UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 1-7784
CENTURY TELEPHONE ENTERPRISES, INC.
A Louisiana Corporation I.R.S. Employer Identification
No. 72-0651161
100 Century Park Drive, Monroe, Louisiana 71203
Telephone number (318) 388-9500
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. [X] Yes [ ] No
As of October 31, 1996, there were 59,814,450 shares of common stock
outstanding.
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CENTURY TELEPHONE ENTERPRISES, INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Income--Three Months and Nine
Months Ended September 30, 1996 and 1995 3
Consolidated Balance Sheets--September 30, 1996 and
December 31, 1995 4
Consolidated Statements of Stockholders' Equity--
Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-20
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
Index to Exhibits 23
2
<PAGE>
PART I. FINANCIAL INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three months Nine months
ended September 30 ended September 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
(Dollars, except per share amounts,
and shares in thousands)
OPERATING REVENUES
Telephone $113,785 106,468 335,819 309,295
Mobile Communications 66,694 53,204 185,286 143,230
Other 12,617 7,632 34,343 20,373
-------- -------- -------- --------
Total operating revenues 193,096 167,304 555,448 472,898
-------- -------- -------- --------
OPERATING EXPENSES
Cost of sales and
operating expenses 100,783 81,480 286,764 236,021
Depreciation and
amortization 33,297 29,432 96,456 82,842
-------- -------- -------- --------
Total operating expenses 134,080 110,912 383,220 318,863
-------- -------- -------- --------
OPERATING INCOME 59,016 56,392 172,228 154,035
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (11,023) (10,924) (33,972) (32,771)
Income from unconsolidated
cellular entities 8,990 6,602 21,584 14,700
Gain on sales of assets 815 - 815 5,909
Minority interest (1,418) (2,440) (5,947) (6,281)
Other income and expense 1,544 1,150 2,601 2,850
-------- -------- -------- --------
Total other income
(expense) (1,092) (5,612) (14,919) (15,593)
-------- -------- -------- --------
INCOME BEFORE INCOME TAX
EXPENSE 57,924 50,780 157,309 138,442
Income tax expense 21,574 18,900 58,353 53,395
-------- -------- -------- --------
NET INCOME $ 36,350 31,880 98,956 85,047
======== ======== ======== ========
PRIMARY EARNINGS PER SHARE $ .60 .54 1.65 1.47
======== ======== ======== ========
FULLY DILUTED EARNINGS PER
SHARE $ .60 .54 1.64 1.46
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ .09 .0825 .27 .2475
======== ======== ======== ========
AVERAGE PRIMARY SHARES
OUTSTANDING 60,111 58,734 59,853 57,790
======== ======== ======== ========
AVERAGE FULLY DILUTED SHARES
OUTSTANDING 60,881 59,193 60,593 58,812
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
3
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CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
------------- ------------
(Dollars in thousands)
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 15,478 8,540
Accounts receivable
Customers, less allowance
of $3,866 and $2,768 57,902 50,943
Other 18,212 24,219
Materials and supplies, at average cost 7,108 6,608
Other 5,412 5,019
---------- ----------
104,112 95,329
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 1,113,301 1,047,808
---------- ----------
INVESTMENTS AND OTHER ASSETS
Excess cost of net assets acquired,
less accumulated amortization of
$63,439 and $52,944 509,610 493,655
Other 233,762 225,629
---------- ----------
743,372 719,284
---------- ----------
$1,960,785 1,862,421
========== ==========
LIABILITIES AND EQUITY
- ----------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 21,288 15,325
Notes payable - 14,199
Accounts payable 50,037 55,329
Accrued expenses and other liabilities
Salaries and benefits 19,260 18,178
Taxes 24,395 12,489
Interest 10,861 6,024
Other 8,660 5,337
Advance billings and customer deposits 14,969 13,043
---------- ----------
149,470 139,924
---------- ----------
LONG-TERM DEBT 589,777 622,904
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES 222,071 211,169
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
175,000,000 shares, issued and outstanding
59,808,933 and 59,113,670 shares 59,809 59,114
Paid-in capital 471,324 453,584
Retained earnings 470,089 387,424
Unearned ESOP shares (11,830) (13,960)
Preferred stock - non-redeemable 10,075 2,262
---------- ----------
999,467 888,424
---------- ----------
$1,960,785 1,862,421
========== ==========
See accompanying notes to consolidated financial statements.
4
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
COMMON STOCK
Balance at beginning of period $ 59,114 53,574
Issuance of common stock for acquisitions 257 577
Conversion of debentures into common stock - 4,540
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 406 335
Conversion of preferred stock into common stock 32 -
-------- --------
Balance at end of period 59,809 59,026
-------- --------
PAID-IN CAPITAL
Balance at beginning of period 453,584 319,235
Issuance of common stock for acquisitions 8,201 15,981
Conversion of debentures into common stock - 108,596
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 8,436 4,566
Amortization of unearned compensation and other 973 986
Conversion of preferred stock into common stock 130 -
-------- --------
Balance at end of period 471,324 449,364
-------- --------
RETAINED EARNINGS
Balance at beginning of period 387,424 291,999
Net income 98,956 85,047
Cash dividends declared
Common stock-$.27 and $.2475 per share (15,999) (14,385)
Preferred stock (292) (92)
-------- --------
Balance at end of period 470,089 362,569
-------- --------
UNEARNED ESOP SHARES
Balance at beginning of period (13,960) (16,840)
Release of ESOP shares 2,130 2,130
-------- --------
Balance at end of period (11,830) (14,710)
-------- --------
PREFERRED STOCK - NON-REDEEMABLE
Balance at beginning of period 2,262 2,268
Issuance of preferred stock for acquisition 7,975 -
Conversion of preferred stock into common stock (162) -
-------- --------
Balance at end of period 10,075 2,268
-------- --------
TOTAL STOCKHOLDERS' EQUITY $999,467 858,517
======== ========
See accompanying notes to consolidated financial statements.
5
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
OPERATING ACTIVITIES
Net income $ 98,956 85,047
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 96,456 82,842
Deferred income taxes 4,644 4,481
Income from unconsolidated cellular entities (21,584) (14,700)
Minority interest 5,947 6,281
Loss on investment in unconsolidated
personal communications services entity 1,100 -
Gain on sales of assets (815) (5,909)
Changes in current assets and current liabilities:
Increase in accounts receivable (726) (8,968)
Decrease in accounts payable (5,386) (1,231)
Increase in other accrued taxes 11,767 8,892
Changes in other current assets and other
current liabilities, net 11,984 1,464
Increase in other noncurrent liabilities 3,850 4,702
Other, net 5,275 6,504
------- --------
Net cash provided by operating activities 211,468 169,405
------- --------
INVESTING ACTIVITIES
Payments for property, plant and equipment (153,892) (143,551)
Acquisitions, net of cash acquired (17,022) (21,906)
Proceeds from sales of assets - 17,922
Reimbursement of investment in unconsolidated
personal communications services entity 18,900 -
Investments in unconsolidated cellular entities (744) (7,786)
Distributions from unconsolidated cellular entities 9,464 3,048
Purchase of life insurance investment (5,944) (6,417)
Note receivable 1,250 416
Other, net (2,347) (1,713)
-------- --------
Net cash used in investing activities (150,335) (159,987)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 22,285 31,487
Payments of long-term debt (54,969) (16,576)
Notes payable, net (14,199) (12,000)
Proceeds from issuance of common stock 8,801 4,901
Cash dividends (16,291) (14,477)
Other, net 178 119
-------- --------
Net cash used in financing activities (54,195) (6,546)
-------- --------
Net increase in cash and cash equivalents 6,938 2,872
Cash and cash equivalents at beginning of period 8,540 7,154
-------- --------
Cash and cash equivalents at end of period $ 15,478 10,026
======== ========
Supplemental cash flow information:
Income taxes paid $ 42,446 45,884
======== ========
Interest paid $ 29,135 32,480
======== ========
See accompanying notes to consolidated financial statements.
6
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(UNAUDITED)
(1) Basis of Financial Reporting
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations of the
Securities and Exchange Commission; however, the Company believes the
disclosures which are made are adequate to make the information presented not
misleading. The financial statements and footnotes included in this Form 10-Q
should be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1995. Certain 1995 amounts have been reclassified to be consistent with the
1996 presentation.
The unaudited financial information for the three months and nine months
ended September 30, 1996 and 1995 has not been audited by independent public
accountants; however, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
results of operations for the three-month and nine-month periods have been
included therein. The results of operations for the first nine months of the
year are not necessarily indicative of the results of operations which might be
expected for the entire year.
(2) Net Property, Plant and Equipment
Net property, plant and equipment is composed of the following:
September 30, December 31,
1996 1995
------------- -----------
(Dollars in thousands)
Telephone, at original cost $1,273,380 1,207,347
Accumulated depreciation (406,841) (357,633)
--------- ---------
866,539 849,714
--------- ---------
Mobile Communications, at cost 243,947 191,594
Accumulated depreciation (70,384) (54,927)
--------- ---------
173,563 136,667
--------- ---------
Corporate and other, at cost 114,650 100,613
Accumulated depreciation (41,451) (39,186)
--------- ---------
73,199 61,427
--------- ---------
$1,113,301 1,047,808
========= =========
(3) Earnings from Unconsolidated Cellular Entities
The following summarizes the unaudited combined results of operations of
the cellular entities in which the Company's investments (as of September 30,
1996 and 1995) were accounted for by the equity method.
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Results of operations
Revenues $722,424 536,296
Operating income $250,839 187,179
Net income $251,193 188,536
7
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(UNAUDITED)
(4) Sales of Assets
In the first quarter of 1995 the Company sold, for an aggregate of
approximately $17.9 million cash, its ownership interests in certain
non-strategic Rural Service Area cellular systems located primarily in western
states and three Metropolitan Statistical Area cellular systems located in the
midwest, which represented an aggregate of approximately 253,000 pops. These
transactions resulted in a pre-tax gain of $5.9 million ($2.0 million
after-tax).
(5) Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," during the first quarter of 1996. SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. SFAS 121 also requires that a rate-regulated enterprise
recognize an impairment for the amount of costs excluded when a regulator
excludes all or part of a cost from the enterprise's rate base. The adoption of
SFAS 121 did not materially affect the Company's consolidated financial position
or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation." SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. As allowed by
SFAS 123, the Company plans to continue to measure compensation cost for
employee stock compensation plans using the method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
will provide pro forma disclosures in the Notes to the Consolidated Financial
Statements as required by SFAS 123.
(6) Shareholders' Rights Plan
In August 1996, the Board of Directors declared a dividend of one
preference share purchase right for each common share outstanding. Such rights
become exercisable if and when a potential acquiror takes certain steps to
acquire 15% or more of Century's common stock. Upon the occurrence of such an
acquisition, each right held by shareholders other than the acquiror may be
exercised to receive that number of shares of common stock or other securities
of Century (or, in certain situations, the acquiring company) which at the time
of such transaction will have a market value of two times the exercise price of
the right.
The Shareholders' Rights Plan approved by the Board of Directors in 1986
will expire in November 1996.
8
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") included herein should be read in conjunction with MD&A and
other information included in the Company's annual report on Form 10-K for the
year ended December 31, 1995. The results of operations for the three months and
nine months ended September 30, 1996 are not necessarily indicative of the
results of operations which might be expected for the entire year.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared
to Three Months Ended September 30, 1995
Net income for the third quarter of 1996 was $36.4 million compared to
$31.9 million during the third quarter of 1995, a 14.0% increase. The increase
was principally due to a $2.6 million increase in operating income, a $2.4
increase in income from unconsolidated cellular entities, a $1.0 million
decrease in minority interest and an $815,000 pre-tax gain on sales of assets,
which were partially offset by a $2.7 million increase in income tax expense.
Three months
ended September 30
------------------
1996 1995
---- ----
(Dollars, except per
share amounts, and
shares in thousands)
Operating income (loss)
Telephone $38,933 36,555
Mobile Communications 20,153 18,517
Other (70) 1,320
------ ------
59,016 56,392
Interest expense (11,023) (10,924)
Income from unconsolidated cellular entities 8,990 6,602
Gain on sales of assets 815 -
Minority interest (1,418) (2,440)
Other income and expense 1,544 1,150
Income tax expense (21,574) (18,900)
------- ------
Net income $36,350 31,880
====== ======
Fully diluted earnings per share $ .60 .54
====== ======
Average fully diluted shares outstanding 60,881 59,193
====== ======
Fully diluted earnings per share increased to $.60 for the three months
ended September 30, 1996 from $.54 during the three months ended September 30,
1995, an 11.1% increase. The average number of fully diluted shares outstanding
increased 2.9%, primarily as a result of shares issued for acquisitions and
through the Company's dividend reinvestment, incentive and benefit plans.
Contributions to operating revenues and operating income by the Company's
telephone, mobile communications, and other operations for the three months
ended September 30, 1996 and 1995 were as follows:
9
<PAGE>
Three months
ended September 30
------------------
1996 1995
---- ----
Operating revenues
Telephone operations 58.9% 63.6
Mobile Communications operations 34.5% 31.8
Other operations 6.6% 4.6
Operating income (loss)
Telephone operations 66.0% 64.8
Mobile Communications operations 34.1% 32.8
Other operations ( .1)% 2.4
Telephone Operations
- --------------------
Three months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating revenues
Local service $ 31,248 28,455
Network access and long distance 68,433 65,596
Other 14,104 12,417
------- -------
113,785 106,468
------- -------
Operating expenses
Plant operations 22,885 21,801
Customer operations 10,936 9,759
Corporate and other 17,252 15,976
Depreciation and amortization 23,779 22,377
------- -------
74,852 69,913
------- -------
Operating income $ 38,933 36,555
======= =======
Telephone operating income increased $2.4 million (6.5%) due to an increase
in operating revenues of $7.3 million (6.9%) which more than offset an increase
in operating expenses of $4.9 million (7.1%).
The $7.3 million increase in revenues was substantially due to a $1.4
million increase in revenues based on minutes of use; a $1.5 million increase
which resulted from an increase in the number of customer access lines; a $2.3
million increase in amounts received from the Federal Communications Commission
("FCC") mandated Universal Service Fund ("USF"); a $1.7 million increase in
revenues related to leasing, selling, installing, maintaining and repairing
customer premise telecommunications equipment and wiring ("CPE services") and an
$840,000 increase in the partial recovery of increased operating expenses
through revenue pools in which the Company participates with other telephone
companies. These increases were partially offset by a $450,000 reduction in
access fees due to the previously-announced reduction in intrastate switched
access rates mandated by the Louisiana Public Service Commission ("LPSC") which
is being phased in from July 1995 through July 1997. For additional information,
see "Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995 -- Telephone Operations."
During the third quarter of 1996, plant operations expenses increased $1.1
million (5.0%), of which $574,000 was due to an increase in expenses incurred in
the provision of CPE services.
10
<PAGE>
Customer operations expenses increased $1.2 million (12.1%) in the third
quarter of 1996, primarily due to increases of $544,000 in salaries and wages
and $309,000 in expenses incurred in the provision of CPE services. A
significant portion of the increases in these customer operations expenses
related to the Company's increased sales and marketing efforts.
Of the $1.3 million (8.0%) increase in corporate and other expenses,
$427,000 was attributable to increased operating taxes and $772,000 to the
provision of CPE services.
Depreciation and amortization increased $1.4 million (6.3%) primarily due
to a higher level of plant in service.
Cellular Operations and Investments
- -----------------------------------
Three months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating income - mobile
communications segment $20,153 18,517
Minority interest (1,534) (2,440)
Income from unconsolidated
cellular entities 8,990 6,602
------ ------
$27,609 22,679
====== ======
The mobile communications segment reflects 100% of the results of
operations of the cellular entities in which the Company has a majority
interest. The minority interest owners' share of the income of such entities was
$1.5 million during the third quarter of 1996 and $2.4 million during the third
quarter of 1995 and is reflected in the Company's Consolidated Statements of
Income as an expense in "Minority interest." See Minority Interest for
additional information.
The Company's share of earnings from the cellular entities in which it has
less than a majority interest is accounted for using the equity method and is
reflected in the Company's Consolidated Statements of Income in "Income from
unconsolidated cellular entities." The Company's share of income from such
entities was $9.0 million and $6.6 million during the three months ended
September 30, 1996 and 1995, respectively.
Mobile Communications Operations
- --------------------------------
Three months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating revenues
Cellular service $65,621 51,858
Equipment sales 1,073 1,346
------ ------
66,694 53,204
------ ------
Operating expenses
Cost of equipment sold 3,167 2,083
System operations 10,279 6,831
General, administrative and
customer service 13,529 10,072
Sales and marketing 10,805 9,248
Depreciation and amortization 8,761 6,453
------ ------
46,541 34,687
------ ------
Operating income $20,153 18,517
====== ======
11
<PAGE>
Mobile communications operating income increased $1.6 million (8.8%) to
$20.2 million in the third quarter of 1996 from $18.5 million in the third
quarter of 1995. Mobile communications operating revenues increased $13.5
million (25.4%) which more than offset an increase in operating expenses of
$11.9 million (34.2%).
The increase in cellular service revenues was substantially due to the
increase in the number of cellular customers. The average number of cellular
units in service in majority-owned markets during the third quarter of 1996 and
1995 was 331,000 and 250,000, respectively. Exclusive of acquisitions, access
and usage revenues increased $8.4 million in the third quarter of 1996 and
roaming and toll revenues increased $2.8 million. Cellular operations acquired
subsequent to the second quarter of 1995 contributed $3.4 million of service
revenues during the third quarter of 1996 and $1.4 million during the third
quarter of 1995.
The average monthly cellular service revenue per customer declined to $66
during the third quarter of 1996 from $69 during the third quarter of 1995. It
has been an industry-wide trend that early subscribers have normally been the
heaviest users and that a higher percentage of new subscribers tend to be lower
usage customers. The average monthly service revenue per customer may further
decline (i) as market penetration increases and additional lower usage customers
are activated and (ii) as competitive pressures intensify and place additional
pressure on rates. The Company is responding to such competitive pressures by,
among other things, modifying certain of its price plans and implementing
certain other plans and promotions, all of which may result in lower average
revenue per customer. The Company will continue to focus on customer service and
attempt to stimulate cellular usage by promoting the availability of certain
enhanced services and by improving the quality of its service through the
construction of additional cell sites and other enhancements to its system,
including the planned deployment of digital service with PCS-type features in
certain cellular markets during the fourth quarter of 1996.
Equipment sales decreased $273,000 (20.3%) in the third quarter of 1996
compared to the third quarter of 1995. Although the Company sold more phones in
the third quarter of 1996 than in the third quarter of 1995, revenues decreased
because the Company has increasingly sold phones below cost, a practice which is
common in the cellular industry. The increase in cost of equipment sold during
the third quarter of 1996 resulted from the increase in the number of cellular
phones sold.
System operations expenses increased $3.4 million (50.5%) in the third
quarter of 1996 primarily due to a $2.3 million increase in the net cost paid to
other carriers related to the provision of cellular service by such other
carriers to the Company's customers who roam in the other carriers' service
areas in excess of the amounts the Company bills its customers. The remainder of
the increase in system operations expenses resulted primarily from the operation
of new cell sites.
General, administrative and customer service expenses increased $3.5
million (34.3%) primarily due to increased expenses resulting from a larger
customer base, such as customer service and retention expenses (an increase of
$1.6 million), the provision for doubtful accounts (an increase of $742,000) and
general office expenses (an increase of $866,000).
Sales and marketing costs increased $1.6 million (16.8%) substantially due
to a $671,000 increase in costs incurred in selling the Company's products and
services in retail locations, including Company-owned retail stores. The
remaining increase was substantially due to an increase in advertising and sales
promotions expenses.
Depreciation and amortization increased $2.3 million (35.8%) due primarily
to a higher level of plant in service.
