<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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 March 31, 1994
--------------
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 1-977
WESTINGHOUSE ELECTRIC CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0877540
------------- -----------
(State of Incorporation) (I.R.S. Employer Identification No.)
Westinghouse Building, 11 Stanwix Street, Pittsburgh, Pa. 15222-1384
----------------------------------------------------------------------
(Address of principal executive offices, zip code)
(412) 244-2000
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No____
Common stock 353,583,832 shares outstanding at April 30, 1994
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<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
INDEX
---------------------------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of
Income
Condensed Consolidated Balance Sheet
Condensed Consolidated Statement of
Cash Flows
Notes to the Condensed Consolidated
Financial Statements
Item 2. Management's Discussion
and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on
Form 8-K
SIGNATURE
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------
(in millions except per share amounts) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
1994 1993
---- ----
<S> <C> <C>
Sales of products and services $ 1,743 $ 2,020
Costs of products and services (1,349) (1,552)
Marketing, administration and
general expenses (329) (322)
Other income and expenses, net
(note 2) 39 6
Interest expense (47) (53)
------- -------
Income from Continuing Operations
before income taxes and minority
interest in income of
consolidated subsidiaries 57 99
Income taxes (22) (36)
Minority interest in income of
consolidated subsidiaries 1 (4)
------- -------
Income from Continuing Operations 36 59
Loss from Discontinued Operations - -
------- -------
Income before cumulative effect of
changes in accounting principles 36 59
Cumulative effect of changes in
accounting principles:
Postemployment benefits (note 3) - (56)
------- -------
Net income $ 36 $ 3
======= =======
</TABLE>
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<PAGE> 4
CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
------------------------------------------------------
(in millions except per share amounts)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
1994 1993
---- ----
<S> <C> <C>
Earnings per common share:
From Continuing Operations $ 0.07 $ 0.14
From Discontinued Operations - -
From cumulative effect of changes
in accounting principles - (0.16)
------- -------
Earnings per common share $ 0.07 $ (0.02)
======= =======
Cash dividends per common share $ 0.05 $ 0.10
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in millions)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
---- ----
(unaudited)
ASSETS
- - ------
<S> <C> <C>
Cash and cash equivalents $ 499 $ 637
Customer receivables 1,273 1,381
Inventories (note 4) 1,662 1,549
Uncompleted contracts costs over
related billings 344 371
Prepaid and other current assets 901 836
------- -------
Total current assets 4,679 4,774
Plant and equipment, net 1,901 1,964
Intangible and other noncurrent assets 3,763 3,815
------- -------
Total assets $10,343 $10,553
======= =======
</TABLE>
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<PAGE> 5
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
------------------------------------------------
(in millions)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
---- ----
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C>
Short-term debt $ 190 $ 662
Current maturities of long-term debt 12 9
Accounts payable 582 656
Uncompleted contracts billings over
related costs 589 672
Other current liabilities 1,743 1,926
------- -------
Total current liabilities 3,116 3,925
Long-term debt 1,882 1,885
Net liabilities of Discontinued Operations 211 211
Other noncurrent liabilities 3,532 3,453
------- -------
Total liabilities 8,741 9,474
------- -------
Contingent liabilities and commitments
(note 6)
Minority interest in equity of
consolidated subsidiaries 30 34
Shareholders' equity (note 7):
Preferred stock, $1.00 par value (25
million shares authorized):
Series A preferred (no shares
issued) - -
Series B conversion preferred
(8 million shares issued) 8 8
Series C conversion preferred
(4 million shares issued) 4 -
Common stock, $1.00 par value
(480 million shares authorized,
393 million shares issued) 393 393
Capital in excess of par value 1,969 1,475
Common stock held in treasury (948) (972)
Other (1,260) (1,260)
Retained earnings 1,406 1,401
------- -------
Total shareholders' equity 1,572 1,045
------- -------
Total liabilities and shareholders'
equity $10,343 $10,553
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 6
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
1994 1993
---- ----
<S> <C> <C>
CONTINUING OPERATIONS:
Cash (used) provided by Operating
Activities $ (168) $ 39
------- -------
Cash Flows from Investing Activities
Capital expenditures (35) (33)
Cash from (to) Discontinued Operations (11) -
Business Divestitures 50 -
Other 10 -
------- -------
Cash (used) provided by Investing
Activities 14 (33)
------- -------
Cash Flows from Financing Activities
Change in short-term debt (469) (20)
Sale of equity securities 505 -
Dividends (30) (48)
Treasury Stock 24 23
Other (14) 1
------- -------
Cash (used) provided by Financing
Activities 16 (44)
------- -------
Cash used by Continuing Operations (138) (38)
------- -------
DISCONTINUED OPERATIONS:
Operating Activities (75) (66)
Investing Activities 1,505 336
Financing Activities (1,664) (407)
------- -------
Cash used by Discontinued Operations (234) (137)
------- -------
Decrease in cash and cash equivalents (372) (175)
Cash and cash equivalents at beginning
of period 1,248 1,554
Cash and cash equivalents at end of ------- -------
period $ 876 $ 1,379
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid -- Continuing Operations $ 44 $ 49
Interest paid -- Discontinued Operations 53 103
Income taxes paid 58 21
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 7
WESTINGHOUSE ELECTRIC CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------
1. GENERAL
The financial statements include the accounts of Westinghouse Electric
Corporation (Westinghouse) and its subsidiary companies (together, the
Corporation) after elimination of intercompany accounts and transactions.
In November 1992, the Corporation's Board of Directors adopted a plan (the
Plan) that included exiting the financial services and other non-strategic
businesses. The Corporation classified the operations of Distribution and
Control Business Unit (DCBU), Westinghouse Electric Supply Company (WESCO)
(collectively, Other Operations) and Financial Services as discontinued
operations in accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
occurring Events and Transactions" (APB 30). Under this Plan, the
disposition of The Knoll Group (Knoll) was scheduled to occur by the end
of 1994 and WCI Communities, Inc. (WCI) by the end of 1995. Financial
Services was comprised primarily of Westinghouse Credit Corporation (WCC)
and Westinghouse Savings Corporation (WSAV), each a subsidiary of
Westinghouse Financial Services, Inc. (WFSI) and the Corporation's leasing
portfolio. During 1993, WFSI and WCC were merged into Westinghouse.
In January 1994, the Corporation announced that the sale of WCI will be
accelerated from 1995 into 1994 and Knoll is no longer for sale. WCI
will continue to be reported as part of Continuing Operations until the
requirements of APB 30 are met. At that time, WCI will be classified as a
discontinued operation and appropriate restatements will be made to the
Corporation's financial statements. See note 5 to the financial
statements.
In the opinion of the management of the Corporation, the condensed
consolidated financial statements include all material adjustments
necessary to present fairly the Corporation's financial position, results
of operations and cash flows. Such adjustments are of a normal recurring
nature. The results for this interim period are not necessarily
indicative of results for the entire year.
When reading the financial information contained in this Quarterly Report,
reference should be made to the financial statements, schedules and notes
contained in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993.
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<PAGE> 8
2. OTHER INCOME AND EXPENSES, NET (in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
1994 1993
---- ----
<S> <C> <C>
Interest on securities $ 5 $ 4
Operating results -
nonconsolidated affiliates (1) (2)
Net gain on disposition
of other assets 35 5
Miscellaneous interest income - 1
Foreign currency transaction and
high-inflation translation effects (2) (3)
Miscellaneous other income and
expenses, net 2 1
---- ----
Other income and expenses, net $ 39 $ 6
==== ====
</TABLE>
Gain on disposition of other assets for the first quarter of 1994 includes
a gain of $32 million from the sale of two Sacramento radio stations.
3. CHANGES IN ACCOUNTING PRINCIPLES
In December 1993, the Corporation adopted, retroactive to January 1, 1993,
Statement of Financial Accounting Standards (SFAS) No. 112 "Employers'
Accounting for Postemployment Benefits." This statement requires
employers to adopt accrual accounting for workers' compensation, salary
continuation, medical and life insurance continuation, severance benefits
and disability benefits provided to former or inactive employees after
employment but before retirement.
The retroactive adoption of SFAS No. 112 resulted in a first quarter 1993
after-tax charge for postemployment benefits at January 1, 1993 of $56
million, or $.16 per share in 1993.
4. INVENTORIES (in millions)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
---- ----
(unaudited)
<S> <C> <C>
Raw materials $ 133 $ 137
Work in process 1,145 989
Finished good 88 104
------- -------
1,366 1,230
Long-term contracts in process 643 678
Progress payments to subcontractors 129 124
Recoverable engineering and development
costs 511 442
------- -------
Less: Inventoried costs related to
contracts with progress
billings (987) (925)
------- --------
Inventories $ 1,662 $ 1,549
======= ========
</TABLE>
-8-
<PAGE> 9
5. DISCONTINUED OPERATIONS
In November 1992, the Corporation announced the Plan that included exiting
the financial services business through the disposition of its asset
portfolios and the sale of other non-strategic businesses. The Plan
provided for the sale of real estate and corporate finance portfolios
over a three-year period and the run-off of the leasing portfolio over a
longer period of time in accordance with contractual terms. Also, as part
of the Plan, the Corporation was to divest the following other
non-strategic operations: DCBU and WESCO; Knoll; and WCI. Financial
Services, DCBU and WESCO have been accounted for as discontinued
operations in accordance with APB 30.
In January 1994, the Corporation announced that the planned sale of WCI
will be accelerated from 1995 into 1994 and Knoll is no longer for sale.
With respect to Knoll, the Corporation's strategy will now be directed to
create shareholder value by continuing to operate this business.
Since adoption of the Plan, the Corporation has made significant progress
in disposing of Financial Services assets. Net portfolio investments have
decreased from $5,534 at November 30, 1992 to $993 million at March 31,
1994, a decrease of $4,541 million.
The Corporation completed the sale of DCBU, excluding its Australian
subsidiary, to Eaton Corporation on January 31, 1994 for a purchase price
of $1.1 billion and the assumption by the buyer of certain liabilities.
The Corporation completed the sale of the Australian subsidiary in March
1994.
The Corporation completed the sale of WESCO on February 28, 1994 to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm,
for a purchase price of approximately $340 million.
A reserve for the estimated loss on the disposal of Discontinued
Operations of $1,383 million, established in November 1992, consisted of
an addition to the valuation allowance for Financial Services portfolios,
estimated future results of operations and sales proceeds to be obtained
from Discontinued Operations, as well as estimates as to the timing of the
divestitures and assumptions regarding other relevant factors.
In the fourth quarter of 1993, the Corporation recorded an additional
provision for loss on disposal of Discontinued Operations of $148 million
on a pre-tax basis or $95 million on an after-tax basis. This change in
the estimated loss resulted from additional information, obtained
through negotiation activity, regarding the expected selling prices of
WESCO and the Australian subsidiary of DCBU. Also contributing to this
provision was a decision to bulk sell a Financial Services residential
development that the Corporation, upon adoption of the Plan, had
intended to transfer to WCI for development. These matters and a
revision to the estimated interest costs expected to be incurred by the
Discontinued Operations during the disposal period resulted in the
additional fourth quarter provision.
The reserve for the estimated loss on the disposal of Discontinued
Operations may require adjustment in future periods to reflect changes in
any of the constituent elements, which may be affected by adverse
economic, market or other factors beyond what was anticipated at March 31,
1994.
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<PAGE> 10
Management has considered all of the above factors and believes that the
reserve for the estimated loss on disposal of Discontinued Operations
should be adequate. The adequacy of this reserve is evaluated each
quarter, and the actual experience and any changes in expectations will be
considered in determining whether adjustment to the reserve is required.
<TABLE>
<CAPTION>
Operating Results of Discontinued Operations
(in millions) (unaudited)
Financial DCBU&
Services WESCO* Total
--------- ----- -----
<S> <C> <C> <C>
Three Months Ended March 31, 1994
Sales of products and services $ 14 $ 319 $ 333
Net earnings (losses) (69) 4 (65)
Three Months Ended March 31, 1993
Sales of products and services $ 107 $ 551 $ 658
Net earnings (losses) (52) 10 (42)
</TABLE>
*Operating results of Discontinued Operations for DCBU and WESCO for the
three months ended March 31, 1994 includes the operating results of DCBU
for the one month ended January 31, 1994 and the operating results of
WESCO for the two months ended February 28, 1994, their respective dates
of sale.
See Management's Discussion and Analysis - Results of Operations for
additional information.
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<PAGE> 11
The assets and liabilities of Discontinued Operations have been separately
classified in the condensed consolidated balance sheet as net liabilities
of Discontinued Operations. A summary of these assets and liabilities
follows:
NET LIABILITIES OF DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
March 31 December 31
1994 1993*
(in millions) ---- ----
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 377 $ 611
Other current assets 12 742
Portfolio investments, net 993 1,127
Plant and equipment, net 4 360
Accrued estimated gain on sale of
Discontinued Operations - 441
Accrued operating income, net - 19
Deferred income taxes 411 415
Other assets 255 375
------ -------
Total assets -- Discontinued
Operations 2,052 4,090
------ -------
LIABILITIES:
Short-term debt 700 2,373
Current maturities of long-term debt 770 774
Other current liabilities 36 338
Long-term debt 643 647
Other liabilities and accrued
operating expenses 114 169
------ -------
Total liabilities and minority
interest -- Discontinued Operations 2,263 4,301
------ -------
Net liabilities of
Discontinued Operations $ 211 $ 211
====== =======
</TABLE>
*Certain amounts have been reclassified for comparative purposes.
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<PAGE> 12
FINANCIAL SERVICES PORTFOLIO INVESTMENTS
Portfolio Investments by Category of Investment and Financing at March 31, 1994
and December 31, 1993 are summarized in the following table.
<TABLE>
<CAPTION>
At March 31, 1994
--------------------------------------------------------
Real
(in millions) (unaudited) Estate Corporate Leasing Total
------ --------- ------- -----
<S> <C> <C> <C> <C>
Receivables $ 37 $ 23 $ 945 $1,005
Real estate properties 123 - - 123
Investments in partnerships
and other entities 222 1 39 262
Nonmarketable equity securities - 15 - 15
------- ------- ------- ------
Portfolio investments 382 39 984 1,405
Valuation allowance (354) (12) (46) (412)
------- ------- ------- ------
Portfolio investments, net $ 28 $ 27 $ 938 $ 993
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1993
--------------------------------------------------------
Real
(in millions) Estate Corporate Leasing Total
------ --------- ------- -----
<S> <C> <C> <C> <C>
Receivables $ 46 $ 47 $ 969 $1,062
Real estate properties 141 - - 141
Investments in partnerships
and other entities 212 82 39 333
Nonmarketable equity securities - 15 - 15
------- ------- ------- ------
Portfolio investments 399 144 1,008 1,551
Valuation allowance (353) (26) (45) (424)
------- ------- ------- ------
Portfolio investments, net $ 46 $ 118 $ 963 $1,127
======= ======= ======= ======
</TABLE>
Leasing portfolio investments at March 31, 1994 included $945 million of
receivables and $39 million of partnerships. Leasing receivables consist of
direct financing and leveraged leases. At March 31, 1994, 78% of leasing
receivables related to aircraft and 19% related to cogeneration facilities.
Certain leasing receivables classified as performing and totalling $137 million
at March 31, 1994 have been identified by management as potential problem
receivables. Management believes that the characterization of receivables as
potential problems is mitigated by the valuation allowance attributed to such
receivables at March 31, 1994.
At March 31, 1994, the Corporation's leasing portfolio included approximately
$120 million of leasing receivables, primarily leveraged, related to aircraft
leased by USAir, Inc., a major U.S. airline. Such leasing receivables were
current as to payments and performing in accordance with contractual terms at
March 31, 1994, and are not considered to be potential problem receivables.
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<PAGE> 13
Investments in partnerships were comprised primarily of the Corporation's
investment in LW Real Estate Investments, L.P. (LW) which totalled $133 million
at March 31, 1994 and represented a 44% limited partnership interest. LW was
formed in April 1993 and purchased over half of Financial Services commercial
real estate assets in several transactions during the remainder of 1993. An
affiliate of the investment banking firm, Lehman Brothers, is the general
partner. Real estate properties were acquired through foreclosure proceedings
or represent "in-substance" foreclosures and are being operated by Financial
Services or contracted professional management until sold. Real estate
receivables consist of loans for commercial and residential real estate
properties and were comprised primarily of residential loans at March 31, 1994.
The Plan calls for the run-off of the leasing portfolio in accordance with
contractual terms. Management expects a significant portion of the
Corporation's investment in LW and any remaining real estate assets to be
liquidated by the end of 1995. The remaining corporate assets are expected to
be liquidated during the remainder of 1994.
Non-earning receivables at March 31, 1994 totalled $41 million. There were no
reduced earning receivables at March 31, 1994. The difference between the
income for the first quarter of 1994 that would have been earned on non-earning
receivables at March 31, 1994, and the income that was actually earned, was not
significant.
Financial Services had issued various loan or investment commitments,
guarantees, standby letters of credit and standby commitments. These
commitments totalled $97 million at March 31, 1994. Management expects the
remaining commitments to either expire unfunded, be assumed by the purchaser in
asset dispositions or be funded with the resulting assets being sold shortly
after funding.
The following table is a reconciliation of the valuation allowance for
portfolio investments for the three months ended March 31, 1994.
<TABLE>
<CAPTION>
VALUATION ALLOWANCE FOR PORTFOLIO INVESTMENTS
(in millions) (unaudited)
Portfolio Percent of
Beginning Investments Ending Portfolio
Balance Written Off Balance Investments
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Category of Financing:
Real estate $ 353 $ 1 $ 354 92.6%
Corporate 26 (14) 12 29.5%
Leasing 45 1 46 4.7%
------ ------ ------
Total $ 424 $ (12) $ 412 29.4%
====== ====== ======
</TABLE>
During the first quarter of 1994, portfolio investments written off represented
0.8% of average outstanding portfolio investments. Investments written off
during the first quarter of 1994 usually resulted from the disposition of the
asset for cash.
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<PAGE> 14
6. CONTINGENT LIABILITIES AND COMMITMENTS
URANIUM SETTLEMENTS
The Corporation had previously provided for all estimated future costs
associated with the resolution of all uranium supply contract suits and
related litigation. The remaining uranium reserve balance includes
uranium settlement assets and reserves for estimated future costs. The
remaining balance at March 31, 1994, is deemed adequate considering all
facts and circumstances known to management. The future obligations
require providing specific quantities of uranium and products and
services over a period extending beyond the year 2010. Variances from
estimates which may occur will be considered in determining if an
adjustment of the liability is necessary.
LITIGATION
Republic of the Philippines and National Power Corporation
In December 1988, the Republic of the Philippines (Philippines) and
National Power Corporation of the Philippines (NPC) (collectively, the
Republic) filed a 15 count lawsuit in the United States District Court
(USDC) for the District of New Jersey against the Corporation in
connection with the construction of a nuclear power plant in the
Philippines. In 1989, the USDC stayed substantially all of the complaint
pending arbitration by the International Chamber of Commerce (ICC) in
Geneva, Switzerland. The USDC did not grant a stay with respect to the one
count in the complaint alleging intentional interference with a fiduciary
relationship. A jury verdict with respect to this count was rendered in
favor of the Corporation on May 18, 1993. The Republic has stated its
intention to appeal this verdict.
The Philippines and NPC challenged the jurisdiction of the ICC, claiming
the contract was invalid due to the alleged bribery in the procurement of
the contract. In December 1991, the ICC arbitration panel issued an award
finding that the NPC had failed to carry its burden of proving an alleged
bribery by the Corporation. The panel thereby concluded that the
arbitration clauses and the contracts were valid and the panel had
jurisdiction over the disputes remaining before it with respect to NPC.
The panel concluded that it did not have jurisdiction over the
Philippines. NPC, in an attempt to attack the ICC decision regarding
jurisdiction and contract validity, filed an action for annulment with the
Swiss Federal Supreme Court which was not successful. Arbitration with
respect to the remaining disputes before the ICC is ongoing.
Steam Generators
At present, there are six pending actions brought by utilities claiming
a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components for
nuclear steam supply systems. One previous action which was pending in
1993 was resolved in the first quarter through a settlement with the
utility. Westinghouse is also a party to six agreements with utilities or
utility plant owners' groups which toll the statute of limitations
regarding their steam generator tube degradation claims and permit the
parties time to engage in discussions. The parties have agreed that no
litigation will be initiated for an agreed upon period of time as set
forth in the respective tolling agreements. The term of each tolling
agreement varies. Westinghouse has notified its insurance carriers of the
pending steam generator actions and claims. While some of the carriers
have denied coverage in whole or in part, most have reserved their rights
with respect to obligations to defend and indemnify the Corporation. The
coverage is the subject of litigation between the Corporation and these
carriers.
Securities Class Actions--Financial Services
The Corporation has been defending a consolidated class action, a
consolidated derivative action and certain individual lawsuits brought
against the Corporation, WFSI and WCC, both previously subsidiaries of
the Corporation, and/or certain present and former directors and
officers of the Corporation, as well as other unrelated parties.
Together, these actions allege various federal securities law and common
law violations arising out of alleged misstatements or omissions
contained in the Corporation's public filings concerning the financial
condition of the Corporation, WFSI and WCC in connection with a $975
million charge to earnings announced on February 27, 1991, a public
offering of Westinghouse common stock in May 1991, a $1,680 million
charge to earnings announced on October 7, 1991, and alleged
misrepresentations regarding the adequacy of internal controls at
the Corporation, WFSI and WCC.
Litigation is inherently uncertain and always difficult to predict.
Substantial damages are sought in each of the foregoing cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect upon the Corporation's
results of operations for a quarter or a year. However, based on its
understanding and evaluation of the relevant facts and circumstances,
management believes the Corporation has
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<PAGE> 15
meritorious defenses to the litigation described above and management
believes that the litigation should not have a material adverse effect on
the financial condition of the Corporation.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local regulations relating to the
discharge of substances into the environment, the disposal of hazardous
wastes and other related activities affecting the environment have had and
will continue to have an impact on the Corporation. While it is difficult
to estimate the timing and ultimate costs to be incurred in the future due
to uncertainties about the status of laws, regulations, technology and
information available for individual sites, management estimates the total
probable and reasonably possible remediation costs that could be incurred
by the Corporation based on the facts and circumstances currently known.
Such estimates include the Corporation's experience to date with
investigating and evaluating site cleanup costs, the professional judgment
of the Corporation's environmental experts, outside environmental
specialists and other experts and, when necessary, counsel. In addition,
the likelihood that other parties which have been named as potentially
responsible parties (PRPs) will have the financial resources to fulfill
their obligations at Superfund sites where they and the Corporation may be
jointly and severally liable has been considered. These estimates have
been used to assess materiality for financial statement disclosure
purposes as follows.
PRP Sites
With regard to remedial actions under federal and state superfund laws,
the Corporation has been named as a PRP at numerous sites located
throughout the country. At many of these sites, the Corporation is either
not a responsible party or its site involvement is very limited or de
minimus. However, the Corporation may have varying degrees of cleanup
responsibilities at 52 of these sites, excluding those discussed in the
preceding sentence. With regard to cleanup costs at these sites, in many
cases the Corporation will share these costs with other responsible
parties and the Corporation believes that any liability incurred will be
satisfied over a number of years. Management believes the total remaining
probable costs which the Corporation could incur for remediation of these
sites as of March 31, 1994 are approximately $63 million, all of which
has been accrued. These remediation actions are expected to occur over a
period of several years. As the remediation activities progress,
additional information may be obtained which may require additional
investigations or an expansion of the remediation activities. This may
result in an increase in site remediation costs; however, until such time
as additional requirements are identified during the remediation process,
the Corporation is unable to reasonably estimate what those costs might
be.
Bloomington Consent Decree
The Corporation is a party to a 1985 Consent Decree relating to
remediation of six sites in Bloomington, Indiana. The Corporation has
additional responsibility for two other sites in Bloomington not included
as part of the Consent Decree. In the Consent Decree, the Corporation
agreed to construct and operate an incinerator, which would be permitted
under federal and state law to burn excavated materials. The incinerator
would also burn municipal solid waste provided by the City of Bloomington
(City) and Monroe County. Applications for permits to build an incinerator
are pending with the United States Environmental Protection Agency, the
State of Indiana and other local permitting agencies. There is continuing
community opposition to the construction of the incinerator and the State
of Indiana has enacted legislation that has resulted in indefinite delays
in granting permits. As a result, the parties to the Consent Decree have
met several times on a cooperative basis and have decided to explore
whether alternative remedial measures should be used to replace the
incineration remedy set forth in the Consent Decree. On February 8, 1994
the parties filed a status report with the United States District Court
for the Southern District of Indiana, which is responsible for overseeing
the implementation of the Consent Decree. This report advised the court of
the parties' intention to investigate alternatives and provided the court
with operating principles for this process. It is the goal of the parties
to reach a consensus on an alternative which is acceptable to all parties
and to the Bloomington public. However, the parties recognize that at the
end of the process they may conclude that the remedy currently provided in
the Consent Decree is the most appropriate. The parties also recognize
that the Consent Decree shall remain in full force during this process.
These actions have resulted in the Corporation's belief that it no longer
is probable that the Consent Decree will be implemented under its present
terms. The Corporation and the other parties may have claims against each
other under the Consent Decree if a mutually agreeable alternative is not
reached. The Corporation may be required to post security for 125% of the
net cost to complete remediation in the event certain requirements of the
Consent Decree are not met. The Corporation believes it has met all of
these requirements.
If necessary permits were to be granted and the Consent Decree fully
implemented in its present form, the Corporation estimates that its total
remaining cost would be approximately $300 million at March 31, 1994.
As part of the Consent Decree, and in addition to burning contaminated
materials, the incinerator would also be used to burn municipal solid
waste and generate electricity which would be purchased by various public
utilities. The Corporation would receive revenues from
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<PAGE> 16
tipping fees and sale of electricity which are estimated to be
approximately $210 million. The Consent Decree also provides the City with
an option to purchase the incinerator after the remediation is completed.
The Corporation has assumed that proceeds from the sale of the incinerator
would be in the range of $100 million to $160 million. Based on the above
estimates, the Corporation continues to believe that the ultimate net cost
of the environmental remediation under the present terms of the Consent
Decree would not result in a material adverse effect on its future
financial condition or results of operations.
However, because the Corporation believes it is probable the Consent
Decree will be modified to an alternate remediation action, the
Corporation estimates that its cost to implement the most reasonable and
likely alternative would be approximately $60 million, all of which has
been accrued. Approximately $16 million of this estimate represents
operating and maintenance costs which will be incurred over an approximate
30 year period. These costs are expected to be distributed equally over
this period and, based on the Corporation's experience with similar
operating and maintenance costs, have been determined to be reliably
determinable on a year-to-year basis. Accordingly, the estimated $44
million gross cost of operating and maintenance has been discounted at a
rate of 5% per year which results in the above described $16 million
charge. The remaining portion of the $60 million charge represents site
construction and other related costs and is valued as of the year of
expenditure. Analyses of internal experts and outside consultants have
been used in forecasting construction and other related costs. The
estimates of future period costs include an assumed inflation rate of 5%
per year. This estimate of $60 million is within a range of reasonably
possible alternatives and one which the Corporation believes to be the
most likely outcome. This alternative includes a combination of
containment, treatment, remediation and monitoring. Other alternatives,
while considered less likely, could cause such costs to be as much as $100
million.
Other Sites
The Corporation is involved with several administrative actions
alleging violations of federal, state or local environmental regulations.
For these matters the Corporation has estimated that its potential total
remaining reasonably possible costs are insignificant.
The Corporation currently manages under contract several
government-owned facilities, which among other things are engaged in the
remediation of hazardous and nuclear wastes. To date, under the terms of
the contracts, the Corporation is not responsible for costs associated
with environmental liabilities, including environmental cleanup costs,
except under certain circumstances associated with negligence and willful
misconduct. There are currently no known claims for which the Corporation
believes it is responsible. In 1994, the U.S. Department of Energy (DoE)
announced its intention to renegotiate its existing contracts for
maintenance and operation of DoE facilities to address environmental
issues.
The Corporation has or will have responsibilities for environmental
remediation such as dismantling incinerators, decommissioning nuclear
licensed sites, and other similar commitments at various sites. The
Corporation has estimated total potential cost to be incurred for these
actions to be approximately $133 million, of which $37 million had been
accrued at March 31, 1994. The Corporation's policy is to accrue these
costs over the estimated lives of the individual facilities which in most
cases is approximately 20 years. The anticipated annual costs currently
being accrued are $6 million.
As part of the agreement for the sale of DCBU to Eaton Corporation, the
Corporation agreed to a cost sharing arrangement if future, but as yet
unidentified, remediation is required as a result of any contamination
caused during the Corporation's operation of DCBU prior to its sale. Under
the terms of the agreement, the Corporation's share of any such
environmental remediation costs, on an annual basis, will be at the rate
of $2.5 million of the first $6 million expended, and 100% of such costs
in excess of $6 million. The Corporation has provided for all known
environmental liabilities related to DCBU. These estimated costs and
related reserves are included in the discussion above of PRP sites.
Environmental liabilities related to the sale of WESCO are insignificant.
Capital Expenditures
Management believes that the total estimated capital expenditures
related to current operations necessary to comply with present
governmental regulations will not have a material adverse effect on
capital resources, liquidity, financial condition and results of
operations.
