by the other two arbitrators.
(c) Expenses. During the term hereof, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in
accordance with its usual policies and procedures as in
effect from time to time. Notwithstanding the foregoing,
after the Change of Control Date, such policies and
procedures shall be no less favorable to the Executive than
those in effect immediately prior to the Change of Control
Date.
(d) Indemnification. During and after the term
hereof, the Company shall indemnify the Executive and hold
the Executive harmless from and against any claim, loss or
cause of action arising from or out of the Executive's
performance as an officer, director or Executive of the
Company or any of its subsidiaries or in any other capacity,
including any fiduciary capacity, in which the Executive
serves at the request of the Company to the maximum extent
permitted by applicable law and the Company's Certificate of
Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection afforded to
the Executive hereunder following a Change of Control be
less than that afforded under the Governing Documents as in
effect immediately prior to the Change of Control Date.
(e) Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect
to the matters referred to herein and supersedes in its
entirety the Key Executive Employment Protection Agreement,
dated November 14, 1995, between the Executive and the
Company. No other agreement relating to the terms of the
Executive's employment by the Company, oral or otherwise,
shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought.
There are no promises, representations, inducements or
statements between the parties other than those that are
expressly contained herein. This
<PAGE>13
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives. In the
event any provision of this Agreement is invalid or
unenforceable, the validity and enforceability of the
remaining provisions hereof shall not be affected. The
Executive acknowledges that he is entering into this
Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he
understands it and its legal consequences.
(f) Notices. All notices and other
communications hereunder shall be in writing and shall be
given by hand-delivery to the other party or by registered
or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: at the home address of the
Executive noted on the records
of the Company
If to the Company: USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice
President - General
Counsel
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually
received by the addressee.
IN WITNESS WHEREOF, the Executive has hereunto set
his hand and the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and
year first above written.
USLIFE CORPORATION
/s/ Gordon E. Crosby, Jr.
_________________________
By: Gordon E. Crosby, Jr.
Title: Chairman of the Board
EXECUTIVE:
/s/ Michael LeFante
___________________
Michael LeFante
<PAGE>1
Exhibit 10(vi)
______________
KEY EXECUTIVE EMPLOYMENT PROTECTION AGREEMENT
_____________________________________________
THIS AGREEMENT between USLIFE Corporation, a New York corporation
(the "Company"), and Ronald M. Chernoff (the "Executive"), dated as of this
23rd day of May, 1996.
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company has employed the Executive in an officer
position and has determined that the Executive holds a position of
importance with the Company;
WHEREAS, the Company believes that, in the event it is confronted with
a situation that could result in a change in ownership or control of the
Company, continuity of management will be essential to its continued
successful operations;
WHEREAS, the Company understands that any such situation will present
significant concerns for the Executive with respect to his financial and
job security;
WHEREAS, the Company desires to assure itself of the Executive's
services during the period in which it is confronting such a situation, and
to provide the Executive certain financial assurances to enable the
Executive to perform the responsibilities of his position without undue
distraction and to exercise his judgment without bias due to his personal
circumstances;
WHEREAS, to achieve these objectives, the Company and the Executive
desire to enter into an agreement providing the Company and the Executive
with certain rights and obligations upon the occurrence of a Change of
Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the Company
and the Executive as follows:
1. Operation of Agreement. (a) Effective Date. The effective
date of this Agreement shall be the date on which a Change of Control
occurs (the "Change of Control Date"), provided that, except as provided in
Section 1(c), if the Executive is not employed by the Company on the Change
of Control Date, this Agreement shall be void and without effect.
Notwithstanding the foregoing, if, prior to the occurrence of a Potential
Change of Control (as defined below) or a Change of Control, the Executive
is demoted to a lower position than the position of Senior Vice President
this Agreement shall be void and without effect.
(b) Employment Protection Benefits. If, on or before the first
anniversary of the Change of Control Date, (x) the Company terminates the
Executive's employment other than due to Disability (as defined below) or
for Cause (as defined below) or (y) the Executive terminates his employment
<PAGE>2
for Good Reason (as defined below), the Company shall pay to the Executive
a cash amount (the "Severance Amount") equal to two times the sum of
(i) the Executive's annual Base Salary; and (ii) the highest
bonus amount payable to the Executive in respect of either of the
last two fiscal years of the Company ending immediately prior to
the Change of Control Date.