12
<PAGE>
Other Operations
- ----------------
Other operations include the results of operations of subsidiaries of the
Company which are not included in the telephone or mobile communications
segments, including, but not limited to, the Company's competitive access
subsidiary and the Company's nonregulated long distance operations. The
operating loss of the Company's competitive access subsidiary was $727,000
greater during the third quarter of 1996 than in the third quarter of 1995.
Income from Unconsolidated Cellular Entities
- --------------------------------------------
Earnings from unconsolidated cellular entities, net of the amortization of
associated goodwill, increased $2.4 million (36.2%) during the third quarter of
1996 compared to the third quarter of 1995 due to the improvement in
profitability of the cellular entities in which the Company owns less than a
majority interest.
Minority Interest
- -----------------
The expense recorded by the Company to reflect the minority interest
owners' share of the profits of the Company's majority-owned and operated
cellular entities decreased $1.0 million during the third quarter of 1996
compared to the third quarter of 1995 primarily due to the effect of the
Company's acquisition, during the second quarter of 1996, of an additional 25%
interest in a cellular partnership (which the Company operates) which decreased
the minority interest owners' share of such partnership.
Income Tax Expense
- ------------------
Income tax expense increased $2.7 million (14.1%) during the third quarter
of 1996 compared to the third quarter of 1995 primarily due to the increase in
income before taxes.
13
<PAGE>
Nine Months Ended September 30, 1996 Compared
to Nine Months Ended September 30, 1995
Net income for the first nine months of 1996 increased $13.9 million
(16.4%) to $99.0 million from $85.0 million during the first nine months of
1995. The increase was principally due to an $18.2 million increase in operating
income and a $6.9 million increase in income from unconsolidated cellular
entities. Such increases were partially offset by a $5.0 million increase in
income tax expense and a $5.1 million decrease in gain on sales of assets.
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars, except per
share amounts, and
shares in thousands)
Operating income
Telephone $115,348 105,925
Mobile Communications 56,105 45,515
Other 775 2,595
------- -------
172,228 154,035
Interest expense (33,972) (32,771)
Income from unconsolidated cellular entities 21,584 14,700
Gain on sales of assets 815 5,909
Minority interest (5,947) (6,281)
Other income and expense 2,601 2,850
Income tax expense (58,353) (53,395)
------- -------
Net income $ 98,956 85,047
======= =======
Fully diluted earnings per share $ 1.64 1.46
======= =======
Average fully diluted shares outstanding 60,593 58,812
======= =======
Fully diluted earnings per share increased to $1.64 for the nine months
ended September 30, 1996 from $1.46 during the nine months September 30, 1995, a
12.3% increase. The average number of fully diluted shares outstanding increased
3.0%, primarily as a result of shares issued for acquisitions and through the
Company's dividend reinvestment, incentive and benefit plans.
Contributions to operating revenues and operating income by the Company's
telephone, mobile communications, and other operations for the nine months ended
September 30, 1996 and 1995 were as follows:
Nine months
ended September 30
------------------
1996 1995
---- ----
Operating revenues
Telephone operations 60.5% 65.4
Mobile Communications operations 33.3% 30.3
Other operations 6.2% 4.3
Operating income
Telephone operations 67.0% 68.8
Mobile Communications operations 32.6% 29.5
Other operations .4% 1.7
14
<PAGE>
Telephone Operations
- --------------------
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating revenues
Local service $ 90,542 82,933
Network access and long distance 205,134 189,752
Other 40,143 36,610
------- -------
335,819 309,295
======= =======
Operating expenses
Plant operations 67,582 64,475
Customer operations 31,761 28,849
Corporate and other 50,669 46,790
Depreciation and amortization 70,459 63,256
------- -------
220,471 203,370
------- -------
Operating income $115,348 105,925
======= =======
Telephone operating income increased $9.4 million (8.9%) due to an increase
in operating revenues of $26.5 million (8.6%) which more than offset an increase
in operating expenses of $17.1 million (8.4%).
The $26.5 million increase in revenues was substantially due to a $6.8
million increase in revenues based on minutes of use, of which approximately
$2.6 million was associated with a change, effective during the third quarter of
1995, in the methodology applied in the network access revenue billing process.
Also contributing to the $26.5 million increase in revenues was a $4.8 million
increase which resulted from an increase in the number of customer access lines;
a $5.5 million increase in amounts received from the FCC mandated USF; a $3.7
million increase in the partial recovery of increased operating expenses through
revenue pools in which the Company participates with other telephone companies;
and a $4.0 million increase in revenues related to CPE services.
The increases in revenues were partially offset by a $1.3 million reduction
in access fees due to the previously-announced reduction in intrastate switched
access rates mandated by the LPSC which is being phased in from July 1995
through July 1997. As such rate reduction in Louisiana continues to be phased
in, future access revenues will be reduced up to approximately $2.1 million
annually (in addition to the reductions disclosed in the Company's Form 10-K for
the year ended December 31, 1995) because of the above-mentioned change in the
methodology applied in the network access revenue billing process. The Company
anticipates certain other future revenue reductions resulting primarily from
regulatory changes and competitive pressures. Based on anticipated revenue
reductions, the Company expects its internal telephone revenue growth rate to
slow during upcoming quarters.
During the first nine months of 1996, plant operations expenses increased
$3.1 million (4.8%), of which $1.8 million was due to an increase in expenses
incurred in the provision of CPE services and $794,000 was due to an increase in
salaries and wages.
Customer operations expenses increased $2.9 million (10.1%) in the first
nine months of 1996, primarily due to increases of $1.5 million in salaries and
wages and $730,000 in expenses incurred in the provision of CPE services. A
significant portion of the increases in these customer operations expenses
related to the Company's increased sales and marketing efforts.
Of the $3.9 million (8.3%) increase in corporate and other expenses, $1.6
million was attributable to increased operating taxes and $2.0 million to the
provision of CPE services.
15
<PAGE>
Depreciation and amortization increased $7.2 million (11.4%) primarily due
to a higher level of plant in service. The composite depreciation rate for
telephone properties was 7.5% for the nine months ended September 30, 1996 and
7.4% for the nine months ended September 30, 1995.
Cellular Operations and Investments
- -----------------------------------
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating income - mobile
communications segment $56,105 45,515
Minority interest (6,141) (6,281)
Income from unconsolidated
cellular entities 21,584 14,700
------ ------
$71,548 53,934
====== ======
The mobile communications segment reflects 100% of the results of
operations of the cellular entities in which the Company has a majority
interest. The minority interest owners' share of the income of such entities was
$6.1 million during the first nine months of 1996 and $6.3 million during the
first nine months of 1995 and is reflected in the Company's Consolidated
Statements of Income as an expense in "Minority interest." See Minority Interest
for additional information.
The Company's share of earnings from the cellular entities in which it has
less than a majority interest is accounted for using the equity method and is
reflected in the Company's Consolidated Statements of Income in "Income from
unconsolidated cellular entities." The Company's share of income from such
entities was $21.6 million and $14.7 million during the nine months ended
September 30, 1996 and 1995, respectively. See Income from Unconsolidated
Cellular Entities for additional information.
Mobile Communications Operations
- --------------------------------
Nine months
ended September 30
------------------
1996 1995
---- ----
(Dollars in thousands)
Operating revenues
Cellular service $182,218 139,101
Equipment sales 3,068 4,129
------- -------
185,286 143,230
------- -------
Operating expenses
Cost of equipment sold 8,889 6,558
System operations 26,632 19,468
General, administrative and
customer service 38,626 27,920
Sales and marketing 31,012 25,672
Depreciation and amortization 24,022 18,097
------- -------
129,181 97,715
------- ------
Operating income $ 56,105 45,515
======= =======
Mobile communications operating income increased $10.6 million (23.3%) to
$56.1 million in the first nine months of 1996 from $45.5 million in the first
nine months of 1995. Mobile communications operating revenues increased $42.1
million (29.4%) which more than offset an increase in operating expenses of
$31.5 million (32.2%).
16
<PAGE>
The increase in cellular service revenues was primarily due to the increase
in the number of cellular customers. The average number of cellular units in
service in majority-owned markets during the first nine months of 1996 and 1995
was 314,700 and 233,000, respectively. Exclusive of acquisitions, access and
usage revenues increased $26.0 million in the first nine months of 1996 and
roaming and toll revenues increased $9.2 million. Cellular operations acquired
subsequent to the second quarter of 1995 contributed $8.3 million of service
revenues during the first nine months of 1996 and $1.4 million during the first
nine months of 1995.
The average monthly cellular service revenue per customer declined to $64
during the first nine months of 1996 from $66 during the first nine months of
1995. It has been an industry-wide trend that early subscribers have normally
been the heaviest users and that a higher percentage of new subscribers tend to
be lower usage customers. The average monthly service revenue per customer may
further decline (i) as market penetration increases and additional lower usage
customers are activated and (ii) as competitive pressures intensify and place
additional pressure on rates. The Company is responding to such competitive
pressures by, among other things, modifying certain of its price plans and
implementing certain other plans and promotions, all of which may result in
lower average revenue per customer. The Company will continue to focus on
customer service and attempt to stimulate cellular usage by promoting the
availability of certain enhanced services and by improving the quality of its
service through the construction of additional cell sites and other enhancements
to its system, including the planned deployment of digital service with PCS-type
features in certain cellular markets during the fourth quarter of 1996.
Equipment sales decreased $1.1 million (25.7%) during the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995.
Although the Company sold more phones in the first nine months of 1996 than in
the first nine months of 1995, revenues decreased because the Company has
increasingly sold phones below cost, a practice which is common in the cellular
industry. The increase in cost of equipment sold during the first nine months of
1996 resulted from the increase in the number of cellular phones sold.
System operations expenses increased $7.2 million (36.8%) during the nine
months ended September 30, 1996 primarily due to a $4.9 million increase in the
net cost paid to other carriers related to (i) the provision of cellular service
by such other carriers to the Company's customers who roam in the other
carriers' service areas in excess of the amounts the Company bills its customers
and (ii) cellular fraud. The remainder of the increase in system operations
expenses resulted primarily from the operation of new cell sites.
General, administrative and customer service expenses increased $10.7
million (38.3%) primarily due to increased expenses resulting from a larger
customer base, such as customer service and retention expenses (an increase of
$3.9 million), the provision for doubtful accounts (an increase of $2.5 million)
and general office expenses (an increase of $3.0 million).
Sales and marketing expenses increased $5.3 million (20.8%) primarily due
to a $1.6 million increase in advertising and sales promotions expenses, a $1.4
million increase in commissions paid to agents and employees for selling
cellular service to new customers, and a $2.3 million increase in costs incurred
in selling products and services in retail locations, including Company-owned
retail stores.
Depreciation and amortization increased $5.9 million (32.7%) due primarily
to a higher level of plant in service.
17
<PAGE>
Other Operations
- ----------------
Other operations include the results of operations of subsidiaries of the
Company which are not included in the telephone or mobile communications
segments, including, but not limited to, the Company's competitive access
subsidiary and the Company's nonregulated long distance operations. Of the $14.0
million (68.6%) increase in operating revenues during the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995, $11.4
million was applicable to the long distance operations. Of the $15.8 million
(88.8%) increase in operating expenses, $10.4 million was incurred by the long
distance operations. During the first nine months of 1996, the operating loss of
the Company's competitive access subsidiary was $2.0 million greater than during
the first nine months of 1995.
Interest Expense
- ----------------
Interest expense increased $1.2 million (3.7%) during the first nine months
of 1996 compared to the first nine months of 1995 primarily due to an increase
in average debt outstanding.
Income from Unconsolidated Cellular Entities
- --------------------------------------------
Earnings from unconsolidated cellular entities, net of the amortization of
associated goodwill, increased $6.9 million (46.8%) during the first nine months
of 1996 compared to the first nine months of 1995 due primarily to the
improvement in profitability of the cellular entities in which the Company owns
less than a majority interest. During the first nine months of 1995, the Company
recorded a nonrecurring $800,000 reduction in earnings from unconsolidated
cellular entities as a result of a retroactive adjustment recorded by the
operator of a cellular partnership in which the Company owns less than a
majority interest.
Gain on Sales of Assets
- -----------------------
During the first quarter of 1995, the Company sold its ownership interests
in certain non-strategic cellular systems which resulted in a pre-tax gain of
$5.9 million ($2.0 million after-tax; $.03 per fully diluted share). For
additional information, see Note 4 of Notes to Consolidated Financial
Statements.
Minority Interest
- -----------------
The increased profitability of the Company's majority-owned and operated
cellular entities during the first nine months of 1996 as compared to the first
nine months of 1995 resulted in a corresponding increase of $1.8 million in the
expense recorded by the Company to reflect the minority interest owners' share
of the profits. Such increase in expense was more than offset by the effect of
the Company's acquisition, during the second quarter of 1996, of an additional
25% interest in a cellular partnership (which the Company operates) which
decreased the minority interest owners' share of such partnership.
Other Income and Expense
- ------------------------
Other income and expense for the first nine months of 1996 was $2.6 million
compared to $2.9 million during the first nine months of 1995. During 1995 the
Company invested $20.0 million in exchange for a minority equity interest in an
entity formed for the purpose of participating in the FCC auction of one 30MHz
Personal Communications Services ("PCS") license for each Basic Trading Area. In
April 1996, such entity withdrew from the auction and, as a result thereof, the
Company withdrew its equity investment in such entity and recorded a $1.1
million loss during the first quarter of 1996. The $1.1 million was the portion
of the Company's investment which, under the terms of its agreement with such
entity, it was not entitled to recoup.
18
<PAGE>
Income Tax Expense
- ------------------
Income tax expense increased $5.0 million (9.3%) during the first nine
months of 1996 compared to the first nine months of 1995 primarily due to the
increase in income before taxes. The effective income tax rate was 37.1% in the
nine months ended September 30, 1996 and 38.6% in the nine months ended
September 30, 1995. The effective income tax rate attributable to the gain on
sales of assets in the first quarter of 1995 was considerably higher than the
Company's consolidated effective income tax rate for the first nine months of
1995.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash used for acquisitions, the Company relies on cash provided
by operations to provide a substantial portion of its cash needs. The Company's
telephone operations have historically provided a stable source of cash flow
which has helped the Company continue its long-term program of capital
improvements. Cash provided by mobile communications operations has increased
each year since that segment became cash-flow positive.
Net cash provided by operating activities was $211.5 million during the
first nine months of 1996 compared to $169.4 million during the first nine
months of 1995. The Company's accompanying consolidated statements of cash flows
identify major differences between net income and net cash provided by operating
activities for each of these periods. For additional information relating to the
telephone operations, mobile communications operations, and other operations of
the Company, see Results of Operations.
Net cash used in investing activities was $150.3 million and $160.0 million
for the nine months ended September 30, 1996 and 1995, respectively. Capital
expenditures for the nine months ended September 30, 1996 were $80.0 million for
telephone operations, $56.8 million for mobile communications operations and
$17.2 million for other operations. The $150.3 million of net cash used in
investing activities in 1996 was net of the reimbursement of $18.9 million
related to the Company's withdrawal of its equity investment in an entity formed
for the purpose of participating in the FCC auction of 30MHz PCS licenses. The
$160.0 million of net cash used in investing activities in 1995 was net of $17.9
million of proceeds from the sale of certain cellular systems. Investments in
unconsolidated cellular entities were $7.0 million less during the nine months
ended September 30, 1996 compared to the nine months ended September 30, 1995
while distributions received from unconsolidated cellular entities were $6.4
million more during 1996 compared to 1995.
Net cash used in financing activities was $54.2 million during the first
nine months of 1996 compared to $6.5 million during the first nine months of
1995. Net payments of debt, including notes payable and long-term debt, were
$49.8 million more during the first nine months of 1996.
Budgeted capital expenditures for 1996 total $102 million for telephone
operations and $26 million for other operations. Revised budgeted capital
expenditures for 1996 total $80 million for mobile communications operations.
In August 1996 Standard & Poor's upgraded Century's senior unsecured debt
rating from BBB+ to A-.
19
<PAGE>
As of September 30, 1996, Century's telephone subsidiaries had available
for use $139.9 million of commitments for long-term financing from the Rural
Utilities Service and the Company had $139.1 million of undrawn committed bank
lines of credit. In addition, approximately $130.0 million of uncommitted credit
facilities were available to Century at September 30, 1996. The Company has
experienced no significant problems in obtaining funds through the issuance of
debt or equity for capital expenditures or other purposes.
OTHER MATTERS
The Company currently accounts for its regulated telephone operations in
accordance with the provisions of Statement of Financial Accounting Standards
No. 71 ("SFAS 71"), "Accounting for the Effects of Certain Types of Regulation."
The ongoing applicability of SFAS 71 to the Company's telephone operations is
being monitored due to the changing regulatory, competitive and legislative
environments, and it is possible that changes in regulation or legislation or
anticipated changes in competition or in the demand for regulated services or
products could result in the Company's telephone operations not being subject to
SFAS 71 in the near future. In that event, implementation of Statement of
Financial Accounting Standards No. 101 ("SFAS 101"), "Regulated Enterprises -
Accounting for the Discontinuance of Application of FASB Statement No. 71,"
would require the write-off of previously established regulatory assets and
liabilities, along with an adjustment of certain accumulated depreciation
accounts to reflect the difference between recorded depreciation and the amount
of depreciation that would have been recorded had the Company's telephone
operations not been subject to rate regulation. Such discontinuance of the
application of SFAS 71 would result in a material, noncash charge against
earnings which would be reported as an extraordinary item. While the effect of
implementing SFAS 101 cannot be precisely estimated at this time, management
believes that the noncash, after-tax, extraordinary charge would be between $100
million and $150 million.
In August 1996 the FCC issued an order (the "Order") which included the
rules implementing most of the interconnection provisions of the
Telecommunications Act of 1996 (the "1996 Act"). Under the 1996 Act's rural
telephone company exemption, all of the Company's telephone subsidiaries are
exempt from certain interconnection requirements until such time as the state
regulatory commission with jurisdiction over any such company receives notice of
a bona fide request for interconnection, services or network elements and such
commission determines that the request is technically feasible, not unduly
economically burdensome and is consistent with the universal service provisions
contained in the 1996 Act. Under the Order, where an appropriate bona fide
request is received by the state regulatory commission, the burden of proving
that the exemption should continue is the responsibility of the rural local
exchange company. Certain provisions of the Order are currently "stayed" pending
judicial review.
20
<PAGE>
PART II. OTHER INFORMATION
CENTURY TELEPHONE ENTERPRISES, INC.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
A. Exhibits
--------
3(i) Amended and Restated Articles of Incorporation of Registrant,
dated as of August 27, 1996.
3(ii) Registrant's Bylaws, as amended through October 7, 1996.
4 Rights Agreement, dated as of August 27, 1996, between
Century Telephone Enterprises, Inc. and Society National
Bank, as Rights Agent (incorporated by reference to Exhibit 1
of Registrant's Current Report on Form 8-K filed August 30,
1996).
10 Consulting Agreement, dated as of July 2, 1996, by and
between Century Telephone Enterprises, Inc. and Jim D.
Reppond.
11 Computations of Earnings per Share
27 Financial Data Schedule
B. Reports on Form 8-K
-------------------
The following item was reported in a Form 8-K filed August 30, 1996:
Item 5. Other Events - Adoption of Shareholders' Rights Plan
21
<PAGE>
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.
CENTURY TELEPHONE ENTERPRISES, INC.
Date: November 7, 1996 /s/ Murray H. Greer
-------------------------
Murray H. Greer
Controller
(Principal Accounting Officer)
22
<PAGE>
CENTURY TELEPHONE ENTERPRISES, INC.
INDEX TO EXHIBITS
Exhibit
Number
- ------
3(i) Amended and Restated Articles of Incorporation of
Registrant, dated as of August 27, 1996, included herein.
3(ii) Registrant's Bylaws, as amended through October 7, 1996,
included herein.