Insurance Recoveries
In 1987, the Corporation filed an action in New Jersey against over 100
insurance companies seeking recovery for these and other environmental
liabilities and litigation involving personal injury and property damage.
The Corporation has received certain recoveries from insurance companies
related to environmental costs. The Corporation has not accrued for any
future insurance recoveries.
Based on the above discussion and including all information presently
known to the Corporation, management believes that the environmental
matters described above will not have a material adverse effect on the
Corporation's capital resources, liquidity, financial condition and
results of operations.
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<PAGE> 17
FINANCING COMMITMENTS -- DISCONTINUED OPERATIONS
Financial Services commitments with off-balance-sheet credit risk
represent financing commitments to provide funds, including loan or
investment commitments, guarantees, standby letters of credit and standby
commitments, generally in exchange for fees. The remaining commitments
have fixed expiration dates from 1994 through 2002.
At March 31, 1994, Financial Services commitments with off-balance sheet
credit risk totalled $97 million compared to $111 million at year-end
1993. Of the $97 million of commitments at March 31, 1994, $86 million
were guarantees, credit enhancements and other standby agreements, and $11
million were commitments to extend credit. Of the $111 million of
commitments at year-end 1993, $90 million were guarantees, credit
enhancements and other standby agreements and $21 million were commitments
to extend credit. Management expects the remaining commitments to either
expire unfunded, be assumed by the purchaser in asset dispositions or be
funded with the resulting assets being sold shortly after funding.
FINANCING COMMITMENTS -- CONTINUING OPERATIONS
During 1993, $76 million of guarantees were transferred from Financial
Services to Continuing Operations. These guarantees were issued primarily
to improve the salability of securities of Financial Services corporate
customers and are collateralized by the assets of the customer. Management
does not expect the Corporation to be required to fund these guarantees.
WCI was contingently liable at March 31, 1994 under guarantees for $60
million of sewer and water district borrowings. The proceeds of the
borrowings were used for sewer and water improvements on residential and
commercial real estate projects of WCI. Management expects these
borrowings to be repaid as the projects are completed and sold, and the
guarantees for such borrowings to expire unfunded.
OTHER COMMITMENTS
The Corporation's other commitments consisting primarily of those for the
purchase of plant and equipment are not material.
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<PAGE> 18
7. SHAREHOLDERS' EQUITY
In March 1994, the Corporation sold, in a private placement, 36,000,000
depositary shares at $14.44 per share. Each of the depositary shares
represents ownership of one-tenth of a share of the Corporation's $1 par
value Series C Conversion Preferred Stock (C Preferred) and entitles the
owner to all of the proportionate rights, preferences and privileges of
the C Preferred.
The net proceeds to the Corporation, after commissions, fees, and
out-of-pocket expenses, totalled $505 million which was used to reduce
short-term debt. As a result of the transaction, par value of C Preferred
was established for $4 million, and capital in excess of par was increased
by $501 million.
The C Preferred shares were treated as a common stock equivalent for the
calculation of earnings per share for the first quarter of 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Orders entered for the first quarter of 1994 were down $192 million
from the first quarter of 1993. The first quarter of 1993 included several
large orders in Electronic Systems and Power Generation. Backlog was up $114
million in the first quarter of 1994 compared to the same period last year.
Sales of products and services and operating profit were down $277 million and
$81 million, respectively, for the first quarter of 1994 compared to the same
period of last year.
Income from Continuing Operations was $36 million for the first quarter of
1994, compared to $59 million for the first quarter of 1993. The Corporation
had net income of $36 million for the first quarter of 1994, compared to $3
million for the same period in 1993. Included in net income for the first
quarter of 1994 was a gain of $32 million from the sale of two Sacramento radio
stations. The first quarter 1993 net income included a $56 million after-tax
charge for the cumulative effect of a change in accounting for postemployment
benefits (SFAS No. 112). See Part I, Item 1, note 3 of this report.
Earnings per share were $.07 for the first quarter of 1994 compared to a loss
of $.02 for the first quarter of 1993. Earnings per share for the first
quarter of 1994 were all from Continuing Operations.
The loss per share for the first quarter of 1993 included earnings of $.14 per
share from Continuing Operations and a charge of $.16 per share from the
cumulative effect of a change in accounting for postemployement benefits, or a
net loss of $.02 per share.
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<PAGE> 19
In March 1994, the Corporation sold, in a private placement, 36,000,000
depositary shares, representing 3,600,000 shares of its $1 par value Series C
Conversion Preferred Stock (C Preferred). See Liquidity and Capital Resources -
Overview. The C Preferred was treated as a common stock equivalent in the
calculation of earnings per share for the first quarter of 1994.
In June 1992, the Corporation sold 32,890,000 depositary shares, representing
8,222,500 shares of the Corporation's $1 par value Series B Conversion
Preferred Stock (B Preferred). The B Preferred was treated as preferred stock
in the calculation of earnings per share for the first quarters of 1993 and
1994.
On January 11, 1994, the Corporation announced a charge totalling $350 million
for restructuring of its continuing businesses, which included costs directly
related to employment reductions which are comprised of approximately $225
million related to separation costs for 3,400 employees, approximately $35
million associated with asset writedowns, and approximately $45 million for
facility closedown and rationalization costs. The remaining portion of the $350
million charge was approximately $45 million related to process and product
redesign or reengineering. The Corporation anticipated that actions resulting
from implementation of its restructuring plan, directed to improving
productivity and operating performance, would result in the reduction of
approximately 6,000 employees, which includes the previously-discussed 3,400
separations and an additional 2,600 reductions expected to result from normal
attrition. Through the end of March 1994, employee reductions as a result of
implementing the restructuring plan totalled 1,100 employees. The 3,400
employee separations that were included as part of the restructuring charge are
expected to result in annual pre-tax savings of approximately $100 million
primarily through reduced employment costs. A substantial portion of this
annual savings is expected to be realized in 1994 and approximately $300
million over the three-year period ending December 31, 1996. Additional savings
will be realized as the anticipated reductions resulting from normal attritions
occur over the next two years. Total cash expenditures for restructuring
through 1996 are expected to approximate $270 million with expenditures of
approximately $180 million in 1994, $55 million in 1995 and $35 million in
1996. During the first quarter of 1994, charges against the reserve totalled
$85 million and consisted primarily of asset writedowns and employee separation
costs. Cash expenditures for restructuring during the first quarter of 1994
totalled $14 million.
Also on January 11, 1994, the Corporation announced plans to dispose of
certain non-strategic businesses including parts of the former Environmental
Services business unit and certain businesses in the Industrial Products and
Services business unit and recorded a $215 million charge during the fourth
quarter of 1993. This charge included all associated costs anticipated to be
incurred in disposing of these businesses, including estimates for the cost of
certain possible environmental remediation which may result from the selling
process. Estimated sales proceeds for these businesses of approximately $175
million were determined from various sources, including offers contained in
bona fide letters of interest received from third parties, estimates from
investment banking firms retained by the Corporation or certain internal
sources. Also included in the $215 million charge is approximately $20 million
for the writedown of certain assets related to discontinued projects. In May
1994, the Corporation completed the sale of Controlmatic, which has
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<PAGE> 20
principal operations in Germany, Switzerland, Austria and Italy. The
Corporation continues to pursue the disposition of the remaining non-strategic
businesses. Through March 1994, charges against the reserve for disposition
totalled $20 million.
In November 1992, the Corporation announced a plan (the Plan) that included
exiting the financial services business through the disposition of its asset
portfolios and the sale of other non-strategic businesses. The Plan provided
for the sale of real estate and corporate finance portfolios over a three-year
period and the run-off of the leasing portfolio over a longer period of time in
accordance with contractual terms. Also, as part of the Plan, the Corporation
was to divest the following other non-strategic operations: Distribution and
Control Business Unit (DCBU); Westinghouse Electric Supply Company (WESCO); The
Knoll Group (Knoll); and WCI Communities, Inc. (WCI). Financial Services, DCBU
and WESCO have been accounted for as discontinued operations in accordance with
APB 30.
In January 1994, the Corporation announced that the planned sale of WCI will be
accelerated from 1995 into 1994 and Knoll is no longer for sale. With respect
to Knoll, the Corporation's strategy will now be directed to create shareholder
value by continuing to operate this business. WCI will continue to be reported
as part of Continuing Operations until the requirements of APB 30 are met. At
that time, WCI will be classified as a discontinued operation and appropriate
restatements will be made to the Corporation's financial statements.
Since adoption of the Plan, the Corporation has made significant progress in
disposing of Financial Services assets. Net portfolio investments have
decreased from $5,534 million at November 30, 1992 to $993 million at March 31,
1994, a decrease of $4,541 million.
The Corporation completed the sale of DCBU, excluding its Australian
subsidiary, to Eaton Corporation on Janury 31, 1994 for a purchase price of
$1.1 billion and the assumption by the buyer of certain liabilities. The
Corporation completed the sale of the Australian subsidiary in March 1994.
The Corporation completed the sale of WESCO on February 28, 1994 to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a
purchase price of approximately $340 million.
The reserve for the estimated loss on the disposal of Discontinued Operations
of $1,383 million, established in November 1992, consisted of an addition to
the valuation allowance for Financial Services portfolios, estimated future
results of operations and sales proceeds to be obtained from Discontinued
Operations, as well as estimates as to the timing of the divestitures and
assumptions regarding other relevant factors.
In the fourth quarter of 1993, the Corporation recorded an additional provision
for loss on disposal of Discontinued Operations of $148 million on a pre-tax
basis or $95 million on an after-tax basis. This change in the estimated loss
resulted from additional information, obtained through negotiation activity,
regarding the expected selling prices of WESCO and the Australian subsidiary
of DCBU. Also contributing to this provision was a
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<PAGE> 21
decision to bulk sell a Financial Services residential development that the
Corporation, upon adoption of the Plan, had intended to transfer to WCI for
development. These matters and a revision to the estimated interest costs
expected to be incurred by the Discontinued Operations during the disposal
period resulted in the additional fourth quarter provision.
The reserve for the estimated loss on the disposal of Discontinued Operations
may require adjustment in future periods to reflect changes in any of the
constituent elements, which may be affected by adverse economic, market or
other factors beyond what was anticipated at March 31, 1994.
Management believes that the reserve for the estimated loss on disposal of
Discontinued Operations should be adequate. The adequacy of this reserve is
evaluated each quarter, and the actual experience and any changes in
expectations will be considered in determining whether adjustment to the
reserve is required.
RESULTS OF OPERATIONS
Continuing Operations
- - ---------------------
The Corporation's Continuing Operations have been realigned so that
each core business is now reported as a separate segment. As a result, the
former Power Systems segment will be replaced by separate segments for Energy
Systems and Power Generation and the former Industries segment will be replaced
by separate segments for Thermo King and Other Businesses. Other Businesses
includes those businesses that have been identified for sale - the Industrial
Products and Services business unit, Resource Energy Systems and Controlmatic.
Resource Energy Systems and Controlmatic were formerly part of the Government
and Environmental Services segment. Westinghouse Communications has been
transferred to the Broadcasting segment.
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<PAGE> 22
Segment Results
---------------
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993 % Change
---- ---- --------
<S> <C> <C> <C>
Broadcasting
Orders $ 190.5 $ 178.7 6.6%
Backlog - - -
Sales 190.5 178.7 6.6%
Operating Profit (Loss) 33.7 26.5 27.2%
Operating Profit Margin 17.7% 14.8% N/A
Electronic Systems
Orders $ 386.9 $ 628.6 -38.5%
Backlog 3,773.8 3,963.8 -4.8%
Sales 449.9 596.0 -24.5%
Operating Profit (Loss) 39.4 52.0 -24.2%
Operating Profit Margin 8.8% 8.7% N/A
Government and Environmental
Services
Orders $ 67.6 $ 63.2 7.0%
Backlog 86.3 36.5 136.4%
Sales 83.8 76.5 9.5%
Operating Profit (Loss) 10.0 19.7 -49.2%
Operating Profit Margin 11.9% 25.8% N/A
Thermo King
Orders $ 248.0 $ 223.0 11.2%
Backlog 223.2 173.8 28.4%
Sales 186.8 174.6 7.0%
Operating Profit (Loss) 26.8 25.7 4.3%
Operating Profit Margin 14.3% 14.7% N/A
Energy Systems
Orders $ 368.3 $ 293.2 25.6%
Backlog 2,682.1 2,470.3 8.6%
Sales 236.0 314.6 -25.0%
Operating Profit (Loss) (8.3) 46.8 -117.7%
Operating Profit Margin -3.5% 14.9% N/A
Power Generation
Orders $ 463.2 $ 547.2 -15.4%
Backlog 2,185.5 2,161.0 1.1%
Sales 291.6 388.9 -25.0%
Operating Profit (Loss) (25.9) (23.1) -12.1%
Operating Profit Margin -8.9% -5.9% N/A
</TABLE>
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<PAGE> 23
<TABLE>
<CAPTION>
Three Months Ended
March 31
1994 1993 % Change
---- ---- --------
<S> <C> <C> <C>
Knoll
Orders $ 117.3 $ 117.1 0.2%
Backlog 104.3 95.5 9.2%
Sales 117.5 119.2 -1.4%
Operating Profit (Loss) (15.0) (10.2) -47.1%
Operating Profit Margin -12.8% -8.6% N/A
WCI
Orders $ 56.2 $ 43.9 28.0%
Backlog - - -
Sales 56.2 43.9 28.0%
Operating Profit (Loss) 12.9 10.8 19.4%
Operating Profit Margin 23.0% 24.6% N/A
Other Businesses
Orders $ 128.3 $ 132.1 -2.9%
Backlog 758.9 805.3 -5.8%
Sales 130.5 129.8 0.5%
Operating Profit (Loss) (13.1) (1.6) N/A
Operating Profit Margin -10.0% -1.2% N/A
Corporate and Other
Orders $ 25.4 $ 18.5 37.3%
Backlog 73.7 52.1 41.5%
Sales 34.5 33.5 3.0%
Operating Profit (Loss) 4.9 (0.3) N/A
Operating Profit Margin 14.2% -0.9% N/A
Intersegment
Orders $ (38.0) $ (40.2) 5.5%
Backlog (33.4) (18.0) -85.6%
Sales (34.6) (36.3) 4.7%
Total - Continuing Operations
Orders $2,013.7 $ 2,205.3 -8.7%
Backlog 9,854.4 9,740.3 1.2%
Sales 1,742.7 2,019.5 -13.7%
Operating Profit (Loss) 65.4 146.3 -55.3%
Operating Profit Margin 3.7% 7.2% N/A
</TABLE>
Broadcasting
Broadcasting's sales and operating profits were up $12 million and $7 millon,
respectively, in the first quarter compared to the same period of 1993.
Television benefited from increased advertising demand, revenues from the
Winter Olympics, improving performance on the West Coast and cost reductions.
Radio's sales were down slightly in the first quarter of 1994 compared to 1993
due to fewer radio stations in the portfolio during the first quarter of 1994.
Radio's operating profit was up substantially
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<PAGE> 24
as revenues for the radio stations remaining in the portfolio were up and cost
reductions continue to benefit performance. Westinghouse Communications had
strong revenue and operating profit growth due to the continued expansion of
its customer base.
Electronic Systems
Orders and backlog for Electronic Systems were down $242 million and $190
million, respectively, in the first quarter of 1994 compared to 1993. Orders
for the first quarter of 1993 included a significant order for $240 million for
an international defense system.
Sales declined by $146 million and operating profit declined $13 million
primarily due to lower sales on Department of Defense (DoD) contracts in 1994
and the favorable effect in 1993 of sales from the cancellation of the Airborne
Self-Protection Jammer program.
Electronic Systems business is influenced by changes in the budgetary plans and
procurement policies of the U.S. government. Reductions in defense spending
and program cancellations in recent years have adversely affected and are
likely to continue to adversely affect the results of this segment. DoD
revenues are expected to be lower in 1994 than in 1993.
Government and Environmental Services
Orders were up $4 million in the first quarter of 1994 compared to the first
quarter of 1993 primarily due to additional state and federal government
remediation orders and orders resulting from the addition of a new facility to
recycle radioactive metals. Backlog was up $50 million mainly due to the
addition to the backlog in the second half of 1993 of a $40 million order for
special material handling containers which will be liquidated over the next
several years and additional state and federal government remediation orders
throughout 1993 and 1994.
Sales were up $7 million for the first quarter of 1994 compared with the same
period last year. Operating profits were down $10 million for the same period
as higher prices in the backlog for hazardous waste incineration in 1993,
continued weakness in the remediation services market and price pressure in
hazardous waste incineration contributed to lower margins.
Thermo King
Orders and backlog were up $25 million and $49 million, respectively, in the
first quarter of 1994 compared to the first quarter of 1993 reflecting a strong
North American truck and trailer market and improvements in European orders.
Sales were up $12 million and operating profit increased about $1 million for
the quarter due to higher sales in the truck and trailer operations and service
parts.
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<PAGE> 25
Energy Systems
Orders were up $75 million and backlog was up $212 million for the first quarter
of 1994 compared to the first quarter of 1993. The increase in orders was
primarily due to international growth initiatives.
Sales and operating profit for Energy Systems were down $79 million and $55
million, respectively, in the first quarter of 1994 compared to the same period
of last year due primarily to decreased licensee income and the favorable
effect of a change in accounting for nuclear fuel revenues in 1993.
Power Generation
Orders were down $84 million and backlog was up $25 million in the first
quarter of 1994 compared to the first quarter of 1993. The first quarter of
1993 included a concentration of several large project orders.
Sales declined $97 million and operating losses increased by $3 million
primarily due to lower project sales, lower volume in service and combustion
turbine new apparatus manufacturing partially offset by cost reductions.
Knoll
Orders for the first quarter of 1994 were flat compared to the first quarter of
1993 while backlog was up $9 million due primarily to the addition in 1993 of
several large orders with longer term shipping schedules.
Sales were down $2 million and operating loss increased by $5 million in the
first quarter of 1994 compared to the same period last year. Increased
marketing and sales expense associated with the launch of new products and the
increased distribution efforts, along with continued weakness in the European
market were the primary contributors to the decreases.
WCI
Sales and operating profit in the first quarter of 1994 were up by $12 million
and $2 million, respectively, compared to the first quarter of 1993 primarily
due to the continued strong South Florida market.
Other Businesses
Orders and backlog were down $4 million and $46 million, respectively, in the
first quarter of 1994 compared to the same period in 1993. The reduction in
backlog is primarily due to a liquidation of Resource Energy Systems backlog as
current period sales are recognized and no new project orders are entered.
Sales were flat and the operating loss increased by $12 million due to lower
margins for Resource Energy Systems, Controlmatic and Westinghouse Motor
Company.
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<PAGE> 26
Discontinued Operations
- - -----------------------
Financial Services
Financial Services revenues for the first quarter of 1994 were significantly
lower than for the same period of last year. The decrease in revenue reflects a
substantial reduction of portfolio investments through asset dispositions.
At March 31, 1994, Financial Services portfolio investments totalled $1,405
million and included the Corporation's leasing portfolio and the remaining real
estate and corporate assets. The Plan calls for the run-off of the leasing
portfolio in accordance with contractual terms. The remaining real estate
assets are primarily comprised of the Corporation's investment in LW Real
Estate Investments, L.P. (LW). Management expects its investment in LW and any
remaining real estate assets to be liquidated by the end of 1995. Management
expects the remaining corporate assets to be liquidated during 1994.
During the first quarter of 1994 Financial Services disposed of portfolio
investments for approximately $133 million in cash. The cash proceeds from
asset sales were primarily used to reduce debt of Discontinued Operations.
Financial Services had issued various loan or investment commitments,
guarantees, standby letters of credit and standby commitments. These
commitments totalled $97 million at March 31, 1994. The Corporation's efforts
to reduce assets and debt were negatively impacted by these commitments.
However, management expects the remaining commitments to either expire
unfunded, be assumed by the purchaser in asset dispositions or be funded with
the resulting assets being sold shortly after funding.
Certain leasing receivables classified as performing and totalling $137 million
at March 31, 1994, have been identified by management as potential problem
receivables. Management believes that the characterization of such receivables
as potential problems is mitigated by the valuation allowance attributed to
such receivables at March 31, 1994.
At March 31, 1994, the Corporation's leasing portfolio included approximately
$120 million of leasing receivables, primarily leveraged, related to aircraft
leased by USAir, Inc., a major U.S. airline. Such leasing receivables were
current as to payments and performing in accordance with contractual terms at
March 31, 1994, and are not considered to be potential problem receivables.
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<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
Overview
- - --------
The Corporation's liquidity has improved through the disposition of Financial
Services assets ahead of schedule, the sale of DCBU and WESCO, and a $520
million preferred stock offering. Management believes that the net proceeds
anticipated from the continued disposition of assets of Discontinued
Operations, WCI and certain identified non-strategic businesses, as well as
cash flow from Discontinued Operations until sold, will be sufficient but not
in excess of the liquidity required to fund Discontinued Operations, including
the repayment of its debt. Other sources of liquidity generally available to
the Corporation include available levels of cash and cash equivalents, unused
borrowing capacity under the Corporation's revolving credit facility, cash flow
from the operations of Continuing Operations and borrowings from other sources,
including funds from the capital markets, subject to then existing market
conditions and other considerations.
Significant progress was made during the first quarter of 1994 in reducing the
Corporation's net debt (total debt less cash and cash equivalents). Net debt at
March 31, 1994 totalled $3,321 million, a reduction of $1,781 million from
$5,102 million at December 31, 1993. The principal sources of cash for this
reduction were the sale of DCBU and WESCO for total cash proceeds of
approximately $1.4 billion as discussed below, the issuance of approximately
$520 million of the Corporation's C Preferred with net proceeds of $505
million, and the sale of Financial Services assets during the first quarter of
1994 for approximately $133 million.
During March 1994, the Corporation sold, in a private placement pursuant to
Rule 144A of the Securities Act of 1933, 36,000,000 depositary shares,
representing 3,600,000 shares of C Preferred. Each depositary share will
automatically convert into one share of common stock on June 1, 1997, unless
called on May 30, 1997 by the Corporation or redeemed at any time prior to
June 1 by the holder. If called by the Corporation, each depositary share
will convert into common stock at a rate between .885 and 1 share. If
redeemed by the holder, each depositary share will convert into .885 of a
share of common stock. The stock carries an annual dividend of $1.30 per
depositary share or $13.00 per C Preferred payable on the same quarterly
schedule as the Corporation's common stock dividend. Dividends are cumulative
and must be declared by the Board of Directors to be payable. Net proceeds
from the offering totalled $505 million and were used to reduce short-term debt.
The Corporation completed the sale of DCBU, excluding its Australian
subsidiary, to Eaton Corporation on January 31, 1994, for a purchase price of
$1.1 billion. The proceeds were used primarily to reduce debt of Discontinued
Operations.
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<PAGE> 28
The Corporation completed the sale of WESCO on February 28, 1994 to an
affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for
approximately $340 million. The proceeds of approximately $340 million were
comprised of approximately $275 million in cash, approximately $50 million in
first mortgage notes and the remainder in stock and options in the new company.
Cash proceeds were used primarily to reduce debt of Discontinued Operations.
On August 26, 1992, Westinghouse filed a registration statement on Form S-3 for
the issuance of up to $1 billion of Westinghouse debt securities. At March 31,
1994, $400 million of this shelf registration was unused.
Prior to the adoption of the Plan, Financial Services entered into interest
rate and currency exchange agreements to manage the interest rate and
currency risk associated with various debt instruments. No transactions were
speculative in nature or leveraged. Given their nature, these agreements have
been accounted for as hedging transactions. At March 31, 1994, the notional
amount of interest rate and currency exchange agreements outstanding totalled
approximately $1.3 billion with an average remaining maturity of 1.3 years.
The Corporation's foreign exchange exposure policy includes selling in national
currencies where possible, and hedging those transactions in excess of $250,000
occurring in currencies other than those of the originating country. In
addition, the Corporation's accounting policies require translation of local
currency financial statements of subsidiaries in highly inflationary and
unstable economies into U.S. dollars in accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," in order to
minimize foreign exchange rate risks and provide for appropriate accounting
treatment where exchange rates are most volatile.
With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52, the
combined total sales for those operations were less than 0.5% of the
Corporation's sales for the first three months of 1994. Any translation
adjustments resulting from converting the local currency balance sheets and
income statements of designated hyperinflationary subsidiaries into U.S.
dollars are recorded as period costs in accordance with SFAS No. 52.
Revolving Credit Facility
- - -------------------------
In December 1991, the Corporation entered into a $6 billion revolving credit
agreement (revolver) with a syndicate of domestic and international banks. This
facility expires in December 1994. The revolver is available for use by the
Corporation subject to the maintenance of certain financial ratios and
compliance with other covenants and subject to there being no material adverse
change with respect to the Corporation taken as a whole. Among other things,
the covenants place restrictions on the incurrence of liens, the amount of debt
on a consolidated basis and at the subsidiary level, and the amount of
contingent liabilities. The covenants also require the maintenance of a maximum
leverage ratio, minimum interest coverage ratios and a minimum consolidated net
worth. Certain of the
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<PAGE> 29
covenants become more restrictive over the term of the revolver. At March 31,
1994, the Corporation was in compliance with these covenants. See Financing
Activities for a discussion of interest costs and fees related to this
facility.
The borrowing status of this facility at March 31, 1994 and December 31, 1993
is presented in the following table.
Borrowing Status of Revolving Credit Facility (in millions)
<TABLE>
<CAPTION>
At At
March 31,1994 December 31,1993
-------------- -----------------
<S> <C> <C>
Commitment Level $ 3,000 $ 4,000
Borrowings (700) (2,855)
------- -------
Availability before letters
of credit 2,300 1,145
Letters of credit issued under
revolving credit facility (149) (149)
------- -------
Availability $ 2,151 $ 996
======= =======
</TABLE>
During 1993, the Corporation and the bank syndicate negotiated certain
amendments to the revolver wherein the Corporation agreed to reduce the
commitment level by a total of $2 billion in 1993 to $4 billion and by an
additional $500 million upon completion of the sale of DCBU. The sale of DCBU
was completed in January 1994. The Corporation decided to reduce the commitment
level by an additional $500 million in February 1994, reducing the total
commitment level to $3 billion at March 31, 1994. On April 7, 1994, the
Corporation further reduced the commitment level by an additional $500 million,
to $2.5 billion.
During the first quarter of 1994, the Corporation made several repayments of
borrowings under the revolver totalling $2,155 million. The primary sources of
cash for these repayments were the total cash proceeds of approximately $1.4
billion received from the sale of DCBU and WESCO, the $505 million of net cash
proceeds from the issuance of the Corporation's C Preferred in March 1994, and
approximately $133 million of proceeds from the sale of Financial Services
assets. Of the $2,155 million of total repayments during the first quarter of
1994, $1,655 million related to Discontinued Operations and $500 million related
to Continuing Operations. At March 31, 1994, there were no borrowings under the
revolver related to Continuing Operations.
The Corporation intends to negotiate a revolving credit facility during 1994 to
replace its existing facility prior to expiration. The replacement facility is
expected to have a commitment level of $2 billion to $3 billion with terms and
conditions based upon market conditions existing at the time of negotiation.
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<PAGE> 30
Operating Activities
- - --------------------
Cash used by operating activities of Continuing Operations was $168 million for
the first quarter of 1994, a decrease of $207 million from the amount provided
in the same period in 1993.
Cash used by operating activities of Discontinued Operations was $75 million
for the first quarter of 1994, an increase of $9 million from the amount used
in the first quarter of 1993.
Investing Activities
- - --------------------
Excluding cash used by Discontinued Operations, investing activities of
Continuing Operations provided $25 million of cash in the first quarter of
1994, compared to $33 million of cash used in the same period in 1993. The
principal source of this improvement was the sale of two radio stations during
the first quarter of 1994.
Investing activities of Discontinued Operations provided $1,505 million of cash
during the first quarter of 1994 compared to $336 million of cash provided for
the same period in 1993. The primary reasons for this increase in cash provided
by the investing activities of Discontinued Operations was the sale of DCBU and
WESCO during the first quarter of 1994. See Overview above.
Financing Activities
- - --------------------
Total debt of the Corporation was $4,197 million at March 31, 1994, a decrease
of $2,153 million from $6,350 million at December 31, 1993. Cash and cash
equivalents of the Corporation were $876 million at March 31, 1994, a decrease
of $372 million from $1,248 million at December 31, 1993.
Short-term debt, including current maturities of long-term debt, of the
Corporation totalled $1,672 million at March 31, 1994 compared to $3,818 million
at December 31, 1993. This decrease is primarily attributable to the repayment
of $2,155 of revolver borrowings during the first quarter of 1994.
Short-term debt, including current maturities of long-term debt, of Continuing
Operations was $202 million at March 31, 1994 compared to $671 million at
December 31, 1993. This decrease is primarily attributed to the repayment of
$500 million of Continuing Operations revolver borrowings during the first
quarter of 1994 resulting from the receipt of proceeds from the preferred equity
offering.
Short-term debt, including current maturities of long-term debt, of Discontinued
Operations totalled $1,470 million at March 31, 1994 compared to $3,147 million
at December 31, 1993, a decrease of $1,677 million. This decrease is primarily
attributed to the repayment of $1,655 million of Discontinued Operations
revolver borrowings during the first quarter of 1994 resulting from the receipt
of proceeds from the sale of DCBU and WESCO.