The Severance Amount shall be paid in a single lump sum as soon as practi-
cable, but in no event more than 10 business days (or at such earlier date
required by law), following the Executive's date of termination.
(c) Termination of Employment Following a Potential Change of
Control. Notwithstanding Section 1(a), if (i) the Executive's employment
is terminated by the Company without Cause (as defined below) after the
occurrence of a Potential Change of Control and prior to the occurrence of
a Change of Control and (ii) a Change of Control occurs within one year of
such termination, the Executive shall be deemed, solely for purposes of
determining his rights under this Agreement, to have remained employed
until the date such Change of Control occurs and to have been terminated by
the Company without Cause immediately after this Agreement becomes
effective.
2. Definitions. (a) Change of Control. For the purposes of
this Agreement, a "Change of Control" shall mean (i) a merger or
consolidation to which the Company is a party and for which the approval of
any shareholders of the Company is required; (ii) any "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended) becoming the beneficial owner, directly or indirectly,
of securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities or (iii) a sale
or transfer of substantially all of the assets of the Company.
(b) Potential Change of Control. For the purposes of this
Agreement, a Potential Change of Control shall be deemed to have occurred
if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended) commences a tender
offer for securities, which if consummated, would result in such person
owning 20% or more of the combined voting power of the Company's then
outstanding securities; (ii) the Company enters into an agreement the con-
summation of which would constitute a Change of Control; (iii) proxies for
the election of directors of the Company are solicited by anyone other than
the Company; or (iv) any other event occurs which is deemed to be a
Potential Change of Control by the Board.
(c) Cause. For purposes of this Agreement, "Cause" means (i) the
Executive's conviction or plea of nolo contendere to a felony; (ii) an act
or acts of extreme dishonesty or gross misconduct on the Executive's part
which result or are intended to result in material damage to the Company's
business or reputation; or (iii) repeated material violations by the
Executive of his position, authority or responsibilities as in effect
<PAGE>3
at the Change of Control Date, which violations are demonstrably willful
and deliberate on the Executive's part and which result in material damage
to the Company's business or reputation.
(d) Good Reason. "Good Reason" means the occurrence of any of
the following, without the express written consent of the Executive, after
the occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any duties
inconsistent in any material adverse respect with the Executive's
position, authority or responsibilities as in effect at the Change of
Control Date, or (B) any other material adverse change in such
position, including titles, authority or responsibilities;
(ii) any failure by the Company, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of
notice thereof given by the Executive, to provide the Executive with a
base salary or incentive compensation opportunities at a level which,
in each case, is at least the same as the base salary paid, or
incentive compensation opportunities made available, to the Executive
immediately prior to the Change of Control Date;
(iii) the failure by the Company to permit the Executive (and, to
the extent applicable, his dependents) to participate in or be covered
under all pension, retirement, deferred compensation, savings,
medical, dental, health, disability, group life, accidental death and
travel accident insurance plans and programs of the Company and its
affiliated companies at a level that is commensurate with the
Executive's participation in such plans immediately prior to the
Change of Control Date (or, if more favorable to the Executive, at the
level made available to the Executive or other similarly situated
officers at any time thereafter); or
(iv) the Company's requiring the Executive to be based at any
office or location more than 50 miles from that location at which he
performed his services for the Company immediately prior to the Change
of Control, except for travel reasonably required in the performance
of the Executive's responsibilities; or
(v) any failure by the Company to obtain the assumption and
agreement to perform this Agreement by a successor as contemplated by
Section 6(b).
In no event shall the mere occurrence of a Change of Control, absent any
further impact on the Executive, be deemed to constitute Good Reason.
(e) Disability. For purposes of this Agreement, Disability shall
mean the Executive's inability to perform the duties of his position, as
determined in accordance with the policies and procedures applicable with
respect to the Company's long-term disability plan, as in effect
immediately prior to the Change of Control Date.
<PAGE>4
3. Other Benefits and Provisions Relating to Termination.
(a) Earned Salary and Accrued Obligations. The Severance Amount
shall be in addition to and neither a limitation of, nor an offset against,
the amount payable to the Executive in respect of (i) his base salary
earned through the date of termination and (ii) any vested amounts or
benefits owing to the Executive under the Company's otherwise applicable
employee benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings thereon) and
not yet paid by the Company and any accrued vacation pay not yet paid by
the Company.