4 Rights Agreement, dated as of August 27, 1996, between Century
Telephone Enterprises, Inc. and Society National Bank, as Rights Agent
(incorporated by reference to Exhibit 1 of Registrant's Current Report on
Form 8-K filed August 30, 1996).
10 Consulting Agreement, dated as of July 2, 1996, by and
between Century Telephone Enterprises, Inc. and Jim D. Reppond,
included herein.
11 Computations of Earnings Per Share, included herein.
27 Financial Data Schedule, included herein.
23
<PAGE>
Exhibit 3(i)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CENTURY TELEPHONE ENTERPRISES, INC.
(Composite Copy of Amended and Restated Articles dated as of May 23, 1995
and all Subsequent Amendments through August 27, 1996,
Compiled in the Manner Required by Rule 601 of Regulation S-K
Promulgated Under the Securities Act of 1933, as Amended)
ARTICLE I
Name
The name of this Corporation is Century Telephone Enterprises, Inc.
ARTICLE II
Purpose
The purpose of the Corporation is to engage in any lawful activity for
which corporations may be formed under the Business Corporation Law of
Louisiana.
ARTICLE III
Capital
A. AUTHORIZED STOCK. The Corporation shall be authorized to issue an
aggregate of 177 million shares of capital stock, of which 175 million shares
shall be Common Stock, $1.00 par value per share, and two million shares shall
be Preferred Stock, $25.00 par value per share.
B. PREFERRED STOCK. (1) The Preferred Stock may be issued from time to time
in one or more series.
(2) In respect to any series of Preferred Stock, the Board of Directors
is hereby authorized to fix or alter the dividend rights, dividend rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series. In addition thereto the Board of Directors shall have
such other powers with respect to the Preferred Stock and any series thereof as
shall be permitted by applicable law.
-1-
<PAGE>
(3) No full dividend for any quarterly dividend period may be declared
or paid on shares of any series of Preferred Stock unless the full dividend for
that period shall be concurrently declared or paid on all series of Preferred
Stock outstanding in accordance with the terms of each series. If there are any
accumulated dividends accrued or in arrears on any share of any series of
Preferred Stock those dividends shall be paid in full before any full dividend
shall be paid on any other series of Preferred Stock. If less than a full
dividend is to be paid, the amount of the dividend to be distributed shall be
divided among the shares of Preferred Stock for which dividends are accrued or
in arrears in proportion to the aggregate amounts which would be distributable
to those holders of Preferred Stock if full cumulative dividends had previously
been paid thereon in accordance with the terms of each series.
C. VOTING RIGHTS. (1)Each share of Common Stock and each outstanding share
of the Series A and H Preferred Stock ("Voting Preferred Stock") which has been
beneficially owned continuously by the same person since May 30, 1987 will
entitle such person to ten votes with respect to such share on each matter
properly submitted to the shareholders of the Corporation for their vote,
consent, waiver, release or other action when the Common Stock and the Voting
Preferred Stock vote together with respect to such matter.
(2) (a) For purposes of this paragraph C, a change in beneficial
ownership of a share of the Corporation's stock shall be deemed to have occurred
whenever a change occurs in any person or group of persons who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has or shares (i) voting power, which includes the power to vote, or
to direct the voting of such share; (ii) investment power, which includes the
power to direct the sale or other disposition of such share; (iii) the right to
receive or retain the proceeds of any sale or other disposition of such share;
or (iv) the right to receive distributions, including cash dividends, in respect
to such share.
(b) In the absence of proof to the contrary provided in accordance
with the procedures referred to in subparagraph (4) of this paragraph C, a
change in beneficial ownership shall be deemed to have occurred whenever a share
of stock is transferred of record into the name of any other person.
(c) In the case of a share of Common Stock or Voting Preferred
Stock held of record in the name of a corporation, general partnership, limited
partnership, voting trustee, bank, trust company, broker, nominee or clearing
agency, or in any other name except a natural person, if it has not been
established pursuant to the procedures referred to in subparagraph (4) that such
share was beneficially owned continuously since May 30, 1987 by the person who
possesses all of the attributes of beneficial ownership referred to in clauses
(i) through (iv) of subparagraph (2)(a) of this paragraph C with respect to such
share of Common Stock or Voting Preferred Stock, then such share of Common Stock
or Voting Preferred Stock shall carry with it only one vote regardless of when
record ownership of such share was acquired.
-2-
<PAGE>
(d) In the case of a share of stock held of record in the name of
any person as trustee, agent, guardian or custodian under the Uniform Gifts to
Minors Act, the Uniform Transfers to Minors Act or any comparable statute as in
effect in any state, a change in beneficial ownership shall be deemed to have
occurred whenever there is a change in the beneficiary of such trust, the
principal of such agent, the ward of such guardian or the minor for whom such
custodian is acting.
(3) Notwithstanding anything in this paragraph C to the contrary, no
change in beneficial ownership shall be deemed to have occurred solely as a
result of:
(a) any event that occurred prior to May 30, 1987, including
contracts providing for options, rights of first refusal and similar
arrangements, in existence on such date to which any holder of shares of stock
is a party;
(b) any transfer of any interest in shares of stock pursuant to a
bequest or inheritance, by operation of law upon the death of any individual, or
by any other transfer without valuable consideration, including a gift that is
made in good faith and not for the purpose of circumventing this paragraph C;
(c) any change in the beneficiary of any trust, or any distribution
of a share of stock from trust, by reason of the birth, death, marriage or
divorce of any natural person, the adoption of any natural person prior to age
18 or the passage of a given period of time or the attainment by any natural
person of a specified age, or the creation or termination of any guardianship or
custodian arrangement; or
(d) any appointment of a successor trustee, agent, guardian or
custodian with respect to a share of stock.
(4) For purposes of this paragraph C, all determinations concerning
changes in beneficial ownership, or the absence of any such change, shall be
made by the Corporation. Written procedures designed to facilitate such
determinations shall be established by the Corporation and refined from time to
time. Such procedures shall provide, among other things, the manner of proof of
facts that will be accepted and the frequency with which such proof may be
required to be renewed. The Corporation and any transfer agent shall be entitled
to rely on all information concerning beneficial ownership of a share of stock
coming to their attention from any source and in any manner reasonably deemed by
them to be reliable, but neither the Corporation nor any transfer agent shall be
charged with any other knowledge concerning the beneficial ownership of a share
of stock.
(5) Each share of Common Stock acquired by reason of any stock split or
dividend shall be deemed to have been beneficially owned by the same person
continuously from the same date as that on which beneficial ownership of the
share of Common Stock, with respect to which such share of Common Stock was
distributed, was acquired.
-3-
COR\48583.1
<PAGE>
(6) Each share of Common Stock acquired upon conversion of the
outstanding Series A and H Preferred Stock of the Corporation ("Convertible
Stock") shall be deemed to have been beneficially owned by the same person
continuously from the date on which such person acquired the Convertible Stock
converted into such share of Common Stock.
(7) Where a holder beneficially owns shares having ten votes per share
and shares having one vote per share, and transfers beneficial ownership of less
than all of the shares held, the shares transferred shall be deemed to consist,
in the absence of evidence to the contrary, of the shares having one vote per
share.
(8) Shares of Common Stock held by the Corporation's employee benefit
plans will be deemed to be beneficially owned by such plans regardless of how
such shares are allocated to or voted by participants, until the shares are
actually distributed to participants.
(9) Each share of Common Stock, whether at any particular time the
holder thereof is entitled to exercise ten votes or one, shall be identical to
all other shares of Common Stock in all other respects.
(10) Each share of Voting Preferred Stock, whether at any particular
time the holder thereof is entitled to exercise ten votes or one, shall be
identical in all other respects to all other shares of Voting Preferred Stock in
the same designated series.
(11) Each share of Common Stock issued by the Corporation in a business
combination transaction shall be deemed to have been beneficially owned by the
person who received such share in the transaction continuously for the shortest
period, as determined in good faith by the Board of Directors, that would be
permitted for the transaction to be accounted for as a pooling of interests,
provided that the Audit Committee of the Board of Directors has made a good
faith determination that (a) such transaction has a bona fide business purpose,
(b) it is in the best interests of the Corporation and its shareholders that
such transaction be accounted for as a pooling of interests under generally
accepted accounting principals and (c) such issuance of Common Stock does not
have the effect of nullifying or materially restricting or disparately reducing
the per share voting rights of holders of an outstanding class or classes of
voting stock of the Corporation. Notwithstanding the foregoing, (i) the
Corporation shall not issue shares in a business combination transaction if such
issuance would result in a violation of any rule or regulation regarding the per
share voting rights of publicly-traded securities that is promulgated by the
Securities and Exchange Commission or the principal exchange upon which the
Common Stock is then listed for trading and (ii) nothing herein shall be
interpreted to require the Corporation to account for any business combination
transaction in any particular manner.
D. NON-ASSESSABILITY; TRANSFERS; PRE-EMPTIVE RIGHTS. The stock of this
Corporation shall be fully paid and non-assessable when issued and shall be
personal property. No transfer of such stock shall be binding upon this
Corporation unless such transfer is made in accordance with these Articles and
the by-laws of this Corporation and duly recorded in the books thereof. No
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stockholder shall have any pre-emptive right to subscribe to any or all
additions to the stock of this Corporation.
E. SERIES A PREFERRED STOCK. The Corporation's Preferred Stock, Series A
("Series A Shares"), shall consist of 160,560 shares of Preferred Stock.
(1) Holders of the outstanding Series A Shares shall be entitled to one
vote per share thereof, voting with holders of shares of Common Stock and with
holders of other voting shares of Preferred Stock as a single class, except as
to those matters on which holders of Preferred Stock or a particular series
thereof are required by applicable law to vote separately; and shall be entitled
to receive, out of any funds legally available therefor, dividends at the rate
of 6-1/8% per annum of the par value thereof, and no more, payable in cash
quarterly on the last day of March, June, September and December, in each year
when and as declared by the Board of Directors of the Corporation; provided
that, if the Net Earnings per share of Common Stock of this Corporation reaches
$1.50 for the preceding calendar year, the annual dividend rate shall be 7-1/8%
thereafter; and further provided that, if the Net Earnings per share of Common
Stock reaches $2.00 for the preceding calendar year, the annual dividend rate
shall be 8-1/8% thereafter. For purposes hereof, "Net Earnings per share of
Common Stock" shall be computed on a fully diluted basis in accordance with
Release No. 15, as amended from time to time by the Accounting Principles Board
(or any successor thereto) of the American Institute of Certified Public
Accountants. Dividends shall accrue on each share of Series A from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared. Dividends shall be cumulative so that if dividends in respect of any
previous quarterly dividend period at the prescribed rate per annum shall not
have been paid on or declared and set apart from all Series A Shares at the time
outstanding, the deficiency shall be fully paid on or declared and set apart for
said shares before any dividend or other distribution shall be paid on or
declared or set apart for shares of Common Stock.
(2) In the event of a liquidation, dissolution or winding up of this
Corporation, the holders of Series A Shares shall be entitled to receive, pro
rata with all other holders of Preferred Stock of whatever series, to the extent
available out of the assets of this Corporation whether such assets are capital
or surplus of any nature, an amount equal to the par value of such Preferred
Stock, and in addition thereto, a further amount equal to the dividends unpaid
and accumulated thereon, to the date that payment is made available to the
holders of Preferred Stock, whether earned or declared or not, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock. A consolidation or merger of this Corporation with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Corporation, shall not be deemed to be a liquidation, dissolution
or winding up, within the meaning of this paragraph.
(3) If the average daily market price per share of this Corporation's
Common Stock maintains a level of $17.13 or higher for a period of at least
ninety consecutive days, thereafter this Corporation, at the option of the Board
of Directors, may at any time or from time to time redeem the whole or any part
of the outstanding Series A Shares by paying in cash therefor twenty five
dollars ($25.00) per share and, in addition to the aforementioned amount, an
amount in cash
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equal to all dividends thereon unpaid and accumulated as provided in paragraph
(1) above, whether earned or declared or not, to and including the date fixed
for redemption, such sum being hereinafter sometimes referred to as the
redemption price. In case of the redemption of a part only of the outstanding
Series A Shares, this Corporation shall designate by lot, in such manner as the
Board of Directors may determine, the shares to be redeemed, or shall effect
such redemption pro rata. Less than all of the Series A Shares at any time
outstanding may not be redeemed until all dividends accrued and in arrears upon
all Series A Shares outstanding shall have been paid for all past dividend
periods, and until full dividends for the then current dividend period on all
Series A Shares then outstanding, other than the shares to be redeemed, shall
have been paid or declared and the full amount thereof set apart for payment. At
least thirty (30) days' previous notice by mail, postage prepaid, shall be given
to the holders of record of the Series A Shares to be redeemed, such notice to
be addressed to each shareholder at his post office address as shown by the
records of this Corporation. On or after the date fixed for redemption and
stated in such notice, each holder of Series A Shares called for redemption
shall surrender his certificate evidencing such shares to this Corporation at
the place designated in such notice and shall thereupon be entitled to receive
payment of the redemption price. In case less than all the shares represented by
any such surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of redemption shall have been
duly given, and if on the date fixed for redemption funds necessary for the
redemption shall be available thereof, then, notwithstanding that the
certificates evidencing any shares so called for redemption shall not have been
surrendered, the dividends with respect to the shares so called for redemption
shall cease to accrue after the date fixed for redemption and all rights with
respect to the shares so called for redemption shall forthwith after such date
cease and determine, except only the right of the holders to receive the
redemption price without interest upon surrender of their certificates thereof.
If, on or prior to any date fixed for redemption of Series A Shares,
this Corporation deposits, with any bank or trust company, as a trust fund, a
sum sufficient to redeem, on the date fixed for redemption thereof, the shares
called for redemption, with irrevocable instructions and authority to the bank
or trust company to give the notice or redemption thereof if such notice shall
not previously have been given by this Corporation, or to complete the giving if
such notice is theretofore commenced, and to pay, on and after the date fixed
for redemption or prior thereto, the redemption price of the shares to their
respective holders upon the surrender of their share certificates, then from and
after the date of the deposit (although prior to the date fixed for redemption),
the shares so called shall cease to accrue after the date fixed for redemption.
The deposit shall be deemed to constitute full payment of the shares to their
holders and from and after the date of the deposit the shares shall be deemed to
be no longer outstanding, and the holders thereof shall cease to be shareholders
with respect to such shares, and shall have no rights with respect thereto
except the right to receive from the bank or trust company payment of the
redemption price of the shares without interest, upon the surrender of their
certificates therefor, and the right to convert said shares as provided herein
at any time up to but not after the close of business on the day prior to the
date fixed for redemption of such shares. Any moneys deposited on account of the
redemption price of Series A Shares converted subsequent to the making of such
deposit shall be repaid to the Corporation forthwith upon the conversion of such
Series A Shares.
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(4) The holders of Series A Shares shall have conversion rights as follows:
(a) The Series A Shares shall be convertible, at the option of the
respective holders thereof, at any time prior to the day prior to such
date, if any, as may have been fixed for the redemption thereof in any
notice of redemption given as provided in (3) hereof, at the office of the
Corporation or any transfer agent for such shares, into fully paid and
non-assessable shares (calculated to the nearest whole share, fractions of
a share being disregarded) of Common Stock of the Corporation, at
conversion price in effect at the time of conversion determined as
hereinafter provided, each Series A Share being taken at $25.00 for the
purpose of such conversion. The price at which shares of Common Stock shall
be deliverable upon conversion (herein called the "conversion price") shall
be $11.42 per share until January 15, 1977, and thereafter the sum of (i)
the average daily closing market price thereof during the preceding 24
months of any national securities exchange upon which said Common Stock is
listed for trading or, in the absence of said listing, then as reported by
the National Association of Securities Dealers, Inc., but not more than
$11.42 and not less than $8.12 per share; and (ii) one-half of the
difference between said average market price and $11.42 per share;
provided, however, that any Series A Shares called for redemption shall be
thereafter convertible, at the option of the holders thereof, at any time
prior to the date fixed for redemption, into shares of Common Stock, which
shall be valued at $11.42 per share for said purpose. Such conversion price
shall be subject to adjustment from time to time in certain circumstances,
as hereinafter provided. The Corporation shall make no payment or
adjustment on account of any dividends accrued on the Series A Shares
surrendered for conversion. In case of the call for redemption of any
Series A Shares, the right of conversion shall terminate as to the shares
designated for redemption, at the close of business on the day preceding
the day fixed for redemption, unless default is made in the payment of the
redemption price.
(b) Before any holder of Series A Shares shall be entitled to
convert the same to Common Stock, he shall surrender the certificates or
certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series A Shares, and shall give written
notice to the Corporation at such office that he elects to convert the same
and shall state in writing therein the name or names in which he wishes the
certificate or certificates for Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder of Series A Shares, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he
shall be entitled, as aforesaid. Such conversion shall be deemed to have
been made as of the date of surrender of the Series A Shares to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of that Common Stock on said date.
(c) In case the Corporation shall at any time subdivide the
outstanding shares of Common Stock, or shall issue as a dividend on Common
Stock such number of shares of Common Stock as shall equal 10% or more of
the number of shares
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<PAGE>
of Common Stock outstanding immediately prior to the issuance of such
dividend, the conversion price in effect immediately prior to such
subdivision or the issuance of such dividend shall be proportionately
decreased, and in case the Corporation shall at any time combine the
outstanding shares of Common Stock, the conversion price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision,
dividend, or combination, as the case may be.
(d) No fractional shares of Common Stock shall be issued upon the
conversion of Series A Shares. If any fractional interest in a share of
Common Stock would, except for the provisions of this paragraph (d), be
deliverable upon conversion hereunder, the Corporation shall adjust such
fractional interest by rounding off said fractional interest to the nearest
whole number of shares of Common Stock.
(e) Whenever the conversion price is adjusted, as herein provided,
the Corporation shall forthwith maintain at its office and file with the
transfer agents for Series A Shares, if any, a statement signed by the
Chairman of the Board, or the President, or a Vice President of the
Corporation, and by its Treasurer or an Assistant Treasurer, showing in
detail the facts requiring such adjustment and the conversion price after
such adjustment. Such transfer agents shall be under no duty or
responsibility with respect to any such statement except to exhibit the
same from time to time to any holder of Series A Shares desiring an
inspection thereof.
(f) In case of any capital reorganization or any reclassification
of the capital stock of the Corporation or in case of the consolidation or
merger of the Corporation with or into another corporation or the
conveyance of all or substantially all of the assets of the Corporation to
another corporation, each Series A Share shall thereafter be convertible
into the number of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series A Share would have been entitled
upon such reorganization, reclassification, consolidation, merger or
conveyance; and, in any such case, appropriate adjustment (as determined by
the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of the Series A Shares, to the end that the provisions set forth
herein (including provisions with respect to changes in and other
adjustments of the conversion price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon conversion of the Series A Shares.
(g) In case:
1. the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend,
or any other distribution, payable otherwise than in cash; or
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<PAGE>
2. the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any other
rights; or
3. of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another
corporation, or conveyance of all of substantially all of the assets
of the Corporation to another corporation; or
4. of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in any such case, the
Corporation shall cause to be mailed to the holders of record of the
outstanding Series A Shares, at least 10 days prior to the date
hereinafter specified, a notice stating the date on which (i) a record
is to be taken for the purpose of such dividend, distribution or
rights, or (ii) such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take
place and the date, if any is to be fixed, as of which holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(h) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose of
effecting the conversion of the Series A Shares, the full number of shares
of Common Stock deliverable upon the conversion of all Series A Shares from
time to time outstanding.
(i) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series A Shares pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the Series A Shares so
converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(j) All certificates of the Series A Shares surrendered for
conversion shall be appropriately cancelled on the books of the
Corporation, and the shares so converted represented by such certificates
shall be restored to the status of authorized but unissued Preferred Stock
of the Corporation without designation as to series.
F. SERIES H PREFERRED STOCK. The Corporation's Preferred Stock, Series
H ("Series H Shares"), shall consist of 20,000 shares of Preferred Stock.