-30-
<PAGE> 31
Total borrowings outstanding under the revolver were $700 million at March 31,
1994 (excluding the $149 million of letters of credit), all of which were
attributable to Discontinued Operations. These borrowings carried a composite
interest rate of 4.3%. The current interest rate for borrowings under the
revolver is based on the London Interbank Offer Rate (LIBOR) plus an interest
rate margin based upon the Corporation's debt ratings and interest coverage
ratio, and utilization of the facility. An increase or decrease in LIBOR will
result in higher or lower interest expense to the Corporation. The
Corporation's interest rate margin increased .125% upon Moody's downgrade on
January 7, 1994. The downgrade by Fitch on January 11, 1994 had no effect on
the margin.
Borrowings under the revolver are also subject to utilization and facility
fees. The utilization fee has decreased from .125% to .0% as a result of
average revolver borrowings and outstanding letters of credit going below
$2,000 million during the first quarter of 1994. The facility fee, also based
on the Corporation's debt ratings and interest coverage ratio, increased .125%
to .50% per annum upon the Standard and Poor's downgrade on March 9, 1993.
However, the commitment level on which the facility fee is based has declined.
See Revolving Credit Facility.
Long-term debt of the Corporation totalled $2,525 million at March 31, 1994, a
$7 million decrease from December 31, 1993. Long-term debt of Continuing
Operations was $1,882 at March 31, 1994 compared to $1,885 million at December
31, 1993. Long-term debt of Discontinued Operations was $643 million at March
31, 1994 compared to $647 million at December 31, 1993.
The Corporation's net debt-to-capital ratio for Continuing Operations was 50%
at March 31, 1994 compared to 65% at December 31, 1993.
PART III. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) On December 1, 1988, the Republic of the Philippines (Republic) and
National Power Corporation (NPC) filed a lawsuit in the United States
District Court (USDC) for the District of New Jersey asserting claims
against the Corporation, Westinghouse International Projects Company and
Burns and Roe Enterprises, Inc. (Burns and Roe) relating to a contract
between NPC and Westinghouse for the construction of a nuclear power plant
in the Philippines, as well as an earlier consulting contract between NPC
and Burns and Roe relating to the same project. This action seeks
rescission of the Westinghouse and Burns and Roe contracts and restitution
of all money and other property paid to Westinghouse and Burns and Roe or,
alternatively, reformation of the NPC-Westinghouse contract. Plaintiffs
requested compensatory, punitive and treble damages, costs and expenses of
the lawsuit, and such other relief as the USDC deems just and proper. The
complaint alleges, among other things, bribery and other fraudulent
conduct, tortious interference with the fiduciary duty owed by Ferdinand
E. Marcos to the Republic and the
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<PAGE> 32
people of the Philippines, common law fraud, and violations of various New
Jersey and federal statutes, including the Federal Racketeer Influenced
and Corrupt Organizations Act (RICO) statute. Plaintiffs demanded a jury
trial.
Also on December 1, 1988, Westinghouse filed a request for arbitration
with the International Chamber of Commerce Court of Arbitration (ICC)
pursuant to the NPC-Westinghouse contract, setting forth certain claims
Westinghouse has against NPC and the Republic and asking for arbitration
of the anticipated claims of the Republic and NPC related to the
Philippines nuclear power plant. The Republic and NPC challenged the
jurisdiction of the ICC, arguing that the contract between the parties,
including its arbitration provision, was invalid due to alleged bribery in
the procurement of the contract. In December 1991, the ICC arbitration
panel issued its award finding that the Republic and NPC had failed to
carry their burden of proving the alleged bribery by the Corporation. The
panel thereby concluded that the arbitration clause and contract were
valid and that the panel has jurisdiction over the remaining disputes
between NPC and the Corporation. In January 1992, NPC filed an action for
annulment of the award by the ICC arbitration panel in the Swiss Federal
Supreme Court. In September 1993, the Swiss Federal Supreme Court issued
an order dismissing NPC's annulment action and assessing cost against NPC.
Evidentiary hearings before the ICC began in the first quarter of 1994 and
will continue throughout the year. A final award is anticipated in the
first quarter of 1995.
With respect to the suit filed in the USDC, Westinghouse filed a motion
requesting that the action filed there be stayed in its entirety pending
arbitration of the Republic's claim. In 1989, the Court granted a motion
brought by the Corporation and ordered 14 of the 15 counts in the lawsuit
stayed pending arbitration. The Court retained jurisdiction over the
remaining count involving an alleged intentional interference with a
fiduciary relationship. Trial commenced with respect to this one count in
March 1993. In May 1993, a jury verdict was rendered in favor of the
Corporation with respect to all claims relating to the alleged intentional
interference with a fiduciary relationship. NPC and the Republic have
indicated that they intend to appeal this decision.
(b) Duke Power Company (Duke) filed a lawsuit against the Corporation in March
1990 in the USDC for the District of South Carolina, Charleston Division,
for an unspecified amount of damages, including treble and punitive
damages, based on 1970 and 1975 contracts for Westinghouse's supply of
nuclear steam supply systems at Duke's McGuire and Catawba plants.
Subsequently, Duke disclosed that it was seeking approximately $655 million
for estimated past and future damages for the four nuclear steam supply
systems. Duke asserted counts for negligence, promissory estoppel, fraud,
negligent misrepresentations, violation of the RICO statute, and violation
of North Caroline and South Carolina unfair trade practices, statutes, and
alleged that the steam generators delivered by the Corporation were
defectively designed and manufactured. Alleged co-owners of the plants
intervened in the litigation as additional plaintiffs. In February 1993,
the USDC granted the Corporation's motion to dismiss Duke's negligent
misrepresentation, negligent design and fabrication claims and portions of
its RICO claims. On March 13,
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<PAGE> 33
1994, the Corporation and Duke entered into a settlement agreement
resolving all claims asserted in the action and entered into a stipulated
order dismissing the action with prejudice.
(c) The Corporation is currently a defendant in approximately 7,400 out of more
than 12,000 asbestos cases pending in the Circuit Court of Kanawa County,
West Virginia. The plaintiffs allege personal injury, wrongful death and
loss on consortium claims arising out of alleged exposure to
asbestos-containing products that were manufactured, supplied or installed
by the defendants, including the Corporation. Trial commenced on April 5,
1994, on the plaintiffs' claims generally, although no individual
plaintiffs will be asserting their claims at this time. Rather, the trial
will focus on whether the various defendants' asbestos-containing products
were hazardous, and whether the defendants had and/or breached a duty to
warn of the alleged hazards associated with those products. The trial will
also determine whether the defendants are liable for punitive damages
arising from a failure to warn of alleged hazards associated with their
asbestos-containing products. The findings made in this phase of trial
regarding "duty to warn" and punitive damages may be applied in future
trials involving the individual plaintiffs.
Management believes that the Corporation has meritorious defenses to all of the
proceedings described above.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) Amendments to the Restated Articles of Incorporation
(b) The Restated Articles of the Corporation, as amended
(c) The Bylaws of the Corporation, as amended, are incorporated herein by
reference to Exhibit 3(c) to Form 10-K/A for the year ended December
31, 1992.
(4) RIGHTS OF SECURITY HOLDERS
(a) The Corporation agrees to provide to the Securities and Exchange
Commission, upon request, a copy of instruments defining the rights
of holders of long-term debt of the Corporation and its consolidated
subsidiaries.
(10) MATERIAL CONTRACTS
(a) The Annual Performance Plan is incorporated herein by reference to
Exhibit 10(a) to Form 10-K/A for the year ended December 31, 1992.
(b) The 1993 Long-Term Incentive Plan is incorporated herein by reference
to Exhibit 10(b) to Form 10-K for the year ended December 31, 1993.
(c) The 1984 Long-Term Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 10(b) to Form 10-Q for the quarter ended June
30, 1993.
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<PAGE> 34
(d) The 1979 Stock Option and Long-Term Incentive Plan is incorporated
herein by reference to Exhibit 10(c) to Form 10-K/A for the year
ended December 31, 1992.
(e) The Westinghouse Employee Stock Purchase Plan is incorporated herein
by reference to Exhibit 10(d) to Form 10-K, as amended, for the year
ended December 31, 1991.
(f) The Westinghouse Personal Investment Plan is incorporated herein by
reference to Exhibit 10(e) to Form 10-K/A for the year ended December
31, 1992.
(g) The Westinghouse Executive Pension Plan, as amended, is incorporated
herein by reference to Exhibit 10(f) to Form 10-Q for the quarter
ended June 30, 1993.
(h) The Deferred Stock and Compensation Plan for Directors is
incorporated herein by reference to Exhibit 10(i) to Form 10-K/A for
the year ended December 31, 1992.
(i) The Advisory Director's Plan is incorporated herein by reference to
Exhibit 10(k) to Form 10-K for the year ended December 31, 1989.
(j) Competitive Advance and Revolving Credit Facility dated as of
December 23, 1991, among the Corporation and WCC as borrowers, the
Co-Agents and Lenders named therein and Chemical Bank as
Administrative Agent, is incorporated herein by reference to Exhibit
10 to the Corporation's Form 8-K dated January 31, 1992.
(k) First Amendment dated as of September 30, 1992 to the Competitive
Advance and Revolving Credit Facility is incorporated herein by
reference to Exhibit 10(l) to Form 10-K/A for the year ended December
31, 1992.
(l) Second Amendment dated as of April 2, 1993 to the Competitive Advance
and Revolving Credit Facility is incorporated herein by reference to
Exhibit 10(m) to Form 10-Q/A for the quarter ended March 31, 1993.
(m) Employment Agreement dated June 9, 1992, between the Corporation and
Robert A. Watson, is incorporated herein by reference to Exhibit 10
to the Corporation's Form 8-K dated August 11, 1992.
(n) Merger Agreement dated as of April 7, 1993 among the Corporation,
Westinghouse Credit Corporation and Westinghouse Financial
Services, Inc. is incorporated herein by reference to Exhibit
10(r) to Form 10-Q/A for the quarter ended March 31, 1993.
(o) The 1991 Long-Term Incentive Plan, as amended, effective December 31,
1993, is incorporated herein by reference to Exhibit 10(o) to Form
10-K for the year ended December 31, 1993.
(p) Amended and Restated Competitive Advance and Revolving Credit
Facility Agreement effective as of May 3, 1993 among the Corporation
as borrower, the Co-Agents and Lenders named therein, and Chemical
Bank as Administrative Agent is incorporated herein by reference to
Exhibit 10(t) to Form 10-Q for the quarter ended June 30, 1993.
(q) First Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility Agreement dated as of June 9, 1993 among
the Corporation as borrower, the Co-Agents and Lenders named therein,
and Chemical Bank as Administrative Agent is incorporated herein by
reference to Exhibit 10(u) to Form 10-Q for the quarter ended June
30, 1993.
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<PAGE> 35
(r) DCBU Purchase Agreement between the Corporation and Eaton Corporation
dated as of August 10, 1993 is incorporated herein by reference to
Exhibit 10(v) to Form 10-Q for the quarter ended June 30, 1993.
(s) Employment Agreement between the Corporation and Michael H. Jordan is
incorporated herein by reference to Exhibit 10 to the Corporation's
Form 8-K, dated September 1, 1993.
(t) Second Amendment to the Amended and Restated Competitive Advance and
Revolving Credit Facility Agreement dated as of December 1, 1993
among the Corporation as borrower, and Chemical Bank as
Administrative Agent is incorporated herein by reference to Exhibit
10(t) to Form 10-K for the year ended December 31, 1993.
(u) Letter Amendment dated December 30, 1993 to the Employment Agreement
between the Corporation and Robert A. Watson is incorporated herein
by reference to Exhibit 10(u) to Form 10-K for the year ended
December 31, 1993.
(11) COMPUTATION OF PER SHARE EARNINGS
(12a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(12b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
b) REPORTS ON FORM 8-K:
A Current Report on Form 8-K (Items 5 and 7) dated March 9, 1994 to report
the Corporation's expected earnings for the first quarter of 1994.
A Current Report on Form 8-K (Items 5 and 7) dated March 30, 1994 to
report the issuance of preferred equity securities.
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<PAGE> 36
SIGNATURE
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, on the 13th day of May 1994.
WESTINGHOUSE ELECTRIC CORPORATION
Robert E. Faust
-----------------------------
Vice President and
Chief Accounting Officer
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<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
<C> <S> <C>
(3) Articles of Incorporation and Bylaws
(a) Amendments to the Restated Articles of Incorporation
(b) The Restated Articles of the Corporation, as amended
(c) The Bylaws of the Corporation, as amended *
(4) Rights of Security Holders
(a) The Corporation agrees to provide to the Securities
and Exchange Commission, upon request, a copy of
instruments defining the rights of holders of long-term
debt of the Corporation and its consolidated
subsidiaries. NA
(10) Material Contracts
(a) The Annual Performance Plan *
(b) The 1993 Long-Term Incentive Plan *
(c) The 1984 Long-Term Incentive Plan *
(d) The 1979 Stock Option and Long-Term Incentive Plan *
(e) The Westinghouse Employee Stock Purchase Plan *
(f) The Westinghouse Personal Investment Plan *
(g) The Westinghouse Executive Pension Plan *
(h) The Deferred Stock and Compensation Plan for Directors *
(i) The Advisory Director's Plan *
(j) Competitive Advance and Revolving Credit Facility *
(k) Amendment to the Competitive Advance and Revolving
Credit Facility *
(l) Second Amendment to the Competitive Advance and
Revolving Credit Facility *
(m) Employment Agreement with Robert A. Watson *
(n) Merger Agreement *
(o) The 1991 Long-Term Incentive Plan *
(p) Amended and Restated Competitive Advance and Revolving
Credit Facility *
(q) First Amendment to the Amended and Restated Competitive
Advance and Revolving Credit Facility *
(r) DCBU Purchase Agreement *
(s) Employment Agreement with Michael H. Jordan *
(t) Second Amendment to the Amended and Restated
Competitive Advance and Revolving Credit Facility *
(u) Letter Amendment to Employment Agreement with
Robert A. Watson *
(11) Computation of Per Share Earnings
(12) Computation of Ratios
(a) Ratio of Earnings to Fixed Charges
(b) Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
</TABLE>
*Incorporated by reference
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<PAGE> 1
EXHIBIT 3(a)
FIFTH: A. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 655 million consisting
of (1) 25 million shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"), and (2) 630 million shares of Common Stock, par value
$1.00 per share ("Common Stock").
LAW2:7499
<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
NOW, THEREFORE, BE IT RESOLVED, that the series of Preferred
Stock authorized by the Board of Directors on February 23, 1994 shall have the
terms and provisions herein set forth:
G.1. DESIGNATION. The shares of such series shall be
designated as "Series C Conversion Preferred Stock" (the "Series C Preferred
Stock") consisting of 3,795,000 shares.
2. RANK. The Series C Preferred Stock shall, with respect to
dividend rights and rights upon liquidation, dissolution and winding up, rank
on a parity with the Series B Conversion Preferred Stock, par value $1.00 per
share (the "Series B Preferred Stock"), of the Corporation and prior to the
Common Stock, par value $1.00 per share (the "Common Stock"), and the Series A
Participating Cumulative Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock"), of the Corporation. All equity securities of the
Corporation to which the Series C Preferred Stock ranks prior, whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise,
including the Common Stock and the Series A Preferred Stock, are collectively
referred to herein as the "Junior Securities"; all equity securities of the
Corporation with which the Series C Preferred Stock ranks on a parity,
including the Series B Preferred Stock, are collectively referred to herein as
the "Parity Securities"; and all equity securities of the Corporation (other
than convertible debt securities) to which the Series C Preferred Stock ranks
junior are collectively referred to herein as the "Senior Securities." The
Series C Preferred Stock shall be subject to the creation of Junior Securities,
Parity Securities and Senior Securities, subject to the limitations thereon
provided for in paragraphs (6)(c) and (6)(d).
3. DIVIDENDS. (a) The holders of outstanding shares of the
Series C Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends accruing at the per share
rate of $3.25 per quarter and no more, payable in arrears on the first day of
each March, June, September and December, respectively (each such date being
hereinafter referred to as a "Dividend Payment Date"), commencing on June 1,
1994. If any Dividend Payment Date is not a business day (as defined in
paragraph (4)(h)(i)), then the Dividend Payment Date shall be on the next
succeeding day
LAW2:7469 1
<PAGE> 3
that is a business day. Each such dividend will be payable to holders of
record as they appear on the stock books of the Corporation on such record
dates, not less than 10 nor more than 90 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors, except that no such
record date shall be declared for the final dividend payable on June 1, 1997
and holders of shares of Series C Preferred Stock will receive such final
dividend only upon surrender of their share certificates. Dividends on a share
of Series C Preferred Stock shall accrue (whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared) on a daily basis
from the previous Dividend Payment Date, except that the first dividend shall
accrue from the date of issuance of such share of Series C Preferred Stock.
Accrued and unpaid dividends shall not bear interest. Dividends will cease to
accrue in respect of the Series C Preferred Stock on the Mandatory Conversion
Date (as defined in paragraph (4)(a)) or on the Settlement Date (as defined in
paragraph (4)(h)(v)), in the event of their earlier conversion pursuant to
paragraph (4)(n), upon the effective date of such conversion, and will cease to
accrue on the date of their earlier redemption pursuant to paragraph (4)(c)
unless the Corporation shall default in delivering the shares of Common Stock
and cash, if any, payable by the Corporation upon such redemption. Dividends
(or cash amounts equal to accrued and unpaid dividends) payable on the Series C
Preferred Stock for any period shorter than a quarterly dividend period shall
be computed on the basis of a 360-day year of twelve 30-day months and, for
purposes of calculating the accrual of dividends, dividends will accrue to, but
not including, the date fixed for payment.
(b) Unless full cumulative dividends, if any, accrued on the
Series C Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum set apart sufficient for such payment through the most
recent Dividend Payment Date (or the obligations of the Corporation with
respect to the payment of such dividends are satisfied as contemplated by
paragraphs (4)(a), (b) or (c)), then, whether or not the Mandatory Conversion
Date has occurred, (i) no full cash dividend shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation or other
distribution declared or made on any Parity Securities, (ii) no dividend shall
be declared or paid or set aside for payment or other distribution declared or
made upon the Common Stock, the Series A Preferred Stock or upon any other
Junior Securities (other than a dividend or distribution paid in shares of, or
warrants, rights or options exercisable for or convertible into, Common Stock,
the Series A Preferred Stock or any other Junior Securities) and (iii) no
Common Stock, Series A Preferred Stock or any
LAW2:7469 2
<PAGE> 4
other Junior Securities shall be redeemed, purchased or otherwise acquired for
any consideration, nor shall any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such series or class by
the Corporation, except by conversion into or in exchange for Junior
Securities. If any dividends are not paid or set apart in full, as aforesaid,
with respect to the Series C Preferred Stock and any Parity Securities, all
dividends declared with respect to the Series C Preferred Stock and any Parity
Securities shall be declared pro rata so that the amount of dividends declared
per share on the Series C Preferred Stock and such Parity Securities shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Series C Preferred Stock and such Parity Securities bear to each other.
Holders of the shares of the Series C Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends as provided in paragraph (3)(a).
(c) Subject to the foregoing provisions of this paragraph (3)
and paragraph (4)(d), the Board of Directors may declare and the Corporation
may pay or set apart for payment dividends and other distributions on any of
the Junior Securities or Parity Securities, and may redeem, purchase or
otherwise retire any Junior Securities or Parity Securities, and the holders of
the shares of the Series C Preferred Stock shall not be entitled to share
therein.
(d) Any dividend payment made on shares of the Series C
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to shares of the Series C Preferred Stock.
(e) All dividends paid with respect to shares of the Series C
Preferred Stock pursuant to this paragraph (3) shall be paid pro rata to the
holders entitled thereto.
(f) Holders of shares of the Series C Preferred Stock shall
be entitled to receive the dividends provided for in this paragraph (3) in
preference to and in priority over any dividends upon any of the Junior
Securities.
4. REDEMPTIONS OR CONVERSIONS. (a) AUTOMATIC CONVERSION ON
MANDATORY CONVERSION DATE. Unless earlier called for redemption by the
Corporation or converted in accordance with the provisions hereof, on June 1,
1997 (the "Mandatory Conversion Date"), each outstanding share of the Series C
Preferred Stock shall automatically convert into:
(i) shares of Common Stock at the Common Equivalent Rate
(determined as provided in paragraph (4)(d)) in effect on the
Mandatory Conversion Date; and
LAW2:7469 3
<PAGE> 5
(ii) the right to receive an amount in cash equal to all accrued
and unpaid dividends on such share of Series C Preferred Stock to the
Mandatory Conversion Date, whether or not declared, out of funds
legally available for the payment of dividends (and dividends shall
cease to accrue on such share as of the Mandatory Conversion Date).
The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock and/or its Common Stock held in its treasury for the
purpose of effecting any conversion of the Series C Preferred Stock, either
pursuant to this paragraph (4)(a) ("Mandatory Conversion") or pursuant to
paragraphs (4)(b), (c) or (n) the full number of shares of Common Stock then
deliverable upon any conversion of all outstanding shares of Series C Preferred
Stock.
The right to receive an amount in cash equal to all accrued
and unpaid dividends on such shares of Series C Preferred Stock (the "Accrued
Dividend Amount") will occur upon Mandatory Conversion whether or not the
Corporation has earnings and whether or not such dividends are declared;
PROVIDED, HOWEVER, that to the extent that funds are not legally available for
the payment of the Accrued Dividend Amount upon Mandatory Conversion, the
holders of Series C Preferred Stock shall be entitled to receive, and the
Corporation shall distribute to such holders, on the fifth business day next
succeeding the Mandatory Conversion Date, in lieu of payment in cash of the
Accrued Dividend Amount, a number of shares of Common Stock equal to 110% of
the Accrued Dividend Amount divided by the Current Market Price (as defined in
paragraph (4)(d)(vii)) of the Common Stock determined as of the second Trading
Date (as defined in paragraph (4)(h)(vi)) prior to the Mandatory Conversion
Date, except that (i) no such distribution shall be made by the Corporation if,
prior to the date on which the Corporation is required to make such
distribution, the Corporation shall have made payment in full of the Accrued
Dividend Amount in cash and (ii) if the Corporation does not have a sufficient
number of authorized but unissued shares of Common Stock and shares of Common
Stock held in its treasury not reserved for other corporate purposes to make
such distribution in full, the Corporation shall make such distribution to the
fullest extent possible, pro rata to the holders of Series C Preferred Stock
entitled thereto (as nearly as may be practicable without creating fractional
shares), and the holders of Series C Preferred Stock shall thereafter have the
right to receive, and the Corporation shall pay to such holders as promptly as
possible, the remainder in cash or shares of Common Stock or a combination
thereof, on the same terms set forth in this paragraph
LAW2:7469 4
<PAGE> 6
(4)(a) for the payment in cash of amounts equal to accrued and unpaid dividends
and for the distribution of shares of Common Stock in lieu of payment of such
amounts in cash.
(b) AUTOMATIC CONVERSION UPON THE OCCURRENCE OF CERTAIN
EVENTS. Immediately prior to the effectiveness of an amendment of the
articles, merger, consolidation, share exchange, division or conversion of the
Corporation or similar extraordinary transaction that results in the conversion
or exchange of Common Stock into, or the right of the holders thereof to
receive, in lieu of or in addition to their shares of Common Stock, other
securities or other property (whether of the Corporation or any other entity)
(any such amendment, merger, consolidation, share exchange, division or
conversion or similar extraordinary transaction being referred to herein as a
"Fundamental Transaction") each outstanding share of the Series C Preferred
Stock shall automatically convert, on the Settlement Date, as defined in
paragraph (4)(h)(v) into:
(A) shares of Common Stock at the same rate as would have
been the case if the Series C Preferred Stock had been called for
redemption on the business day immediately preceding the Mandatory
Conversion Date (with a Current Market Price determined as of the
second Trading Date prior to the Settlement Date) but in no case
greater than the Common Equivalent Rate; plus
(B) the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of the Series C Preferred
Stock to and including the Settlement Date, whether or not declared,
out of funds legally available for the payment of dividends (and
dividends shall cease to accrue on such share after the Settlement
Date); plus
(C) the right to receive an amount of cash initially equal to
$34.90, declining by $0.03056 on each day following the date of
issuance of the Series C Preferred Stock (computed on the basis of a
360-day year of twelve 30-day months) to $0.00 on June 1, 1997, in
each case determined with reference to the Settlement Date, out of
funds legally available therefor.
At the option of the Corporation, it may deliver on the
Settlement Date in lieu of some or all of the cash consideration described in
clauses (B) and (C) above, pro rata to the holders of Series C Preferred Stock
entitled thereto, a number of shares of Common Stock to be determined by
dividing the amount of cash consideration that the Corporation has elected to
pay in Common Stock by the
LAW2:7469 5
<PAGE> 7
Current Market Price (as defined in paragraph (4)(d)(vii)) of the Common Stock
determined, in the case of a Fundamental Transaction, as of the second Trading
Date prior to the Settlement Date.
(c) OPTIONAL REDEMPTION. The Corporation shall have the
right to call, in whole or in part, the outstanding shares of the Series C
Preferred Stock for redemption on the business day immediately preceding the
Mandatory Conversion Date. On the redemption date, the Corporation shall
deliver to the holders thereof in exchange for each such share called for
redemption the greater of (i) a number of shares of Common Stock equal to the
Call Price (as defined in paragraph (4)(h)(ii)) divided by the Current Market
Price of the Common Stock determined as of the second Trading Date immediately
preceding the Notice Date (as defined in paragraph 4(h)(iv)) and (ii) 8.85
shares of Common Stock (subject to adjustment in the same manner as the Common
Equivalent Rate, as described in paragraph 4(d)). Accrued and unpaid dividends
on shares of Series C Preferred Stock so redeemed will be paid in cash on the
date fixed for their redemption, whether or not declared, out of funds legally
available for the payment of dividends (and dividends shall cease to accrue on
such share as of such date). If fewer than all the outstanding shares of
Series C Preferred Stock are to be called for redemption, shares to be redeemed
shall be selected by the Corporation from outstanding shares of Series C
Preferred Stock by lot or pro rata (as nearly as may be practicable without
creating fractional shares) or by any other method determined by the Board of
Directors of the Corporation in its sole discretion to be equitable.
(d) COMMON EQUIVALENT RATE ADJUSTMENTS. The Common
Equivalent Rate to be used to determine the number of shares of Common Stock to
be delivered on the conversion of the Series C Preferred Stock into shares of
Common Stock pursuant to paragraphs (4)(a) or (b) shall be initially ten shares
of Common Stock for each share of Series C Preferred Stock; PROVIDED, HOWEVER,
that such Common Equivalent Rate shall be subject to adjustment from time to
time as provided below in this paragraph (4)(d). All adjustments to the Common
Equivalent Rate shall be calculated to the nearest 1/100th of a share of Common
Stock (or, if there is not a nearest 1/100th of a share, to the next lower
1/100th of a share). No adjustment will be required unless such adjustment
would require an increase or decrease of at least one percent therein;
PROVIDED, HOWEVER, that any adjustments which, by reason of the foregoing, are
not required to be made will be carried forward and taken into account in any
subsequent adjustment. Such rate in effect at any time is herein called the
"Common Equivalent Rate."
LAW2:7469 6
<PAGE> 8
(i) If the Corporation shall:
(A) pay a dividend or make a distribution with
respect to Common Stock in shares of
Common Stock,
(B) subdivide or split its outstanding shares
of Common Stock into a greater number of
shares,
(C) combine its outstanding shares of
Common Stock into a smaller number of
shares, or
(D) issue by reclassification of its shares of
Common Stock any shares of Common Stock of
the Corporation other than in a Fundamental
Transaction described in paragraph (4)(b),
then, in any such event, the Common Equivalent Rate in effect immediately prior
thereto shall be adjusted so that the holder of a share of the Series C
Preferred Stock shall be entitled to receive on the conversion of such share
of the Series C Preferred Stock, the number of shares of Common Stock which
such holder would have owned or been entitled to receive after the happening
of any of the events described above had such share of the Series C Preferred
Stock been converted at the Common Equivalent Rate in effect immediately prior
to such event or any record date with respect thereto. Such adjustment shall
become effective at the opening of business on the business date next following
the record date for determination of stockholders entitled to receive such
dividend or distribution in the case of a dividend or distribution, and shall
become effective immediately after the effective date in case of a subdivision,
split, combination or reclassification; and any shares of Common Stock issuable
in payment of a dividend shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under clauses (ii)
and (iii) below. Such adjustments shall be made successively.
(ii) If the Corporation shall, after the date hereof,
issue rights or warrants to all holders of its Common Stock entitling them (for
a period not exceeding 45 days from the date of such issuance) to subscribe for
or purchase shares of Common Stock at a price per share less than the Current
Market Price of the Common Stock (determined pursuant to paragraph (4)(d)(vii))
on the record date for the determination of stockholders entitled to
LAW2:7469 7
<PAGE> 9
receive such rights or warrants, then in each case the Common Equivalent Rate
shall be adjusted by multiplying the Common Equivalent Rate in effect
immediately prior to the date of issuance of such rights or warrants 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, immediately
prior to such issuance, plus the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or warrants, 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, immediately
prior to such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at such Current Market Price (determined by multiplying such total
number of shares by the exercise price of such rights or warrants and dividing
the product so obtained by such Current Market Price). Such adjustment shall
become effective at the opening of business on the business day next following
the record date for the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Common
Equivalent Rate shall be readjusted to the Common Equivalent Rate which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered. Such adjustments shall be made successively.