(b) Continuation of Benefits. If the Executive is entitled to
receive the Severance Amount, the Executive (and, to the extent applicable,
his dependents) shall be entitled, after the date of termination until the
earlier of (x) the second anniversary of his date of termination (the "End
Date") or (y) the date the Executive becomes eligible for comparable
benefits under a similar plan, policy or program of a subsequent employer,
to continue participation in all of the Company's employee and executive
welfare and fringe benefit plans (the "Benefit Plans"). To the extent any
such benefits cannot be provided under the terms of the applicable plan,
policy or program, the Company shall provide a comparable benefit under
another plan or from the Company's general assets. The Executive's par-
ticipation in the Benefit Plans will be on the same terms and conditions
that would have applied had the Executive continued to be employed by the
Company through the End Date.
(c) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section
7(d). For purposes of this Agreement, a "Notice of Termination" means a
written notice given, in the case of a termination for Cause, within 10
business days of the Company's having actual knowledge of the events giving
rise to such termination, and in the case of a termination for Good Reason,
within 180 days of the Executive's having actual knowledge of the events
giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of
receipt of such notice, specifies the termination date of this Agreement
(which date shall be not more than 15 days after the giving of such
notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(d) Discharge of the Company's Obligations. Except as expressly
provided in the last sentence of this Section 3(d), the Severance Amount
and the amounts payable and benefits provided in respect of the Executive
pursuant to Section 3 following termination of his employment shall be in
full and complete satisfaction of the Executive's rights under this
Agreement and any other claims he may have in respect of his employment by
<PAGE>5
the Company or any of its subsidiaries. Such amounts shall constitute
liquidated damages with respect to any and all such rights and claims and,
upon the Executive's receipt of such amounts, the Company shall be released
and discharged from any and all liability to the Executive in connection
with this Agreement or otherwise in connection with the Executive's
employment with the Company and its subsidiaries. Nothing in this Section
3(d) shall be construed to release the Company from it obligation under
Section 3(e) below to indemnify the Executive.
(e) Indemnification. The Company shall indemnify the Executive
and hold the Executive harmless from and against any claim, loss or cause
of action arising from or out of the Executive's performance as an officer,
director or employee of the Company or any of its subsidiaries or in any
other capacity, including any fiduciary capacity, in which the Executive
serves at the request of the Company to the maximum extent permitted by
applicable law and the Company's Certificate of Incorporation and By-Laws
(the "Governing Documents"), provided that in no event shall the protection
afforded to the Executive hereunder be less than that afforded under the
Governing Documents as in effect immediately prior to the Change of Control
Date.
(f) Certain Further Payments by the Company.
(i) In the event that any amount or benefit paid or distributed
to the Executive pursuant to this Agreement, taken together with any
amounts or benefits otherwise paid or distributed to the Executive by
the Company or any affiliated company (collectively, the "Covered
Payments"), are or become subject to the tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar tax that may hereafter be
imposed, the Company shall pay to the Executive at the time specified
in Section 3(f)(v) below an additional amount (the "Tax Reimbursement
Payment") such that the net amount retained by the Executive with
respect to such Covered Payments, after deduction of any Excise Tax on
the Covered Payments and any Federal, state and local income or
employment tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section 3(f), but before deduction for any
Federal, state or local income or employment tax withholding on such
Covered Payments, shall be equal to the amount of the Covered
Payments.
(ii) For purposes of determining whether any of the Covered
Payments will be subject to the Excise Tax and the amount of such
Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of
the Code, and all "parachute payments" in excess of the
"base amount" (as defined under Section 280G(b)(3) of the
Code) shall be treated as subject to the Excise Tax, unless,
and except to the extent that, in the good faith judgment of
the Company's independent certified public accountants
appointed prior to the Change of Control Date or tax counsel
<PAGE>6
selected by such accountants (the "Accountants"), the
Company has a reasonable basis to conclude that such Covered
Payments (in whole or in part) either do not constitute
"parachute payments" or represent reasonable compensation
for personal services actually rendered (within the meaning
of Section 280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the Tax
Reimbursement Payment, the Executive shall be deemed to pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar
year in which the Tax Reimbursement Payment is to be made,
and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the
calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in Federal income
taxes which could be obtained from the deduction of such
state or local taxes if paid in such year.