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<PAGE>
(1) Holders of the outstanding Series H Shares shall be entitled to one
vote per share thereof, voting with holders of shares of Common Stock and with
holders of other voting shares of Preferred Stock as a single class, except as
to those matters on which holders of Preferred Stock or a particular series
thereof are required by applicable law to vote separately; and shall be entitled
to receive, out of any funds legally available therefor, dividends at the rate
of 7% per annum of the part value thereof, and no more, payable in cash
quarterly on the last day of March, June, September, and December in each year,
commencing 1975, when and as declared by the Board of Directors of the
Corporation. Dividends shall accrue on each share of Series H from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared. Dividends shall be cumulative so that if dividends in respect of any
previously quarterly dividend period at the prescribed rate per annum shall not
have been paid on or declared and set or apart for all Series H Shares at the
time outstanding, the deficiency shall be fully paid on or declared and set
apart for said shares before any dividend or other distribution shall be paid on
or declared or set apart for shares of Common Stock.
(2) In the event of a liquidation, dissolution or winding up of this
Corporation, the holders of Series H Shares shall be entitled to receive, pro
rata with all other holders of Preferred Stock of whatever series, to the extent
available out of the assets of this Corporation, whether such assets are capital
or surplus of any nature, an amount equal to the par value of such Preferred
Stock, and in addition thereto, a further amount equal to the dividends unpaid
and accumulated thereon, to the date that payment is earned or declared or not,
and no more, before any payment shall be made or any assets distributed to the
holders of Common Stock. A consolidation or merger of this Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up, within the meaning of this paragraph.
(3) The holders of Series H Shares shall have conversion rights as
follows:
(a) The Series H Shares shall be convertible, at the option of the
respective holders thereof, at the office of the Corporation or any
transfer agent for such shares, into fully paid and non-assessable shares
(calculated to the nearest whole share, fractions of a share being
disregarded) of Common Stock of the Corporation, at the conversion rate of
one and twelve thirteenths (1-12/13ths) shares of Common Stock for each
Series H Share converted. Such conversion rate shall be subject to
adjustment from time to time in certain instances, as hereinafter provided.
The Corporation shall make no payment or adjustment on account of any
dividends accrued on the Series H Shares surrendered for conversion.
(b) Before any holder of Series H Shares shall be entitled to
convert the same in Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series H Shares, and shall give written
notice to the Corporation at such office that he elects to convert the same
and shall state in writing therein the name or names in which he wishes the
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<PAGE>
certificate or certificates for Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder of Series H Shares, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he
shall be entitled, as aforesaid. Such conversion shall be deemed to have
been made as of the date of surrender of the Series H Shares to be
converted, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of that Common Stock on said date.
(c) In case the Corporation shall at any time subdivide the
outstanding shares of Common Stock, or shall issue as a dividend on Common
Stock such number of shares of Common Stock as shall equal 10% or more of
the number of shares of Common Stock outstanding immediately prior to the
issuance of such dividend, the conversion price in effect immediately prior
to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in case the Corporation shall at any time
combine the outstanding shares of Common Stock, the conversion price in
effect immediately prior to such combination shall be proportionately
increased, effective at the close of business on the date of such
subdivision, dividend or combination, as the case may be.
(d) No fractional shares of Common Stock shall be issued upon the
conversion of Series H Shares. If any fractional interest in a share of
Common Stock would, except for the provisions of this paragraph (d), be
deliverable upon conversion hereunder, the Corporation shall adjust such
fractional interest by rounding off said fractional interest to the nearest
whole number of shares of Common Stock.
(e) Whenever the conversion is adjusted, as herein provided, the
Corporation shall forthwith maintain at its office and file with the
transfer agents for Series H Shares, if any, a statement signed by the
Chairman of the Board, or the President, or a Vice President of the
Corporation, and by its Treasurer or an Assistant Treasurer, showing in
detail the facts requiring such adjustment and the conversion price after
such adjustment. Such transfer agent shall be under no duty or
responsibility with resect to any such statement except to exhibit the same
from time to time to any holder of Series H Shares desiring an inspection
thereof.
(f) In case of any capital reorganization or any reclassification
of the capital stock of the Corporation or in case of the consolidation or
merger of the Corporation with or into another corporation or the
conveyance of all or substantially all of the assets of the Corporation to
another corporation, each Series H Share shall thereafter be convertible
into the number of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series H Shares would have been
entitled upon such reorganization, reclassification, consolidation, merger
or conveyance; and, in any such case, appropriate adjustment (as determined
by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests
thereafter of the holders of the
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<PAGE>
Series H Shares, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of
the conversion price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Series H Shares.
(g) In case:
1. the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend,
or any other distribution, payable otherwise than in cash; or
2. the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any other
rights; or
3. of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another
corporation, or conveyance of all or substantially all of the assets
of the Corporation to another corporation; or
4. of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in any such case, the
Corporation shall cause to be mailed to the holders of record of the
outstanding Series H Shares, at least 10 days prior to the date
hereinafter specified, a notice stating the date on which (i) a record
is to be taken for the purpose of such dividend, distribution, or
rights, or (ii) such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take
place and the date, if any is to be fixed, as of which holders of
Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(h) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, solely for the purpose of
effecting the conversion of the Series H Shares, the full number of shares
of Common Stock deliverable upon the conversion of all Series H Shares from
time to time outstanding.
(i) The Corporation shall pay any and all issue and other taxes
that may be payable in respect to any issue or delivery of shares of Common
Stock or conversion of Series H Shares pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the Series H Shares so
converted
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<PAGE>
were registered, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(j) All certificates of the Series H Shares surrendered for
conversion shall be appropriately cancelled on the books of the
Corporation, and the shares so converted represented by such certificates
shall be restored to the status of authorized but unissued Preferred Stock
of the Corporation without designation as to series.
G. SERIES K PREFERRED STOCK. The Corporation's 5% Cumulative Convertible
Series K Preferred Stock ("Series K Shares") shall consist of 75,000 shares of
Preferred Stock having the preferences, limitations and relative rights set
forth below.
(1) Holders of the Series K Shares shall be entitled to cast one vote
per share, voting with holders of shares of Common Stock and with holders of
other series of voting preferred stock as a single class on any matter to come
before a meeting of the shareholders, except with respect to the casting of
ballots on those matters as to which holders of Preferred Stock or a particular
series thereof are required by law to vote separately.
(2) The Series K Shares shall, with respect to dividend rights and
rights upon liquidation, dissolution and winding up, rank prior to the Common
Stock and pari passu with respect to the Series A Shares and Series H Shares.
All equity securities of the Corporation as to which the Series K Shares rank
prior, whether with respect to dividends or upon liquidation, dissolution or
winding-up or otherwise, including the Common Stock, are collectively referred
to herein as the "Junior Securities"; all equity securities of the Corporation
as to which the Series K Shares rank pari passu, including the Series A Shares
and Series H Shares, are collectively referred to herein as the "Parity
Securities"; and all other equity securities of the Corporation (other than
convertible debt securities) as to which the Series K Shares ranks junior are
collectively referred to herein as the "Senior Securities." The preferences,
limitations and relative rights of the Series K Shares shall be subject to the
preferences, limitations and relative rights of any Junior Securities, Parity
Securities or Senior Securities issued after the Series K Shares.
(3) The holders of Series K Shares shall have the following dividend
rights:
(a) The holders of record of the Series K Shares shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
of the Corporation legally available therefor, an annual cash dividend of
$1.25 on each Series K Share, payable quarterly on each March 31, June 30,
September 30 and December 31 on which any Series K Shares shall be
outstanding (each a "Dividend Due Date"), commencing on the last day of the
calendar quarter in which a wholly-owned subsidiary of the Corporation
merges with and into Kingsley Telephone Company. Dividends on each Series K
Share shall accrue and be cumulative from and after the date of issuance of
such Series K Share and dividends payable for any partial quarterly period
shall be calculated on the basis of a year of 360 days
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<PAGE>
consisting of twelve 30-day months. Dividends shall be payable to the
holders of record as they appear on the Corporation's stock transfer books
at the close of business on the record date for such payment, which the
Board of Directors shall fix not more than 60 days or less than 10 days
preceding a Dividend Due Date. Holders of the Series K Shares shall not be
entitled to any dividends, whether paid in cash, property or stock, in
excess of the cumulative dividends as provided in this paragraph (a) and
shall not be entitled to any interest thereon.
(b) Unless all cumulative dividends accrued on the Series K Shares
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, then (i) except as provided in the last sentence of this
paragraph, no dividend or other distribution shall be declared or paid or
set apart for payment on any Parity Securities, (ii) no dividend or other
distribution shall be declared or paid or set aside for payment upon the
Junior Securities (other than a dividend or distribution paid in shares of,
or warrants, rights or options exercisable for or convertible into, Junior
Securities) and (iii) no Junior Securities shall be redeemed, purchased or
otherwise acquired for any consideration, nor shall any monies be paid to
or made available for a sinking fund for the redemption of any Junior
Securities, except by conversion of Junior Securities into, or by exchange
of Junior Securities for, other Junior Securities. If accrued dividends are
not paid or set apart with respect to the Series K Shares and all other
Parity Securities in full, all dividends declared with respect to such
securities shall be declared pro rata on a share-by-share basis among all
Series K Shares and Parity Securities outstanding at the time.
(4) The holders of Series K Shares shall have the following conversion
rights:
(a) Subject to the rights of the Corporation specified in paragraph
(b) below, each Series K Share shall be convertible, at any time, at the
option of the holder thereof into that number of fully paid and
nonassessable shares of the Common Stock obtained by dividing $25.00 by the
Conversion Price then in effect under the terms of this subsection (4).
Unless and until changed in accordance with the terms of this subsection
(4), the Conversion Price shall be $25.33. In order for a holder of the
Series K Shares to effect such conversion, the holder shall deliver to
Society Shareholder Services, Inc., Dallas Texas, or such other agent as
may be designated by the Board of Directors as the transfer agent for the
Series K Shares (the "Transfer Agent"), the certificates representing such
shares in accordance with paragraph (c) below accompanied by written notice
jointly addressed to the Corporation and the Transfer Agent that the holder
thereof elects to convert such shares or a specified portion thereof. Each
conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates representing the
Series K Shares being converted shall have been delivered to the Transfer
Agent in accordance with each term and condition of paragraph (c) below,
accompanied by the written notice jointly addressed to the Corporation and
the Transfer Agent of such conversion (the "Optional Conversion Date"), and
the person or persons in whose names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be
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<PAGE>
deemed to have become the holder or holders of record of the Common Stock
represented thereby at such time. As of the close of business on the
Optional Conversion Date, the Series K Shares shall be deemed to cease to
be outstanding and all rights of any holder thereof shall be extinguished
except for the rights arising under the Common Stock issued in exchange
therefor and the right to receive accrued and unpaid dividends on such
Series K Shares through the Optional Conversion Date on the terms specified
in paragraph (d) below.
(b) At any time after July 1, 1997, the Corporation, at its option,
shall be entitled to convert, in whole but not in part, each outstanding
Series K Share into that number of fully paid and nonassessable shares of
Common Stock obtained by dividing $25.00 by the Conversion Price then in
effect. In order to effect such conversion, the Corporation shall mail
notice to each record holder of the Series K Shares at least 30 but not
more than 60 days prior to the date fixed for such conversion (the
"Mandatory Conversion Date" and together with the Optional Conversion Date,
the "Conversion Date"). Each notice shall specify the Mandatory Conversion
Date and the Conversion Price then in effect. Any notice mailed in such
manner shall be conclusively deemed to have been duly given regardless of
whether such notice is in fact received. Upon receipt of such notice, the
holder of Series K Shares shall promptly surrender to the Transfer Agent in
accordance with paragraph (c) below the certificate representing the
converted Series K Shares. In order to facilitate the conversion of the
Series K Shares, the Board of Directors may fix a record date for the
determination of the holders of the Series K Shares, which shall not be
more than 60 days prior to the Mandatory Conversion Date. As of the close
of business on the Mandatory Conversion Date, the Series K Shares shall be
deemed to cease to be outstanding and all rights of any holder thereof
shall be extinguished except for the rights arising under the Common Stock
issued in exchange therefore and the right to receive accrued and unpaid
dividends on such Series K Shares through the Mandatory Conversion Date on
the terms specified in paragraph (d) below; provided, however, that no
certificates representing such Common Stock shall be issued and no
dividends or other distributions shall be payable with respect to such
Common Stock, until the certificates representing the Series K Shares have
been surrendered to the Transfer Agent in accordance with paragraph (c)
below.
(c) In connection with surrendering to the Transfer Agent the
certificates representing (or formerly representing) Series K Shares, the
holder shall furnish the Transfer Agent with transfer instruments
satisfactory to the Corporation and sufficient to transfer the Series K
Shares being converted to the Corporation free of any adverse interest or
claims. As promptly as practicable after the surrender of the Series K
Shares in accordance with this paragraph and any other requirement under
this subsection (4), the Corporation, acting directly or through the
Transfer Agent, shall issue and deliver to such holder certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions hereof (along with any interest
payment specified in paragraph (a) or (b) above and cash payment in lieu of
fractional shares specified in paragraph (e) below). Certificates will be
issued for the balance of any remaining Series K Shares in any case in
which fewer than all of the Series K Shares are converted. Any
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conversion under paragraph (a) or (b) shall be effected at the Conversion
Price in effect on the Conversion Date.
(d) If the Conversion Date with respect to any Series K Share
occurs after any record date with respect to the payment of a dividend on
the Series K Shares (the "Dividend Record Date") and on or prior to the
Dividend Due Date, then (i) the dividend due on such Dividend Due Date
shall be payable to the holder of record of such share as of the Dividend
Record Date and (ii) the dividend that accrues from the close of business
on the Dividend Record Date through the Conversion Date shall be payable to
the holder of record of such share as of the Conversion Date. Except as
provided in this subsection (4), no payment or adjustment shall be made in
connection with any conversion on account of any dividends accrued on
Series K Shares surrendered for conversion or on account of any dividends
on the Common Stock issued upon conversion.
(e) No fractional interest in a share of Common Stock shall be
issued by the Corporation upon the conversion of any Series K Share. In
lieu of any such fractional interest, the holder that would otherwise be
entitled to such fractional interest shall receive a cash payment (computed
to the nearest cent) equal to such fraction multiplied by the market value
of a share of Common Stock, which shall be deemed to equal the last
reported per share sale price of Common Stock on the New York Stock
Exchange ("NYSE") (or, if the Common Stock is not then traded on the NYSE,
then the last reported per share sale price on such other national
securities exchange on which the Common Stock is listed or admitted to
trading or, if not then listed or admitted to trading on any national
securities exchange, then the last quoted bid price in the over-the-counter
market as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ"), or any similar system of automated
dissemination of securities prices) on the Trading Day (as defined below)
immediately prior to the Conversion Date. As used in this subsection (4),
the term "Trading Day" means (i) if the Common Stock is listed or admitted
for trading on any national securities exchange, days on which such
national securities exchange is open for business, or (ii) if the Common
Stock is not so listed or admitted for trading but is quoted by NASDAQ or
any similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system.
(f) The Conversion Price shall be adjusted from time to time as
follows:
1. If the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Company in the form
of Common Stock, then the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction
the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator of which shall be the aggregate
number of shares of Common Stock that
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would be outstanding if such dividend or other distribution were
effected as of such date. For the purposes of this subparagraph (1),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation.
2. If the Corporation shall issue rights, warrants or other
securities convertible into Common Stock to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per
share (determined as provided in subparagraph (6) below) of the Common
Stock on the date fixed for the determination of shareholders entitled
to receive such rights, warrants or convertible securities, then the
Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number
of shares of Common Stock that the aggregate of the offering price of
the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such current market price and the
denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase. For the purposes of this subparagraph (2),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation.
3. If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, then the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be reduced proportionately in the manner provided in subparagraph (1)
above, and, conversely, if the outstanding shares of Common Stock
shall each be combined into a smaller number of shares of Common
Stock, then the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased.
4. If the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or cash or other assets (excluding any dividend or
distribution referred to in subparagraph (1) above, any rights,
warrants or convertible securities referred to in subparagraph (2)
above, and any dividend payable solely in cash from the earnings of
the Corporation), then in each case the Conversion Price shall be
adjusted so that the Conversion Price shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
close of business on the record date for the determination of holders
of Common Stock entitled to receive such distribution by a fraction
the numerator of
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which shall be the current market price per share (determined as
provided in subparagraph (6) below) of the Common Stock on such record
date less the then fair market value per share (determined solely by
the Board of Directors and described in a statement filed with the
Transfer Agent) of the cash or other assets or evidences of
indebtedness so distributed (and for which an adjustment to the
Conversion Price has not previously been made pursuant to the terms of
this paragraph (f)) applicable to one share of Common Stock and the
denominator of which shall be such current market price per share of
the Common Stock.
5. The reclassification of Common Stock into securities,
including securities other than Common Stock (other than any
reclassification upon a consolidation, merger or statutory share
exchange to which subparagraph (9) below applies), shall be deemed to
involve (A) a distribution of such securities other than Common Stock
to all holders of Common Stock and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of shareholders entitled to receive such distribution"
and "the date fixed for such determination" within the meaning of
subparagraph (2) above, and (B) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter and the effective
date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon
which such subdivision or combination becomes effective" within the
meaning of subparagraph (3) above.
6. For the purpose of any computation under subparagraphs (2)
and (4) above, the current market price per share of Common Stock on
any day shall be deemed to be the average of the last reported sale
price for the 20 consecutive Trading Days selected by the Board of
Directors commencing no more than 30 Trading Days before and ending no
later than the day before the day in question on the NYSE (or, if the
Common Stock is not then traded on the NYSE, then the last reported
sale price on such other national securities exchange on which the
Common Stock is listed or admitted to trading or, if not then listed
or admitted to trading on any national securities exchange, then the
last quoted bid price in the over-the- counter market as reported by
NASDAQ or any similar system of automated dissemination of securities
prices).
7. No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% of such price; provided, however, that any adjustments which
by reason of this subparagraph (7) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment
and provided, further, that any adjustment shall be made in accordance
with the provisions of this paragraph (f) (other than this
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subparagraph (7)) not later than such time as may be required in order
to preserve the tax-free nature of a distribution to the holders of
shares of Common Stock. Anything in this subparagraph (7) to the
contrary notwithstanding, the Corporation shall be entitled to make
such reductions in the Conversion Price, in addition to those required
by this paragraph (f), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision or combination
of shares, distribution of capital stock or rights or warrants to
purchase stock or securities, or distribution of evidences of
indebtedness or assets (other than cash dividends or distributions
paid from retained earnings) hereafter made by the Corporation to its
shareholders be a tax-free distribution for federal income tax
purposes. All calculations shall be made to the nearest cent.
8. Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly deliver to the Transfer Agent
an officer's certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment, which certificate shall constitute conclusive
evidence, absent manifest error, of the correctness of such
adjustment. Promptly after delivery of such certificate, the
Corporation shall prepare and mail a notice to each holder of Series K
Shares at each such holder's last address as the same appears on the
books of the Corporation, which notice shall set forth the Conversion
Price and a brief statement of the facts requiring the adjustment.