(iii) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock of evidence of its indebtedness
or other assets (including shares of capital stock of the Corporation (other
than Common Stock) but excluding any distributions and dividends referred to in
clause (i) above or any cash dividends), or shall issue to all holders of its
Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than those referred to in clause (ii) above), then in each
such case, the Common Equivalent Rate shall be adjusted by multiplying the
Common Equivalent Rate in effect on the record date mentioned below by a
fraction, of which the numerator shall be the Current Market Price of the
Common Stock (determined pursuant to paragraph (4)(d)(vii)) on the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and of which the denominator shall be such Current Market Price
per share of Common Stock less the fair value (as determined by the Board of
Directors of the Corporation, whose determination shall be conclusive) as of
such record date of the portion of the assets or evidences of indebtedness so
distributed, or of
LAW2:7469 8
<PAGE> 10
such subscription rights or warrants, applicable to one share of Common Stock.
Such adjustment shall become effective on the opening of business on the
business day next following the record date for the determination of
stockholders entitled to receive such dividend or distribution.
(iv) In case the Corporation shall, by dividend or otherwise,
at any time distribute to all holders of its Common Stock cash (excluding (a)
any cash dividends on the Common Stock to the extent that the aggregate cash
dividends per share of Common Stock in any consecutive 12-month period do not
exceed the greater of (x) the amount per share of Common Stock of the cash
dividends paid on the Common Stock in the next preceding 12-month period, to
the extent that such dividends for the preceding 12-month period did not
require an adjustment to the Common Equivalent Rate pursuant to this paragraph
(as adjusted to reflect subdivisions or combinations of the Common Stock) and
(y) 15 percent of the average daily Closing Prices (as defined in paragraph
(4)(h)(iii)) of the Common Stock for the ten consecutive Trading Days
immediately prior to the date of declaration of such distribution and (b) any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, then, in each
such case, unless the Corporation elects to reserve such an amount of cash for
distribution to the holders of the Series C Preferred Stock so that any such
shares will receive upon conversion, in addition to the shares of the Common
Stock to which such holder is entitled, the amount of cash (to the extent not
excluded as provided above) which such holder would have received if such
holder had, immediately prior to the record date for such distribution of cash,
converted its shares of Series C Preferred Stock into Common Stock, the Common
Equivalent Rate shall be increased so that the same shall equal the rate
determined by multiplying the Common Equivalent Rate in effect at the close of
business on such record date by a fraction of which the numerator shall be the
Closing Price of the Common Stock on such record date and the denominator shall
be the Closing Price of the Common Stock less the amount of cash so distributed
(to the extent not excluded as provided above) applicable to one share of
Common Stock, such increase to become effective immediately prior to the
opening of business on the day following such record date; PROVIDED, HOWEVER,
that in the event the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Closing Price of the
Common Stock on such record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of Series C Preferred
Stock shall thereafter have the right to receive upon conversion the amount of
cash (to the extent not excluded as provided above) such holder would
LAW2:7469 9
<PAGE> 11
have received had such holder converted each share of Series C Preferred Stock
on such record date. If any adjustment is required to be made as set forth in
this paragraph (4)(d)(iv) as a result of a distribution which is a dividend
described in subclause (a) of this paragraph, such adjustment shall be based
upon the amount by which such distribution exceeds the amount of the dividend
permitted to be excluded pursuant to such subclause (a) of this paragraph. If
an adjustment is required to be made pursuant to this paragraph as a result of
a distribution which is not such a dividend, such adjustment shall be based
upon the full amount of such distribution.
(v) In case of the consummation of a tender or exchange offer
(other than an odd-lot tender offer ) made by the Corporation or any subsidiary
of the Corporation for all or any portion of the Common Stock to the extent
that the cash and value of any other consideration included in such payment per
share of Common Stock exceeds 110% of the first reported sales price per share
of Common Stock on the Trading Day next succeeding the Expiration Time (as
defined below), the Common Equivalent Rate shall be increased so that the same
shall equal the rate determined by multiplying the Common Equivalent Rate in
effect immediately prior to the last time tenders or exchanges may be made
pursuant to such tender or exchange offer (the "Expiration Time") by a fraction
of which the denominator shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) on the Expiration Time
multiplied by the first reported sales price of the Common Stock on the Trading
Day next succeeding the Expiration Time, and the numerator shall be the sum of
(A) the fair market value (determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (B) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the
Expiration Time and the first reported sales price of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time.
(vi) Anything in this paragraph (4) notwithstanding, the
Corporation shall be entitled to make such upward adjustments in the Common
Equivalent Rate, in addition to those required by this paragraph (4), as the
Corporation in its sole discretion may determine to be
LAW2:7469 10
<PAGE> 12
advisable, in order that any stock dividends, subdivisions of shares,
distributions of rights to purchase stock or securities, or distributions of
securities convertible into or exchangeable for stock (or any transaction which
could be treated as any of the foregoing transactions pursuant to Section 305
of the Internal Revenue Code of 1986, as amended) hereafter made by the
Corporation to its stockholders shall not be taxable. If the Corporation
determines that an adjustment to the Common Equivalent Rate should be made, an
adjustment shall be made effective as of such date as is determined by the
Board of Directors of the Corporation. The determination of the Board of
Directors of the Corporation as to whether an adjustment to the Common
Equivalent Rate should be made pursuant to the foregoing provisions of this
paragraph (4)(d)(vi), and, if so, as to what adjustment should be made and
when, shall be conclusive, final and binding on the Corporation and all
stockholders of the Corporation.
(vii) As used in this paragraph (4), the "Current Market
Price" of the Common Stock on any date shall be the average of the daily
Closing Prices (as defined in paragraph (4)(h)(iii)) for the five consecutive
Trading Dates ending on and including the date of determination of the Current
Market Price; provided, however, that if the Closing Price for the Trading Date
next following such five-day period (the "next-day closing price") is less than
95% of such average, then the Current Market Price per share of Common Stock on
such date of determination shall be the next-day Closing Price; and provided,
further, that, if any event that results in an adjustment of the Common
Equivalent Rate occurs during such five-day period or, for the purposes of
calculating the Current Market Price in connection with any redemption or
conversion of Series C Preferred Stock or any determination of an amount in
cash payable in lieu of a fraction of a share of Common Stock, if any event
that results in an adjustment of the Common Equivalent Rate occurs during the
period beginning on the first day of such five-day period and ending on the
applicable redemption or conversion date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
the occurrence of such event.
(viii) In any case in which paragraph (4)(d) shall require that
an adjustment as a result of any event become effective at the opening of
business on the business day next following a record date and the date fixed
for conversion or redemption pursuant to paragraphs (4)(a), (b), (c) or (n)
occurs after such record date, but before the occurrence of such event the
Corporation may in its sole discretion elect to defer the following until after
the occurrence of such event: (A) issuing to the holder of any converted or
redeemed shares of the Series C Preferred Stock
LAW2:7469 11
<PAGE> 13
the additional shares of Common Stock issuable upon such conversion or
redemption before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of a fractional share of Common Stock
pursuant to paragraph (4)(f).
(e) NOTICE OF ADJUSTMENTS. Whenever the Common
Equivalent Rate or Optional Conversion Rate is adjusted as herein provided, the
Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate
and the adjusted Optional Conversion Rate (as defined in paragraph 4(n)) in
accordance with this paragraph (4) and prepare a certificate signed by the
Chief Financial Officer, any Vice President, the Treasurer or Controller of the
Corporation setting forth the adjusted Common Equivalent Rate, the adjusted
Optional Conversion Rate, the method of calculation thereof in reasonable
detail and the facts requiring such adjustment and upon which such adjustment
is based, which certificate shall be conclusive, final and binding evidence of
the correctness of the adjustment, and file such certificate forthwith with the
transfer agent or agents for the Series C Preferred Stock and the Common Stock;
and
(ii) mail a notice stating that the Common Equivalent Rate
and the Optional Conversion Rate have been adjusted, the facts requiring such
adjustment and the facts upon which such adjustment is based and setting forth
the adjusted Common Equivalent Rate and the adjusted Optional Conversion Rate
to the holder of record of the outstanding shares of the Series C Preferred
Stock at or prior to the time the Corporation mails an interim statement to its
stockholders covering the fiscal quarter during which the facts requiring such
adjustment occurred, but in any event within 45 days of the end of such fiscal
quarter.
(f) NO FRACTIONAL SHARES. No fractional share or scrip
representing fractional shares of Common Stock shall be issued upon the
redemption or conversion of any shares of Series C Preferred Stock. Instead of
any fractional interest in a share of Common Stock which would otherwise be
deliverable upon the redemption or conversion of a share of Series C Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the same fraction of the (i) Current
Market Price of the Common Stock determined as of the second Trading Date
LAW2:7469 12
<PAGE> 14
immediately preceding the Notice Date, in the case of redemption pursuant to
paragraph 4(c), (ii) Closing Price (as defined in paragraph 4(h)(iii) of the
Common Stock determined (A) as of the fifth Trading Date immediately preceding
the Mandatory Conversion Date, in the case of a Mandatory Conversion, or (B) as
of the second Trading Date immediately preceding the date of conversion in the
case of any optional conversion pursuant to paragraph 4(n), or (iii) the
Settlement Date, in the case of a Fundamental Transaction. If more than one
share shall be surrendered for conversion at one time by the same holder, the
number of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series C Preferred
Stock so surrendered.
(g) CANCELLATION. Shares of Series C Preferred Stock
that have been issued and reacquired in any manner, including shares purchased,
exchanged, redeemed or converted, shall not be reissued as part of the Series C
Preferred Stock and shall (upon compliance with any applicable provisions of
the laws of the Commonwealth of Pennsylvania) have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as to series and
may be redesignated and reissued as part of any series of the Preferred Stock.
(h) DEFINITIONS. As used in this paragraph (4):
(i) the term "business day" shall mean any day other than
a Saturday, Sunday or a day on which banking institutions in the State
of New York or the Commonwealth of Pennsylvania are authorized or
obligated by law or executive order to close or are closed because of
a banking moratorium or otherwise;
(ii) the term "Call Price" shall mean $131.25 per share;
(iii) the term "Closing Price" on any day shall mean the closing
sale price regular way on such day or, in case no such sale takes
place on such day, the reported closing bid price regular way, in each
case on the New York Stock Exchange or, if the Common Stock is not
listed or admitted to trading on such Exchange, then on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (which shall be the national securities exchange
on which the greatest number of shares of Common Stock has been traded
during the five consecutive Trading Dates ending on and including the
date of determination of the Current Market Price), or, if not quoted
or listed or admitted to trading on any national securities exchange
or quotation system, the closing bid price of the Common Stock on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similarly generally
accepted
LAW2:7469 13
<PAGE> 15
reporting service, or if not so available as determined in good faith by
the Board of Directors, on the basis of such relevant factors as it in
good faith considers, in the reasonable judgement of the Board of
Directors, appropriate;
(iv) the term "Notice Date" with respect to any notice
given by the Corporation in connection with the Series C Preferred
Stock shall be the earlier of the public announcement with respect to
any matter or the commencement of the mailing of such notice to the
holders of the Series C Preferred Stock in accordance with paragraph
(4)(i);
(v) the term "Settlement Date" shall mean the business day
immediately prior to the effective date of a Fundamental Transaction;
(vi) the term "Trading Date" shall mean a date on which the New
York Stock Exchange (or any successor thereto) is open for the
transaction of business.
(i) NOTICE OF REDEMPTION OR AUTOMATIC CONVERSION. The
Corporation will provide notice of any redemption or automatic conversion
(including any potential conversion upon the effectiveness of a Fundamental
Transaction but excluding any conversion pursuant to paragraphs (4)(a) or (n))
of shares of Series C Preferred Stock to holders of record of the Series C
Preferred Stock to be called or converted not less than 15 nor more than 60
days prior to the date fixed for such redemption or conversion, as the case may
be; PROVIDED, HOWEVER, that if the timing of a Fundamental Transaction makes it
impracticable to provide at least 15 days notice, the Corporation shall provide
such notice as soon as is practicable. Such notice shall be provided by
mailing notice of such redemption or conversion first class postage prepaid, to
each holder of record of the Series C Preferred Stock to be redeemed or
converted, at such holder's address as it appears on the stock register of the
Corporation; PROVIDED, HOWEVER, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the redemption
or conversion of any shares of Series C Preferred Stock to be redeemed or
converted, except as to the holder to whom the Corporation has failed to give
such notice or whose notice was defective. Each such notice shall state, as
appropriate, the following:
(i) the redemption or automatic conversion date;
LAW2:7469 14
<PAGE> 16
(ii) that all outstanding shares of Series C Preferred
Stock are to be redeemed or converted or, in the case of a call for
redemption pursuant to paragraph (4)(c) of fewer than all outstanding
shares of Series C Preferred Stock, the number of such shares held by
such holder to be redeemed;
(iii) in the case of a call for redemption pursuant to paragraph
(4)(c), the Call Price, the number of shares of Common Stock
deliverable upon redemption of each share of Series C Preferred Stock
to be redeemed and, if applicable, the Current Market Price used to
calculate such number of shares of Common Stock subject to any
subsequent adjustments pursuant to paragraph (4)(d);
(iv) whether the Corporation is delivering shares of Common Stock
in lieu of cash (in the case of a conversion pursuant to paragraphs
(4)(a) or (4)(b)), the Current Market Price to be used to calculate
the number of such shares of Common Stock and, if the Corporation is
delivering shares in respect of less than all the cash that would
otherwise be deliverable by the Corporation upon such conversion, the
portion of such cash in lieu of which Common Stock will be delivered;
(v) the place or places where certificates for such shares
are to be surrendered for redemption or conversion; and
(vi) that dividends on the shares of Series C Preferred Stock to
be redeemed or converted will cease to accrue on such redemption or
automatic conversion date or, in the case of a conversion pursuant to
paragraph (4)(b), on the related Settlement Date, unless, in the case
of a redemption pursuant to paragraph (4)(c), the Corporation shall
default in delivering the shares of Common Stock and cash, if any,
payable by the Corporation at the time and place specified in such
notice.
(j) DEPOSIT OF SHARES AND FUNDS. The Corporation's
obligation to deliver shares of Common Stock and provide funds in accordance
with this paragraph (4) shall be deemed fulfilled if, on or before a redemption
or conversion date or Settlement Date, the Corporation shall deposit, with a
bank or trust company, or an affiliate of a bank or trust company, having an
office or agency in New York city and having a capital and surplus of at least
$50,000,000, such number of shares of Common Stock as are
LAW2:7469 15
<PAGE> 17
required to be delivered by the Corporation pursuant to this paragraph (4) upon
the occurrence of the related redemption or conversion (including any payment
of cash in lieu of the issuance of fractional share amounts pursuant to
paragraph (4)(f)), together with funds (or, in the case of a conversion
pursuant to paragraphs (4)(a) or (4)(b), shares of Common Stock and/or funds)
sufficient to pay all accrued and unpaid dividends on the shares to be redeemed
or converted as required by this paragraph (4), in trust for the account of the
holders of the shares to be redeemed or converted (and so as to be and continue
to be available thereto), with irrevocable instructions and authority to such
bank or trust company that such shares and funds be delivered upon redemption
or conversion of the shares of Series C Preferred Stock so called for
redemption or converted. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any shares of Common Stock or funds so
deposited and unclaimed at the end of two years from such redemption or
conversion date shall be repaid and released to the Corporation, after which
the holder or holders of such shares of Series C Preferred Stock so called for
redemption or converted shall look only to the Corporation for delivery of such
shares of Common Stock or funds.
(k) SURRENDER OF CERTIFICATES; STATUS. Each holder of shares
of Series C Preferred Stock to be redeemed or converted shall surrender the
certificates evidencing such shares (properly endorsed or assigned for
transfer, unless any notice shall state otherwise) to the Corporation at the
place designated in the notice of such redemption or conversion and shall
thereupon be entitled to receive certificates evidencing shares of Common Stock
and to receive any funds payable pursuant to this paragraph (4) following such
surrender and following the date of such redemption or conversion. In case
fewer than all the shares represented by any such surrendered certificate are
called for redemption, a new certificate shall be issued at the expense of the
Corporation representing the unredeemed shares. If such notice of redemption
or conversion shall have been given, and if on the date fixed for redemption or
conversion (or on the Mandatory Conversion Date) shares of Common Stock and
funds necessary for the redemption or conversion shall have been either set
aside by the Corporation separate and apart from its other funds or assets in
trust for the account of the holders of the shares to be redeemed or converted
(and so as to be and continue to be available therefor) or deposited with a
bank or trust company or affiliate thereof as provided in paragraph (4)(j), or
the circumstances described in clause (ii) to the proviso appearing in the
third full paragraph of paragraph (4)(a) are in effect, then, notwithstanding
that the certificates evidencing any shares of Series C Preferred
LAW2:7469 16
<PAGE> 18
Stock so called for redemption or subject to conversion shall not have been
surrendered, the shares represented thereby so called for redemption or subject
to conversion shall be deemed no longer outstanding, dividends with respect to
the shares so called for redemption or subject to conversion shall cease to
accrue after the date fixed for redemption or conversion or, in the case of a
conversion pursuant to paragraph (4)(b), on the related Settlement Date, and
all rights with respect to the shares so called for redemption or subject to
conversion shall forthwith after such date cease and terminate, except for the
right of the holders to receive the shares of Common Stock and funds, if any,
payable pursuant to this paragraph (4) without interest upon surrender of their
certificates therefor.
(l) DIVIDEND PAYMENTS. Holders of shares of Series C
Preferred Stock at the close of business on a record date for any payment of
declared dividends will be entitled to receive the dividend payable on such
shares of Series C Preferred Stock on the corresponding Dividend Payment Date
notwithstanding the optional conversion of such shares of Series C Preferred
Stock following such record date and before such Dividend Payment Date.
However, shares of Series C Preferred Stock surrendered for optional conversion
pursuant to paragraph 4(n) after the close of business on a record date for any
payment of declared dividends and before the opening of business on the next
succeeding Dividend Payment Date must be accompanied by payment in cash of an
amount equal to the dividend attributable to the current quarterly dividend
period payable on such date. Notwithstanding the foregoing, holders of Series
C Preferred Stock who convert pursuant to paragraph 4(n) their Series C
Preferred Stock at any time after such Series C Preferred Stock have been
called for redemption, will be entitled to receive, in addition to shares of
Common Stock issuable upon conversion, cash payment of dividends accrued and
unpaid to the date of such conversion. Except as set forth in the preceding
sentence, upon any optional conversion pursuant to paragraph 4(n) of shares of
Series C Preferred Stock, the Corporation will make no payment of or allowance
for accrued and unpaid dividends, whether or not in arrears, on such shares of
Series C Preferred Stock, or for previously declared dividends or distributions
on the shares of Common Stock issued upon such conversion.
(m) PAYMENT OF TAXES. The Corporation will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on the redemption or conversion of
shares of Series C Preferred Stock pursuant to this paragraph (4); provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of
LAW2:7469 17
<PAGE> 19
any registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of Series C
Preferred Stock redeemed or converted or to be redeemed or converted, 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.
(n) CONVERSION AT THE OPTION OF THE HOLDER. After 40 days
following the latest date of original issuance of the Series C Preferred Stock,
the shares of the Series C Preferred Stock are convertible, in whole or in
part, at the option of the holders thereof, at any time before the Mandatory
Conversion Date, unless previously redeemed, into shares of Common Stock at a
rate of 8.85 shares of Common Stock for each share of Series C Preferred Stock
(the "Optional Conversion Rate"). The Optional Conversion Rate is subject to
adjustment in the same manner as the Common Equivalent Rate, as described in
paragraph (4)(d). The right to convert shares of Series C Preferred Stock
called for redemption will terminate immediately before the close of business
on the redemption date with respect to such shares.
Conversion of shares of Series C Preferred Stock at the option
of the holder may be effected by delivering certificates evidencing such shares
of Series C Preferred Stock, together with written notice of conversion and a
proper assignment of such certificates to the Corporation or in blank (and, if
applicable, cash payment of an amount equal to the dividend attributable to the
current quarterly dividend period payable on such shares), to the office of the
transfer agent for Series C Preferred Stock or to any other office or agency
maintained by the Corporation for that purpose and otherwise in accordance with
conversion procedures established by the Corporation. Each optional conversion
will be deemed to have been effected immediately before the close of business
on the date on which the foregoing requirements have been satisfied. The
conversion will be at the Optional Conversion Rate in effect at such time and
on such date.
5. LIQUIDATION PREFERENCES. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after payment or provision for
payment of any Senior Securities, an amount per share of Series C Preferred
Stock in cash equal to the sum of (i) $144.40 plus (ii) all accrued and
LAW2:7469 18
<PAGE> 20
unpaid dividends thereon to the date of liquidation, dissolution or winding up,
before any payment shall be made or any assets distributed to the holders of
any of the Junior Securities. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the holders of
outstanding shares of the Series C Preferred Stock and any Parity Securities,
then the holders of all such shares shall share ratably in such distribution of
assets in accordance with the amount which would be payable on such
distribution if the amounts to which the holders of outstanding shares of
Series C Preferred Stock and the holders of outstanding shares of such Parity
Securities are entitled were paid in full. Except as provided in this
paragraph (5)(a), holders of Series C Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation.
(b) For the purposes of this paragraph (5), none of the
following shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation:
(i) the voluntary sale, conveyance, lease, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets
of the Corporation;
(ii) the consolidation or merger of the Corporation with or
into one or more other corporations or other associations;
(iii) the consolidation or merger of one or more
corporations or other associations with or into the Corporation;
(iv) the participation by the Corporation in a share exchange;
(v) the division of the Corporation pursuant to 15 Pa.C.S.
Subch. 19D;
(vi) the conversion of the Corporation pursuant to 15 Pa.C.S.
Subch. 19E.
6. VOTING RIGHTS. (a) The holders of record of shares of
Series C Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this paragraph (6) or as otherwise provided by law.
LAW2:7469 19
<PAGE> 21
(b) In the event that dividends payable to the holders of
Series C Preferred Stock are in arrears and unpaid for the equivalent of six
quarterly periods, the Board of Directors will be increased by two directors
and the holders of Series C Preferred Stock, together with the holders of all
other outstanding series of the Preferred Stock in respect of which such a
default in payment of dividends as described hereinabove exists and is entitled
to vote thereon, voting as a single class without regard to series, will be
entitled to elect two directors of the expanded Board of Directors. Such
entitlement shall continue until such time as all dividends in arrears on all
of the Series C Preferred Stock at the time outstanding have been paid or
declared and set aside for payment, whereupon such voting rights of the holders
of the Series C Preferred Stock shall cease (and the respective terms of the
two additional directors shall thereupon expire and the number of directors
constituting the full board be decreased by two) subject to being again revived
from time to time upon the reoccurrence of the conditions described in this
paragraph (6)(b) as giving rise thereto.
At any time when the rights of holders of Series C Preferred
Stock to elect two additional directors shall have so vested, the Corporation
shall, upon the written request of the holders of record of not less than 10%
of the Series C Preferred Stock then outstanding (or 10% of all of the shares
of Preferred Stock having the right to vote for such directors in case holders
of shares of other series of Preferred Stock shall also have the right to elect
directors in such circumstances), call a special meeting of holders of the
Series C Preferred Stock (and other series of Preferred Stock, if applicable)
for the election of directors. In the case of a written request, the special
meeting shall be held within 60 days after the delivery of the request, upon
the notice provided by law and in the bylaws of the Corporation; except that
the Corporation shall not be required to call such a special meeting if the
request is received less than 120 days before the date fixed for the next
ensuing annual meeting of stockholders of the Corporation.
Whenever the number of directors of the Corporation shall have
been increased by two as provided in this paragraph (6)(b), the number as so
increased may thereafter be further increased or decreased in such manner as
may be permitted by the bylaws and without the vote of the holders of Series C
Preferred Stock. No such action shall impair the right of the holders of
Series C Preferred Stock to elect and to be represented by two directors as
provided in this paragraph (6)(b).
The two directors elected as provided in this paragraph (6)(b)
shall serve until the next annual meeting
LAW2:7469 20
<PAGE> 22
of stockholders of the Corporation and until their respective successors shall
be elected and qualified or the earlier expiration of their terms as provided
in this paragraph (6)(b). No such director may be removed without the vote of
holders of a majority of the shares of Series C Preferred Stock (or holders of
a majority of shares of Preferred Stock having the right to vote in the
election of such director in case holders of shares of other series of
Preferred Stock shall also have the right to elect such director). If, prior
to the expiration of the term of any such director, a vacancy in the office of
such director shall occur, such vacancy shall, until the expiration of such
term, in each case be filled by the remaining director elected as provided in
this paragraph (6)(b) or, if none remains in office, by vote of the holders of
record of a majority of the outstanding shares of Series C Preferred Stock (or
holders of a majority of shares of Preferred Stock who are then entitled to
participate in the election of such directors in case holders of shares of
other series of Preferred Stock shall also have the right to elect such
director).
(c) So long as any shares of the Series C Preferred Stock are
outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series C Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Common Stock and any necessary funds have been
deposited in trust for such redemption or conversion pursuant to paragraph
(4)(j)), the Corporation shall not, without the affirmative vote of the holders
of at least 66-2/3% of the shares of Series C Preferred Stock and any other
series of Preferred Stock entitled to vote thereon at the time outstanding,
voting together as one class without regard to series, in person or by proxy,
or by resolution adopted at an annual or special meeting called for the
purpose, amend pursuant to the provisions of 15 Pa.C.S. Subchapter 19B or in
the context of any other type of Fundamental Transaction any of the provisions
of the Corporation's Restated Articles of Incorporation which would either (i)
authorize any new class of Senior Securities or (ii) alter or change the
rights, preferences or limitations of the Series C Preferred Stock so as to
affect such rights, preferences or limitations in any material respect
prejudicial to the holders of the Series C Preferred Stock.
(d) So long as any shares of the Series C Preferred Stock are
outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series C Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Common Stock and any necessary funds have been
deposited in trust for such redemption or conversion pursuant to paragraph
(4)(j)), the Corporation shall not, without the affirmative vote of the holders
of at
LAW2:7469 21
<PAGE> 23
least a majority of the shares of Series C Preferred Stock and any other series
of Preferred Stock entitled to vote thereon at the time outstanding voting or
consenting, as the case may be, voting together as one class without regard to
series, given in person or by proxy, either in writing or by resolution adopted
at an annual or special meeting called for the purpose, amend pursuant to the
provisions of 15 Pa.C.S. Subchapter 19B or in the context of any other type of
Fundamental Transaction any of the provisions of the Corporation's Restated
Articles of Incorporation which would either (i) increase the total number of
authorized shares of Preferred Stock or (ii) authorize or create any class of
Parity Securities.
7. INCREASE IN SHARES. The number of shares of Series C
Preferred Stock may, to the extent of the Corporation's authorized and unissued
Preferred Stock, be increased by further resolution duly adopted by the Board
of Directors and the filing of a statement with respect to shares with the
Department of State of the Commonwealth of Pennsylvania.
8. LIMITATIONS. Except as may otherwise be required by law,
the shares of Series C Preferred Stock shall not have any powers, preferences
or relative, participating, optional or other special rights other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) or otherwise in the Restated Articles of Incorporation of
the Corporation.
LAW2:7469 22
<PAGE> 1
EXHIBIT 3(b)
RESTATED ARTICLES
OF
WESTINGHOUSE ELECTRIC CORPORATION
(As amended to May 5, 1994)
FIRST: The name of the corporation (hereinafter called the
Corporation) is WESTINGHOUSE ELECTRIC CORPORATION.
SECOND: The location and post office address of the current registered
office of the Corporation in the Commonwealth of Pennsylvania is Westinghouse
Building, Gateway Center, Pittsburgh, Allegheny County, Pennsylvania 15222.
THIRD: The Corporation is subject to the Act of the General Assembly of
the Commonwealth of Pennsylvania, known as the "Business Corporation Law",
approved May 5, 1933, and any act amendatory thereof, supplementary thereto or
substituted therefor, and the purposes for which the Corporation is organized
are:
(1) To develop, build, manufacture, process and otherwise produce,
to purchase, lease, exchange and otherwise acquire, and to hold, own, use,
operate, repair, sell, lease, assign, distribute and otherwise deal in and
dispose of structures, machinery, equipment, apparatus, appliances, devices,
products, materials, articles, processes and systems for any application or
purpose, whether for use for industrial, utility, transportation, broadcasting,
communication, home, defense, consumer or other
LAW2:7499 -1-
<PAGE> 2
purposes or applications, or combinations thereof, whatsoever, including but
not limited to the following: for the generation, conversion, transmission,
utilization, storage and control of any form of energy whatsoever (including
but not limited to electrical, mechanical, chemical, atomic, nuclear, steam,
thermal, mineral, gas, water and solar); for the handling, conditioning,
heating, cooling, treatment, application or use of air and other gases, liquids
and solids; for aerial, nautical, terrestrial, spatial or celestial operations,
applications or navigation; for radio, television and all other forms of
transmission, reception or communication; and for incorporation into or use in,
on or about any establishment, building or structure of any kind or nature
whatsoever; and any and all related engines, turbines, motors, parts, tools,
accessories and improvements thereof and supplies or materials pertaining or
incidental to any of the above structures, machinery, equipment, apparatus,
appliances, devices, products, materials, articles, processes and systems, of
any kind or nature whatsoever.