(iv) In the event that the Excise Tax is subsequently determined
by the Accountants or pursuant to any proceeding or negotiations with
the Internal Revenue Service to be less than the amount taken into
account hereunder in calculating the Tax Reimbursement Payment made,
the Executive shall repay to the Company, at the time that the amount
of such reduction in the Excise Tax is finally determined, the portion
of such prior Tax Reimbursement Payment that would not have been paid
if such Excise Tax had been applied in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Tax
Reimbursement Payment to be refunded to the Company has been paid to
any Federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Company shall not
exceed interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to be pursued
(and the method of allocating the expenses thereof) if the Executive's
good faith claim for refund or credit is denied.
<PAGE>7
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the
Internal Revenue Service to exceed the amount taken into account
hereunder at the time the Tax Reimbursement Payment is made
(including, but not limited to, by reason of any payment the existence
or amount of which cannot be determined at the time of the Tax
Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or
penalty payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(v) The Tax Reimbursement Payment (or portion thereof) provided
for in Section 3(f)(i) above shall be paid to the Executive not later
than 10 business days following the payment of the Covered Payments;
provided, however, that if the amount of such Tax Reimbursement
Payment (or portion thereof) cannot be finally determined on or before
the date on which payment is due, the Company shall pay to the
Executive by such date an amount estimated in good faith by the Ac-
countants to be the minimum amount of such Tax Reimbursement Payment
and shall pay the remainder of such Tax Reimbursement Payment
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined, but in
no event later than 45 calendar days after payment of the related
Covered Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to
the Executive, payable on the fifth business day after written demand
by the Company for payment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
4. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment,
defense or other right which the Company may have against the Executive or
others whether by reason of the subsequent employment of the Executive or
otherwise.
5. Legal Fees and Expenses. If the Executive asserts any claim
in any contest (whether initiated by the Executive or by the Company) as to
the validity, enforceability or interpretation of any provision of this
Agreement, the Company shall pay the Executive's legal expenses (or cause
such expenses to be paid) including, without limitation, his reasonable
attorney's fees, on a quarterly basis, upon presentation of proof of such
expenses, provided that the Executive shall reimburse the Company for such
amounts, plus simple interest thereon at the 90-day United States Treasury
Bill rate as in effect from time to time, compounded annually, if the
Executive shall not prevail, in whole or in part, as to any material issue
as to the validity, enforceability or interpretation of any provision of
this Agreement.
6. Successors. (a) This Agreement is personal to the Executive
and, without the prior written consent of the Company, shall not
<PAGE>8
be assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company
would be required to perform if no such succession had taken place.
7. Miscellaneous. (a) Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, applied without reference to principles of conflict of laws.
(b) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by binding arbitration.
The arbitration shall be held in New York, New York and except to the ex-
tent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or
equity. The arbitrator shall be acceptable to both the Company and the
Executive. If the parties cannot agree on an acceptable arbitrator, the
dispute shall be heard by a panel of three arbitrators, one appointed by
each of the parties and the third appointed by the other two arbitrators.
(c) Entire Agreement. Upon the Change of Control Date, this
Agreement shall constitute the entire agreement between the parties hereto
with respect to the matters referred to herein. No other agreement re-
lating to the terms of the Executive's employment by the Company, oral or
otherwise, shall be binding between the parties unless it is in writing and
signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements between the parties
other than those that are expressly contained herein. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives. In the event any provision of this Agreement is invalid
or unenforceable, the validity and enforceability of the remaining
provisions hereof shall not be affected. The Executive acknowledges that
he is entering into this Agreement of his own free will and accord, and
with no duress, that he has read this Agreement and that he understands it
and its legal consequences.
(d) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand-delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
<PAGE>9
If to the Executive: at the home address of the Executive noted on
the records of the Company
If to the Company:
USLIFE Corporation
125 Maiden Lane
New York, New York 10038
Attn.: Executive Vice President -
General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
USLIFE CORPORATION
/s/ Christopher S. Ruisi
________________________
By: Christopher S. Ruisi
Title: President and
Chief Operating Officer
EXECUTIVE:
/s/ Ronald M. Chernoff
______________________
Ronald M. Chernoff
<PAGE>1
Exhibit 10(vii)
_______________
First Amendment to
__________________
Employment and Key Executive Employment Protection Agreement
____________________________________________________________
This First Amendment ("First Amendment") dated as of May 1, 1996, to
an Employment and Key Executive Employment Protection Agreement
("Agreement") dated November 14, 1995 between USLIFE Corporation, a New
York corporation ("Employer") and A. Scott Bushey ("Executive").