9. If the Corporation shall be a party to any transaction,
including, without limitation, a merger, consolidation or statutory
share exchange but excluding a reincorporation merger and any
transaction as to which subparagraphs (1) through (5) apply, in which
shares of Common Stock shall be converted into the right to receive
securities, cash or other property (or any combination thereof) (each
of the foregoing being referred to herein as a "Transaction"), then
each holder of Series K Shares outstanding shall have the right
thereafter to convert such shares only into the kind and amount of
securities, cash and other property receivable in connection with such
Transaction by a holder of the number of shares of Common Stock into
which such Series K Shares might have been converted immediately prior
to such Transaction, assuming such holder of Common Stock (A) is not
an entity with which the Corporation consolidated, into which the
Corporation merged, that merged into the Corporation, that engaged in
a share exchange, or to which such sale or transfer was made, as the
case may be (a "constituent entity"), or an affiliate of a constituent
entity, (B) did not exercise dissenters' rights with respect to such
Transaction and (C) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash or other property
receivable in connection with such Transaction (provided that if the
kind or amount of securities, cash and other property receivable in
connection with such Transaction is not the same for each share of
Common Stock held immediately prior to such Transaction by holders
other than a constituent entity or an affiliate thereof and in respect
of which such rights of
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<PAGE>
election shall not have been exercised ("non-electing share"), then
for the purpose of this subparagraph (9) the kind and amount of
securities, cash and other property receivable in connection with such
Transaction by each non-electing share shall be deemed to be the kind
and amount so receivable per share by all or a plurality of the
non-electing shares). If necessary, appropriate adjustment shall be
made in the application of the provisions set forth herein with
respect to the rights and interests thereafter of the holders of
Series K Shares so that the provisions set forth herein shall
thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities
or property thereafter deliverable on the conversion of the shares.
Any such adjustment shall be evidenced by a certificate of independent
public accountants and a notice of such adjustment filed and mailed in
the manner set forth in subparagraph (8) above, and each containing
the information set forth in such subparagraph (8); and any adjustment
so certified shall for all purposes hereof conclusively be deemed to
be an appropriate adjustment. The above provisions shall similarly
apply to successive Transactions.
10. For purposes of this paragraph (f), "Common Stock" includes
any stock of any class of the Corporation that has no preference in
respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and that is not subject to redemption by the Corporation.
However, subject to the provisions of subparagraph (9) above, shares
issuable on conversion of Series K Shares shall include only shares of
the class designated as Common Stock of the Corporation on the date of
the initial issuance of Series K Shares by the Corporation, or shares
of any class or classes resulting from any reclassification thereof
that have no preference in respect of dividends or amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and that are not subject to redemption
by the Corporation; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then so
issuable shall be substantially in the proportion that the total
number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
(g) The Corporation shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issuance or
delivery of shares of Common Stock in connection with conversions of Series
K Shares pursuant hereto; provided, however, that the Corporation shall not
be required to pay any tax that may be payable in respect of any transfer
involved in the issuance or delivery of shares of Common Stock in a name
other than that of the record holder of the Series K Shares to be converted
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery 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.
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(h) The Corporation covenants that (A) all shares of Common Stock
that may be issued upon conversions of Series K Shares will upon issuance
be duly and validly issued, fully paid and nonassessable, free of all liens
and charges and not subject to any preemptive rights, and (B) it will at
all times reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued shares of Common Stock or its
issued shares of Common stock held in its treasury, or both, for the
purpose of effecting conversions of Series K Shares, the whole number of
shares of Common Stock deliverable upon the conversion of all outstanding
Series K Shares.
(5) The holders of Series K Shares shall have the following liquidation
rights and preferences:
(a) Upon any voluntary or involuntary dissolution, liquidation, or
winding up of the Corporation (for the purposes of this subsection (5), a
"Liquidation"), the holder of each Series K Share then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its shareholders an amount equal to $25.00 per share plus
all dividends (whether or not declared or due) accrued and unpaid on such
share through the date fixed for the distribution of assets of the
Corporation to the holders of Series K Shares. With respect to the
distribution of the Corporation's assets upon a Liquidation, the Series K
Shares shall rank prior to Junior Securities, pari passu with the Parity
Securities and junior to the Senior Securities.
(b) If upon any Liquidation of the Corporation, the assets
available for distribution to the holders of Series K Shares and any Parity
Securities then outstanding shall be insufficient to pay in full the
liquidation distributions to the holders of the outstanding Series K Shares
and Parity Securities in accordance with the terms of these Articles of
Incorporation, then the holders of such shares shall share ratably in such
distribution of assets.
(c) Neither the voluntary sale, conveyance, lease, pledge, exchange
or transfer of all or substantially all the property or assets of the
Corporation, the merger or consolidation of the Corporation into or with
any other corporation, the merger of any other corporation into the
Corporation, a statutory share exchange with any other corporation, nor any
purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall be deemed to be a Liquidation of the
Corporation for the purposes of this subsection (5) (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
(d) The holder of any Series K Shares shall not be entitled to
receive any payment owed for such shares under this subsection (5) until
such holder shall cause to be delivered to the Corporation the certificate
or certificates representing such Series K Shares and transfer instruments
satisfactory to the Corporation and sufficient to transfer such Series
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K Shares to the Corporation free of any adverse interest or claim. No
interest shall accrue on any payment upon Liquidation.
(e) After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of Series K Shares
will not be entitled to any further participation in any distribution of
assets by the Corporation.
(6) The Series K Shares is not entitled to any preemptive or
subscription rights in respect of any securities of the Corporation.
H. SERIES L PREFERRED STOCK. The Corporation's 5% Cumulative Convertible
Series L Preferred Stock ("Series L Shares") shall consist of 325,000 shares of
Preferred Stock having the preferences, limitations and relative rights set
forth below.
(1) VOTING RIGHTS. Holders of the Series L Shares shall be entitled to
cast one vote per share, voting with holders of shares of Common Stock and with
holders of other series of voting preferred stock as a single class on any
matter to come before a meeting of the shareholders, except with respect to the
casting of ballots on those matters as to which holders of Preferred Stock or a
particular series thereof are required by law to vote separately.
(2) RANK. The Series L Shares shall, with respect to dividend rights
and rights upon liquidation, dissolution and winding up, rank prior to the
Common Stock and pari passu with respect to the Series A, H and K Shares. All
equity securities of the Corporation to which the Series L Shares rank prior,
whether with respect to dividends or upon liquidation, dissolution or winding-up
or otherwise, including the Common Stock, are collectively referred to herein as
the "Junior Securities"; all equity securities of the Corporation with which the
Series L Shares rank pari passu, including the Series A, H and K Shares, are
collectively referred to herein as the "Parity Securities"; and all other equity
securities of the Corporation (other than any convertible debt securities) to
which the Series L Shares ranks junior are collectively referred to herein as
the "Senior Securities." The preferences, limitations and relative rights of the
Series L Shares shall be subject to the preferences, limitations and relative
rights of the Junior Securities, Parity Securities and Senior Securities issued
after the Series L Shares are issued.
(3) DIVIDENDS. (a) The holders of record of the Series L Shares shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available therefor, an annual cash dividend
of $1.25 on each Series L Share, payable quarterly on each March 31, June 30,
September 30 and December 31 on which any Series L Shares shall be outstanding
(each a "Dividend Due Date"), commencing on the first such date following the
issuance of the Series L Shares. Dividends on each Series L Share shall accrue
and be cumulative from and after the date of issuance of such Series L Share and
dividends payable for any partial quarterly period shall be calculated on the
basis of a year of 360 days consisting of twelve 30-day months. Dividends shall
be payable to the holders of record as they appear on the Corporation's stock
transfer books at the close of business on the record date for such payment,
which the Board of Directors
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shall fix not more than 60 days or less than 10 days preceding a Dividend Due
Date. Holders of the Series L Shares shall not be entitled to any dividends,
whether paid in cash, property or stock, in excess of the cumulative dividends
as provided in this paragraph (a) and shall not be entitled to any interest
thereon.
(b) Unless all cumulative dividends accrued on the Series L Shares
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,
then (i) except as provided below, no dividend or other distribution shall be
declared or paid or set apart for payment on any Parity Securities, (ii) no
dividend or other distribution shall be declared or paid or set aside for
payment upon the Junior Securities (other than a dividend or distribution paid
in shares of, or warrants, rights or options exercisable for or convertible
into, Junior Securities) and (iii) no Junior Securities shall be redeemed,
purchased or otherwise acquired for any consideration, nor shall any monies be
paid to or made available for a sinking fund for the redemption of any Junior
Securities, except by conversion of Junior Securities into, or by exchange of
Junior Securities for, other Junior Securities. If any accrued dividends are not
paid or set apart with respect to the Series L Shares and any Parity Securities,
all dividends declared with respect to the Series L Shares and any Parity
Securities shall be declared pro rata on a share-by-share basis among all Series
L Shares and Parity Securities outstanding at the time.
(4) CONVERSION. (a) Each Series L Share shall be convertible, at any
time, at the option of the holder thereof into that number of fully paid and
nonassessable shares of the Common Stock obtained by dividing $25.00 by the
Conversion Price then in effect under the terms of this subsection (4). Unless
and until changed in accordance with the terms of this subsection (4), the
Conversion Price shall be $41.25. In order for a holder of the Series L Shares
to effect such conversion, the holder shall deliver to KeyCorp Shareholder
Services, Inc., Dallas, Texas, or such other agent as may be designated by the
Board of Directors as the transfer agent for the Series L Shares (the "Transfer
Agent"), the certificates representing such shares in accordance with paragraph
(b) below accompanied by written notice jointly addressed to the Corporation and
the Transfer Agent that the holder thereof elects to convert such shares or a
specified portion thereof. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
representing the Series L Shares being converted shall have been delivered to
the Transfer Agent in accordance with each term and condition of paragraph (b)
below, accompanied by the written notice jointly addressed to the Corporation
and the Transfer Agent of such conversion (the "Conversion Date"), and the
person or persons in whose names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Common Stock represented thereby
at such time. As of the close of business on the Conversion Date, the Series L
Shares shall be deemed to cease to be outstanding and all rights of any holder
thereof shall be extinguished except for the rights arising under the Common
Stock issued in exchange therefor and the right to receive accrued and unpaid
dividends on such Series L Shares through the Conversion Date on the terms
specified in paragraph (c) below.
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(b) In connection with surrendering to the Transfer Agent the
certificates representing (or formerly representing) Series L Shares, the holder
shall furnish the Transfer Agent with transfer instruments satisfactory to the
Corporation and sufficient to transfer the Series L Shares being converted to
the Corporation free of any adverse interest or claims. As promptly as
practicable after the surrender of the Series L Shares in accordance with this
paragraph and any other requirement under this subsection (4), the Corporation,
acting directly or through the Transfer Agent, shall issue and deliver to such
holder certificates for the number of whole shares of Common Stock issuable upon
the conversion of such shares in accordance with the provisions hereof (along
with any interest payment specified in paragraph (a) above and any cash payment
in lieu of fractional shares specified in paragraph (d) below). Certificates
will be issued for the balance of any remaining Series L Shares in any case in
which fewer than all of the Series L Shares are converted. Any conversion under
paragraph (a) shall be effected at the Conversion Price in effect on the
Conversion Date.
(c) If the Conversion Date with respect to any Series L Share
occurs after any record date with respect to the payment of a dividend on the
Series L Shares (the "Dividend Record Date") and on or prior to the Dividend Due
Date, then (i) the dividend due on such Dividend Due Date shall be payable to
the holder of record of such share as of the Dividend Record Date and (ii) the
dividend that accrues from the close of business on the Dividend Record Date
through the Conversion Date shall be payable to the holder of record of such
share as of the Conversion Date. Except as provided in this subsection (4), no
payment or adjustment shall be made upon any conversion on account of any
dividends accrued on Series L Shares surrendered for conversion or on account of
any dividends on the Common Stock issued upon conversion.
(d) No fractional interest in a share of Common Stock shall be
issued by the Corporation upon the conversion of any Series L Share. In lieu of
any such fractional interest, the holder that would otherwise be entitled to
such fractional interest shall receive a cash payment (computed to the nearest
cent) equal to such fraction multiplied by the market value of a share of Common
Stock, which shall be deemed to equal the last reported per share sale price of
Common Stock on the New York Stock Exchange ("NYSE") (or, if the Common Stock is
not then traded on the NYSE, the last reported per share sale price on such
other national securities exchange on which the Common Stock is listed or
admitted to trading or, if not then listed or admitted to trading on any
national securities exchange, the last quoted bid price in the over-the-counter
market as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ"), or any similar system of automated
dissemination of securities prices) on the trading day immediately prior to the
Conversion Date.
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(e) The Conversion Price shall be adjusted from time to time as
follows:
1. If the Corporation effects any (i) dividend or other
distribution upon or in redemption of the Common Stock payable in the form of
shares of capital stock of the Corporation or any of its subsidiaries or in the
form of any other property (other than cash dividends paid in the ordinary
course), (ii) combination of outstanding shares of Common Stock into a smaller
number of shares of Common Stock, (iii) split or other subdivision of
outstanding shares of Common Stock into a larger number of shares of Common
Stock, or (iv) reorganization, exchange or reclassification of Common Stock, or
any consolidation or merger of the Corporation with another corporation, or the
sale of all or substantially all of its assets to another corporation, or any
other transaction effected in a manner such that holders of outstanding Common
Stock shall be entitled to receive (either directly, or upon subsequent
liquidation) stock, securities or other property with respect to or in exchange
for Common Stock (a "Diluting Event"), then as a condition of such Diluting
Event, lawful, appropriate, equitable and adequate adjustments shall be made to
the Conversion Price whereby the holders of the Series L Shares shall thereafter
be entitled to receive (under the same terms otherwise applicable to their
receipt of the Common Stock upon conversion of the Series L Shares), in lieu of
or in addition to, as the case may be, the number of shares of Common Stock
issuable under this subsection (4), such shares of stock, securities or other
property as may be issued or payable with respect to or in exchange for that
number of shares of Common Stock to which such holders of Series L Shares were
so entitled under this subsection (4), and in any such case appropriate,
equitable and adequate adjustments shall also be made to such resulting
consideration in like manner in connection with any subsequent Diluting Events.
It is the intention of the parties that the foregoing shall have the effect of
entitling such holders of Series L Shares to receive upon the due exercise of
their conversion rights under this subsection (4) such stock, securities and
other property (other than cash dividends paid in the ordinary course) as such
holders would have received had they held the Common Stock issuable under this
subsection (4) (or any replacement or additional stock, securities or property,
as applicable) on the record date of such Diluting Event.
2. No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 5% of
such price.
3. Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly deliver to the Transfer Agent an
officer's certificate setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment,
which certificate shall constitute conclusive evidence, absent manifest error,
of the correctness of such adjustment. Promptly after delivery of such
certificate, the Corporation shall prepare and mail a notice to each holder of
Series L Shares at each such holder's last address as the same appears on the
books of the Corporation, which notice shall set forth the Conversion Price and
a brief statement of the facts requiring the adjustment. The failure of the
Corporation to take any such action shall not invalidate any corporate action by
the Corporation.
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(f) The Corporation covenants that (A) all shares of Common Stock
that may be issued upon conversions of Series L Shares will upon issue be duly
and validly issued, fully paid and nonassessable, and free of all liens, charges
or preemptive rights, and (B) it will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock or its issued shares of Common Stock held in its
treasury, or both, for the purpose of effecting conversions of Series L Shares,
the whole number of shares of Common Stock deliverable upon the conversion of
all outstanding Series L Shares not theretofore converted.
(5) LIQUIDATION PREFERENCE. (a) Upon any voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation (for the purposes of
this subsection (5), a "Liquidation"), the holder of each Series L Share then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its shareholders, an amount equal to $25 per share
plus all dividends (whether or not declared or due) accrued and unpaid on such
share on the date fixed for the distribution of assets of the Corporation to the
holders of Series L Shares. With respect to the distribution of the
Corporation's assets upon a Liquidation, the Series L Shares shall rank prior to
Junior Securities, pari passu with the Parity Securities and junior to the
Senior Securities.
(b) If upon any Liquidation of the Corporation, the assets
available for distribution to the holders of Series L Shares and any Parity
Securities then outstanding shall be insufficient to pay in full the liquidation
distributions to the holders of outstanding Series L Shares and Parity
Securities in accordance with the terms of these Articles of Incorporation, then
the holders of such shares shall share ratably in such distribution of assets in
accordance with the amount that would be payable on such distribution if the
amounts to which the holders of the Series L Shares and Parity Securities are
entitled were paid in full.
(c) Neither the voluntary sale, conveyance, lease, pledge, exchange
or transfer of all or substantially all the property or assets of the
Corporation, the merger or consolidation of the Corporation into or with any
other corporation, the merger of any other corporation into the Corporation, a
share exchange with any other corporation, nor any purchase or redemption of
some or all of the shares of any class or series of stock of the Corporation,
shall be deemed to be a Liquidation of the Corporation for the purposes of this
subsection (5) (unless in connection therewith the Liquidation of the
Corporation is specifically approved).
(d) The holder of any Series L Shares shall not be entitled to
receive any payment owed for such shares under this subsection (5) until such
holder shall cause to be delivered to the Corporation the certificate or
certificates representing such Series L Shares and transfer instruments
satisfactory to the Corporation and sufficient to transfer such Series L Shares
to the Corporation free of any adverse interest. No interest shall accrue on any
payment upon Liquidation after the due date thereof.
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(e) After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of Series L Shares will not
be entitled to any further participation in any distribution of assets by the
Corporation.
(6) PREEMPTIVE RIGHTS. The Series L Shares is not entitled to any
preemptive or subscription rights in respect of any securities of the
Corporation.
I. JUNIOR PREFERRED STOCK. The Corporation's Series AA Junior
Participating Preferred Stock (the "Junior Preferred Stock") shall consist of
300,000 shares of Preferred Stock.
(1) The rights of the holders of Junior Preferred Stock to dividends
and distributions shall be as follows:
(a) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Junior Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, (i) cash dividends in an amount per
share (rounded to the nearest cent) equal to 100 times the aggregate per
share amount of all cash dividends declared or paid on the Common Stock,
and (ii) a preferential cash dividend ("Preferential Dividends"), if any,
on the 15th day of March, June, September, and December of each year or, if
such 15th day is not a business day, on the business day immediately
preceding such 15th day (each a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Junior Preferred Stock, in an
amount equal to $21.00 per share of Junior Preferred Stock less the per
share amount of all cash dividends declared on the Junior Preferred Stock
pursuant to clause (i) of this sentence 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 Junior Preferred Stock. In the event this Corporation shall, at
any time after the issuance of any share or fraction of a share of Junior
Preferred Stock, make any distribution on the shares of Common Stock,
whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Corporation
or otherwise, which is payable in cash or any debt security, debt
instrument, real or personal property or any other property (other than
cash dividends subject to clause (i) of the immediately preceding sentence
and other than a distribution of shares of Common Stock or other capital
stock of this Corporation and other than a distribution of rights or
warrants to acquire any such share, including any debt security convertible
into or exchangeable for any such share, at a price less than the Current
Market Price of such share), then and in each such event this Corporation
shall simultaneously pay on each then outstanding share of Junior Preferred
Stock a distribution, in like kind, of 100 times (subject to the provisions
for adjustment hereinafter set forth) such distribution paid on a share of
Common Stock. The dividends and distributions on the Junior Preferred Stock
to which holders thereof are entitled pursuant to clause (i) of the first
sentence of this paragraph and pursuant to the second sentence of this
paragraph are hereinafter referred to as "Participating Dividends," and the
multiple of such cash and non-
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cash dividends on the Common Stock applicable to the determination of the
Participating Dividends, which shall be 100 initially but shall be adjusted
from time to time as hereinafter provided, is hereinafter referred to as
the "Dividend Multiple." In the event this Corporation shall at any time
declare or pay any dividend or make any distribution on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock,
then in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of Participating Dividends which holders of
shares of Junior Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event multiplied by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
(b) This Corporation shall declare each Participating Dividend at
the same time it declares any cash or non-cash dividend or distribution on
the Common Stock in respect of which a Participating Dividend is required
to be paid. No cash or non-cash dividend or distribution on the Common
Stock in respect of which a Participating Dividend is required to be paid
shall be paid or set aside for payment on the Common Stock unless a
Participating Dividend in respect of such dividend or distribution on the
Common Stock shall be simultaneously paid, or set aside for payment, on the
Junior Preferred Stock.
(c) Preferential Dividends shall begin to accrue on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of any shares of Junior Preferred
Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall
not bear interest. Preferential Dividends paid on the shares of Junior
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.