(2) To develop, build, manufacture, process and otherwise produce,
to purchase, lease, exchange and otherwise acquire, and to hold, own, use,
operate, repair, sell, lease, assign, distribute and otherwise deal in and
dispose of structures, machinery, equipment, apparatus, appliances, devices,
products, materials, articles, processes, systems, goods, wares and merchandise
of every kind, nature and description, and to engage in any industrial,
manufacturing, mining, mercantile,
LAW2:7499 -2-
<PAGE> 3
broadcasting, trading or other lawful business of any kind or character
whatsoever.
(3) To conduct and carry on research work in, and to engage in any
activity pertaining or incidental to, any scientific, technical or other field
or fields, and to render services of a scientific, technical or other nature to
any person, association, firm, corporation, country, state, municipality or
other governmental division or subdivision.
(4) To purchase, lease, exchange and otherwise acquire all, or any
part of, or any interest in, the properties, assets, business and goodwill of
any one or more persons, associations, firms or corporations; to pay for the
same in cash, property or its own or other securities; to hold, own, use,
operate, reorganize and otherwise manage such properties, assets, business and
goodwill; to sell, lease, assign, distribute, liquidate and otherwise deal in
and dispose of the whole or any part thereof; and in connection therewith, to
assume or guarantee performance of any liabilities, obligations or contracts of
such persons, associations, firms or corporations.
(5) To develop, apply for, register, take licenses in respect of,
purchase, lease, exchange and otherwise acquire, and to hold, own, use,
operate, sell, lease, assign, grant licenses in respect of, manufacture under,
exercise and otherwise deal in and dispose of any and all inventions, devices,
formulae, technical or business information, including trade secrets, know-how,
processes, improvements and modifications thereof, letters
LAW2:7499 -3-
<PAGE> 4
patent and all rights connected therewith or appertaining thereto, copyrights,
trademarks, trade names, trade symbols and other indications of origin and
ownership, franchises, licenses, concessions or other rights granted by or
recognized under the laws of any country, state, municipality or other
governmental division or subdivision.
(6) To purchase, exchange and otherwise acquire, and to hold, own,
sell, assign, transfer, reissue, cancel and otherwise deal in and dispose of
its own shares and securities, to such extent and in such manner and upon such
terms as it may determine; provided that the Corporation shall not use its
funds or property for the purchase of its own shares when such purchase shall
be prohibited by law; and provided that shares of its capital stock which
belong to the Corporation shall not be voted directly or indirectly.
(7) To enter into, make, perform and carry out contracts and
agreements of every kind and description which may be necessary, appropriate,
convenient or advisable in carrying out the purpose of the Corporation, with
any person, association, firm, corporation, country, state, municipality or
other governmental division or subdivision.
(8) To carry out any of or all the foregoing purposes as principal
or agent and alone or with associates; and to execute from time to time such
general or special powers of attorney to such person or persons as it may
determine, granting to such person or persons such powers as it may deem
proper, and to
LAW2:7499 -4-
<PAGE> 5
revoke such powers of attorney as and when it may desire; and to conduct its
business in any and all of its branches at one or more offices in the
Commonwealth of Pennsylvania and elsewhere.
(9) To do everything necessary, suitable, convenient or proper
for, or in connection with, or incident to, the accomplishment of any of the
purposes herein enumerated, or which shall at any time appear conducive to or
expedient for the accomplishment of any of such purposes, not inconsistent with
the laws of the Commonwealth of Pennsylvania.
Except as otherwise expressly provided in this Article THIRD, none of
the purposes set forth above in this Article THIRD shall be in any way limited
or restricted by reference to, or inference from, any other of the purposes
therein set forth, and each of said purposes shall be regarded as a separate
and independent purpose.
The purposes set forth above shall be construed as powers as well as
purposes; but the enumeration herein of certain powers is not intended to be
exclusive of, or a waiver of, but shall be in addition to, the powers, rights
or privileges granted or conferred by said "Business Corporation Law" and any
other laws of the Commonwealth of Pennsylvania applicable to the Corporation
that may now or hereafter be in force. Without limiting the generality of the
foregoing, the Corporation shall have and may exercise the general powers which
are now or may hereafter be enumerated in Section 302 of said "Business
Corporation Law", or any act amendatory thereof, supplemental thereto or
substituted
LAW2:7499 -5-
<PAGE> 6
therefor, to the same extent as if such powers were set forth in full herein.
Except as otherwise provided by law or these Articles or the By-laws,
the powers of the Corporation shall be exercised by its Board of Directors.
Nothing herein contained shall authorize or be construed as intended
to authorize the Corporation to carry on any business or exercise any powers in
any commonwealth, state, territory, or country which a business corporation
organized under the laws of such commonwealth, state, territory or country
could not carry on or exercise, except to the extent permitted or authorized by
the laws of such commonwealth, state, territory or country; and notwithstanding
any provision herein, the Corporation shall not be deemed to have the power to
carry on or exercise within the Commonwealth of Pennsylvania any business
whatsoever the carrying on or exercising of which would prevent the Corporation
from being classified as a business corporation under said "Business
Corporation Law", or any act amendatory thereof, supplemental thereto or
substituted therefor.
FOURTH: The term of existence of Corporation shall be perpetual.
FIFTH: A. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 505 million consisting
of (1) 25 million shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"), and (2) 630
LAW2:7499 -6-
<PAGE> 7
million shares of Common Stock, par value $1.00 per share ("Common Stock").
B. The Board of Directors is hereby expressly authorized to
provide, out of the unissued shares of Preferred Stock, for series of Preferred
Stock. Before any share of any such series is issued, the Board shall fix, and
hereby is expressly empowered to fix, the following provisions of the shares
thereof:
(1) the terms of such series, the number of shares to
constitute such series and the stated value thereof if different from the par
value thereof;
(2) whether the shares of such series shall have voting
rights in addition to any voting rights provided by law and, if so, the terms
of such voting rights, which may be general or limited;
(3) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the preference
or relation which such dividends shall bear to the dividends payable on any
shares of stock of any other class or any other series of Preferred Stock;
(4) whether the shares of such series shall be subject to
redemption at the election of the Corporation or the holders of such series
and, if so, the times, prices and other conditions of such redemption;
(5) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such
series in the
LAW2:7499 -7-
<PAGE> 8
event of, voluntary or involuntary liquidation, dissolution or winding up, or
upon any distribution of the assets of the Corporation;
(6) whether the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so, the extent to
and manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement or
other corporate purposes and the terms and provisions relative to the
operation thereof;
(7) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other class or
any other series of Preferred Stock or any other securities and, if so, the
price or prices or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same, and any other terms and conditions of conversion
or exchange;
(8) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, or upon the purchase,
redemption or other acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of Preferred Stock;
(9) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of any other series of Preferred Stock or of
any other class of stock; and
LAW2:7499 -8-
<PAGE> 9
(10) any other powers, preferences and relative,
participating, optional and other special rights, and any qualifications,
limitations and restrictions thereof.
C. The powers, preferences and relative, participating, optional
and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series of Preferred Stock at any time outstanding.
All shares of any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that shares of any one
series issued at different times may differ as to the dates from which
dividends thereon shall be cumulative.
D. Subject to the provisions of this Article FIFTH and actions
taken by the Board of Directors pursuant to this Article
FIFTH:
(1) such dividends (whether in cash, stock or
otherwise) as may be determined by the Board of Directors may be declared
and paid on the Common Stock from time to time in accordance with the laws of
the Commonwealth of Pennsylvania; and the holders of the Preferred Stock shall
not be entitled to participate in any such dividends whether payable in cash,
stock or otherwise;
(2) voting power shall be exclusively vested in the
Common Stock;
(3) dividends upon shares of any class of the
Corporation shall be payable only out of assets legally available
LAW2:7499 -9-
<PAGE> 10
for the payment of such dividends, and the rights of the holders of the
Preferred Stock of all series and of the holders of the Common Stock in respect
of dividends shall at all times be subject to the power of the Board of
Directors, which is hereby expressly vested in said Board, from time to time to
set aside such reserves and to make such other provisions, if any, as said
Board shall deem to be necessary or advisable for working capital, for
additions, improvements and betterments to plant and equipment, for expansion
of the Corporation's business (including the acquisition of real and personal
property for that purpose), for plans for maintaining employment at the plants
of the Corporation and also for other plans for the benefit of employees
generally, and for any other purposes of the Corporation whether or not similar
to those herein mentioned;
(4) holders of Preferred Stock and holders of Common
Stock shall not have any preemptive, preferential or other right to subscribe
for or purchase or acquire any shares of any class or any other securities of
the Corporation, whether now or hereafter authorized, and whether or not
convertible into, or evidencing or carrying the right to purchase, shares of
any class or any other securities now or hereafter authorized, and whether the
same shall be issued for cash, services or property, or by way of dividend or
otherwise, other than such right, if any, as the Board of Directors in its
discretion from time to time may determine. If the Board of Directors shall
offer to the holders of the Preferred Stock or the holders of the Common
Stock,, or
LAW2:7499 -10-
<PAGE> 11
any of them, any such shares or other securities of the Corporation, such offer
shall not in any way constitute a waiver or release of the right of the Board
of Directors subsequently to dispose of other portions of said shares or
securities without so offering the same to said holders.
(5) the shares of Preferred Stock and the shares of
Common Stock may be issued for such consideration and for such corporate
purposes as the Board of Directors may from time to time determine;
(6) subject to the provisions of the By-laws of the
Corporation as from time to time amended, with respect to the closing of the
transfer books or the fixing of a record date for the determination of
stockholders entitled to vote, each holder of record of shares of any class of
the Corporation shall be entitled to one vote, on each matter submitted to a
vote at a meeting of stockholders and in respect of which shares of such class
shall be entitled to be voted, for every share of such class standing in his
name on the books of the Corporation;
(7) in each election of directors no stockholder shall
have any right to cumulate his votes and cast them for one candidate or
distribute them among two or more candidates.
E. 1. DESIGNATION AND NUMBER OF SHARES. The shares of such
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"). The par value of each share of the
Series A Preferred Stock shall be $1. The number of shares initially
constituting the Series A
LAW2:7499 -11-
<PAGE> 12
Preferred Stock shall be 3,000,000; provided, however, that, if more than a
total of 3,000,000 shares of Series A Preferred Stock shall be issuable upon
the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement
dated as of December 7, 1988, between the Corporation and Mellon Bank, N.A., as
Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, pursuant to Section 602(B) of the Pennsylvania Business
Corporation Law, shall direct by resolution or resolutions that a certificate
be properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 10 thereof, providing for the total number of shares of
Series A Preferred Stock authorized to be issued to be increased (to the extent
that the Certificate of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
such Rights.
2. DIVIDENDS OR DISTRIBUTIONS. (a) Subject to the prior
and superior rights of the holders of shares of any other series or Preferred
Stock or other class of capital stock of the Corporation ranking prior and
superior to the shares of Series A Preferred Stock with respect to dividends,
the holders of shares of the Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation legally available therefore, (1) quarterly dividends payable
in cash on the first day of March, June, September and December in each year
(each such date being
LAW2:7499 -12-
<PAGE> 13
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series A Preferred Stock, in the amount of $10 per whole
share (rounded to the nearest cent) less the amount of all cash dividends
declared on the Series A Preferred Stock pursuant to the following clause (2)
since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock, and (2)
dividends payable in cash on the payment date for each cash dividend declared
on the Common Stock in an amount per whole share (rounded to the nearest cent)
equal to the Formula Number then in effect times the cash dividends then to be
paid on each share of Common Stock. In addition, if the Corporation shall pay
any dividend or make any distribution on the Common Stock payable in assets,
securities or other forms of noncash consideration (other than dividends or
distributions solely in shares of Common Stock), then, in each such case, the
Corporation shall simultaneously pay or make on each outstanding whole share of
Series A Preferred Stock a dividend or distribution in like kind equal to the
Formula Number then in effect times such dividend or distribution on each share
of the Common Stock. As used herein, the "Formula Number" shall be 100;
provided, however, that, if at any time after December 17, 1988, the
Corporation shall (i) declare or pay any dividend on the Common Stock payable
in shares of Common Stock or make any
LAW2:7499 -13-
<PAGE> 14
distribution on the Common Stock in shares of Common Stock, (ii) subdivided (by
a stock split or otherwise) the outstanding shares of Common Stock into a
larger number of shares of Common Stock or (iii) combine (by a reverse stock
split or otherwise) the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then in each such event the Formula Number
shall be adjusted to a number determined by multiplying the Formula Number in
effect immediately prior to such event by a fraction, the numerator of which is
the number of shares of Common Stock that are outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that are outstanding immediately prior to such event (and rounding the result
to the nearest whole number); and provided further that, if at any time after
December 17, 1988, the Corporation shall issue any shares of its capital stock
in a reclassification or change of the outstanding shares of Common Stock
(including any such reclassification or change in connection with a merger in
which the Corporation is the surviving corporation), then in each such event
the Formula Number shall be appropriately adjusted to reflect such
reclassification or change.
(b) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in Section 2(a)
immediately prior to or at the same time it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution solely in shares of
Common Stock);
LAW2:7499 -14-
<PAGE> 15
provided, however, that, in the event no dividend or distribution (other than a
dividend or distribution in shares of Common Stock) shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
record date shall be the same as the record date for any corresponding dividend
or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from and after the Quarterly
Dividend Payment Date next preceding the date of original issue of such shares
of Series A Preferred Stock; provided, however, that dividends on such shares
which are originally issued after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and on or prior to the next succeeding Quarterly Dividend Payment Date
shall begin to accrue and be cumulative from and after such Quarterly Dividend
Payment Date. Notwithstanding the foregoing, dividends on shares of Series A
Preferred Stock which are originally issued prior to the record date for the
first Quarterly Dividend Payment shall be calculated as if cumulative from and
after the March 1, June 1, September 1
LAW2:7499 -15-
<PAGE> 16
or December 1, as the case may be, next preceding the date of original issuance
of such shares. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock
are outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock
shall not be entitled to receive any dividends or other distributions except as
provided herein.
3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be
entitled to a number of votes equal to the Formula Number then in effect, for
each share of Series A Preferred Stock held of record on each matter on which
holders of the Common Stock or stockholders generally are entitled to vote,
multiplied by the maximum number of votes per share which the holders of the
Common Stock or stockholders generally then have with respect to such matter.
LAW2:7499 -16-
<PAGE> 17
(b) Except as otherwise provided herein or by applicable
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock shall vote together as one class for the election of
directors of the Corporation and on all other matters submitted to a vote of
stockholders of the Corporation.
(c) If, at the time of any annual meeting of stockholders
for the election of directors, the equivalent of six quarterly dividends
(whether or not consecutive) payable on any share or shares of Series A
Preferred Stock are in default, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other
directors of the Corporation, the holders of record of the Series A Preferred
Stock, voting separately as a class to the exclusion of the holders of Common
Stock, shall be entitled at said meeting of stockholders (and at each
subsequent annual meeting of stockholders), unless all dividends in arrears
have been paid or declared and set apart for payment prior thereto, to vote for
the election of two directors of the Corporation, the holders of any Series A
Preferred Stock being entitled to cast a number of votes per share of Series A
Preferred Stock equal to the Formula Number. Until the default in payments of
all dividends which permitted the election of said directors shall cease to
exist any director who shall have been so elected pursuant to the next
preceding sentence may be removed at any
LAW2:7499 -17-
<PAGE> 18
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 below or by
applicable law, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
authorizing or taking any corporate action.
4. CERTAIN RESTRICTIONS. (a) Whenever quarterly
dividends or other dividends or distributions payable on the
LAW2:7499 -18-
<PAGE> 19
Series A Preferred Stock as provided in Section 2 hereof are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series
A Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock; PROVIDED that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution,
LAW2:7499 -19-
<PAGE> 20
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph (a)
of this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
5. LIQUIDATION RIGHTS, FAIR VALUE FOR PURPOSES OF
PENNSYLVANIA ANTI-TAKEOVER STATUTE. (a) Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A
LAW2:7499 -20-
<PAGE> 21
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $100 per share or (y)
an aggregate amount per share equal to the Formula Number then in effect times
the aggregate amount to be distributed per share to holders of Common Stock, or
(2) to the holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of
all such shares are entitled upon such liquidation, dissolution or winding up.
(b) Notwithstanding anything to the contrary in this
certificate, in case any Controlling Person (as defined from time to time in
Section 910 of 15 Pennsylvania Consolidated Statutes) shall be required to
purchase any shares of Series A Preferred Stock pursuant to such Section 910,
the amount that is determined to represent the "fair value" (as that term is
used in such Section 910) of such shares shall be an amount per share equal to
the Formula Number then in effect times the aggregate amount per share that
such Controlling Person is required to pay to purchase any share of Common
Stock pursuant to such Section 910.
6. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common
LAW2:7499 -21-
<PAGE> 22
Stock are exchanged for or changed into other stock or securities, cash or any
other property, then in any such case the then outstanding shares of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to the Formula Number then in effect times the aggregate
amount of stock, securities, cash or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is
exchanged or changed.
7. NO REDEMPTION; NO SINKING FUND. (a) The shares of
Series A Preferred Stock shall not be subject to redemption by the Corporation
or at the option of any holder of Series A Preferred Stock; provided, however,
that the Corporation may purchase or otherwise acquire outstanding shares of
Series A Preferred Stock in the open market or by offer to any holder or
holders of shares of Series A Preferred Stock in accordance with the provisions
of Section 4(a)(iv) hereof.
(b) The shares of Series A Preferred Stock shall not be
subject to or entitled to the operation of a retirement or sinking fund.
8. RANKING. The Series A Preferred Stock shall rank
junior to all other series of Preferred Stock of the Corporation, unless the
Board of Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
LAW2:7499 -22-
<PAGE> 23
9. FRACTIONAL SHARES. The Series A Preferred Stock
shall be issuable upon exercise of the Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is one
one-hundredth (1/100th) of a share or any integral multiple of such fraction
which shall entitle the holder, in proportion to such holder's fractional
shares, to receive dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of holders of Series
A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the
first issuance of a share or a fraction of a share of Series A Preferred Stock,
may elect (1) to issue certificates evidencing such authorized fraction of a
share of Series A Preferred Stock or (2) to issue depository receipts
evidencing such authorized fraction of a share of Series A preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that
the holders of such depository receipts shall have all the rights, privileges
and preferences to which they are entitled as holders of the Series A Preferred
Stock.
10. REACQUIRED SHARES. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, without designation as to
LAW2:7499 -23-
<PAGE> 24
series until such shares are once more designated as part of a particular
series by the Board of Directors pursuant to the provisions of Article FIFTH of
the Restated Articles of Incorporation.
11. AMENDMENT. None of the powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Stock as provided herein or in the Restated Articles of Incorporation
shall be amended in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series A Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of at
least 80% of the outstanding shares of Series A Preferred Stock, voting as a
separate class; provided, however, that no such amendment approved by the
holders of at least 80% of the outstanding shares of Series A Preferred Stock
shall be deemed to apply to the powers, preferences, rights or privileges of
any holder of shares of Series A Preferred Stock originally issued upon
exercise of the Rights after the time of such approval without the approval of
such holder.
F.1. DESIGNATION. The shares of such series shall be designated as
"Series B Conversion Preferred Stock" (the "Series B Preferred Stock")
consisting of 8,222,500 shares.
2. RANK. The Series B Preferred Stock shall, with respect to
dividend rights and rights upon liquidation, dissolution and winding up, rank
prior to the Common Stock, par value $1.00 per share (the "Common Stock"), and
the Series A Participating
LAW2:7499 -24-
<PAGE> 25
Cumulative Preferred Stock, par value $1.00 per share (the "Series A Preferred
Stock"), of the Corporation. All equity securities of the Corporation to which
the Series B Preferred Stock ranks prior, whether with respect to dividends or
upon liquidation, dissolution, winding up or otherwise, including the Common
Stock and the Series A Preferred Stock, are collectively referred to herein as
the "Junior Securities;" all equity securities of the Corporation with which
the Series B Preferred Stock ranks on a parity are collectively referred to
herein as the "Parity Securities;" and all equity securities of the Corporation
(other than convertible debt securities) to which the Series B Preferred Stock
ranks junior are collectively referred to herein as the "Senior Securities."
The Series B Preferred Stock shall be subject to the creation of Junior
Securities, Parity Securities and Senior Securities, subject to the limitations
thereon provided for in paragraphs (6)(c) and (6)(d).
3. DIVIDENDS. (a) The holders of outstanding shares of the
Series B Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available for the payment of
dividends, cumulative preferential cash dividends accruing at the per share
rate of $1.53 per quarter and no more, payable in arrears on the first day of
each March, June, September and December, respectively (each such date being
hereinafter referred to as a "Dividend Payment Date"), commencing on September
1, 1992. If any Dividend Payment Date is not a business day (as defined in
paragraph
LAW2:7499 -25-
<PAGE> 26
(4)(h)(i)), then the Dividend Payment Date shall be on the next succeeding day
that is a business day. Each such dividend will be payable to holders of
record as they appear on the stock books of the Corporation on such record
dates, not less than 10 nor more than 90 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors. Dividends on a share of
Series B Preferred Stock shall accrue (whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared) on a daily basis
from the previous Dividend Payment Date, except that the first dividend shall
accrue from the date of issuance of such share of Series B Preferred Stock.
Accrued and unpaid dividends shall not bear interest. Dividends will cease to
accrue in respect of the Series B Preferred Stock on the Mandatory Conversion
Date (as defined in paragraph (4)(a)) or on the Settlement Date (as defined in
paragraph (4)(h)(vi)), in the event of their earlier conversion, and will cease
to accrue on the date of their earlier redemption pursuant to paragraph (4)(c)
unless the Corporation shall default in delivering the shares of Common Stock
and cash, if any, payable by the corporation upon such redemption. Dividends
(or cash amounts equal to accrued and unpaid dividends) payable on the Series B
Preferred Stock for any period shorter than a quarterly dividend period shall
be computed on the basis of a 360-day year of twelve 30-day months.
LAW2:7499 -26-
<PAGE> 27
(b) Unless full cumulative dividends, if any, accrued on
the Series B Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum set apart sufficient for such payment through the
most recent Dividend Payment Date, or the obligation of the Corporation with
respect to the payment of such dividends shall have been satisfied in full by
the distribution of shares of Common Stock as contemplated by paragraph (4)(a),
then, whether or not the Mandatory Conversion Date has occurred, (i) no full
dividend shall be declared by the Board of Directors or paid or set apart for
payment by the Corporation or other distribution declared or made on any Parity
Securities, (ii) no dividend shall be declared or paid or set aside for payment
or other distribution declared or made upon the Common Stock, the Series A
Preferred Stock or upon any other Junior Securities (other than a dividend or
distribution paid in shares of, or warrants, rights or options exercisable for
or convertible into, Common Stock, the Series A Preferred Stock or any other
Junior Securities) and (iii) no Common Stock, Series A Preferred Stock or any
other Junior Securities shall be redeemed, purchased or otherwise acquired for
any consideration, nor shall any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such series or class by
the Corporation, except by conversion into or in exchange for Junior
Securities. If any dividends are not paid or set apart in full, as aforesaid,
with respect to the Series B Preferred Stock and any Parity Securities, all
dividends declared with respect to the
LAW2:7499 -27-
<PAGE> 28
Series B Preferred Stock and any Parity Securities shall be declared pro rata
so that the amount of dividends declared per share on the Series B Preferred
Stock and such Parity Securities shall in all cases bear to each other the same
ratio that accrued dividends per share on the Series B Preferred Stock and such
Parity Securities bear to each other. Holders of the shares of the Series B
Preferred Stock shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of full cumulative dividends as provided in
paragraph (3)(a).
(c) Subject to the foregoing provisions of this paragraph
(3) and paragraph (4)(d), the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends and other distributions
on any of the Junior Securities or Parity Securities, and may redeem, purchase
or otherwise retire any Junior securities or Parity Securities, and the holders
of the shares of the Series B Preferred Stock shall not be entitled to share
therein.
(d) Any dividend payment made on shares of the Series B
Preferred Stock shall first be credited against the earliest accrued but unpaid
dividend due with respect to shares of the Series B Preferred Stock.
(e) All dividends paid with respect to shares of the
Series B Preferred Stock pursuant to this paragraph (3) shall be paid pro rata
to the holders entitled thereto.
(f) Holders of shares of the Series B Preferred Stock
shall be entitled to receive the dividends provided for in this
LAW2:7499 -28-
<PAGE> 29
paragraph (3) in preference to and in priority over any dividends upon any of
the Junior Securities.
4. REDEMPTIONS OR CONVERSIONS. (a) AUTOMATIC CONVERSION ON
MANDATORY CONVERSION DATE. Unless earlier called for redemption in accordance
with the provisions hereof, on September 1, 1995 (the "Mandatory Conversion
Date"), each outstanding share of the Series B Preferred Stock shall
automatically convert into:
(i) shares of Common Stock at the Common Equivalent Rate
(determined as provided in paragraph (4)(d)) in effect on the
Mandatory Conversion Date; and (ii) the right to receive an amount
in cash equal to all accrued and unpaid dividends on such share of
Series B Preferred Stock to and including the Mandatory Conversion
Date, whether or not declared, out of funds legally available for the
payment of dividends (and dividends shall cease to accrue on such
share as of the Mandatory Conversion Date).
The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock and/or its issued Common Stock held in its treasury for
the purpose of effecting any conversion of the Series B Preferred Stock
pursuant to this paragraph (4)(a) ("Mandatory Conversion"), the full number of
shares of Common Stock then deliverable upon any such conversion of all
outstanding shares of Series B Preferred Stock.
LAW2:7499 -29-
<PAGE> 30
The conversion of each share of Series B Preferred Stock into
the right to receive an amount in cash equal to all accrued and unpaid
dividends on such share of Series B Preferred Stock (the "Accrued Dividend
Amount") will occur upon Mandatory Conversion whether or not the Corporation
has earnings and whether or not such dividends are declared; PROVIDED, HOWEVER,
that to the extent that funds are not legally available for the payment of the
Accrued Dividend Amount upon Mandatory Conversion, the holders of Series B
Preferred Stock shall be entitled to receive, and the corporation shall
distribute to such holders, on the fifth business day next succeeding the
Mandatory Conversion Date, in lieu of payment in cash of the Accrued Dividend
Amount, a number of shares of Common Stock equal to 110% of the Accrued
Dividend Amount divided by the Current Market Price (as defined in paragraph
(4)(d)(v)) of the Common Stock determined as of the second Trading Date (as
defined in paragraph (4)(h)(vii)) prior to the Mandatory Conversion Date,
except that (i) no such distribution shall be made by the Corporation if, prior
to the date on which the Corporation is required to make such distribution, the
Corporation shall have made payment in full of the Accrued Dividend Amount in
cash and (ii) if the Corporation does not have a sufficient number of
authorized but unissued shares of Common Stock and shares of Common Stock held
in its treasury not reserved for other corporate purposes to make such
distribution in full, the Corporation shall make such distribution to the
fullest extent possible, pro rata to the
LAW2:7499 -30-
<PAGE> 31
holders of Series B Preferred Stock entitled thereto (as nearly as may be
practicable without creating fractional shares), and the holders of Series B
Preferred Stock shall thereafter have the right to receive, and the Corporation
shall pay to such holders as promptly as possible, the remainder in cash or
shares of Common Stock or a combination thereof, on the same terms set forth in
this paragraph 4(a) for the payment in cash of amounts equal to accrued and
unpaid dividends and for the distribution of shares of Common Stock in lieu of
payment of such amounts in cash.
(b) AUTOMATIC CONVERSION UPON THE OCCURRENCE OF CERTAIN
EVENTS. Either:
(i) immediately prior to the effectiveness of an
amendment of the articles, merger or consolidation, share exchange,
division or conversion of the Corporation that results in the
conversion or exchange of Common Stock into, or the right of the
holders thereof to receive, in lieu of or in addition to their shares
of Common Stock, other securities or other property (whether of the
Corporation or any other entity) (any amendment, merger,
consolidation, share exchange, division or conversion is referred to
herein as a "Fundamental Transaction"), or
(ii) immediately prior to the close of business on the
business day immediately preceding the Distribution Date (as defined
in paragraph (4)(h)(iv)) (the occurrence of the
LAW2:7499 -31-
<PAGE> 32
Distribution Date is referred to herein as the "Distribution Date
Event"),
each outstanding share of the Series B Preferred Stock shall
automatically convert into:
(A) shares of Common Stock at the Common Equivalent Rate
in effect immediately prior to the effectiveness of such Fundamental
Transaction or immediately prior to the close of business on the
business day immediately preceding such Distribution Date; plus
(B) the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of the Series B Preferred
Stock to and including the Settlement Date (as defined in paragraph
(4)(h)(vi)), whether or not declared, out of funds legally available
for the payment of dividends (and dividends shall cease to accrue on
such share as of the Settlement Date); plus
(C) the right to receive an amount of cash initially
equal to $9.72, declining by $0.008380 on each day following the date
of issuance of the Series B Preferred Stock (computed on the basis of
a 360-day year of twelve 30-day months) to $.52 on July 1, 1995, and
equal to zero thereafter, in each case determined with reference to
the Settlement Date, out of funds legally available therefor, unless
sooner redeemed.