The Terms of this First Amendment are:
1. The first sentence of Paragraph 1 of the Agreement is hereby
deleted in its entirety and the following sentence is inserted in its
place:
"Except as otherwise expressly provided herein, the Company agrees to
employ the Executive and the Executive agrees to perform services as
an employee of the Company or one of its subsidiaries for an initial
period commencing on May 1, 1996 (the "Commencement Date") and ending
on the day immediately preceding the third anniversary of the
Commencement Date."
2. The first sentence of clause (a) of Paragraph 3 is hereby deleted
in its entirety and the following sentence is inserted in its place:
"The Company will pay Executive for his services hereunder at the rate
$212,000 per annum, in equal monthly installments, plus any lump sum
bonus payments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by
the Company's Board of Directors and/or the Executive Compensation
Committee or its successor, in the sole and absolute discretion of
said Board and/or Committee."
3. Except as specifically amended by this First Amendment, all other
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Agreement on the date first set forth above.
USLIFE CORPORATION
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ A. Scott Bushey
___________________
A. Scott Bushey
<PAGE>1
Exhibit 10(viii)
________________
First Amendment to
__________________
Employment and Key Executive Employment Protection Agreement
____________________________________________________________
This First Amendment ("First Amendment") dated as of May 1, 1996, to
an Employment and Key Executive Employment Protection Agreement
("Agreement") dated November 14, 1995 between USLIFE Corporation, a New
York corporation ("Employer") and Arnold A. Dicke ("Executive").
The Terms of this First Amendment are:
1. The first sentence of Paragraph 1 of the Agreement is hereby
deleted in its entirety and the following sentence is inserted in its
place:
"Except as otherwise expressly provided herein, the Company agrees to
employ the Executive and the Executive agrees to perform services as
an employee of the Company or one of its subsidiaries for an initial
period commencing on May 1, 1996 (the "Commencement Date") and ending
on the day immediately preceding the third anniversary of the
Commencement Date."
2. The first sentence of clause (a) of Paragraph 3 is hereby deleted
in its entirety and the following sentence is inserted in its place:
"The Company will pay Executive for his services hereunder at the rate
$290,000 per annum, in equal monthly installments, plus any lump sum
bonus payments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by
the Company's Board of Directors and/or the Executive Compensation
Committee or its successor, in the sole and absolute discretion of
said Board and/or Committee."
3. Except as specifically amended by this First Amendment, all other
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Agreement on the date first set forth above.
USLIFE CORPORATION
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Arnold A. Dicke
___________________
Arnold A. Dicke
<PAGE>1
Exhibit 10(ix)
______________
First Amendment to
__________________
Employment and Key Executive Employment Protection Agreement
____________________________________________________________
This First Amendment ("First Amendment") dated as of May 1, 1996, to
an Employment and Key Executive Employment Protection Agreement
("Agreement") dated November 14, 1995 between USLIFE Corporation, a New
York corporation ("Employer") and Wesley E. Forte ("Executive").
The Terms of this First Amendment are:
1. The first sentence of Paragraph 1 of the Agreement is hereby
deleted in its entirety and the following sentence is inserted in its
place:
"Except as otherwise expressly provided herein, the Company agrees to
employ the Executive and the Executive agrees to perform services as
an employee of the Company or one of its subsidiaries for an initial
period commencing on May 1, 1996 (the "Commencement Date") and ending
on the day immediately preceding the third anniversary of the
Commencement Date."
2. The first sentence of clause (a) of Paragraph 3 is hereby deleted
in its entirety and the following sentence is inserted in its place:
"The Company will pay Executive for his services hereunder at the rate
$385,000 per annum, in equal monthly installments, plus any lump sum
bonus payments, plus such periodic salary increases and such
additional compensation (if any) as may from time to time be voted by
the Company's Board of Directors and/or the Executive Compensation
Committee or its successor, in the sole and absolute discretion of
said Board and/or Committee."
3. Except as specifically amended by this First Amendment, all other
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
the Agreement on the date first set forth above.
USLIFE CORPORATION
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ Wesley E. Forte
___________________
Wesley E. Forte
<PAGE>1
Exhibit 10(x)
_____________
First Amendment to
__________________
Employment and Key Executive Employment Protection Agreement
____________________________________________________________
This First Amendment ("First Amendment") dated as of May 1, 1996, to an
Employment and Key Executive Employment Protection Agreement ("Agreement") dated
November 14, 1995 between USLIFE Corporation, a New York corporation
("Employer") and John D. Gavrity ("Executive").