(2) The holders of shares of Junior Preferred Stock shall have the
following voting rights:
(d) Subject to the provisions for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the shareholders of this
Corporation. The number of votes which a holder of Junior Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In
the event this Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares of Common
Stock, then in each such case the Vote Multiple thereafter applicable to
the determination of the number of votes per share to which holders of
shares of
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Junior Preferred Stock shall be entitled after such event shall be the
Voting Multiple immediately prior to such event multiplied by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(e) Except as otherwise provided herein or by law, the holders of
shares of Junior Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
shareholders of this Corporation.
(f) The holder of a fractional share of Junior Preferred Stock may
vote any such fractional share in increments of 1/100 of a share on all
matters submitted to a vote of the shareholders of this Corporation such
that the holder of a fractional share of Junior Preferred Stock may cast
one vote for each one hundredth of a share of Junior Preferred Stock held
of record by him.
(g) In the event that the Preferential Dividends accrued on the
Junior Preferred Stock for four or more quarterly dividend periods, whether
consecutive or not, shall not have been declared and paid or set apart for
payment, the holders of record of the Junior Preferred Stock shall have the
right, at the next meeting of shareholders called for the election of
directors, voting as a class to elect two members to the Board of
Directors, which directors shall be in addition to the number provided for
under the By-laws prior to such event, to serve until the next Annual
Meeting and until their successors are elected and qualified or their
earlier resignation, removal or incapacity or until such earlier time as
all accrued and unpaid Preferential Dividends upon the outstanding shares
of Junior Preferred Stock shall have been paid (or set aside for payment)
in full. The holders of shares of Junior Preferred Stock shall continue to
have the right to elect directors as provided by the immediately preceding
sentence until all accrued and unpaid Preferential Dividends upon the
outstanding shares of Junior Preferred Stock shall have been paid (or set
aside for payment) in full. Such directors may be removed and replaced by
such shareholders, and vacancies in such directorships may be filled only
by such shareholders (or by the remaining director elected by such
shareholders, if there be one) in the manner permitted by law; provided,
however, that any such action by shareholders shall be taken at a meeting
of shareholders and shall not be taken by written consent thereof.
(h) Except as otherwise required by law or set forth herein,
holders of Junior 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 the taking of
any corporate action.
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(3) This Corporation shall abide by the following restrictions:
(a) Whenever Preferential Dividends or Participating Dividends are
in arrears or this Corporation shall be in default in payment thereof,
thereafter and until all accrued and unpaid Preferential Dividends and
Participating Dividends, whether or not declared, on shares of Junior
Preferred Stock outstanding shall have been paid or set aside for payment
in full, and in addition to any and all other rights which any holder of
shares of Junior Preferred Stock may have in such circumstances, the
Corporation shall not:
1. 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 Junior Preferred
Stock;
2. declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity as to dividends with the
Junior Preferred Stock, unless dividends are paid ratably on the
Junior 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;
3. except as permitted by subparagraph (4) below, 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 Junior Preferred Stock, provided
that this 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 (both as to dividends and upon
liquidation, dissolution or winding up) to the Junior Preferred Stock;
or
4. purchase or otherwise acquire for consideration any shares
of Junior Preferred Stock, or any shares of stock ranking on a parity
with the Junior Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up), 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) This 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 3, purchase or otherwise acquire such shares at such
time and in such manner.
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(c) This Corporation shall not issue any shares of Junior Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of November 17, 1986 between the Corporation and the
Rights Agent named therein or any comparable agreement entered into after
the expiration date thereof (the "Rights Agreement"), a copy of which is on
file with the Secretary of the Corporation at its principal executive
office and shall be made available to shareholders of record without charge
upon written request therefor addressed to said Secretary. Notwithstanding
the foregoing sentence, nothing contained in the provisions hereof shall
prohibit or restrict this Corporation from issuing for any purpose any
series of preferred stock with rights and privileges similar to, different
from, or greater than, those of the Junior Preferred Stock.
(4) Any shares of Junior Preferred Stock purchased or otherwise
acquired by this Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. This Corporation shall cause
all such shares upon their retirement and cancellation to become authorized but
unissued shares of preferred stock, without designation as to series, and such
shares may be reissued as part of a new series of preferred stock to be created
by resolution or resolutions of the Board of Directors.
(5) Upon any voluntary or involuntary liquidation, dissolution or
winding up of this Corporation, no distribution shall be made (a) to the holders
of shares of stock ranking junior to the Junior Preferred Stock (upon
liquidation, dissolution or winding up) unless the holders of shares of Junior
Preferred Stock shall have received, subject to adjustment as hereinafter
provided, the greater of either (i) $8,500 per share plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, or (ii) the amount equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock, or (b) to the
holders of stock ranking on a parity upon liquidation, dissolution or winding up
with the Junior Preferred Stock, unless simultaneously therewith distributions
are made ratably on the Junior Preferred Stock and all other shares of such
parity stock in proportion to the total amounts to which the holders of shares
of Junior Preferred Stock are entitled under clause (a)(i) of this sentence and
to which the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Junior
Preferred Stock shall be entitled upon liquidation, dissolution or winding up of
this Corporation pursuant to clause (a)(ii) of the foregoing sentence is
hereinafter referred to as the "Participating Liquidation Amount" and the
multiple of the amount to be distributed to holders of shares of Common Stock
upon the liquidation, dissolution or winding up of this Corporation applicable
pursuant to said clause to the determination of the Participating Liquidation
Amount, which shall be 100 initially but shall be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Liquidation Multiple."
In the event this Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or split
or a combination, consolidation or reverse split of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock, then in
each such case the Liquidation Multiple therefor applicable to the determination
of the Participating Liquidation Amount to which holders of Junior Preferred
Stock shall be entitled after such event shall be the Liquidation Multiple
applicable immediately prior to such event
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multiplied by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(6) The holders of shares of Junior Preferred Stock shall have the
following rights:
(a) In the event that holders of shares of Common Stock of this
Corporation receive in respect of their shares of Common Stock any share of
capital stock of this Corporation (other than any share of Common Stock of
the Corporation), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise
("Transaction"), then and in each such event the dividend rights, voting
rights and rights upon the liquidation, dissolution or winding up of this
Corporation of the shares of Junior Preferred Stock shall be adjusted so
that after such event the holders of Junior Preferred Stock shall be
entitled, in respect of each share of Junior Preferred Stock held, in
addition to such rights in respect thereof to which such holder was
entitled immediately prior to such adjustment, to (i) such additional
dividends as equal the Dividend Multiple in effect immediately prior to
such Transaction multiplied by the additional dividends which the holder of
a share of Common Stock shall be entitled to receive by virtue of the
receipt in the Transaction of such capital stock, (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior to
such Transaction multiplied by the additional voting rights which the
holder of a share of Common Stock shall be entitled to receive by virtue of
the receipt in the Transaction of such capital stock and (iii) such
additional distributions upon liquidation, dissolution or winding up of
this Corporation as equal the Liquidation Multiple in effect immediately
prior to such Transaction multiplied by the additional amount which the
holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of this Corporation by virtue of the
receipt in the Transaction of such capital stock, as the case may be, all
as provided by the terms of such capital stock.
(b) In the event that holders of shares of Common Stock of this
Corporation receive in respect of their shares of Common Stock any right or
warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable
for Common Stock) at a purchase price per share less than the Current
Market Price (as hereinafter defined) of a share of Common Stock on the
date of issuance of such right or warrant, then and in each such event the
dividend rights, voting rights and rights upon the liquidation, dissolution
or winding up of this Corporation of the shares of Junior Preferred Stock
shall each be adjusted so that after such event the Dividend Multiple, the
Vote Multiple and the Liquidation Multiple shall each be the product of the
Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the
case may be, in effect immediately prior to such event multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired
upon exercise in full of all such rights or warrants and the denominator of
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which shall be the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the number of shares of
Common Stock which could be purchased, at the Current Market Price of the
Common Stock at the time of such issuance, by the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of this
Corporation receive in respect of their shares of Common Stock any right or
warrant to purchase capital stock of this Corporation (other than shares of
Common Stock), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for capital stock
of this Corporation (other than Common Stock), at a purchase price per
share less than the Current Market Price of such shares of capital stock on
the date of issuance of such right or warrant, then and in each such event
the dividend rights, voting rights and rights upon liquidation, dissolution
or winding up of this Corporation of the shares of Junior Preferred Stock
shall each be adjusted so that after such event each holder of a share of
Junior Preferred Stock shall be entitled, in respect of each share of
Junior Preferred Stock held, in addition to such rights in respect thereof
to which such holder was entitled immediately prior to such event, to
receive (i) such additional dividends as equal the Dividend Multiple in
effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of shares of Common Stock shall be entitled
upon exercise of such right or warrant by virtue of the capital stock which
could be acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined) and (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such event
multiplied, first, by the additional voting rights to which the holder of a
share of Common Stock shall be entitled upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction and (iii) such
additional distributions upon liquidation, dissolution or winding up of
this Corporation as equal the Liquidation Multiple in effect immediately
prior to such event multiplied, first, by the additional amount which the
holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of this Corporation upon exercise of
such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction.
For purposes of this paragraph, the "Discount Fraction" shall be a
fraction, the numerator of which shall be the difference between the
Current Market Price (as hereinafter defined) of a share of the capital
stock subject to a right or warrant distributed to the holders of shares of
Common Stock of this Corporation as contemplated by this paragraph
immediately after the distribution thereof and the purchase price per share
for such share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Current Market Price of a share of such
capital stock immediately after the distribution of such right or warrant.
(d) For purposes of this Section (6), the "Current Market Price" of
a share of capital stock of this Corporation (including a share of Common
Stock) on any date shall be deemed to be the average of the daily closing
prices per share thereof over the 30
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consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that, in the event that such Current
Market Price of any such share of capital stock is determined during a
period which includes any date that is within 30 Trading Days after the
ex-dividend date for (i) a dividend or distribution on stock payable in
shares of such stock or securities convertible into shares of such stock,
or (ii) any subdivision, split, combination, consolidation, reverse stock
split or reclassification of such stock, then, and in each such case, the
Current Market Price shall be appropriately adjusted by the Board of
Directors of this Corporation to reflect the Current Market Price of such
stock to take into account ex-dividend trading. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange, or, if the shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or if on any such date the
shares are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the shares selected by the Board of Directors of this
Corporation. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not
listed or admitted to trading on any national securities exchange, on which
the New York Stock Exchange or such other national securities exchange as
may be selected by the Board of Directors of this Corporation is open. If
the shares are not publicly held or not so listed or traded on any day
within the period of 30 Trading Days applicable to the determination of
Current Market Price thereof as aforesaid, "Current Market Price" shall
mean the fair market value thereof per share as determined in good faith by
the Board of Directors of this Corporation. In either case referred to in
the foregoing sentence, the determination of Current Market Price shall be
described in a statement filed with the Secretary of the Corporation.
(7) In case this Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each outstanding share of Junior Preferred Stock
shall at the time be similarly exchanged for or changed into the aggregate
amount of stock, securities, cash and/or other property (payable in like kind),
as the case may be, for which or into which each share of Common Stock is
changed or exchanged multiplied by the highest of the Vote Multiple, the
Dividend Multiple or the Liquidation Multiple in effect immediately prior to
such event.
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(8) Adjustments to the Junior Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs. This Corporation shall give prompt written notice to
each holder of a share of Junior Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights or rights upon liquidation, dis solution
or winding up of this Corporation of such shares required by the provisions
hereof. Notwithstanding the foregoing sentence, the failure of this Corporation
to give such notice shall not affect the validity of or the force or effect of
or the requirement for such adjustment.
(9) The shares of Junior Preferred Stock shall not be redeemable at the
option of this Corporation or any holder thereof. Notwithstanding the foregoing
sentence of this Section, this Corporation may acquire shares of Junior
Preferred Stock in any other manner permitted by law, the provisions hereof and
the Articles of Incorporation of the Corporation.
(10) Unless otherwise provided in these Articles of Incorporation, the
Junior Preferred Stock shall rank junior to all other series of the
Corporation's preferred stock (as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up) and senior to
the Common Stock.
(11) The provisions of this Section of the Articles of Incorporation
shall not be amended in any manner which would materially affect the rights,
privileges or powers of the Junior Preferred Stock without, in addition to any
other vote of shareholders required by law, the affirmative vote of the holders
of 80% or more of the outstanding shares of Junior Preferred Stock, voting
together as a single class.
J. SERIES BB PREFERENCE STOCK. The Corporation's Series BB Participating
Cumulative Preference Stock shall consist of 1,000,000 shares of Preferred Stock
having the preferences, limitations and relative rights set forth below. Such
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of shares
of Series BB Participating Cumulative Preference Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options or rights or upon the
conversion of any outstanding securities issued by the Corporation convertible
into Series BB Participating Cumulative Preference Stock.
(1) The holders of Series BB Participating Cumulative Preference Stock
shall have the following dividend rights.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series BB Participating Cumulative Preference Stock with respect to
dividends, the holders of shares of Series BB Participating Cumulative
Preference Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the fifteenth day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing
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on the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series BB Participating Cumulative Preference Stock,
in an amount per share (rounded to the nearest cent) equal to the greater of (a)
$10.00 or (b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series BB
Participating Cumulative Preference Stock. In the event the Corporation shall at
any time after August 27, 1996 (the "Right Declaration Date") (i) declare or pay
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series BB Participating Cumulative Preference Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series BB Participating Cumulative Preference Stock as provided in paragraph (a)
above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution 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 $10.00 per share on
the Series BB Participating Cumulative Preference Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series BB Participating Cumulative Preference Stock from
the Quarterly Dividend Payment Date next preceding the date of issue of such
shares of Series BB Participating Cumulative Preference Stock, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends of such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series BB Participating Cumulative
Preference Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series BB Participating Cumulative Preference 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. The Board of Directors may fix a record date for
the determination of holders of shares
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of Series BB Participating Cumulative Preference Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 45 days prior to the date fixed for the payment thereof.
(2) In addition to any voting rights otherwise required by law, the
holders of shares of Series BB Participating Cumulative Preference Stock shall
have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series BB Participating Cumulative Preference Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare or pay any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders of
shares of Series BB Participating Preference Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided in the Corporation's Articles of
Incorporation or by law, the holders of shares of Series BB Participating
Cumulative Preference Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) (i) If at any time dividends on any Series BB Participating
Cumulative Preference Stock shall be in arrears in an amount equal to six
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Series BB Participating Cumulative Preference Stock then outstanding shall have
been declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Series BB Participating
Cumulative Preference Stock) with dividends in arrears in an amount equal to six
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two Directors.
(ii) During any default period, such voting right of the
holders of Series BB Participating Cumulative Preference Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 2(c) or at any annual meeting of shareholders, and thereafter at annual
meetings of shareholders, provided that neither such voting right nor the right
of the holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless the
holders of 10% in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the
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holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may then exist up
to two Directors or, if such right is exercised at an annual meeting, to elect
two Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series BB Participating
Cumulative Preference Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareholder or shareholders
owning in the aggregate not less than 10% of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board, the Chief Executive Officer,
the President, a Vice-President or the Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this paragraph (c)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to the
holder the last address appearing on the books of the Corporation. Such meeting
shall be called for a time not earlier than 20 days and not later than 60 days
after such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any shareholder or shareholders owning in the aggregate not less than
10% of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (c)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the shareholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(c)(ii) of this Section 2) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this paragraph
(c) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
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(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the Corporation's Articles of Incorporation or By-laws
irrespective of any increase made pursuant to the provisions of paragraph
(c)(ii) of this Section 2 (such number being subject, however, to change
thereafter in any manner provided by law or in the Corporation's Articles of
Incorporation or By-laws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled by
a majority of the remaining Directors.
(d) Except as set forth herein, holders of Series BB Participating
Cumulative Preference 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 taking any corporate
action.
(3) Any shares of Series BB Participating Cumulative Preference 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 and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the shareholders or the Board of
Directors, subject to the conditions and restrictions on issuance set forth in
the Corporation's Articles of Incorporation.
(4) The Corporation shall abide by the following restrictions:
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series BB Participating Cumulative Preference
Stock as provided for in Section 1 are in arrears or the Corporation shall
be in default in payment thereof, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series BB Participating Cumulative Preference Stock outstanding shall have
been paid or set aside for payment in full, and in addition to any and all
other rights which any holder of shares of Series BB Participating
Cumulative Preference Stock may have in such circumstances, the Corporation
shall not:
1. declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series BB Participating
Cumulative Preference Stock;
2. declare or pay dividends, 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 BB
Participating Cumulative Preference Stock, unless dividends are paid
ratably on the Series BB Participating
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Cumulative Preference 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;
3. redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series BB Participating
Cumulative Preference Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series BB Participating Cumulative Preference
Stock; or
4. redeem or purchase or otherwise acquire for consideration
any shares of Series BB Participating Cumulative Preference Stock, or
any shares of stock ranking on a parity with the Series BB
Participating Cumulative Preference Stock (either as to dividends or
upon liquidation, dissolution or winding up), 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) Upon any liquidation, dissolution or winding up of the Corporation,
the holders of Series BB Participating Cumulative Preference Stock shall have
the following rights.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, no distribution shall be made to
the holders of shares of stock ranking (either as to dividends or upon
liquidation, dissolution or winding up) junior to the Series BB Participating
Cumulative Preference Stock unless, prior thereto, the holders of shares of
Series BB Participating Cumulative Preference Stock shall have received $100 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment (the "Series BB
Liquidation Preference"). Following the payment of the full amount of the Series
BB Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series BB Participating Cumulative Preference Stock unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series BB Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (c) below to reflect such events as
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stock splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii), the "Adjustment Number"). Following the
payment of the full amount of the Series BB Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series BB
Participating Cumulative Preference Stock and Common Stock, respectively,
holders of Series BB Participating Cumulative Preference Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Cumulative Preference Stock and Common Stock, on a per
share basis, respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series BB Liquidation Preference and
the liquidation preferences of all other series of Cumulative Preference Stock,
if any, which rank on a parity with the Series BB Participating Cumulative
Preference Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment then such remaining
assets shall be distributed ratably to the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(6) In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or converted into other stock or securities, cash and/or any other
property, then in any such case the shares of Series BB Participating Cumulative
Preference Stock shall at the same time be similarly exchanged or converted in
an amount per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is converted or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare or
pay any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or conversion of
shares of Series BB Participating Cumulative Preference Stock shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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(7) The shares of Series BB Participating Cumulative Preference Stock
shall not be redeemable.
(8) The Articles of Incorporation of the Corporation shall not be
further amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series BB Participating Cumulative
Preference Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series BB
Participating Cumulative Preference Stock, voting separately as a class.
(9) Series BB Participating Cumulative Preference Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series BB Participating Cumulative Preference Stock.
ARTICLE IV
Directors
A. NUMBER OF DIRECTORS. The business and affairs of this Corporation shall
be managed under the direction of the Board of Directors. The number of
directors comprising the Board of Directors of this Corporation (exclusive of
directors who may be elected by the holders of any one or more series of
Preferred Stock voting separately) shall be 14 unless otherwise determined from
time to time by resolution adopted by the affirmative votes of both (i) 80% of
the directors then in office and (ii) a majority of the Continuing Directors (as
defined in Article V(D)), voting as a separate group, provided, however, that no
decrease in the number of directors shall shorten the term of any incumbent
director.
B. CLASSIFICATION. The Board of Directors, other than those who may be
elected by the holders of any one or more series of Preferred Stock voting
separately, shall be divided, with respect to the time during which they shall
hold office, into three classes, designated Class I, II and III, as nearly equal
in number as possible. Any increase or decrease in the number of directors shall
be apportioned by the Board of Directors so that all classes of directors shall
be as nearly equal in number as possible. At each annual meeting of
shareholders, directors chosen to succeed those whose terms then expire shall be
elected to hold office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election and until their
successors are duly elected and qualified.