At the option of the Corporation, it may deliver on the
Settlement Date in lieu of some or all of the cash consideration
LAW2:7499 -32-
<PAGE> 33
described in clauses (B) and (C) above, pro rata to the holders of Series B
Preferred Stock entitled thereto, a number of shares of Common Stock to be
determined by dividing the amount of cash consideration that the Corporation
has elected to pay in Common Stock by the Current Market Price (as defined in
paragraph (4)(d)(v)) of the Common Stock determined, in the case of a
Fundamental Transaction, as of the second Trading Date (as defined in paragraph
(4)(h)(vii)) immediately preceding the Notice Date (as defined in paragraph
(4)(h)(v)) and, in the case of a Distribution Date Event, as of the second
Trading Date immediately preceding the Distribution Date.
(c) RIGHT TO CALL FOR REDEMPTION. At any time and from
time to time prior to the Mandatory Conversion Date, the Corporation shall have
the right to call, in whole or in part, the outstanding shares of the Series B
Preferred Stock for redemption. Upon the redemption date, the Corporation
shall deliver to the holders thereof in exchange for each such share called for
redemption, (i) a number of shares of Common Stock equal to the Call Price (as
defined in paragraph (4)(h)(ii)) in effect on the redemption date divided by
the Current Market Price of the Common Stock determined as of the second
Trading Date immediately preceding the Notice Date and (ii) an amount in cash
equal to all accrued and unpaid dividends on such share of Series B Preferred
Stock to and including the redemption date (and dividends shall cease to accrue
on such share as of such date), whether or not declared, out of funds legally
available for the
LAW2:7499 -33-
<PAGE> 34
payment of dividends. If fewer than all the outstanding shares of Series B
Preferred Stock are to be called for redemption, shares to be redeemed shall be
selected by the Corporation from outstanding shares of Series B Preferred Stock
not previously redeemed by lot or pro rata (as nearly as may be practicable
without creating fractional shares) or by any other method determined by the
Board of Directors of the Corporation in its sole discretion to be equitable.
(d) COMMON EQUIVALENT RATE ADJUSTMENTS. The Common
Equivalent Rate to be used to determine the number of shares of Common Stock to
be delivered on the conversion of the Series B Preferred Stock into shares of
Common Stock pursuant to paragraphs (4)(a) or (b) shall be initially four
shares of Common Stock for each share of Series B Preferred Stock; PROVIDED,
HOWEVER, that such Common Equivalent Rate shall be subject to adjustment from
time to time as provided below in this paragraph (4)(d). All adjustments to
the Common Equivalent Rate shall be calculated to the nearest 1/100th of a
share of Common Stock. Such rate in effect at any time is herein called the
"Common Equivalent Rate."
(i) If the Corporation shall:
(A) pay a dividend or make a distribution with
respect to Common Stock in shares of
Common Stock,
(B) subdivide or split its outstanding shares of
Common Stock into a greater number of shares,
LAW2:7499 -34-
<PAGE> 35
(C) combine its outstanding shares of Common
Stock into a smaller number of shares, or
(D) issue by reclassification of its shares of
Common Stock any shares of Common Stock of
the Corporation other than in a Fundamental
Transaction described in paragraph (4)(b)(i),
then, in any such event, the Common Equivalent Rate in effect immediately prior
thereto shall be adjusted so that the holder of a share of the Series B
Preferred Stock shall be entitled to receive on the conversion of such share of
the Series B Preferred Stock, the number of shares of Common Stock which such
holder would have owned or been entitled to receive after the happening of any
of the events described above had such share of the Series B Preferred Stock
been converted at the Common Equivalent Rate in effect immediately prior to
such event or any record date with respect thereto. Such adjustment shall
become effective at the opening of business on the business day next following
the record date for determination of stockholders entitled to receive such
dividend or distribution in the case of a dividend or distribution, and shall
become effective immediately after the effective date in case of a subdivision,
split, combination or reclassification; and any shares of Common Stock issuable
in payment of a dividend shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend for purposes of
calculating the number of
LAW2:7499 -35-
<PAGE> 36
outstanding shares of Common Stock under clauses (ii) and (iii) below. Such
adjustment shall be made successively.
(ii) If the Corporation shall, after the date hereof, issue rights
or warrants to all holders of its Common Stock entitling them (for a period not
exceeding 45 days from the date of such issuance) to subscribe for or purchase
shares of Common Stock at a price per share less than the Current Market Price
of the Common Stock (determined pursuant to paragraph (4)(d)(v)) on the record
date for the determination of stockholders entitled to receive such rights or
warrants, then in each case the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect immediately prior to the date
of issuance of such rights or warrants 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, immediately prior to such issuance, plus
the number of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, 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, immediately prior to such issuance, plus
the number of shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at such Current Market Price
(determined by multiplying such total number of shares by the exercise price of
such rights or warrants and dividing the
LAW2:7499 -36-
<PAGE> 37
product so obtained by such Current Market Price). Such adjustment shall
become effective at the opening of business on the business day next following
the record date for the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Common
Equivalent Rate shall be readjusted to the Common Equivalent Rate which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered. Such adjustment shall be made successively.
(iii) If the Corporation shall pay a dividend or make a distribution
to all holders of its Common Stock of evidence of its indebtedness or other
assets (including shares of capital stock of the Corporation (other than Common
Stock) but excluding any distributions and dividends referred to in clause (i)
above or any cash dividends), or shall issue to all holders of its Common Stock
rights or warrants to subscribe for or purchase any of its securities (other
than those referred to in clause (ii) above), then in each such case, the
Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent
Rate in effect on the record date mentioned below by a fraction, of which the
numerator shall be the Current Market Price of the Common Stock (determined
pursuant to paragraph (4)(d)(v)) on the record date for the determination of
stockholders entitled to receive such
LAW2:7499 -37-
<PAGE> 38
dividend or distribution, and of which the denominator shall be such Current
Market Price per share of Common Stock less the fair value (as determined by
the Board of Directors of the Corporation, whose determination shall be
conclusive) as of such record date of the portion of the assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants,
applicable to one share of Common Stock. Such adjustment shall become
effective on the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
dividend or distribution.
(iv) Anything in this paragraph (4) notwithstanding, the
Corporation shall be entitled to make such upward adjustments in the Common
Equivalent Rate, in addition to those required by this paragraph (4), as the
corporation in its sole discretion may determine to be advisable, in order that
any stock dividends, subdivision of shares, distributions of rights to purchase
stock or securities, or distributions of securities convertible into or
exchangeable for stock (or any transaction which could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) hereafter made by the Corporation to its stockholders shall
not be taxable. If the Corporation determines that an adjustment to the Common
Equivalent Rate should be made, an adjustment shall be made effective as of
such date as is determined by the Board of Directors of the Corporation. The
determination of the Board of
LAW2:7499 -38-
<PAGE> 39
Directors of the Corporation as to whether an adjustment to the Common
Equivalent Rate should be made pursuant to the foregoing provisions of this
paragraph (4)(d)(iv), and, if so, as to what adjustment should be made and
when, shall be conclusive, final and binding on the Corporation and all
stockholders of the Corporation.
(v) As used in this paragraph (4), the "Current Market Price" of
the Common Stock on any date shall be the average of the daily Closing Prices
(as defined in paragraph (4)(h)(iii)) for the five consecutive Trading Dates
ending on and including the date of determination of the Current Market Price;
provided, however, that if the Closing Price for the Trading Date next
following such five-day period (the "next-day closing price") is less than 95%
of such average, then the Current Market Price per share of Common Stock on
such date of determination shall be the next-day closing price; and provided,
further, that, if any event that results in an adjustment of the Common
Equivalent Rate occurs during such five-day period or, for the purposes of
calculating the Current Market Price in connection with any redemption or
conversion of Series B Preferred Stock or any determination of an amount in
cash payable in lieu of a fraction of a share of Common Stock, if any event
that results in an adjustment of the Common Equivalent Rate occurs during the
period beginning on the first day of such five-day period and ending on the
applicable redemption or conversion date, the Current Market
LAW2:7499 -39-
<PAGE> 40
Price as determined pursuant to the foregoing will be appropriately adjusted to
reflect the occurrence of such event.
(vi) In any case in which paragraph (4)(d) shall require that an
adjustment as a result of any event become effective at the opening of business
on the business day next following a record date and the date fixed for
conversion pursuant to paragraphs (4)(a) and (b) occurs after such record date,
but before the occurrence of such event the Corporation may in its sole
discretion elect to defer the following until after the occurrence of such
event: (A) issuing to the holder of any converted shares of the Series B
Preferred Stock the additional shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of a fractional share of Common Stock
pursuant to paragraph (4)(f).
(e) NOTICE OF ADJUSTMENTS. Whenever the Common
Equivalent Rate is adjusted as herein provided, the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate in
accordance with this paragraph (4) and prepare a certificate signed by the
Chief Financial Officer, any Vice President, the Treasurer or Controller of the
Corporation setting forth the adjusted Common Equivalent Rate, the method of
calculation thereof in reasonable detail and the facts requiring such
adjustment and upon which such adjustment is based, which certificate shall be
conclusive, final and binding evidence of
LAW2:7499 -40-
<PAGE> 41
the correctness of the adjustment, and file such certificate forthwith with the
transfer agent or agents for the Series B Preferred Stock and the Common Stock;
and
(ii) mail a notice stating that the Common Equivalent Rate has been
adjusted, the facts requiring such adjustment and the facts upon which such
adjustment is based and setting forth the adjusted Common Equivalent Rate to
the holders of record of the outstanding shares of the Series B Preferred Stock
at or prior to the time the corporation mails an interim statement to its
stockholders covering the fiscal quarter during which the facts requiring such
adjustment occurred, but in any event within 45 days of the end of such fiscal
quarter.
(f) NO FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon the
redemption or conversion of any shares of Series B Preferred Stock. Instead of
any fractional interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of a share of Series B Preferred Stock, the
Corporation shall pay to the holder of such share an amount in cash (computed
to the nearest cent) equal to the same fraction of the Current Market Price of
the Common Stock determined as of the second Trading Date immediately preceding
(i) the Mandatory Conversion Date, in the case of a Mandatory Conversion, or
(ii) the relevant Notice Date, in any other case. If more than one share shall
be surrendered for conversion at one time by the same holder, the number of
full shares of Common Stock issuable upon
LAW2:7499 -41-
<PAGE> 42
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock so surrendered.
(g) CANCELLATION. Shares of Series B Preferred Stock
that have been issued and reacquired in any manner, including shares purchased,
exchanged, redeemed or converted, shall not be reissued as part of the Series B
Preferred Stock and shall (upon compliance with any applicable provisions of
the laws of the Commonwealth of Pennsylvania) have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as to series and
may be redesignated and reissued as part of any series of the Preferred Stock.
(h) DEFINITIONS. As used in this paragraph (4):
(i) the term "business day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of New
York or the Commonwealth of Pennsylvania are authorized or obligated by law or
executive order to close or are closed because of a banking moratorium or
otherwise;
(ii) the term "Call Price" shall mean the per share price (payable
in shares of Common Stock) at which the Corporation may redeem shares of Series
B Preferred Stock, which shall be initially equal to $104.92, declining by
$0.008380 on each day following the date of issuance of the Series B Preferred
Stock (computed on the basis of a 360-day year of twelve 30-day months) to
$95.72 on July 1, 1995 and equal to $95.20 thereafter, if not sooner redeemed;
LAW2:7499 -42-
<PAGE> 43
(iii) the term "Closing Price" on any day shall mean the closing
sale price regular way on such day or, in case no such sale takes place on such
day, the reported closing bid price regular way, in each case on the New York
Stock Exchange or, if the Common Stock is not listed or admitted to trading on
such Exchange, then on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of Common Stock has
been traded during the five consecutive Trading Dates ending on and including
the date of determination of the Current Market Price), or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing bid price of the Common Stock on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or a similarly generally accepted reporting service, or if not so
available as determined in good faith by the Board of Directors, on the basis
of such relevant factors as it in good faith considers, in the reasonable
judgment of the Board of Directors, appropriate;
(iv) the term "Distribution Date" shall have the meaning set forth
in the Rights Agreement dated December 7, 1988, between the Company and Mellon
Bank, N.A., as Rights Agent, as amended through the date hereof and as the same
may be further amended, modified, restated or supplemented (the "Rights
Agreement");
LAW2:7499 -43-
<PAGE> 44
(v) the term "Notice Date" with respect to any notice given by the
Corporation in connection with a redemption or conversion of any of the Series
B Preferred Stock shall be the commencement of the mailing of such notice to
the holders of the Series B Preferred Stock in accordance with paragraph
(4)(i);
(vi) the term "Settlement Date" shall mean the following: with
respect to a Distribution Date Event, the business day immediately preceding
the Distribution Date, and with respect to a Fundamental Transaction, the
business day immediately prior to the effective date of the Fundamental
Transaction;
(vii) the term "Trading Date" shall mean a date on which the New
York Stock Exchange (or any successor thereto) is open for the transaction of
business.
(i) NOTICE OF REDEMPTION OR CONVERSION. The Corporation
will provide notice of any redemption or conversion (including any potential
conversion upon the effectiveness of a Fundamental Transaction but excluding
any conversion pursuant to paragraph (4)(a)) of shares of Series B Preferred
Stock to holders of record of the Series B Preferred Stock to be called or
converted not less than 30 nor more than 60 days prior to the date fixed for
such redemption or conversion, as the case may be; provided, however, that with
respect to conversion upon the occurrence of a Distribution Date or, if the
timing of the effectiveness of a Fundamental Transaction makes it impracticable
to provide at least 30 days' notice, the Corporation shall provide such notice
as soon as practicable prior to such
LAW2:7499 -44-
<PAGE> 45
occurrence or effectiveness. Such notice shall be provided by mailing notice
of such redemption or conversion first class postage prepaid, to each holder of
record of the Series B Preferred Stock to be redeemed or converted, at such
holder's address as it appears on the stock register of the Corporation;
provided, however, that no failure to give such notice nor any defect therein
shall affect the validity of the proceeding for the redemption or conversion of
any shares of Series B Preferred Stock to be redeemed or converted. Each such
notice shall state, as appropriate, the following:
(i) the redemption or conversion date;
(ii) that all outstanding shares of Series B Preferred Stock are
to be redeemed or converted or, in the case of a call for redemption pursuant
to paragraph (4)(c) of fewer than all outstanding shares of Series B Preferred
Stock pursuant to paragraph (4)(c), the number of such shares held by such
holder to be redeemed;
(iii) in the case of a call for redemption pursuant to paragraph
(4)(c), the Call Price, the number of shares of Common Stock deliverable upon
redemption of each share of Series B Preferred Stock to be redeemed and the
Current Market Price used to calculate such number of shares of Common Stock
subject to any subsequent adjustments pursuant to paragraph (4)(d);
(iv) whether the Corporation is delivering shares of Common Stock
in lieu of cash (in the case of a conversion pursuant to paragraphs (4)(a) or
(4)(b)), the Current Market
LAW2:7499 -45-
<PAGE> 46
Price to be used to calculate the number of such shares of Common Stock and, if
the Corporation is delivering shares in respect of less than all the cash that
would otherwise be deliverable by the Corporation upon such conversion, the
portion of such cash in lieu of which Common Stock will be delivered;
(v) the place or places where certificates for such shares are to
be surrendered for redemption or conversion; and
(vi) that dividends on the shares of Series B Preferred Stock to
be redeemed or converted will cease to accrue on such redemption or conversion
date or, in the case of a conversion pursuant to paragraph (4)(b), on the
related Settlement Date, unless, in the case of a redemption pursuant to
paragraph (4)(c), the Corporation shall default in delivering the shares of
Common Stock and cash, if any, payable by the Corporation at the time and place
specified in such notice.
If, after notice is given in connection with a potential
Distribution Date Event or Fundamental Transaction, the Rights are redeemed or
expire or the event which gave rise to the giving of such notice does not
occur, as a result of which the potential Fundamental Transaction or
Distribution Date Event does not occur, a notice to such effect shall promptly
be given to the holders of Series B Preferred Stock.
(j) DEPOSIT OF SHARES AND FUNDS. The Corporation's
obligation to deliver shares of Common Stock and provide funds in accordance
with this paragraph (4) shall be deemed fulfilled if, on or before a redemption
or conversion date or Settlement Date,
LAW2:7499 -46-
<PAGE> 47
the Corporation shall deposit, with a bank or trust company, or an affiliate of
a bank or trust company, having an office or agency in New York City and having
a capital and surplus of at least $50,000,000, such number of shares of Common
Stock as are required to be delivered by the Corporation pursuant to this
paragraph (4) upon the occurrence of the related redemption or conversion
(including any payment of cash in lieu of the issuance of fractional share
amounts pursuant to paragraph (4)(f)), together with funds (or, in the case of
a conversion pursuant to paragraphs (4)(a) or (4)(b), shares of Common Stock
and/or funds) sufficient to pay all accrued and unpaid dividends on the shares
to be redeemed or converted as required by this paragraph (4), in trust for the
account of the holders of the shares to be redeemed or converted (and so as to
be and continue to be available thereto), with irrevocable instructions and
authority to such bank or trust company that such shares and funds be delivered
upon redemption or conversion of the shares of Series B Preferred Stock so
called for redemption or converted. Any interest accrued on such funds shall
be paid to the Corporation from time to time. Any shares of Common Stock or
funds so deposited and unclaimed at the end of two years from such redemption
or conversion date shall be repaid and released to the Corporation, after which
the holder or holders of such shares of Series B Preferred Stock so called for
redemption or converted shall look only to the Corporation for delivery of such
shares of Common Stock or funds.
LAW2:7499 -47-
<PAGE> 48
(k) SURRENDER OF CERTIFICATES: STATUS. Each holder of
shares of Series B Preferred Stock to be redeemed or converted shall surrender
the certificates evidencing such shares (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and the
notice shall so state) to the Corporation at the place designated in the notice
of such redemption or conversion and shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and to receive any funds payable
pursuant to this paragraph (4) following such surrender and following the date
of such redemption or conversion. In case fewer than all the shares
represented by any such surrendered certificate are called for redemption, a
new certificate shall be issued at the expense of the Corporation representing
the unredeemed shares. If such notice of redemption or conversion shall have
been given, and if on the date fixed for redemption or conversion shares of
Common Stock and funds necessary for the redemption or conversion shall have
been either set aside by the Corporation separate and apart from its other
funds or assets in trust for the account of the holders of the shares to be
redeemed or converted (and so as to be and continue to be available therefor)
or deposited with a bank or trust company or affiliate thereof as provided in
paragraph (4)(j), or the circumstances described in clause (ii) to the proviso
appearing in the third full paragraph of paragraph (4)(a) are in effect, then,
notwithstanding that the certificates evidencing any shares of Series B
Preferred Stock so called for
LAW2:7499 -48-
<PAGE> 49
redemption or subject to conversion shall not have been surrendered, the shares
represented thereby so called for redemption or subject to conversion shall be
deemed no longer outstanding, dividends with respect to the shares so called
for redemption or subject to conversion shall cease to accrue after the date
fixed for redemption or conversion or, in the case of a conversion pursuant to
paragraph (4)(b), on the related Settlement Date, and all rights with respect
to the shares so called for redemption or subject to conversion shall forthwith
after such date cease and terminate, except for the right of the holders to
receive the shares of Common Stock and funds, if any, payable pursuant to this
paragraph (4) without interest upon surrender of their certificates therefor.
(l) DIVIDEND PAYMENTS,. The holders of shares of Series
B Preferred Stock at the close of business on a dividend payment record date
shall be entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the call or conversion
thereof, except that holders of shares called for redemption or to be converted
on a date occurring between such record date and the Dividend Payment Date
shall not be entitled to receive such dividend on such Dividend Payment Date
but instead will receive accrued and unpaid dividends to such date or the
related Settlement Date, as the case may be.
(m) PAYMENT OF TAXES. The Corporation will pay any and
all documentary, stamp or similar issue or transfer taxes
LAW2:7499 -49-
<PAGE> 50
payable in respect of the issue or delivery of shares of Common Stock on the
redemption or conversion of shares of Series B Preferred Stock pursuant to this
paragraph (4); provided, however, that the Corporation shall not be required to
pay any tax which may be payable in respect of any registration of transfer
involved in the issue or delivery of shares of Common Stock in a name other
than that of the registered holder of Series B Preferred Stock redeemed or
converted or to be redeemed or converted, 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.
(5) LIQUIDATION PREFERENCE. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of Series B Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after payment or provision for
payment of any Senior Securities, an amount per share of Series B Preferred
Stock in cash equal to the sum of (i) $68 plus (ii) all accrued and unpaid
dividends thereon to the date of liquidation, dissolution or winding up, before
any payment shall be made or any assets distributed to the holders of any of
the Junior Securities. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the holders of outstanding
shares of the Series B Preferred Stock and any Parity
LAW2:7499 -50-
<PAGE> 51
Securities, then the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount which would be payable on
such distribution if the amounts to which the holders of outstanding shares of
Series B Preferred Stock and the holders of outstanding shares of such Parity
Securities are entitled were paid in full. Except as provided in this
paragraph (5)(a), holders of Series B Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation.
(b) For the purposes of this paragraph (5), none of the
following shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation: (i) the voluntary sale,
conveyance, lease, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or assets
of the Corporation; (ii) the consolidation or merger of the Corporation with or
into one or more other corporations or other associations; (iii) the
consolidation or merger of one or more corporations or other associations with
or into the Corporation; (iv) the participation by the Corporation in a share
exchange; (v) the division of the Corporation pursuant to 15 Pa.C.S. Subch.
19D; (vi) the conversion of the Corporation pursuant to 15 Pa.C.S. Subch. 19E.
(6) VOTING RIGHTS. (a) The holders of record of shares of
Series B Preferred Stock shall not be entitled to a voting
LAW2:7499 -51-
<PAGE> 52
rights except as hereinafter provided in this paragraph (6) or as otherwise
provided by law.
(b) In the event that dividends payable to the holders of
Series B Preferred Stock are in arrears and unpaid for the equivalent of six
quarterly periods, the Board of Directors will be increased by two directors
and the holders of Series B Preferred Stock, together with the holders of all
other outstanding series of the Preferred Stock in respect of which such a
default in payment of dividends as described hereinabove exists and is entitled
to vote thereon, voting as a single class without regard to series, will be
entitled to elect two directors of the expanded Board of Directors. Such
entitlement shall continue until such time as all dividends in arrears on all
of the Series B Preferred Stock at the time outstanding have been paid or
declared and set aside for payment, whereupon such voting rights of the holders
of the Series B Preferred Stock shall cease (and the respective terms of the
two additional directors shall thereupon expire and the number of directors
constituting the full board be decreased by two) subject to being again revived
from time to time upon the reoccurrence of the conditions described in this
paragraph (6)(b) as giving rise thereto.
At any time when the right of holders of Series B
Preferred Stock to elect two additional directors shall have so vested, the
Corporation shall, upon the written request of the holders of record of not
less than 10% of the Series B Preferred Stock then outstanding (or 10% of all
of the shares of Preferred
LAW2:7499 -52-
<PAGE> 53
Stock having the right to vote for such directors in case holders of shares of
other series of Preferred Stock shall also have the right to elect directors in
such circumstances) call a special meeting of holders of the Series B Preferred
Stock (and other series of Preferred Stock, if applicable) for the election of
directors. In the case of a written request, the special meeting shall be held
within 60 days after the delivery of the request, upon the notice provided by
law and in the bylaws of the Corporation; except that the Corporation shall not
be required to call such a special meeting if the request is received less than
120 days before the date fixed for the next ensuing annual meeting of
stockholders of the Corporation.
Whenever the number of directors of the Corporation
shall have been increased by two as provided in this paragraph (6)(b), the
number as so increased may thereafter be further increased or decreased in such
manner as may be permitted by the bylaws and without the vote of the holders of
Series B Preferred Stock. No such action shall impair the right of the holders
of Series B Preferred Stock to elect and to be represented by two directors as
provided in this paragraph (6)(b).
The two directors elected as provided in this
paragraph (6) (b) shall serve until the next annual meeting of stockholders of
the Corporation and until their respective successors shall be elected and
qualified or the earlier expiration of their terms as provided in this
paragraph (6)(b).
LAW2:7499 -53-
<PAGE> 54
No such director may be removed without the vote of holders of a majority of
the shares of Series B Preferred Stock (or holders of a majority of shares of
Preferred Stock having the right to vote in the election of such director in
case holders of shares of other series of Preferred Stock shall also have the
right to elect such director). If, prior to the expiration of the term of any
such director, a vacancy in the office of such director shall occur, such
vacancy shall, until the expiration of such term, in each case be filled by the
remaining director elected as provided in this paragraph (6)(b) or, if none
remains in office, by vote of the holders of record of a majority of the
outstanding shares of Series B Preferred Stock (or holders of a majority of
shares of Preferred Stock who are then entitled to participate in the election
of such directors in case holders of shares of other series of Preferred Stock
shall also have the right to elect such director).
(c) So long as any shares of the Series B Preferred Stock
are outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series B Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Common Stock and any necessary funds have been
deposited in trust for such redemption or conversion pursuant to paragraph
(4)(j)), the Corporation shall not, without the affirmative vote of the holders
of at least 66-2/3% of the shares of Series B Preferred Stock and any other
series of Preferred Stock entitled to vote thereon at the time outstanding,
voting together as one class
LAW2:7499 -54-
<PAGE> 55
without regard to series, in person or by proxy, or by resolution adopted at an
annual or special meeting called for the purpose, amend pursuant to the
provisions of 15 Pa.C.S., Subchapter 19B or in the context of any other type of
Fundamental Transaction any of the provisions of the Corporation's Articles of
Incorporation which would either (i) authorize any new class of Senior
Securities or (ii) alter or change the rights, preferences or limitations of
the Series B Preferred Stock so as to affect such rights, preferences or
limitations in any material respect prejudicial to the holders of the Series B
Preferred Stock.
(d) So long as any shares of the Series B Preferred Stock
are outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series B Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Common Stock and any necessary funds have been
deposited in trust for such redemption or conversion pursuant to paragraph
(4)(j)), the Corporation shall not, without the affirmative vote of the holders
of at least a majority of the shares of Series B Preferred Stock and any other
series of Preferred Stock entitled to vote thereon at the time outstanding
voting or consenting, as the case may be, voting together as one class without
regard to series, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting called for the purpose,
amend pursuant to the provisions of 15 Pa.C.S., Subchapter 19B or in the
context of any other type of Fundamental Transactions any of the provisions of
the Corporation's Articles
LAW2:7499 -55-
<PAGE> 56
of Incorporation which would either (i) increase the total number of authorized
shares of Preferred Stock or (ii) authorize or create any class of Parity
Securities.
(7) INCREASE IN SHARES. The number of shares of Series B
Preferred Stock may, to the extent of the Corporation's authorized and unissued
Preferred Stock, be increased by further resolution duly adopted by the Board
of Directors and the filing of a statement with respect to shares with the
Department of State of the Commonwealth of Pennsylvania.
(8) LIMITATIONS. Except as may otherwise be required by
law, the shares of Series B Preferred Stock shall not have any powers,
preferences or relative, participating, optional or other special rights other
than those specifically set forth in this resolution (as such resolution may be
amended from time to time) or otherwise in the Articles of Incorporation of the
Corporation.
G.1. DESIGNATION. The shares of such series shall be
designated as "Series C Conversion Preferred Stock" (the "Series C Preferred
Stock") consisting of 3,795,000 shares.
2. RANK. The Series C Preferred Stock shall, with
respect to dividend rights and rights upon liquidation, dissolution and winding
up, rank on a parity with the Series B Conversion Preferred Stock, par value
$1.00 per share (the "Series B Preferred Stock"), of the Corporation and prior
to the Common Stock, par value $1.00 per share (the "Common Stock"), and the
Series A Participating Cumulative Preferred Stock, par value $1.00 per share
(the "Series A Preferred Stock"), of the
LAW2:7499 -56-
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Corporation. All equity securities of the Corporation to which the Series C
Preferred Stock ranks prior, whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise, including the Common Stock
and the Series A Preferred Stock, are collectively referred to herein as the
"Junior Securities"; all equity securities of the Corporation with which the
Series C Preferred Stock ranks on a parity, including the Series B Preferred
Stock, are collectively referred to herein as the "Parity Securities"; and all
equity securities of the Corporation (other than convertible debt securities)
to which the Series C Preferred Stock ranks junior are collectively referred to
herein as the "Senior Securities." The Series C Preferred Stock shall be
subject to the creation of Junior Securities, Parity Securities and Senior
Securities, subject to the limitations thereon provided for in paragraphs
(6)(c) and (6)(d).