The Terms of this First Amendment are:
1. The first sentence of Paragraph 1 of the Agreement is hereby deleted in
its entirety and the following sentence is inserted in its place:
"Except as otherwise expressly provided herein, the Company agrees to
employ the Executive and the Executive agrees to perform services as an
employee of the Company or one of its subsidiaries for an initial period
commencing on May 1, 1996 (the "Commencement Date") and ending on the day
immediately preceding the third anniversary of the Commencement Date."
2. The first sentence of clause (a) of Paragraph 3 is hereby deleted in
its entirety and the following sentence is inserted in its place:
"The Company will pay Executive for his services hereunder at the rate
$290,000 per annum, in equal monthly installments, plus any lump sum bonus
payments, plus such periodic salary increases and such additional
compensation (if any) as may from time to time be voted by the Company's
Board of Directors and/or the Executive Compensation Committee or its
successor, in the sole and absolute discretion of said Board and/or
Committee."
3. Except as specifically amended by this First Amendment, all other
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Agreement on the date first set forth above.
USLIFE CORPORATION
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ John D. Gavrity
___________________
John D. Gavrity
<PAGE>1
Exhibit 10(xi)
______________
First Amendment to
__________________
Employment and Key Executive Employment Protection Agreement
____________________________________________________________
This First Amendment ("First Amendment") dated as of May 1, 1996, to an
Employment and Key Executive Employment Protection Agreement ("Agreement") dated
November 14, 1995 between USLIFE Corporation, a New York corporation
("Employer") and James M. Schlomann ("Executive").
The Terms of this First Amendment are:
1. The first sentence of Paragraph 1 of the Agreement is hereby deleted in
its entirety and the following sentence is inserted in its place:
"Except as otherwise expressly provided herein, the Company agrees to
employ the Executive and the Executive agrees to perform services as an
employee of the Company or one of its subsidiaries for an initial period
commencing on May 1, 1996 (the "Commencement Date") and ending on the day
immediately preceding the third anniversary of the Commencement Date."
2. The first sentence of clause (a) of Paragraph 3 is hereby deleted in
its entirety and the following sentence is inserted in its place:
"The Company will pay Executive for his services hereunder at the rate
$295,000 per annum, in equal monthly installments, plus any lump sum bonus
payments, plus such periodic salary increases and such additional
compensation (if any) as may from time to time be voted by the Company's
Board of Directors and/or the Executive Compensation Committee or its
successor, in the sole and absolute discretion of said Board and/or
Committee."
3. Except as specifically amended by this First Amendment, all other
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment to the
Agreement on the date first set forth above.
USLIFE CORPORATION
By: /s/ Gordon E. Crosby, Jr.
_________________________
Gordon E. Crosby, Jr.
Chairman of the Board
/s/ James M. Schlomann
______________________
James M. Schlomann
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, SUMMARY STATEMENTS OF CONSOLIDATED NET
INCOME, AND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE
30, 1996 OF USLIFE CORPORATION AND SUBSIDIARIES FILED ON FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 5,776,937
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,071
<MORTGAGE> 275,997
<REAL-ESTATE> 30,953
<TOTAL-INVEST> 6,473,838
<CASH> 55,480
<RECOVER-REINSURE> 6,255 <F1>
<DEFERRED-ACQUISITION> 789,960
<TOTAL-ASSETS> 7,776,922
<POLICY-LOSSES> 5,465,279
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 217,652
<POLICY-HOLDER-FUNDS> 59,141
<NOTES-PAYABLE> 610,962
0
530
<COMMON> 57,471
<OTHER-SE> 1,074,891
<TOTAL-LIABILITY-AND-EQUITY> 7,776,922
512,229
<INVESTMENT-INCOME> 249,253
<INVESTMENT-GAINS> (570)
<OTHER-INCOME> 134,653
<BENEFITS> 537,358 <F2>
<UNDERWRITING-AMORTIZATION> 120,577 <F3>
<UNDERWRITING-OTHER> 202,656
<INCOME-PRETAX> 33,151
<INCOME-TAX> 11,030
<INCOME-CONTINUING> 22,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,121
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> See Note 5 of Notes to Financial Statements.
<F2> Includes $12.441 million relating to charge
discussed in Note 6 of Notes to Financial
Statements.
<F3> Includes $37.198 million relating to charge
discussed in Note 6 of Notes to Financial
Statements.
</TABLE>