C. VACANCIES. Except as provided in Article IV(G) hereof, any vacancy on
the Board (including any vacancy resulting from an increase in the authorized
number of directors or from a failure of the shareholders to elect the full
number of authorized directors) may, notwithstanding any resulting absence of a
quorum of directors, be filled only by the Board of Directors, acting by vote of
both (i) a majority of the directors then in office and (ii) a majority of all
the Continuing Directors,
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voting as a separate group, and any director so appointed shall serve until the
next shareholders' meeting held for the election of directors of the class to
which he shall have been appointed and until his successor is duly elected and
qualified.
D. REMOVAL. Subject to Article IV(G) hereof and notwithstanding any other
provisions of these Articles or the Bylaws of this Corporation, any director or
the entire Board of Directors may be removed at any time, but only for cause, by
the affirmative vote at a meeting of shareholders called for such purpose of the
holders of both (i) a majority of the Total Voting Power (as defined in Article
V(D) hereof) entitled to be cast by the holders of Voting Stock (as defined in
Article V(D) hereof), voting together as a single class, and (ii) a majority of
the Total Voting Power entitled to be cast by the Independent Shareholders (as
defined in Article V(D) hereof), voting as a separate group. At the same meeting
in which the shareholders remove one or more directors, a successor or
successors may be elected for the unexpired term of the director or directors
removed. Except as set forth in this Article, directors shall not be subject to
removal.
E. TENDER OFFERS AND OTHER EXTRAORDINARY TRANSACTIONS. In connection with
the exercise of its judgment in determining what is in the best interest of the
Corporation and its stockholders when evaluating a Business Combination (as
defined in Article V(D) hereof) or a tender or exchange offer or a proposal by
another Person or Persons to make a tender or exchange offer, the Board of
Directors of the Corporation shall consider, in addition to the adequacy of the
amount to be paid in connection with any such transaction, all of the following
factors and any other factors which it deems relevant: (i) the social and
economic effects of the transaction on the Corporation and its subsidiaries, and
their respective employees, customers, creditors and other elements of the
communities in which they operate or are located, (ii) the business and
financial condition and earnings prospects of the acquiring Person or Persons,
including, but not limited to, debt service and other existing or likely
financial obligations of the acquiring Person or Persons, and the possible
effect of such conditions upon the Corporation and its Subsidiaries and the
other elements of the communities in which the Corporation and its subsidiaries
operate or are located, and (iii) the competence, experience and integrity of
the acquiring Person or Persons and its or their management.
F. BOARD QUALIFICATIONS. (1) Except as otherwise provided in Article IV(G)
hereof, no person shall be eligible for nomination, election or service as a
director of the Corporation who shall:
(a) in the opinion of the Board of Directors fail to respond
satisfactorily to the Corporation respecting any inquiry of the Corporation
for information to enable the Corporation to make any certification
required by the Federal Communications Commission under the Anti-Drug Abuse
Act of 1988 or to determine the eligibility of such person under this
Article;
(b) have been arrested or convicted of any offense concerning the
distribution or possession of, or trafficking in, drugs or other controlled
substances, provided
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that in the case of an arrest the Board of Directors may in its discretion
determine that notwithstanding such arrest such persons shall remain
eligible under this Article; or
(c) have engaged in actions that could lead to such an arrest or
conviction and that the Board of Directors determines would make it unwise
for such person to serve as a director of the Corporation.
(2) Any person serving as a director of the Corporation shall
automatically cease to be a director on such date as he ceases to have the
qualifications set forth in paragraph (1) above, and his position shall be
considered vacant within the meaning of Article IV(C) hereof.
G. DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding anything in
these Articles of Incorporation to the contrary, whenever the holders of any one
or more series of Preferred Stock shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the provisions of
these Articles of Incorporation (as they may be duly amended from time to time)
fixing the rights and preferences of such Preferred Stock shall govern with
respect to the nomination, election, term, removal, vacancies or other related
matters with respect to such directors.
ARTICLE V
Certain Business Combinations
A. VOTE REQUIRED IN BUSINESS COMBINATIONS. No Business Combination may be
effected unless all of the following conditions have been fulfilled:
(1) In addition to any vote otherwise required by law or these
Articles, the proposal to effect a Business Combination shall have been approved
by (i) a majority of the directors then in office and a majority of the
Continuing Directors and (ii) by the affirmative votes of both of the following:
(a) 80% of the Total Voting Power entitled to be cast by holders of
outstanding shares of Voting Stock of this Corporation, voting as a
separate voting group; and
(b) Two-thirds of the Total Voting Power entitled to be cast by the
Independent Stockholders present or duly represented at a meeting, voting
as a separate voting group.
(2) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended (the "Act"), and the rules and regulations thereunder (or
any subsequent provisions replacing the Act, rules or regulations as a whole or
in part) is mailed to all shareholders of the
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Corporation at least 30 days prior to the consummation of such Business
Combination (regardless of whether such proxy or information statement is
required pursuant to the Act or subsequent provisions).
B. Nonapplicability of Voting Requirements. The vote required by Paragraph
A of this Article does not apply to a Business Combination if all conditions
specified in either of paragraphs 1 or 2 below are met:
(1) The proposed Business Combination is approved prior to the time the
Related Person involved in the proposed transaction became a Related Person by
the affirmative votes of both a majority of the directors then in office and a
majority of the Continuing Directors, voting as a separate group.
(2) All of the following five conditions have been met:
(a) The aggregate amount of the cash and the Market Value on the
Valuation Date of consideration other than cash to be received per share by
all holders of Common Stock in such Business Combination is at least equal
to the highest of the following:
1. the highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealers' fees, paid by or
on behalf of the Related Person for any shares of Common Stock of the
same class or series acquired by it within the two-year period
immediately prior to the Announcement Date or in the transaction in
which it became a Related Person, whichever is higher;
2. The Market Value per share of Common Stock of the same class
or series on the Announcement Date or on the Determination Date,
whichever is higher; or
3. The price per share equal to the Market Value per share of
Common Stock of the same class or series determined pursuant to clause
(2) immediately preceding, multiplied by the fraction of (i) the
highest per share price, including any brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by or for the Related Person
for any shares of Common Stock of the same class or series acquired by
it within the two-year period immediately prior to the Announcement
Date, over (ii) the Market Value per share of Common Stock of the same
class or series on the first day in such two-year period on which the
Related Person acquired any shares of Common Stock.
(b) The aggregate amount of the cash and the Market Value as of the
Valuation Date of consideration other than cash to be received per share by
holders of shares of any class or series of outstanding stock other than
Common Stock is at least equal to the
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highest of the following, whether or not the Related Person has previously
acquired any shares of a particular class or series of stock:
1. The highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealers' fees, paid by or
for the Related Person for any shares of such class of stock acquired
by it within the two-year period immediately prior to the Announcement
Date or in the transaction in which it became a Related Person,
whichever is higher;
2. The highest preferential amount per share to which the
holders of shares of such class of stock are entitled in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
this Corporation;
3. The Market Value per share of such class of stock on the
Announcement Date or on the Determination Date, whichever is higher;
or
4. The price per share equal to the Market Value per share of
such class of stock determined pursuant to clause (3) immediately
preceding, multiplied by the fraction of (i) the highest per share
price, including any brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by or for the Related Person for any
shares of any class of Voting Stock acquired by it within the two-year
period immediately prior to the Announcement Date, over (ii) the
Market Value per share of the same class of Voting Stock on the first
day in such two-year period on which the Related Person acquired any
shares of the same class of Voting Stock.
(c) The consideration to be received by holders of any class or
series of outstanding stock is to be in cash or in the same form as the
Related Person has previously paid for shares of the same class or series
of stock. If the Related Person has paid for shares of any class of stock
with varying forms of consideration, the form of consideration for such
class of stock shall be either cash or the form used to acquire the largest
number of shares of such class or series of stock previously acquired by
it.
(d) After the Related Person has become a Related Person and prior
to the consummation of such Business Combination:
1. There shall have been no failure to declare and pay at the
regular date therefor any full periodic dividends, cumulative or not,
on any outstanding Preferred Stock of this Corporation;
2. There shall have been no reduction in the annual rate of
dividends paid on any class or series of stock of this Corporation
that is not Preferred Stock except as necessary to reflect any
subdivision of the stock, and no failure to increase the annual rate
of dividends as necessary to reflect
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any reclassification, including any reverse stock split,
recapitalization, reorganization, or any similar transaction which has
the effect of reducing the number of outstanding shares of the stock;
and
3. The Related Person did not become the Beneficial Owner of
any additional shares of stock of this Corporation except as part of
the transaction which resulted in such Related Person becoming a
Related Person or by virtue of proportionate stock splits or stock
dividends.
The provisions of clause (1) and (2) immediately preceding shall not apply
if no Related Person or an Affiliate or Associate of the Related Person
voted as a director of this Corporation in a manner inconsistent with such
clauses and the Related Person, within ten days after any act or failure to
act inconsistent with such clauses, notifies the Board of Directors of this
Corporation in writing that the Related Person disapproves thereof and
requests in good faith that the Board of Directors rectify such act or
failure to act.
(e) After the Related Person has become a Related Person, the
Related Person may not have received the benefit, directly or indirectly,
except proportionately as a shareholder, of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or
other tax advantages provided by this Corporation or any of its
Subsidiaries, whether in anticipation of or in connection with such
Business Combination or otherwise.
C. ALTERNATIVE SHAREHOLDER VOTE FOR BUSINESS COMBINATIONS. In the event the
conditions set forth in Subparagraph (B)(1) or (B)(2) have been met, the
affirmative vote required of shareholders in order to approve the proposed
Business Combination shall be 66-2/3% of the Total Voting Power present or duly
represented at the meeting called for such purpose.
D. DEFINITIONS. The following terms, for all purposes of these Articles or
the By-laws of this Corporation, shall have the following meaning:
(1) An "Affiliate" of, or a person "affiliated with," a specified
person means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
(2) "Announcement Date" means the first general public announcement of
the proposal or intention to make a proposal of the Business Combination or its
first communication generally to shareholders of this Corporation, whichever is
earlier.
(3) "Associate," when used to indicate a relationship with any person,
means any of the following:
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(a) Any corporation or organization, other than this Corporation,
of which such person is an officer, director or partner or is, directly or
indirectly, the Beneficial Owner of 10% or more of any class of Equity
Securities.
(b) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity.
(c) Any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person.
(d) Any investment company registered under the Investment Company
Act of 1940 for which such person serves as investment advisor.
(4) A person shall be deemed to be the "Beneficial Owner" of any shares
of capital stock (regardless whether owned of record):
(a) Which that person or any of its Affiliates or Associates,
directly or indirectly, owns beneficially;
(b) Which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether exercisable immediately or only after the
passage of time) 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 capital
stock of the corporation or any of its subsidiaries.
(5) "Business Combination" means any of the following transactions,
when entered into by the Corporation or a Subsidiary with, or upon a proposal
by, a Related Person:
(a) The merger or consolidation of, or an exchange of securities
by, the Corporation or any Subsidiary;
(b) The sale, lease, exchange, mortgage, pledge, transfer or any
other disposition (in one or a series of transactions) of any assets of the
Corporation, or of any Subsidiary, having an aggregate book or fair market
value of $1,000,000 or more, measured at the time the transaction or
transactions are approved by the Board of Directors;
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(c) The adoption of a plan or proposal for the liquidation or
dissolution of the Corporation or any Subsidiary;
(d) The issuance or transfer by the Corporation or any Subsidiary
(in one or a series of transactions) of securities of the Corporation, or
of any Subsidiary, having a fair market value of $1,000,000 or more;
(e) The reclassification of securities (including a reverse stock
split), recapitalization, consolidation or any other transaction (whether
or not involving a Related Person) which has the direct or indirect effect
of increasing the voting power (regardless whether then exercisable) or the
proportionate amount of the outstanding shares of any class or series of
Equity Securities of this Corporation or any of its Subsidiaries of a
Related Person, or any Associate or Affiliate of a Related Person;
(f) Any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation or any Subsidiary to an Interested Shareholder or any Affiliate
or Associate thereof, except proportionately as a shareholder; or
(g) Any agreement, contract or other arrangement providing directly
or indirectly for any of the foregoing.
(6) "Capital Stock" means any Common Stock, Preferred Stock or other
capital stock of the Corporation, or any bonds, debentures, or other obligations
granted voting rights by the Corporation pursuant to La. R.S. 12:75H.
(7) "Common Stock" means any stock other than a class or series of
preferred or preference stock.
(8) "Continuing Director" shall mean any member of the Board of
Directors who is not a Related Person or an Affiliate or Associate thereof, and
who was a member of the Board of Directors prior to the time that the Related
Person became a Related Person, and any successor to a Continuing Director who
is not a Related Person or an Affiliate or Associate thereof and was recommended
to succeed a Continuing Director by a majority of Continuing Directors who were
then members of the Board of Directors, provided that, in the absence of a
Related Person, any reference to "Continuing Directors" shall mean all directors
then in office.
(9) "control," including the terms "controlling," "controlled by" and
"under common control with," means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise. The beneficial ownership of 10% or more of the votes entitled to be
cast by a corporation's voting stock creates a presumption of control.
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(10) "Determination Date" means the date on which a Related Person
first became a Related Person.
(11) "Equity Security" means any of the following:
(a) Any stock or similar security, certificate of interest or
participation in any profit sharing agreement, voting trust certificate or
certificate of deposit for an equity security.
(b) Any security convertible, with or without consideration, into
an equity security, or any warrant or other security carrying any right to
subscribe to or purchase an equity security.
(c) Any put, call, straddle or other option or privilege of buying
an equity security from or selling an equity security to another without
being bound to do so.
(12) "Independent Shareholder" or "Independent Stockholder" means a
holder of Voting Stock of this Corporation who is not a Related Person.
(13) "Market Value" means the following:
(a) In the case of stock, the highest closing sale price on the
date or during the period in question of a share of such stock 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 on the date or during the period in question on
the National Association of Securities Dealers, Inc., Automated Quotations
Systems, or any alternative system then in use, or, if no such quotations
are available, the fair market value on the date or during the period in
question of a share of such stock as determined by a majority of the
Continuing Directors of this Corporation in good faith.
(b) In the case of property other than cash or stock, the fair
market value of such property on the date or during the period in question
as determined by a majority of the Continuing Directors of this Corporation
in good faith.
(14) A "person" shall mean any individual, firm, corporation or other
entity, or a group of persons acting or agreeing to act together in the manner
set forth in Rule 13d-5 under the Securities Exchange Act of 1934, as in effect
on January 1, 1984.
(15) "Related Person" means any person (other than the Corporation, a
Subsidiary or any profit sharing, employee stock ownership or other employee
benefit plan of the Corporation or any Subsidiary or any trust, trustee of or
fiduciary with respect to any such plan acting in such capacity) who (a) is the
direct or indirect Beneficial Owner of shares of Capital Stock representing
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more than 10% of the outstanding Total Voting Power entitled to vote for the
election of directors, and any Affiliate or Associate of any such person, or (b)
is an Affiliate or Associate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the Beneficial
Owner, directly of indirectly, of shares of Capital Stock (including two or more
classes or series voting together as a single class) representing 10% or more of
the outstanding Total Voting Power entitled to vote for the election of
directors. For the purpose of determining whether a person is the Beneficial
Owner of a percentage, specified in this Article, of the outstanding Total
Voting Power, the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned by that person through application of Article
V(D)(3) but shall not include any other shares which may be issuable to any
other person.
(16) "Subsidiary" means any corporation of which Voting Stock having a
majority of the votes entitled to be cast is owned, directly or indirectly, by
this Corporation.
(17) "Total Voting Power," when used in reference to any particular
matter properly brought before the shareholders for their consideration and
vote, means the total number of votes that holders of Capital Stock are entitled
to cast with respect to such matter.
(18) "Valuation Date" means the following:
(a) For a Business Combination voted upon by shareholders, the
latter of the date prior to the date of the shareholders' vote and the day
20 days prior to the consummation of the Business Combination; and
(b) For a Business Combination not voted upon by the shareholders,
the date of the consummation of the Business Combination.
(19) "Voting Stock" means shares of Capital Stock of the Corporation
entitled to vote generally in the election of directors.
E. BENEFIT OF STATUTE. This Corporation claims and shall have the benefit
of the provisions of R.S. 12:133 except that the provisions of R.S. 12:133 shall
not apply to any business combination involving an interested shareholder that
is an employee benefit plan or related trust of this Corporation.
ARTICLE VI
Shareholders' Meetings
A. WRITTEN CONSENTS. Any action required or permitted to be taken at any
annual or special meeting of shareholders may be taken only upon the vote of the
shareholders, present in person or represented by duly authorized proxy, at an
annual or special meeting duly noticed and
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called, as provided in the Bylaws of the Corporation, and may not be taken by a
written consent of the shareholders pursuant to the Business Corporation Law of
the State of Louisiana.
B. SPECIAL MEETINGS. Subject to the terms of any outstanding class or
series of Preferred Stock that entitles the holders thereof to call special
meetings, the holders of a majority of the Total Voting Power of the Corporation
shall be required to cause the Secretary of the Corporation to call a special
meeting of shareholders pursuant to La. R.S. 12:73B (or any successor
provision). Nothing in this Article VI shall limit the power of the President of
the Corporation or its Board of Directors to call a special meeting of
shareholders.
ARTICLE VII
Limitation of Liability and Indemnification
A. LIMITATION OF LIABILITY. No director or officer of the Corporation shall
be liable to the Corporation or to its shareholders for monetary damages for
breach of his fiduciary duty as a director or officer, provided that the
foregoing provision shall not eliminate or limit the liability of a director or
officer for (1) any breach of his duty of loyalty to the Corporation or its
shareholders; (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (3) liability for unlawful
distributions of the Corporation's assets to, or redemptions or repurchases of
the Corporation's shares from, shareholders of the Corporation, under and to the
extent provided in La. R.S. 12:92D; or (4) any transaction from which he derived
an improper personal benefit.
B. AUTHORIZATION OF FURTHER ACTIONS. The Board of Directors may (1) cause
the Corporation to enter into contracts with its directors and officers
providing for the limitation of liability set forth in this Article to the
fullest extent permitted by law, (2) adopt By-laws or resolutions, or cause the
Corporation to enter into contracts, providing for indemnification of directors
and officers of the Corporation and other persons (including but not limited to
directors and officers of the Corporation's direct and indirect Subsidiaries) to
the fullest extent permitted by law and (3) cause the Corporation to exercise
the insurance powers set forth in La. R.S. 12:83F, notwithstanding that some or
all of the members of the Board of Directors acting with respect to the
foregoing may be parties to such contracts or beneficiaries of such By-laws or
resolutions or the exercise of such powers. No repeal or amendment of any such
By-laws or resolutions limiting the right to indemnification thereunder shall
affect the entitlement of any person to indemnification whose claim thereto
results from conduct occurring prior to the date of such repeal or amendment.
C. SUBSIDIARIES. The Board of Directors may cause the Corporation to
approve for the officers and directors of its direct and indirect Subsidiaries
limitation of liability, indemnification and insurance provisions comparable to
the foregoing.
D. AMENDMENT OF ARTICLE. Notwithstanding any other provisions of these
Articles of Incorporation, the affirmative vote of the holders of at least 80%
of the Total Voting Power shall be
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required to amend or repeal this Article VII, and any amendment or repeal of
this Article shall not adversely affect any elimination or limitation of
liability of a director or officer of the Corporation under this Article with
respect to any action or inaction occurring prior to the time of such amendment
or repeal.