3. DIVIDENDS. (a) The holders of outstanding shares of
the Series C Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative preferential cash dividends accruing at the
per share rate of $3.25 per quarter and no more, payable in arrears on the
first day of each March, June, September and December, respectively (each such
date being hereinafter referred to as a "Dividend Payment Date"), commencing on
June 1, 1994. If any Dividend Payment Date is not a business day (as defined
in paragraph (4)(h)(i)), then the Dividend Payment Date shall be on
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the next succeeding day that is a business day. Each such dividend will be
payable to holders of record as they appear on the stock books of the
Corporation on such record dates, not less than 10 nor more than 90 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors, except that no such record date shall be declared for the final
dividend payable on June 1, 1997 and holders of shares of Series C Preferred
Stock will receive such final dividend only upon surrender of their share
certificates. Dividends on a share of Series C Preferred Stock shall accrue
(whether or not the Corporation has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared) on a daily basis from the previous Dividend Payment
Date, except that the first dividend shall accrue from the date of issuance of
such share of Series C Preferred Stock. Accrued and unpaid dividends shall not
bear interest. Dividends will cease to accrue in respect of the Series C
Preferred Stock on the Mandatory Conversion Date (as defined in paragraph
(4)(a)) or on the Settlement Date (as defined in paragraph (4)(h)(v)), in the
event of their earlier conversion pursuant to paragraph (4)(n), upon the
effective date of such conversion, and will cease to accrue on the date of
their earlier redemption pursuant to paragraph (4)(c) unless the Corporation
shall default in delivering the shares of Common Stock and cash, if any,
payable by the Corporation upon such redemption. Dividends (or cash amounts
equal to accrued and
LAW2:7499 -58-
<PAGE> 59
unpaid dividends) payable on the Series C Preferred Stock for any period
shorter than a quarterly dividend period shall be computed on the basis of a
360-day year of twelve 30-day months and, for purposes of calculating the
accrual of dividends, dividends will accrue to, but not including, the date
fixed for payment.
(b) Unless full cumulative dividends, if any,
accrued on the Series C Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum set apart sufficient for such payment
through the most recent Dividend Payment Date (or the obligations of the
Corporation with respect to the payment of such dividends are satisfied as
contemplated by paragraphs (4)(a), (b) or (c)), then, whether or not the
Mandatory Conversion Date has occurred, (i) no full cash dividend shall be
declared by the Board of Directors or paid or set apart for payment by the
Corporation or other distribution declared or made on any Parity Securities,
(ii) no dividend shall be declared or paid or set aside for payment or other
distribution declared or made upon the Common Stock, the Series A Preferred
Stock or upon any other Junior Securities (other than a dividend or
distribution paid in shares of, or warrants, rights or options exercisable for
or convertible into, Common Stock, the Series A Preferred Stock or any other
Junior Securities) and (iii) no Common Stock, Series A Preferred Stock or any
other Junior Securities shall be redeemed, purchased or otherwise acquired for
any consideration, nor shall any moneys be paid to or made available for a
sinking fund for the redemption of any
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<PAGE> 60
shares of any such series or class by the Corporation, except by conversion
into or in exchange for Junior Securities. If any dividends are not paid or
set apart in full, as aforesaid, with respect to the Series C Preferred Stock
and any Parity Securities, all dividends declared with respect to the Series C
Preferred Stock and any Parity Securities shall be declared pro rata so that
the amount of dividends declared per share on the Series C Preferred Stock and
such Parity Securities shall in all cases bear to each other the same ratio
that accrued dividends per share on the Series C Preferred Stock and such
Parity Securities bear to each other. Holders of the shares of the Series C
Preferred Stock shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of full cumulative dividends as provided in
paragraph (3)(a).
(c) Subject to the foregoing provisions of this
paragraph (3) and paragraph (4)(d), the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends and other distributions
on any of the Junior Securities or Parity Securities, and may redeem, purchase
or otherwise retire any Junior Securities or Parity Securities, and the holders
of the shares of the Series C Preferred Stock shall not be entitled to share
therein.
(d) Any dividend payment made on shares of the
Series C Preferred Stock shall first be credited against the earliest accrued
but unpaid dividend due with respect to shares of the Series C Preferred Stock.
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<PAGE> 61
(e) All dividends paid with respect to shares of
the Series C Preferred Stock pursuant to this paragraph (3) shall be paid pro
rata to the holders entitled thereto.
(f) Holders of shares of the Series C Preferred
Stock shall be entitled to receive the dividends provided for in this paragraph
(3) in preference to and in priority over any dividends upon any of the Junior
Securities.
4. REDEMPTIONS OR CONVERSIONS. (a) AUTOMATIC
CONVERSION ON MANDATORY CONVERSION DATE. Unless earlier called for redemption
by the Corporation or converted in accordance with the provisions hereof, on
June 1, 1997 (the "Mandatory Conversion Date"), each outstanding share of the
Series C Preferred Stock shall automatically convert into:
(i) shares of Common Stock at the Common Equivalent Rate
(determined as provided in paragraph (4)(d)) in effect on the
Mandatory Conversion Date; and
(ii) the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of Series C Preferred Stock
to the Mandatory Conversion Date, whether or not declared, out of
funds legally available for the payment of dividends (and dividends
shall cease to accrue on such share as of the Mandatory Conversion
Date).
The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock and/or its Common Stock held in its treasury for the
purpose of effecting any conversion
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<PAGE> 62
of the Series C Preferred Stock, either pursuant to this paragraph (4)(a)
("Mandatory Conversion") or pursuant to paragraphs (4)(b), (c) or (n) the full
number of shares of Common Stock then deliverable upon any conversion of all
outstanding shares of Series C Preferred Stock.
The right to receive an amount in cash equal to all accrued
and unpaid dividends on such shares of Series C Preferred Stock (the "Accrued
Dividend Amount") will occur upon Mandatory Conversion whether or not the
Corporation has earnings and whether or not such dividends are declared;
PROVIDED, HOWEVER, that to the extent that funds are not legally available for
the payment of the Accrued Dividend Amount upon Mandatory Conversion, the
holders of Series C Preferred Stock shall be entitled to receive, and the
Corporation shall distribute to such holders, on the fifth business day next
succeeding the Mandatory Conversion Date, in lieu of payment in cash of the
Accrued Dividend Amount, a number of shares of Common Stock equal to 110% of
the Accrued Dividend Amount divided by the Current Market Price (as defined in
paragraph (4)(d)(vii)) of the Common Stock determined as of the second Trading
Date (as defined in paragraph (4)(h)(vi)) prior to the Mandatory Conversion
Date, except that (i) no such distribution shall be made by the Corporation if,
prior to the date on which the Corporation is required to make such
distribution, the Corporation shall have made payment in full of the Accrued
Dividend Amount in cash and (ii) if the Corporation does not have a sufficient
number of authorized but unissued
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<PAGE> 63
shares of Common Stock and shares of Common Stock held in its treasury not
reserved for other corporate purposes to make such distribution in full, the
Corporation shall make such distribution to the fullest extent possible, pro
rata to the holders of Series C Preferred Stock entitled thereto (as nearly as
may be practicable without creating fractional shares), and the holders of
Series C Preferred Stock shall thereafter have the right to receive, and the
Corporation shall pay to such holders as promptly as possible, the remainder in
cash or shares of Common Stock or a combination thereof, on the same terms set
forth in this paragraph (4)(a) for the payment in cash of amounts equal to
accrued and unpaid dividends and for the distribution of shares of Common Stock
in lieu of payment of such amounts in cash.
(b) AUTOMATIC CONVERSION UPON THE OCCURRENCE OF
CERTAIN EVENTS. Immediately prior to the effectiveness of an amendment of the
articles, merger, consolidation, share exchange, division or conversion of the
Corporation or similar extraordinary transaction that results in the conversion
or exchange of Common Stock into, or the right of the holders thereof to
receive, in lieu of or in addition to their shares of Common Stock, other
securities or other property (whether of the Corporation or any other entity)
(any such amendment, merger, consolidation, share exchange, division or
conversion or similar extraordinary transaction being referred to herein as a
"Fundamental Transaction") each outstanding share of the Series C
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<PAGE> 64
Preferred Stock shall automatically convert, on the Settlement Date, as defined
in paragraph (4)(h)(v) into:
(A) shares of Common Stock at the same rate as
would have been the case if the Series C
Preferred Stock had been called for
redemption on the business day immediately
preceding the Mandatory Conversion Date (with
a Current Market Price determined as of the
second Trading Date prior to the Settlement
Date) but in no case greater than the Common
Equivalent Rate; plus
(B) the right to receive an amount in cash equal
to all accrued and unpaid dividends on such
share of the Series C Preferred Stock to and
including the Settlement Date, whether or not
declared, out of funds legally available for
the payment of dividends (and dividends shall
cease to accrue on such share after the
Settlement Date); plus
(C) the right to receive an amount of cash
initially equal to $34.90, declining by
$0.03056 on each day following the date of
issuance of the Series C Preferred Stock
(computed on the basis of a 360-day year of
twelve 30- day months) to $0.00 on June 1,
1997, in each case determined with reference
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<PAGE> 65
to the Settlement Date, out of funds legally
available therefor.
At the option of the Corporation, it may deliver on the
Settlement Date in lieu of some or all of the cash consideration described in
clauses (B) and (C) above, pro rata to the holders of Series C Preferred Stock
entitled thereto, a number of shares of Common Stock to be determined by
dividing the amount of cash consideration that the Corporation has elected to
pay in Common Stock by the Current Market Price (as defined in paragraph
(4)(d)(vii)) of the Common Stock determined, in the case of a Fundamental
Transaction, as of the second Trading Date prior to the Settlement Date.
(c) OPTIONAL REDEMPTION. The Corporation shall
have the right to call, in whole or in part, the outstanding shares of the
Series C Preferred Stock for redemption on the business day immediately
preceding the Mandatory Conversion Date. On the redemption date, the
Corporation shall deliver to the holders thereof in exchange for each such
share called for redemption the greater of (i) a number of shares of Common
Stock equal to the Call Price (as defined in paragraph (4)(h)(ii)) divided by
the Current Market Price of the Common Stock determined as of the second
Trading Date immediately preceding the Notice Date (as defined in paragraph
4(h)(iv)) and (ii) 8.85 shares of Common Stock (subject to adjustment in the
same manner as the Common Equivalent Rate, as described in paragraph 4(d)).
Accrued and unpaid dividends on shares of Series C Preferred
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<PAGE> 66
Stock so redeemed will be paid in cash on the date fixed for their redemption,
whether or not declared, out of funds legally available for the payment of
dividends (and dividends shall cease to accrue on such share as of such date).
If fewer than all the outstanding shares of Series C Preferred Stock are to be
called for redemption, shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series C Preferred Stock by lot or pro
rata (as nearly as may be practicable without creating fractional shares) or by
any other method determined by the Board of Directors of the Corporation in its
sole discretion to be equitable.
(d) COMMON EQUIVALENT RATE ADJUSTMENTS. The
Common Equivalent Rate to be used to determine the number of shares of Common
Stock to be delivered on the conversion of the Series C Preferred Stock into
shares of Common Stock pursuant to paragraphs (4)(a) or (b) shall be initially
ten shares of Common Stock for each share of Series C Preferred Stock;
PROVIDED, HOWEVER, that such Common Equivalent Rate shall be subject to
adjustment from time to time as provided below in this paragraph (4)(d). All
adjustments to the Common Equivalent Rate shall be calculated to the nearest
1/100th of a share of Common Stock (or, if there is not a nearest 1/100th of a
share, to the next lower 1/100th of a share). No adjustment will be required
unless such adjustment would require an increase or decrease of at least one
percent therein; PROVIDED, HOWEVER, that any adjustments which, by reason of
the foregoing, are not required to be made will be
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<PAGE> 67
carried forward and taken into account in any subsequent adjustment. Such rate
in effect at any time is herein called the "Common Equivalent Rate."
(i) If the Corporation shall:
(A) pay a dividend or make a
distribution with respect to
Common Stock in shares of
Common Stock,
(B) subdivide or split its outstanding
shares of Common Stock into a
greater number of shares,
(C) combine its outstanding shares of
Common Stock into a smaller number
of shares, or
(D) issue by reclassification of its
shares of Common Stock any shares of
Common Stock of the Corporation
other than in a Fundamental
Transaction described in paragraph
(4)(b),
then, in any such event, the Common Equivalent Rate in effect immediately prior
thereto shall be adjusted so that the holder of a share of the Series C
Preferred Stock shall be entitled to receive on the conversion of such share of
the Series C Preferred Stock, the number of shares of Common Stock which such
holder would have owned or been entitled to receive after the happening of any
of the events described above had such share of the Series
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<PAGE> 68
C Preferred Stock been converted at the Common Equivalent Rate in effect
immediately prior to such event or any record date with respect thereto. Such
adjustment shall become effective at the opening of business on the business
date next following the record date for determination of stockholders entitled
to receive such dividend or distribution in the case of a dividend or
distribution, and shall become effective immediately after the effective date
in case of a subdivision, split, combination or reclassification; and any
shares of Common Stock issuable in payment of a dividend shall be deemed to
have been issued immediately prior to the close of business on the record date
for such dividend for purposes of calculating the number of outstanding shares
of Common Stock under clauses (ii) and (iii) below. Such adjustments shall be
made successively.
(ii) If the Corporation shall, after the date
hereof, issue rights or warrants to all holders of its Common Stock entitling
them (for a period not exceeding 45 days from the date of such issuance) to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price of the Common Stock (determined pursuant to paragraph
(4)(d)(vii)) on the record date for the determination of stockholders entitled
to receive such rights or warrants, then in each case the Common Equivalent
Rate shall be adjusted by multiplying the Common Equivalent Rate in effect
immediately prior to the date of issuance of such rights or warrants by a
fraction, of which the numerator shall be the number of shares of
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<PAGE> 69
Common Stock outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights or
warrants, 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,
immediately prior to such issuance, plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common
Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at such Current Market Price (determined by multiplying
such total number of shares by the exercise price of such rights or warrants
and dividing the product so obtained by such Current Market Price). Such
adjustment shall become effective at the opening of business on the business
day next following the record date for the determination of stockholders
entitled to receive such rights or warrants. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Common Equivalent Rate shall be readjusted to the Common Equivalent Rate
which would then be in effect had the adjustments made upon the issuance of
such rights or warrants been made upon the basis of delivery of only the number
of shares of Common Stock actually delivered. Such adjustments shall be made
successively.
(iii) If the Corporation shall pay a dividend
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<PAGE> 70
or make a distribution to all holders of its Common Stock of evidence of its
indebtedness or other assets (including shares of capital stock of the
Corporation (other than Common Stock) but excluding any distributions and
dividends referred to in clause (i) above or any cash dividends), or shall
issue to all holders of its Common Stock rights or warrants to subscribe for or
purchase any of its securities (other than those referred to in clause (ii)
above), then in each such case, the Common Equivalent Rate shall be adjusted by
multiplying the Common Equivalent Rate in effect on the record date mentioned
below by a fraction, of which the numerator shall be the Current Market Price
of the Common Stock (determined pursuant to paragraph (4)(d)(vii)) on the
record date for the determination of stockholders entitled to receive such
dividend or distribution, and of which the denominator shall be such Current
Market Price per share of Common Stock less the fair value (as determined by
the Board of Directors of the Corporation, whose determination shall be
conclusive) as of such record date of the portion of the assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants,
applicable to one share of Common Stock. Such adjustment shall become
effective on the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
dividend or distribution.
(iv) In case the Corporation shall, by
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<PAGE> 71
dividend or otherwise, at any time distribute to all holders of its Common
Stock cash (excluding (a) any cash dividends on the Common Stock to the extent
that the aggregate cash dividends per share of Common Stock in any consecutive
12-month period do not exceed the greater of (x) the amount per share of Common
Stock of the cash dividends paid on the Common Stock in the next preceding
12-month period, to the extent that such dividends for the preceding 12-month
period did not require an adjustment to the Common Equivalent Rate pursuant to
this paragraph (as adjusted to reflect subdivisions or combinations of the
Common Stock) and (y) 15 percent of the average daily Closing Prices (as
defined in paragraph (4)(h)(iii)) of the Common Stock for the ten consecutive
Trading Days immediately prior to the date of declaration of such distribution
and (b) any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
then, in each such case, unless the Corporation elects to reserve such an
amount of cash for distribution to the holders of the Series C Preferred Stock
so that any such shares will receive upon conversion, in addition to the shares
of the Common Stock to which such holder is entitled, the amount of cash (to
the extent not excluded as provided above) which such holder would have
received if such holder had, immediately prior to the record date for such
distribution of cash, converted its shares of Series C Preferred Stock into
Common Stock, the Common Equivalent Rate shall be increased so that the same
shall equal the rate
LAW2:7499 -71-
<PAGE> 72
determined by multiplying the Common Equivalent Rate in effect at the close of
business on such record date by a fraction of which the numerator shall be the
Closing Price of the Common Stock on such record date and the denominator shall
be the Closing Price of the Common Stock less the amount of cash so distributed
(to the extent not excluded as provided above) applicable to one share of
Common Stock, such increase to become effective immediately prior to the
opening of business on the day following such record date; PROVIDED, HOWEVER,
that in the event the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Closing Price of the
Common Stock on such record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of Series C Preferred
Stock shall thereafter have the right to receive upon conversion the amount of
cash (to the extent not excluded as provided above) such holder would have
received had such holder converted each share of Series C Preferred Stock on
such record date. If any adjustment is required to be made as set forth in
this paragraph (4)(d)(iv) as a result of a distribution which is a dividend
described in subclause (a) of this paragraph, such adjustment shall be based
upon the amount by which such distribution exceeds the amount of the dividend
permitted to be excluded pursuant to such subclause (a) of this paragraph. If
an adjustment is required to be made pursuant to this paragraph as a result of
a distribution which is
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<PAGE> 73
not such a dividend, such adjustment shall be based upon the full amount of
such distribution.
(v) In case of the consummation of a tender or
exchange offer (other than an odd-lot tender offer ) made by the Corporation or
any subsidiary of the Corporation for all or any portion of the Common Stock to
the extent that the cash and value of any other consideration included in such
payment per share of Common Stock exceeds 110% of the first reported sales
price per share of Common Stock on the Trading Day next succeeding the
Expiration Time (as defined below), the Common Equivalent Rate shall be
increased so that the same shall equal the rate determined by multiplying the
Common Equivalent Rate in effect immediately prior to the last time tenders or
exchanges may be made pursuant to such tender or exchange offer (the
"Expiration Time") by a fraction of which the denominator shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) on the Expiration Time multiplied by the first reported sales price of
the Common Stock on the Trading Day next succeeding the Expiration Time, and
the numerator shall be the sum of (A) the fair market value (determined by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged
and not withdrawn as of the Expiration Time (the
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<PAGE> 74
shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (B) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the first
reported sales price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time.
(vi) Anything in this paragraph (4)
notwithstanding, the Corporation shall be entitled to make such upward
adjustments in the Common Equivalent Rate, in addition to those required by
this paragraph (4), as the Corporation in its sole discretion may determine to
be advisable, in order that any stock dividends, subdivisions of shares,
distributions of rights to purchase stock or securities, or distributions of
securities convertible into or exchangeable for stock (or any transaction which
could be treated as any of the foregoing transactions pursuant to Section 305
of the Internal Revenue Code of 1986, as amended) hereafter made by the
Corporation to its stockholders shall not be taxable. If the Corporation
determines that an adjustment to the Common Equivalent Rate should be made, an
adjustment shall be made effective as of such date as is determined by the
Board of Directors of the Corporation. The determination of the Board of
Directors of the Corporation as to whether an adjustment to the Common
Equivalent Rate should be made pursuant to the foregoing provisions of this
paragraph (4)(d)(vi), and, if so, as to what adjustment should be made and
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<PAGE> 75
when, shall be conclusive, final and binding on the Corporation and all
stockholders of the Corporation.
(vii) As used in this paragraph (4), the "Current
Market Price" of the Common Stock on any date shall be the average of the daily
Closing Prices (as defined in paragraph (4)(h)(iii)) for the five consecutive
Trading Dates ending on and including the date of determination of the Current
Market Price; provided, however, that if the Closing Price for the Trading Date
next following such five- day period (the "next-day closing price") is less
than 95% of such average, then the Current Market Price per share of Common
Stock on such date of determination shall be the next-day Closing Price; and
provided, further, that, if any event that results in an adjustment of the
Common Equivalent Rate occurs during such five-day period or, for the purposes
of calculating the Current Market Price in connection with any redemption or
conversion of Series C Preferred Stock or any determination of an amount in
cash payable in lieu of a fraction of a share of Common Stock, if any event
that results in an adjustment of the Common Equivalent Rate occurs during the
period beginning on the first day of such five-day period and ending on the
applicable redemption or conversion date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
the occurrence of such event.
(viii) In any case in which paragraph (4)(d) shall
require that an adjustment as a result of any event become
LAW2:7499 -75-
<PAGE> 76
effective at the opening of business on the business day next following a
record date and the date fixed for conversion or redemption pursuant to
paragraphs (4)(a), (b), (c) or (n) occurs after such record date, but before
the occurrence of such event the Corporation may in its sole discretion elect
to defer the following until after the occurrence of such event: (A) issuing
to the holder of any converted or redeemed shares of the Series C Preferred
Stock the additional shares of Common Stock issuable upon such conversion or
redemption before giving effect to such adjustment and (B) paying to such
holder any amount in cash in lieu of a fractional share of Common Stock
pursuant to paragraph (4)(f).
(e) NOTICE OF ADJUSTMENTS. Whenever the Common
Equivalent Rate or Optional Conversion Rate is adjusted as herein provided, the
Corporation shall:
(i) forthwith compute the adjusted Common
Equivalent Rate and the adjusted Optional Conversion Rate (as defined in
paragraph 4(n)) in accordance with this paragraph (4) and prepare a certificate
signed by the Chief Financial Officer, any Vice President, the Treasurer or
Controller of the Corporation setting forth the adjusted Common Equivalent
Rate, the adjusted Optional Conversion Rate, the method of calculation thereof
in reasonable detail and the facts requiring such adjustment and upon which
such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and file such
certificate
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<PAGE> 77
forthwith with the transfer agent or agents for the Series C Preferred Stock
and the Common Stock; and
(ii) mail a notice stating that the Common
Equivalent Rate and the Optional Conversion Rate have been adjusted, the facts
requiring such adjustment and the facts upon which such adjustment is based and
setting forth the adjusted Common Equivalent Rate and the adjusted Optional
Conversion Rate to the holder of record of the outstanding shares of the Series
C Preferred Stock at or prior to the time the Corporation mails an interim
statement to its stockholders covering the fiscal quarter during which the
facts requiring such adjustment occurred, but in any event within 45 days of
the end of such fiscal quarter.
(f) NO FRACTIONAL SHARES. No fractional share or
scrip representing fractional shares of Common Stock shall be issued upon the
redemption or conversion of any shares of Series C Preferred Stock. Instead of
any fractional interest in a share of Common Stock which would otherwise be
deliverable upon the redemption or conversion of a share of Series C Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the same fraction of the (i) Current
Market Price of the Common Stock determined as of the second Trading Date
immediately preceding the Notice Date, in the case of redemption pursuant to
paragraph 4(c), (ii) Closing Price (as defined in paragraph 4(h)(iii) of the
Common Stock determined (A) as of the fifth Trading Date immediately preceding
the Mandatory Conversion Date, in the case
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<PAGE> 78
of a Mandatory Conversion, or (B) as of the second Trading Date immediately
preceding the date of conversion in the case of any optional conversion
pursuant to paragraph 4(n), or (iii) the Settlement Date, in the case of a
Fundamental Transaction. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Series C Preferred Stock so surrendered.
(g) CANCELLATION. Shares of Series C Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased, exchanged, redeemed or converted, shall not be reissued as part of
the Series C Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of the Commonwealth of Pennsylvania) have the status of
authorized and unissued shares of the class of Preferred Stock undesignated as
to series and may be redesignated and reissued as part of any series of the
Preferred Stock.
(h) DEFINITIONS. As used in this paragraph
(4):
(i) the term "business day" shall mean any day
other than a Saturday, Sunday or a day on which banking institutions in the
State of New York or the Commonwealth of Pennsylvania are authorized or
obligated by law or executive order to close or are closed because of a banking
moratorium or otherwise;
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(ii) the term "Call Price" shall mean $131.25 per
share;
(iii) the term "Closing Price" on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the reported closing bid price regular way, in each
case on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on such Exchange, then on the principal national securities
exchange on which the Common Stock is listed or admitted to trading (which
shall be the national securities exchange on which the greatest number of
shares of Common Stock has been traded during the five consecutive Trading
Dates ending on and including the date of determination of the Current Market
Price), or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of the Common
Stock on the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similarly generally accepted
reporting service, or if not so available as determined in good faith by the
Board of Directors, on the basis of such relevant factors as it in good faith
considers, in the reasonable judgement of the Board of Directors, appropriate;
(iv) the term "Notice Date" with respect to any
notice given by the Corporation in connection with the Series C Preferred Stock
shall be the earlier of the public announcement with respect to any matter or
the commencement of the mailing of
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such notice to the holders of the Series C Preferred Stock in accordance with
paragraph (4)(i);
(v) the term "Settlement Date" shall mean the
business day immediately prior to the effective date of a Fundamental
Transaction;
(vi) the term "Trading Date" shall mean a date on
which the New York Stock Exchange (or any successor thereto) is open for the
transaction of business.
(i) NOTICE OF REDEMPTION OR AUTOMATIC CONVERSION.
The Corporation will provide notice of any redemption or automatic conversion
(including any potential conversion upon the effectiveness of a Fundamental
Transaction but excluding any conversion pursuant to paragraphs (4)(a) or (n))
of shares of Series C Preferred Stock to holders of record of the Series C
Preferred Stock to be called or converted not less than 15 nor more than 60
days prior to the date fixed for such redemption or conversion, as the case may
be; PROVIDED, HOWEVER, that if the timing of a Fundamental Transaction makes it
impracticable to provide at least 15 days notice, the Corporation shall provide
such notice as soon as is practicable. Such notice shall be provided by
mailing notice of such redemption or conversion first class postage prepaid, to
each holder of record of the Series C Preferred Stock to be redeemed or
converted, at such holder's address as it appears on the stock register of the
Corporation; PROVIDED, HOWEVER, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for
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the redemption or conversion of any shares of Series C Preferred Stock to be
redeemed or converted, except as to the holder to whom the Corporation has
failed to give such notice or whose notice was defective. Each such notice
shall state, as appropriate, the following:
(i) the redemption or automatic conversion date;
(ii) that all outstanding shares of Series C
Preferred Stock are to be redeemed or converted or, in the case of a call for
redemption pursuant to paragraph (4)(c) of fewer than all outstanding shares of
Series C Preferred Stock, the number of such shares held by such holder to be
redeemed;
(iii) in the case of a call for redemption pursuant
to paragraph (4)(c), the Call Price, the number of shares of Common Stock
deliverable upon redemption of each share of Series C Preferred Stock to be
redeemed and, if applicable, the Current Market Price used to calculate such
number of shares of Common Stock subject to any subsequent adjustments pursuant
to paragraph (4)(d);
(iv) whether the Corporation is delivering shares
of Common Stock in lieu of cash (in the case of a conversion pursuant to
paragraphs (4)(a) or (4)(b)), the Current Market Price to be used to calculate
the number of such shares of Common Stock and, if the Corporation is delivering
shares in respect of less than all the cash that would otherwise be
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deliverable by the Corporation upon such conversion, the portion of such cash
in lieu of which Common Stock will be delivered;
(v) the place or places where certificates for
such shares are to be surrendered for redemption or conversion; and
(vi) that dividends on the shares of Series C
Preferred Stock to be redeemed or converted will cease to accrue on such
redemption or automatic conversion date or, in the case of a conversion
pursuant to paragraph (4)(b), on the related Settlement Date, unless, in the
case of a redemption pursuant to paragraph (4)(c), the Corporation shall
default in delivering the shares of Common Stock and cash, if any, payable by
the Corporation at the time and place specified in such notice.
(j) DEPOSIT OF SHARES AND FUNDS. The
Corporation's obligation to deliver shares of Common Stock and provide funds in
accordance with this paragraph (4) shall be deemed fulfilled if, on or before a
redemption or conversion date or Settlement Date, the Corporation shall
deposit, with a bank or trust company, or an affiliate of a bank or trust
company, having an office or agency in New York city and having a capital and
surplus of at least $50,000,000, such number of shares of Common Stock as are
required to be delivered by the Corporation pursuant to this paragraph (4) upon
the occurrence of the related redemption or conversion (including any payment
of cash in lieu of the issuance of fractional share amounts pursuant to
paragraph (4)(f)), together with funds (or, in the case of a conversion
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pursuant to paragraphs (4)(a) or (4)(b), shares of Common Stock and/or funds)
sufficient to pay all accrued and unpaid dividends on the shares to be redeemed
or converted as required by this paragraph (4), in trust for the account of the
holders of the shares to be redeemed or converted (and so as to be and continue
to be available thereto), with irrevocable instructions and authority to such
bank or trust company that such shares and funds be delivered upon redemption
or conversion of the shares of Series C Preferred Stock so called for
redemption or converted. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any shares of Common Stock or funds so
deposited and unclaimed at the end of two years from such redemption or
conversion date shall be repaid and released to the Corporation, after which
the holder or holders of such shares of Series C Preferred Stock so called for
redemption or converted shall look only to the Corporation for delivery of such
shares of Common Stock or funds.
(k) SURRENDER OF CERTIFICATES; STATUS. Each
holder of shares of Series C Preferred Stock to be redeemed or converted shall
surrender the certificates evidencing such shares (properly endorsed or
assigned for transfer, unless any notice shall state otherwise) to the
Corporation at the place designated in the notice of such redemption or
conversion and shall thereupon be entitled to receive certificates evidencing
shares of Common Stock and to receive any funds payable pursuant to this
paragraph (4) following such surrender and following the date of
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such redemption or conversion. In case fewer than all the shares represented
by any such surrendered certificate are called for redemption, a new
certificate shall be issued at the expense of the Corporation representing the
unredeemed shares. If such notice of redemption or conversion shall have been
given, and if on the date fixed for redemption or conversion (or on the
Mandatory Conversion Date) shares of Common Stock and funds necessary for the
redemption or conversion shall have been either set aside by the Corporation
separate and apart from its other funds or assets in trust for the account of
the holders of the shares to be redeemed or converted (and so as to be and
continue to be available therefor) or deposited with a bank or trust company or
affiliate thereof as provided in paragraph (4)(j), or the circumstances
described in clause (ii) to the proviso appearing in the third full paragraph
of paragraph (4)(a) are in effect, then, notwithstanding that the certificates
evidencing any shares of Series C Preferred Stock so called for redemption or
subject to conversion shall not have been surrendered, the shares represented
thereby so called for redemption or subject to conversion shall be deemed no
longer outstanding, dividends with respect to the shares so called for
redemption or subject to conversion shall cease to accrue after the date fixed
for redemption or conversion or, in the case of a conversion pursuant to
paragraph (4)(b), on the related Settlement Date, and all rights with respect
to the shares so called for redemption or subject to conversion shall forthwith
after such date cease and
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terminate, except for the right of the holders to receive the shares of Common
Stock and funds, if any, payable pursuant to this paragraph (4) without
interest upon surrender of their certificates therefor.
(l) DIVIDEND PAYMENTS. Holders of shares of
Series C Preferred Stock at the close of business on a record date for any
payment of declared dividends will be entitled to receive the dividend payable
on such shares of Series C Preferred Stock on the corresponding Dividend
Payment Date notwithstanding the optional conversion of such shares of Series C
Preferred Stock following such record date and before such Dividend Payment
Date. However, shares of Series C Preferred Stock surrendered for optional
conversion pursuant to paragraph 4(n) after the close of business on a record
date for any payment of declared dividends and before the opening of business
on the next succeeding Dividend Payment Date must be accompanied by payment in
cash of an amount equal to the dividend attributable to the current quarterly
dividend period payable on such date. Notwithstanding the foregoing, holders
of Series C Preferred Stock who convert pursuant to paragraph 4(n) their Series
C Preferred Stock at any time after such Series C Preferred Stock have been
called for redemption, will be entitled to receive, in addition to shares of
Common Stock issuable upon conversion, cash payment of dividends accrued and
unpaid to the date of such conversion. Except as set forth in the preceding
sentence, upon any optional conversion pursuant to paragraph 4(n) of shares of
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Series C Preferred Stock, the Corporation will make no payment of or allowance
for accrued and unpaid dividends, whether or not in arrears, on such shares of
Series C Preferred Stock, or for previously declared dividends or distributions
on the shares of Common Stock issued upon such conversion.
(m) PAYMENT OF TAXES. The Corporation will pay
any and all documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on the redemption or
conversion of shares of Series C Preferred Stock pursuant to this paragraph
(4); provided, however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any registration of transfer involved in
the issue or delivery of shares of Common Stock in a name other than that of
the registered holder of Series C Preferred Stock redeemed or converted or to
be redeemed or converted, 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.
(n) CONVERSION AT THE OPTION OF THE HOLDER.
After 40 days following the latest date of original issuance of the Series C
Preferred Stock, the shares of the Series C Preferred Stock are convertible, in
whole or in part, at the option of the holders thereof, at any time before the
Mandatory Conversion Date, unless previously redeemed, into shares of Common
Stock at a rate of 8.85 shares of Common Stock for each
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share of Series C Preferred Stock (the "Optional Conversion Rate"). The
Optional Conversion Rate is subject to adjustment in the same manner as the
Common Equivalent Rate, as described in paragraph (4)(d). The right to convert
shares of Series C Preferred Stock called for redemption will terminate
immediately before the close of business on the redemption date with respect to
such shares.
Conversion of shares of Series C Preferred Stock at
the option of the holder may be effected by delivering certificates evidencing
such shares of Series C Preferred Stock, together with written notice of
conversion and a proper assignment of such certificates to the Corporation or
in blank (and, if applicable, cash payment of an amount equal to the dividend
attributable to the current quarterly dividend period payable on such shares),
to the office of the transfer agent for Series C Preferred Stock or to any
other office or agency maintained by the Corporation for that purpose and
otherwise in accordance with conversion procedures established by the
Corporation. Each optional conversion will be deemed to have been effected
immediately before the close of business on the date on which the foregoing
requirements have been satisfied. The conversion will be at the Optional
Conversion Rate in effect at such time and on such date.
5. LIQUIDATION PREFERENCES. (a) In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of
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<PAGE> 88
Series C Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
after payment or provision for payment of any Senior Securities, an amount per
share of Series C Preferred Stock in cash equal to the sum of (i) $144.40 plus
(ii) all accrued and unpaid dividends thereon to the date of liquidation,
dissolution or winding up, before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities. If the assets of
the Corporation are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of the Series C Preferred Stock
and any Parity Securities, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount which
would be payable on such distribution if the amounts to which the holders of
outstanding shares of Series C Preferred Stock and the holders of outstanding
shares of such Parity Securities are entitled were paid in full. Except as
provided in this paragraph (5)(a), holders of Series C Preferred Stock shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(b) For the purposes of this paragraph (5), none
of the following shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation:
(i) the voluntary sale, conveyance, lease,
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exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation;
(ii) the consolidation or merger of the
Corporation with or into one or more other corporations or other associations;
(iii) the consolidation or merger of one or more
corporations or other associations with or into the Corporation;
(iv) the participation by the Corporation in a
share exchange;
(v) the division of the Corporation pursuant to
15 Pa.C.S. Subch. 19D;
(vi) the conversion of the Corporation pursuant to
15 Pa.C.S. Subch. 19E.
6. VOTING RIGHTS. (a) The holders of record of shares
of Series C Preferred Stock shall not be entitled to any voting rights except
as hereinafter provided in this paragraph (6) or as otherwise provided by law.
(b) In the event that dividends payable to the
holders of Series C Preferred Stock are in arrears and unpaid for the
equivalent of six quarterly periods, the Board of Directors will be increased
by two directors and the holders of Series C Preferred Stock, together with the
holders of all other outstanding series of the Preferred Stock in respect of
which such a default in payment of dividends as described hereinabove
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exists and is entitled to vote thereon, voting as a single class without regard
to series, will be entitled to elect two directors of the expanded Board of
Directors. Such entitlement shall continue until such time as all dividends in
arrears on all of the Series C Preferred Stock at the time outstanding have
been paid or declared and set aside for payment, whereupon such voting rights
of the holders of the Series C Preferred Stock shall cease (and the respective
terms of the two additional directors shall thereupon expire and the number of
directors constituting the full board be decreased by two) subject to being
again revived from time to time upon the reoccurrence of the conditions
described in this paragraph (6)(b) as giving rise thereto.
At any time when the rights of holders of Series C
Preferred Stock to elect two additional directors shall have so vested, the
Corporation shall, upon the written request of the holders of record of not
less than 10% of the Series C Preferred Stock then outstanding (or 10% of all
of the shares of Preferred Stock having the right to vote for such directors in
case holders of shares of other series of Preferred Stock shall also have the
right to elect directors in such circumstances), call a special meeting of
holders of the Series C Preferred Stock (and other series of Preferred Stock,
if applicable) for the election of directors. In the case of a written
request, the special meeting shall be held within 60 days after the delivery of
the request, upon the notice provided by law and in the bylaws of the
Corporation; except that the Corporation shall not be required to
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call such a special meeting if the request is received less than 120 days
before the date fixed for the next ensuing annual meeting of stockholders of
the Corporation.
Whenever the number of directors of the Corporation
shall have been increased by two as provided in this paragraph (6)(b), the
number as so increased may thereafter be further increased or decreased in such
manner as may be permitted by the bylaws and without the vote of the holders of
Series C Preferred Stock. No such action shall impair the right of the holders
of Series C Preferred Stock to elect and to be represented by two directors as
provided in this paragraph (6)(b).
The two directors elected as provided in this
paragraph (6)(b) shall serve until the next annual meeting of stockholders of
the Corporation and until their respective successors shall be elected and
qualified or the earlier expiration of their terms as provided in this
paragraph (6)(b). No such director may be removed without the vote of holders
of a majority of the shares of Series C Preferred Stock (or holders of a
majority of shares of Preferred Stock having the right to vote in the election
of such director in case holders of shares of other series of Preferred Stock
shall also have the right to elect such director). If, prior to the expiration
of the term of any such director, a vacancy in the office of such director
shall occur, such vacancy shall, until the expiration of such term, in each
case be filled by the remaining director elected as provided
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in this paragraph (6)(b) or, if none remains in office, by vote of the holders
of record of a majority of the outstanding shares of Series C Preferred Stock
(or holders of a majority of shares of Preferred Stock who are then entitled to
participate in the election of such directors in case holders of shares of
other series of Preferred Stock shall also have the right to elect such
director).
(c) So long as any shares of the Series C
Preferred Stock are outstanding (except when notice of the redemption or
conversion of all outstanding shares of Series C Preferred Stock has been given
pursuant to paragraph (4)(i) and shares of Common Stock and any necessary funds
have been deposited in trust for such redemption or conversion pursuant to
paragraph (4)(j)), the Corporation shall not, without the affirmative vote of
the holders of at least 66-2/3% of the shares of Series C Preferred Stock and
any other series of Preferred Stock entitled to vote thereon at the time
outstanding, voting together as one class without regard to series, in person
or by proxy, or by resolution adopted at an annual or special meeting called
for the purpose, amend pursuant to the provisions of 15 Pa.C.S. Subchapter 19B
or in the context of any other type of Fundamental Transaction any of the
provisions of the Corporation's Restated Articles of Incorporation which would
either (i) authorize any new class of Senior Securities or (ii) alter or change
the rights, preferences or limitations of the Series C Preferred Stock so as to
affect such rights, preferences
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or limitations in any material respect prejudicial to the holders of the Series
C Preferred Stock.
(d) So long as any shares of the Series C
Preferred Stock are outstanding (except when notice of the redemption or
conversion of all outstanding shares of Series C Preferred Stock has been given
pursuant to paragraph (4)(i) and shares of Common Stock and any necessary funds
have been deposited in trust for such redemption or conversion pursuant to
paragraph (4)(j)), the Corporation shall not, without the affirmative vote of
the holders of at least a majority of the shares of Series C Preferred Stock
and any other series of Preferred Stock entitled to vote thereon at the time
outstanding voting or consenting, as the case may be, voting together as one
class without regard to series, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting called for the
purpose, amend pursuant to the provisions of 15 Pa.C.S. Subchapter 19B or in
the context of any other type of Fundamental Transaction any of the provisions
of the Corporation's Restated Articles of Incorporation which would either (i)
increase the total number of authorized shares of Preferred Stock or (ii)
authorize or create any class of Parity Securities.
7. INCREASE IN SHARES. The number of shares of Series C
Preferred Stock may, to the extent of the Corporation's authorized and unissued
Preferred Stock, be increased by further resolution duly adopted by the Board
of Directors and the filing
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of a statement with respect to shares with the Department of State of the
Commonwealth of Pennsylvania.
8. LIMITATIONS. Except as may otherwise be required by
law, the shares of Series C Preferred Stock shall not have any powers,
preferences or relative, participating, optional or other special rights other
than those specifically set forth in this resolution (as such resolution may be
amended from time to time) or otherwise in the Restated Articles of
Incorporation of the Corporation.
SIXTH: A. A higher than majority stockholder vote for certain
Business Combinations (as defined below) shall be required as follows:
(1) In addition to any affirmative vote required by law
or these Articles or the terms of any series of Preferred Stock or any other
securities of the Corporation and except as otherwise expressly provided in
Section B. of this Article SIXTH:
(a) any merger or consolidation of the
Corporation or any Subsidiary with (i) any Interested Stockholder or with (ii)
any other corporation (whether or not itself an Interested Stockholder) which
is, or after such merger or consolidation would be, an Affiliate or Associate
of an Interested Stockholder;
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions
whether or not related) to an Interested Stockholder (or an Affiliate or
Associate of an Interested Stockholder) of
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any assets of the Corporation or of a Subsidiary having an aggregate Fair
Market Value of $10,000,000 or more;
(c) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions
whether or not related) to or with the Corporation or a Subsidiary of any
assets of an Interested Stockholder (or an Affiliate or Associate of an
Interested Stockholder) having an aggregate Fair Market Value of $10,000,000 or
more;
(d) the issuance or sale by the Corporation or
any Subsidiary (in one transaction or a series of transactions whether or not
related) of any securities of the Corporation or of any Subsidiary to any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder in exchange for cash, securities or other consideration (or a
combination thereof) having an aggregate Fair Market Value of $10,000,000 or
more except an issuance of securities upon conversion of convertible securities
of the,Corporation or of a Subsidiary which were not acquired by such
Interested Stockholder (or such Affiliate or Associate) from the Corporation or
a Subsidiary;
(e) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(f) any reclassification of securities (including
any reverse stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its
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Subsidiaries or any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares of
any class of equity securities or securities convertible into equity securities
of the Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; shall require the affirmative vote of (i) the holders of at least
eighty percent (80%) of the combined voting power of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in an
annual election of directors (the "Voting Stock") and (ii) the holders of at
least a majority of the combined voting power of the then outstanding Voting
Stock held by Disinterested Stockholders, in each case voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law, by any other provisions of these Articles or by the terms of any series of
Preferred Stock or any other securities of the Corporation;
(2) The term "Business Combination" as used in this
Article SIXTH shall mean any transaction which is referred to in any one or
more of clauses (a) through (f) of paragraph (1) of Section A. of this Article
SIXTH.
B. The provisions of Section A. of this Article SIXTH shall not
be applicable to any Business Combination, and such
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Business Combination shall require only such affirmative vote (if any) as is
required by law, any other provision of these Articles or the terms of any
class or series of capital stock of the Corporation entitled to a preference
over the Common Stock as to dividends or upon liquidation, or the terms of any
other securities of the Corporation, if all of the conditions specified in
either of the following paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by
a majority of the Disinterested Directors or
(2) All the following six conditions shall have been
met -
(a) The transaction constituting the Business
Combination shall provide for a consideration to be received by holders of
Common Stock in exchange for their Common Stock, and the aggregate amount of
the cash and the Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest of the following:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of Common Stock beneficially owned by
the Interested Stockholder which were acquired (x) within the two-year period
immediately prior to the first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the transaction
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in which it became an Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the "Determination Date"),
whichever is higher; and
(iii) (if applicable) the price per share equal to
the Fair Market Value per share of Common Stock determined pursuant to clause
(ii) immediately preceding, multiplied by the ratio of (x) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any shares of Common Stock beneficially
owned by the Interested Stockholder which were acquired within the two-year
period immediately prior to the Announcement Date to (y) the Fair Market Value
per share of Common Stock on the first day in such two-year period on which the
Interested Stockholder beneficially owned any shares of Common Stock, whether
or not such Stockholder was an Interested Stockholder on that day.
(b) If the transaction constituting the Business
Combination shall provide for a consideration to be received by holders of any
class of outstanding Voting Stock other than Common Stock, the aggregate amount
of the cash and the Fair Market Value as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of shares of such Voting Stock shall be at least
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equal to the highest of the following (it being intended that the requirements
of this clause (2)(b) shall be required to be met with respect to every class
of outstanding Voting Stock other than Institutional Voting Stock, whether or
not the Interested Stockholder beneficially owns any shares of a particular
class of Voting Stock):
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of such class of Voting Stock
beneficially owned by the Interested Stockholder which were acquired (x) within
the two-year period immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential
amount per share to which the holders of shares of such class of Voting Stock
are entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(iii) the Fair Market Value per share of such class
of Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(iv) (if applicable) the price per share equal to
the Fair Market Value per share of such class of Voting Stock determined
pursuant to clause (iii) immediately preceding, multiplied by the ratio of (x)
the highest per share price
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<PAGE> 100
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of such class of Voting Stock
beneficially owned by the Interested Stockholder which were acquired within the
two-year period immediately prior to the Announcement Date to (y) the Fair
Market Value per share of such class of Voting Stock on the first day in such
two-year period on which the Interested Stockholder beneficially owned any
shares of such class of Voting Stock, whether or not such Stockholder was an
Interested Stockholder on that day.
(c) The consideration to be received by holders
of a particular class of Voting Stock (including Common Stock) shall be in cash
or in the same form as was previously paid in order to acquire shares of such
class of Voting Stock which are beneficially owned by the Interested
Stockholder and, if the Interested Stockholder beneficially owns shares of any
class of Voting Stock which were acquired with varying forms of consideration,
the form of consideration to be received by holders of such class of Voting
Stock shall be either cash or the form used to acquire the largest number of
shares of such class of Voting Stock beneficially owned by it. The prices
determined in accordance with clauses (a) and (b) of paragraph (2) of this
Section B. shall be subject to an appropriate adjustment in the event of any
stock dividend, stock split, subdivision, combination of shares or similar
event.
LAW2:7499 -100-
<PAGE> 101
(d) After such Interested Stockholder has become
an Interested Stockholder and prior to the consummation of such
(i) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare and pay at
the regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding Preferred Stock or other capital stock entitled
to a preference over the Common Stock as to dividends or upon liquidation;
(ii) except as approved by a majority of the
Disinterested Directors, there shall have been (x) no reduction in the annual
amount of dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock) and (y) no failure to increase the annual
amount of dividends as necessary to prevent any such reduction in the event of
any reclassification (including any reverse stock split), recapitalization,
reorganization or similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock;
(iii) such Interested Stockholder shall not have
become the beneficial owner of any additional shares of Voting Stock except as
part of the transaction in which it became an Interested Stockholder; and
(iv) there shall have always been at least
three Disinterested Directors on the Board of Directors
LAW2:7499 -101-
<PAGE> 102
(e) After such Interested Stockholder has become
an Interested Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(f) A proxy or information statement describing
the proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or regulations) shall be
mailed to stockholders at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article SIXTH:
(1) A "person" shall mean any individual, a
partnership, a corporation, an association, a trust or other entity.
(2) "Interested Stockholder" at any particular
time shall mean any person (other than the Corporation or any Subsidiary) who
or which:
LAW2:7499 -102-
<PAGE> 103
(a) is at such time the beneficial
owner, directly or indirectly, of five percent (5%) or more of the voting power
of the Voting Stock;
(b) is an Affiliate of the Corporation
and at any time within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of five percent (5%)
or more of the voting power of the Voting Stock; or
(c) is at such time an assignee of or
has otherwise succeeded to the beneficial ownership of any shares of Voting
Stock which were at any time within the two-year period immediately prior to
the date in question beneficially owned by any Interested Stockholder (as
defined in C.(2)(a) and (b) above), if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not involving
a public offering within the meaning of the Securities Act of 1933.
(3) "Disinterested Stockholder" shall mean a
stockholder of the Corporation who is not an Interested Stockholder or an
Affiliate or an Associate of an Interested Stockholder.
(4) A person shall be a "beneficial owner" of any
shares of Voting Stock:
(a) which such person or any of its
Affiliates or Associates beneficially owns, directly or indirectly;
LAW2:7499 -103-
<PAGE> 104
(b) which such person or any of its
Affiliates or Associates has (i) the right to acquire (whether or not such
right is exercisable immediately) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or
(c) which are beneficially owned,
directly or indirectly, by any other person with which such person or any of
its Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
(5) For the purpose of determining whether a
person is an Interested Stockholder pursuant to paragraph (2) of this Section
C., the number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned by an Interested Stockholder through application of
paragraph (4) of this Section C. but shall not include any other shares of
Voting Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(6) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
December 31, 1984 (the term "registrant" in such Rule 12b-2 meaning in this
case the Corporation).
LAW2:7499 -104-
<PAGE> 105
(7) "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph (2) of this Section C. the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Corporation.
(8) "Disinterested Director" means any member of
the Board of Directors who is unaffiliated with, and not a representative or
nominee of, an Interested Stockholder and (a) was a member of the Board prior
to the time that the Interested Stockholder became an Interested Stockholder,
or (b) recommended to succeed a Disinterested Director by a majority of the
Disinterested Directors then on the Board.
(9) "Fair Market Value" means: (a) in the case of
stock, the highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the Composite Tape
for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of Securities
Dealers,
LAW2:7499 -105-
<PAGE> 106
Inc. Automated Quotation System or any other system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Disinterested Directors
in good faith; and (b) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined by a
majority of the Disinterested Directors in good faith.
(10) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than cash to be
received" as used in paragraph (2) of Section B. of this Article SIXTH shall
include the shares of Common Stock and the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
(11) The term "class" of Voting Stock shall be
deemed to refer to a series of Voting Stock where more than one series of
Voting Stock is outstanding within a class of Voting Stock.
(12) "Institutional Voting Stock" shall mean any
class of Voting Stock which was issued to and continues to be held solely by
one or more insurance companies, pension funds, commercial banks, savings banks
or similar financial institutions or institutional investors.
D. A majority of the Disinterested Directors of the Corporation
shall have the power and duty to determine for the purposes of this Article
SIXTH, on the basis of information known to them after reasonable inquiry, (1)
whether a person is an
LAW2:7499 -106-
<PAGE> 107
Interested Stockholder, (2) the number of shares of Voting Stock beneficially
owned by any person, (3) whether a person is an Affiliate or Associate of
another, (4) whether the requirements of Section B. of this Article SIXTH have
been met with respect to any Business Combination, (5) whether a class of
Voting Stock is Institutional Voting Stock and (6) whether the assets which are
subject to any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by this Corporation or any
subsidiary in any Business Combination has, an aggregate Fair Market Value of
$10,000,000 or more. Any such determination made in good faith shall be
binding and conclusive on all parties.
E. Nothing contained in this Article SIXTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by
law.
F. In addition to any requirements of law and any other
provisions of these Articles or the terms of any class or series of capital
stock of the Corporation entitled to a preference over the Common Stock as to
dividends or upon liquidation, or the terms of any other securities of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Articles or any such terms), the affirmative vote of
(1) the holders of eighty percent (80%) or more of the
combined voting power of the Voting Stock, voting together as a single class,
and
LAW2:7499 -107-
<PAGE> 108
(2) a majority of the combined voting power of the Voting
Stock held by the Disinterested Stockholders, voting together as a single
class, shall be required to amend, alter or repeal, or adopt any provision
inconsistent with, this Article SIXTH.
SEVENTH: A. Except as otherwise fixed by or pursuant to
the terms of any class or series of capital stock of the Corporation entitled
to a preference over the Common Stock as to dividends or upon liquidation, the
number, qualification, terms of office, manner of election, time and place of
meeting, compensation, powers and duties of the directors shall be fixed from
time to time by or pursuant to the By-laws.
B. If the By-laws so provide, the members of the Board (other
than those who may be elected by the holders of any class or series of capital
stock having a preference over the Common Stock as to dividends or upon
liquidation pursuant to the terms of these Articles or of such class or series
of stock) shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, having such terms and being elected in such manner as shall be
specified in the By-laws.
EIGHTH: In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors is expressly authorized to:
A. adopt any By-laws a majority of the entire Board of Directors
may deem necessary or desirable for the efficient
LAW2:7499 -108-
<PAGE> 109
conduct of the affairs of the Corporation, including, but not limited to,
provisions governing the conduct of, and the matters which may properly be
brought before, meetings of the stockholders and provisions specifying the
manner and extent to which prior notice shall be given of the submission of
proposals to be considered at any such meeting or of nominations for the
election of directors to be held at any such meeting; and
B. repeal, alter or amend the By-laws by the vote of a majority
of the entire Board of Directors.
NINTH: In addition to any requirements of law and any other
provisions of these Articles or the terms of any series of Preferred Stock or
any other securities of the Corporation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles or any such terms),
the affirmative vote of the holders of eighty percent (80%) or more of the
combined voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in an annual election (the "Voting
Stock"), voting together as a single class, shall be required to:
A. remove a director without cause (For purposes of this Article
(NINTH] "cause" shall mean the willful and continuous failure of a director to
substantially perform such director's duties to the Corporation, other than any
such failure resulting from incapacity due to physical or mental illness, or
the willful engaging by a director in gross misconduct materially and
demonstrably injurious to the Corporation.);
LAW2:7499 -109-
<PAGE> 110
B. adopt, amend, alter or repeal any provision of the By-laws,
except that By-law XVI may be amended or altered by a majority vote of the
Voting Stock if the majority of the entire Board of Directors has first
recommended the amendment or alteration for approval by the stockholders;
C. amend, alter or repeal or adopt any provision inconsistent
with, Articles SEVENTH or EIGHTH or this Article NINTH; and
D. amend, alter or repeal or adopt any provisions inconsistent
with any provision, other than Articles SIXTH, SEVENTH or EIGHTH or this
Article NINTH, contained in these Articles of Incorporation, unless otherwise
first recommended and approved by a majority of the entire Board of Directors
or, if there is an Interested Stockholder (as defined in Article SIXTH), by a
majority of the Disinterested Directors (as defined in Article SIXTH), in which
cases a majority vote of the Voting Stock is required to amend, alter or repeal
such other provisions of these Articles.
TENTH: To the fullest extent that the law of the Commonwealth of
Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be
amended, permits the elimination of the liability of directors, no director of
the corporation shall be liable for monetary damages for any action taken, or
any failure to take any action. This Article TENTH shall not apply to any
breach of performance of duty or any failure of performance of duty by any
director occurring prior to January
LAW2:7499 -110-
<PAGE> 111
27, 1987. No amendment to or repeal of this Article TENTH shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any act or failure to act on the part of
such director occurring prior to such amendment or repeal.
ELEVENTH: The Corporation may, to the fullest extent permitted
by applicable law as then in effect, indemnify any person who is or was a
director, officer, employe or agent of the Corporation or is or was serving at
the request of the corporation as a director, officer, employe or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employe benefit plan) and may take such
steps as may be deemed appropriate by the Corporation, including purchasing and
maintaining insurance, entering in to contracts (including, without limitation,
contracts of indemnification between the Corporation and its directors and
officers), creating a trust fund, granting security interests or using other
means (including, without limitation, a letter of credit) to insure the payment
of such amount as may be necessary to effect such indemnification. This
Article shall apply to any action taken, or any failure to take any action, on
or after January 27, 1987.
LAW2:7499 -111-
<PAGE> 1
EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS
(unaudited)
<TABLE>
<CAPTION> Three Months Ended
March 31 March 31
1994 1993
---- ----
<S> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding 352,972,879 347,379,209
Additional shares due to:
Stock options 3,309,018 3,268,492
Series C Preferred shares 870,968 --
----------- -----------
Total equivalent shares 357,152,865 350,647,701
=========== ===========
ADJUSTED EARNINGS (in millions):
Net income from Continuing
Operations $ 36 $ 59
Less: Series B preferred stock dividends 13 13
----------- -----------
Adjusted net income from
Continuing Operations 23 46
Income from Discontinued
Operations -- --
Cumulative effect of changes in
accounting principles -- (56)
----------- -----------
Adjusted net income (loss) after
cumulative effect of changes
in accounting principles $ 23 $ (10)
=========== ===========
EARNINGS (LOSS) PER SHARE
From Continuing Operations $ 0.07 $ 0.14
From cumulative effect of
changes in accounting principles -- (0.16)
----------- -----------
Earnings (loss) per share $ 0.07 $(0.02)
=========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 12(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31 December 31
1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $ 57 $ 99 $(236)
Less: Equity in income (loss) of
50 percent or less owned affiliates (1) (2) (7)
Add: Fixed charges excluding
capitalized interest 56 63 253
----- ----- -----
Earnings as adjusted $ 114 $ 164 $ 24
===== ===== =====
Fixed charges:
Interest expense $ 47 $ 53 $ 217
Rental expense 9 10 36
Capitalized interest - 1 3
----- ----- -----
Total fixed charges $ 56 $ 64 $ 256
===== ===== =====
Ratio of earnings to fixed charges 2.04x 2.56x (a)
===== ===== =====
</TABLE>
(a) Additional income before income taxes and minority interest of $232
million would be necessary to attain a ratio of earnings to fixed charges
of 1.00x for the year ended December 31, 1993.
<PAGE> 1
EXHIBIT 12(b) COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31
1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $ 57 $ 99 $(236)
Less: Equity in income (loss) of
50 percent or less owned affiliates (1) (2) (7)
Add: Fixed charges excluding
capitalized interest 77 83 325
----- ----- -----
Earnings as adjusted $ 135 $ 184 $ 96
===== ===== =====
Combined fixed charges and
preferred dividends:
Interest expense $ 47 $ 53 $ 217
Rental expense 9 10 36
Capitalized interest - 1 3
Pre-tax earnings required to cover
preferred dividend requirements (a) 21 20 72
----- ----- -----
Total combined fixed charges and
preferred dividends $ 77 $ 84 $ 328
===== ===== =====
Ratio of earnings to combined fixed
charges and preferred dividends 1.75x 2.19x (b)
===== ===== =====
</TABLE>
(a) Dividend requirement divided by 100% minus effective income tax rate.
(b) Additional income before income taxes and minority interest of $232
million would be necessary to attain a ratio of earnings to combined fixed
charges and preferred dividends of 1.00x for the year ended December 31,
1993.