ARTICLE VIII
Reversion
Except for cash, shares or other property or rights payable or issuable to
the holders of Preferred Stock, the rights to which shall be determined under
applicable state law, Cash, property or share dividends, shares issuable to
shareholders in connection with a reclassification of stock, and the redemption
price of redeemed shares, that are not claimed by the shareholders entitled
thereto within one year after the dividend or redemption price became payable or
the shares became issuable, despite reasonable efforts by the Corporation to pay
the dividend or redemption price or deliver the certificates for the shares to
such shareholders within such time, shall, at the expiration of such time,
revert in full ownership to the Corporation, and the Corporation's obligation to
pay such dividend or redemption price or issue such shares, as the case may be,
shall thereupon cease, provided, however, that the Board of Directors may, at
any time, for any reason satisfactory to it, but need not, authorize (i) payment
of the amount of any cash or property dividend or redemption price or (ii)
issuance of any shares, ownership of which has reverted to the Corporation
pursuant to this Article, to the person or entity who or which would be entitled
thereto had such reversion not occurred.
ARTICLE IX
Amendments
A. CHARTER AMENDMENTS. Articles IV (other than paragraphs F and G), V,
VI(A) and IX of these Articles of Incorporation shall not be amended in any
manner (whether by modification or repeal of an existing Article or Articles or
by addition of a new Article or Articles) except upon resolutions adopted by the
affirmative vote of both (i) 80% of the Total Voting Power entitled to be cast
by the holders of outstanding shares of Voting Stock, voting together as a
single group, and (ii) two-thirds of the Total Voting Power entitled to be cast
by the Independent Shareholders present or duly represented at a shareholders'
meeting, voting as a separate group; provided, however, that if such resolutions
shall first be adopted by both a majority of the directors then in office and a
majority of the Continuing Directors, voting as a separate group, then such
resolutions shall be deemed adopted by the shareholders upon the affirmative
vote of a majority of the Total Voting Power entitled to be cast by the holders
of outstanding shares of Voting Stock, voting as a single group.
B. BYLAW AMENDMENTS. Bylaws of this Corporation may be altered, amended, or
repealed or new Bylaws may be adopted by (i) the shareholders, but only upon the
affirmative vote
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of both 80% of the Total Voting Power entitled to be cast by the holders of
outstanding shares of Voting Stock, voting together as a single group, and
two-thirds of the Total Voting Power entitled to be cast by the Independent
Shareholders present or duly represented at a shareholders' meeting, voting as a
separate group, or (ii) the Board of Directors, but only upon the affirmative
vote of both a majority of the directors then in office and a majority of the
Continuing Directors, voting as a separate group.
*************************************
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Exhibit 3(ii)
BYLAWS
OF
CENTURY TELEPHONE ENTERPRISES, INC.
(as amended through October 7, 1996)
<PAGE>
BYLAWS
CENTURY TELEPHONE ENTERPRISES, INC.
TABLE OF CONTENTS
ARTICLE I - Officers..............................................1
Section 1. Required and Permitted Officers.................1
Section 2. Election and Removal of Officers................4
ARTICLE II - Board of Directors...................................4
Section 1. Powers..........................................4
Section 2. Organizational and Regular Meetings.............4
Section 3. Special Meetings................................4
Section 4. Waiver of Notice................................5
Section 5. Quorum..........................................5
Section 6. Notice of Adjournment...........................5
Section 7. Written Consents................................5
Section 8. Voting..........................................6
Section 9. Use of Communications Equipment.................6
Section 10. Indemnification.................................6
Section 11. Certain Qualifications.........................10
ARTICLE III - Committees.........................................10
Section 1. Committees.....................................10
Section 2. Appointment and Removal of Committee Members...13
Section 3. Procedures for Committees......................13
Section 4. Meetings.......................................13
Section 5. Authority of Chairman to Appoint Committees....13
ARTICLE IV - Shareholders' Meetings..............................14
Section 1. Place of Meetings..............................14
Section 2. Annual Meeting.................................14
Section 3. Special Meetings...............................14
Section 4. Notice of Meetings.............................14
Section 5. Notice of Shareholder Nominations and
Shareholder Business...........................14
Section 6. Quorum.........................................16
Section 7. Voting Power Present or Represented............17
Section 8. Voting Requirements............................17
Section 9. Proxies........................................17
Section 10. Adjournments...................................17
Section 11. Written Consents...............................18
Section 12. List of Shareholders...........................18
Section 13. Procedure at Shareholders Meetings.............18
ARTICLE V - Certificates of Stock.............................18
ARTICLE VI - Registered Shareholders...........................19
ARTICLE VII - Loss of Certificate...............................19
ARTICLE VIII - Checks............................................19
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ARTICLE IX - Dividends.........................................19
ARTICLE X - Inapplicability of Louisiana Control
Share Statute.....................................19
ARTICLE XI - Certain Definitions...............................20
ARTICLE XII - Amendments........................................20
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BYLAWS
(Amended entirely May 23, 1995)
(Amended Article I, Section 1, Subsection 1.1 (L), added new Subsection
1.1 (O), and amended Subsection 1.2 - October 7, 1996)
ARTICLE I
OFFICERS
SECTION 1. REQUIRED AND PERMITTED OFFICERS
1.1 Officers. The officers of the Corporation shall be a Chairman of the
Board; a Chief Executive Officer; a President; a Secretary; and a Treasurer. The
Board may elect such other officers as the Board may determine. An officer need
not be a Director and any two or more of the offices may be held by one person,
provided, however, that a person holding more than one office may not sign in
more than one capacity any certificate or any instrument required to be signed
by two officers. The required and permitted officers and duties thereof are as
follows:
A. Chairman of the Board (Chairman). The Chairman shall preside at all
meetings of the shareholders and Directors, ensure that all orders, policies and
resolutions of the Board are carried out and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
B. Vice Chairman. The Board may from time to time elect one or more Vice
Chairmen. The Vice Chairman shall serve in the absence or inability of the
Chairman to serve. In the event of the death, resignation or permanent inability
of the Chairman to serve, the Vice Chairman shall automatically succeed to the
office of Chairman until such time as the Board of Directors convenes a properly
called meeting to elect a new Chairman. In the event that there is more than one
Vice Chairman, then the one who has served in that capacity for the longest
period of time shall serve in the absence of the Chairman or assume the office
of Chairman as the case may be.
C. CHIEF EXECUTIVE OFFICER (CEO). The CEO shall, subject to the powers of
the Chairman, have general and active management of the business of the
Corporation. He may sign, execute and deliver in the name of the Corporation
powers of attorney, contracts, bonds and other obligations and shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or the Bylaws. The CEO shall manage the day-to-day affairs of the
Corporation and direct the activities of the President - Telephone Group,
President - Telecommunications Services, the General Counsel and the Chief
Financial Officer. Without limiting the generality of the foregoing, the CEO
shall establish the annual salaries of each non-executive officer of the
Corporation, unless otherwise directed by the Board, and the annual salaries of
each officer of the Corporation's subsidiaries, unless otherwise directed by the
respective boards of directors of such subsidiaries.
D. PRESIDENT. The President may sign, execute and deliver in the name of
the Corporation powers of attorney, contracts, bonds, and other obligations and
shall perform such other duties as may be prescribed from time to time by the
Board of Directors, the Chairman, the CEO, or the Bylaws.
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E. EXECUTIVE VICE PRESIDENT(S). The Executive Vice President(s) shall
assist the CEO in discharging the duties of that office in any manner requested
and perform any other duties as may be prescribed by the CEO, the Board of
Directors or the Bylaws.
F. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the
principal financial officer of the Corporation. He shall manage the financial
affairs of the Corporation and direct the activities of the Treasurer,
Controller and other officers responsible for functional areas within the
Finance Group. He shall be responsible for all internal and external financial
reporting. He may sign, execute and deliver in the name of the Corporation
powers of attorney, contracts, bonds, and other obligations and shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
G. TREASURER. As directed by the Chief Financial Officer, the Treasurer
shall have general custody of all the funds and securities of the Corporation.
He may sign, with the CEO, President, Chief Financial Officer or such other
person or persons as may be designated for the purpose by the Board of
Directors, all bills of exchange or promissory notes of the Corporation. He
shall perform such other duties as may be prescribed from time to time by the
Chief Financial Officer or the Bylaws.
H. CONTROLLER. As directed by the Chief Financial Officer, the Controller
shall be responsible for the development and maintenance of the accounting
systems used by the Corporation and its subsidiaries. The Controller shall be
authorized to implement policies and procedures to ensure that the Corporation
and its subsidiaries maintain internal accounting control systems designed to
provide reasonable assurance that the accounting records accurately reflect
business transactions and that such transactions are in accordance with
management's authorization. Additionally, as directed by the Chief Financial
Officer, the Controller shall be responsible for internal and external financial
reporting for the Corporation and its subsidiaries.
I. ASSISTANT TREASURER. The Assistant Treasurer shall have such powers and
perform such duties as may be assigned by the Treasurer. In the absence or
disability of the Treasurer, the Assistant Treasurer shall perform the duties
and exercise the powers of the Treasurer.
J. SECRETARY. The Secretary shall keep the minutes of all meetings of the
shareholders, the Board of Directors and all committees. He shall cause notice
to be given of meetings of shareholders, of the Board of Directors and of any
committee appointed by the Board. He shall have custody of the corporate seal
and general charge of the records, documents and papers of the Corporation not
pertaining to the duties vested in other officers, which shall at all reasonable
times be open to the examination of any Director. He may sign or execute
contracts with any other officer thereunto authorized in the name of the
Corporation and affix the seal of Corporation thereto. He shall perform such
other duties as may be prescribed from time to time by the Board of Directors or
the Bylaws.
K. ASSISTANT SECRETARY. The Assistant Secretary shall have powers and
perform such duties as may be assigned by the Secretary. In the absence or
disability of the Secretary, the Assistant Secretary shall perform the duties
and exercise the power of the Secretary.
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L. PRESIDENT - MOBILE COMMUNICATIONS GROUP. The President - Mobile
Communications Group shall serve as President of all cellular and paging
subsidiaries and be responsible for such other subsidiaries of the Company as he
is from time to time directed by the President or the Board of Directors
thereof. Subject to any limitation in these Bylaws or the Bylaws of any such
subsidiaries, he shall be responsible for all operations, marketing,
construction, preparation of budgets and business plans, and the profitability
of all of the operations of the companies under his supervision.
M. PRESIDENT - TELEPHONE GROUP. The President - Telephone Group shall serve
as President of all operating telephone subsidiaries and subsidiaries operating
in conjunction therewith. Subject to any limitations in these Bylaws or the
Bylaws of any such subsidiaries, he shall be responsible for all operations,
marketing, construction, preparation of budgets and business plans, and the
profitability of all of the operations of the companies under his supervision.
N. GENERAL COUNSEL. The General Counsel shall be directly responsible for
advising the Board of Directors, the Corporation, and all its officers and
employees in all matters affecting the legal affairs of the Corporation. He
shall determine the need for and, if necessary, select outside counsel to
represent the Corporation and approve all fees in connection with their
representation. He shall also have such other powers, duties and authority as
may be prescribed to him from time to time by the CEO, the Board of Directors,
or the Bylaws.
O. SENIOR VICE PRESIDENT - CORPORATE DEVELOPMENT AND STRATEGY. The Senior
Vice President - Corporate Development and Strategy shall be responsible for
developing new business opportunities, implementation of new technologies, and
at the direction of the President, the integration of new and existing products
and services within and across business units.
P. Senior Vice President(s). The Senior Vice President(s) shall perform
such duties as may be prescribed from time to time by the Board of Directors,
the CEO, or the Bylaws.
Q. Vice President(s). The Vice President(s) shall have such powers and
perform such duties as may be assigned to them by the Board of Directors, the
CEO, the President, or the Executive Vice President or Senior Vice President to
whom they report. A Vice President may sign and execute contracts and other
obligations pertaining to the regular course of his duties.
R. Assistant Vice President(s). The Assistant Vice President(s) shall have
such powers and perform such duties as may be assigned to them by the Board of
Directors, the CEO, the President or the officer to whom they report. An
Assistant Vice President may sign and execute contracts and other obligations
pertaining to the regular course of his duties.
1.2 Executive Officer Group. The Executive Officer Group shall be the
Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer,
the President - Mobile Communications Group, the President - Telephone Group,
the Senior Vice President - Corporate Development and Strategy, and the General
Counsel.
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SECTION 2. ELECTION AND REMOVAL OF OFFICERS
- ---------- --------------------------------
2.1 ELECTION. The officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of the shareholders
and, at any time, the Board may remove any officer (with or without cause, and
regardless of any contractual obligation to such officer) and fill a vacancy in
any office, but any election to, removal from or appointment to fill a vacancy
in any office, and the determination of the terms of employment thereof, shall
require the affirmative votes of (a) a majority of the Directors then in office
and (b) a majority of the Continuing Directors, voting as a separate group.
2.2 REMOVAL. In addition, the Chief Executive Officer is empowered in his
sole discretion to remove or suspend any officer or other employee of the
Corporation who (a) fails to respond satisfactorily to the Corporation
respecting any inquiry by the Corporation for information to enable it to make
any certification required by the Federal Communications Commission under the
Anti-Drug Abuse Act of 1988, (b) is arrested or convicted of any offense
concerning the distribution or possession of, or trafficking in, drugs or other
controlled substances, or (c) the Chief Executive Officer believes to have been
engaged in actions that could lead to such an arrest or conviction.
ARTICLE II
----------
BOARD OF DIRECTORS
SECTION 1. POWERS
- ------------------
In addition to the powers and authorities by these Bylaws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws required to be exercised or
done by the shareholders.
SECTION 2. ORGANIZATIONAL AND REGULAR MEETINGS
- -----------------------------------------------
The Board of Directors shall hold an annual organizational meeting, without
notice, immediately following the adjournment of the annual meeting of the
shareholders and shall hold a regular meeting on the first Tuesday after the
twentieth day in the months of February, May, August and November of each year.
The Secretary shall give not less than five days' written notice to each
Director of all regular meetings, which notice shall state the time and place of
the meeting.
SECTION 3. SPECIAL MEETINGS
- ----------------------------
3.1 CALL OF SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or, if he is absent or unable or
unwilling to act, by the President. Upon the written request of any two
Directors delivered to the Chairman of the Board, the President or the Secretary
of the Corporation, a special meeting shall be called.
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3.2 NOTICE. Written notice of the time and place of special meetings shall
be delivered personally to the Directors or sent to each Director by letter or
by telegram, charges prepaid, addressed to him at his address shown in the
Corporation's records. In case such notice is mailed or telegraphed, it shall be
deposited in the United States mail at least 72 hours prior to the meeting or
delivered to an overnight mail delivery service or to the telegraph company in
the place in which the principal office of the corporation is located at least
48 hours prior to the meeting. In case such notice is personally delivered as
above provided, it shall be so delivered at least 24 hours prior to the meeting.
The foregoing notwithstanding, if the Chairman or the President shall determine,
in his sole discretion, that the subject of the special meeting is urgent and
must be considered by the Board without delay, notice may be given by personal
delivery or by telephone not less than 12 hours prior to the time set for the
meeting, provided a confirming telegram or overnight letter is sent to the
Director contemporaneously. Such mailing, telegraphing, telephoning or personal
delivery as above provided shall be due, legal and personal notice to such
Director.
SECTION 4. WAIVER OF NOTICE
- ----------------------------
Any Director may waive notice of a meeting by written waiver executed
either before or after the meeting. Directors present at any regular or special
meeting shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone shall not be
deemed to have received or waived due notice if, at the beginning of the
meeting, he objects to the transaction of any business because the meeting is
not lawfully called.
SECTION 5. QUORUM
- ------------------
A majority of the authorized number of Directors as fixed by or pursuant to
the Articles of Incorporation shall be necessary to constitute a quorum for the
transaction of business, provided, however, that a minority of the Directors, in
the absence of a quorum, may adjourn from time to time, but may not transact any
business. If a quorum is present when the meeting convened, the directors
present may continue to do business, taking action by vote of a majority of a
quorum, until adjournment, notwithstanding the withdrawal of enough directors to
leave less than a quorum or the refusal of any director present to vote.
SECTION 6. NOTICE OF ADJOURNMENT
- ---------------------------------
Notice of the time and place of holding an adjourned meeting need not be
given to absent Directors if the time and place is fixed at the meeting
adjourned.
SECTION 7. WRITTEN CONSENTS
- ----------------------------
Anything to the contrary contained in these Bylaws notwithstanding, any
action required or permitted to be taken by the Board of Directors may be taken
without a meeting, if all members of the Board of Directors shall individually
or collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such Directors at a meeting.
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SECTION 8. VOTING
- ------------------
At all meetings of the Board, each Director present shall have one vote. At
all meetings of the Board, all questions, the manner of deciding which is not
otherwise specifically regulated by law, the Articles of Incorporation or these
Bylaws, shall be determined by a majority of the Directors present at the
meeting, provided, however, that any shares of other corporations owned by the
Corporation shall be voted only pursuant to resolutions duly adopted upon the
affirmative votes of (a) 80% of the Directors then in office and (b) a majority
of the Continuing Directors, voting as a separate group.
SECTION 9. USE OF COMMUNICATIONS EQUIPMENT
- -------------------------------------------
Meetings of the Board of Directors may be held by means of telephone
conference calls or similar communications equipment provided that all persons
participating in the meeting can hear and communicate with each other.
SECTION 10. INDEMNIFICATION
- ----------------------------
10.1 DEFINITIONS. As used in this Section:
(a) The term "Expenses" shall mean any expenses or costs (including,
without limitation, attorney's fees, judgments, punitive or exemplary damages,
fines and amounts paid in settlement). If any of the foregoing amounts paid on
behalf of Indemnitee are not deductible by Indemnitee for federal or state
income tax purposes, the Corporation will reimburse Indemnitee for tax liability
with respect thereto by paying to Indemnitee an amount which, after taking into
account taxes on such amount, equals Indemnitee's incremental tax liability.
(b) The term "Claim" shall mean any threatened, pending or completed
claim, action, suit, or proceeding, whether civil, criminal, administrative or
investigative and whether made judicially or extra-judicially, or any separate
issue or matter therein, as the context requires.
(c) The term "Determining Body" shall mean (i) those members of the
Board of Directors who are not named as parties to the Claim for which
indemnification is being sought ("Impartial Directors"), if there are at least
three Impartial Directors, or (ii) a committee of at least three directors
appointed by the Board of Directors (regardless of whether the members of the
Board of Directors voting on such appointment are Impartial Directors) and
composed of Impartial Directors or (iii) if there are fewer than three Impartial
Directors or if the Board of Directors or a committee appointed thereby so
directs (regardless of whether the members thereof are Impartial Directors),
independent legal counsel, which may be the regular outside counsel of the
Corporation.
(d) The term "Indemnitee" shall mean each director and officer and each
former director and officer of the Corporation.
10.2 INDEMNITY. (a) To the extent any Expenses incurred by Indemnitee are
in excess of the amounts reimbursed or indemnified pursuant to policies of
liability insurance maintained by the Corporation, the Corporation shall
indemnify and hold harmless Indemnitee against any such Expenses actually and
reasonably incurred in connection with any Claim against Indemnitee (whether as
a subject of or party to, or a proposed or threatened subject of or party to,
the Claim) or in which Indemnitee is involved solely as a witness or person
required to give evidence, by reason of his position (i) as a director or
officer of the Corporation, (ii) as a director or officer of any subsidiary of
the Corporation or as a fiduciary with respect to any employee benefit plan of
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the Corporation, or (iii) as a director, officer, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other for-profit or not-for-profit entity or enterprise, if such position is or
was held at the request of the Corporation, whether relating to service in such
position before or after the effective date of this Section 10, if (i) the
Indemnitee is successful in his defense of the Claim on the merits or otherwise
or (ii) the Indemnitee has been found by the Determining Body (acting in good
faith) to have met the Standard of Conduct; provided that (a) the amount of
Expenses for which the Corporation shall indemnify Indemnitee may be reduced by
the Determining Body to such amount as it deems proper if it determines in good
faith that the Claim involved the receipt of a personal benefit by Indemnitee
and (b) no indemnification shall be made in respect of any Claim as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation or to have obtained
an improper benefit, unless, and only to the extent that, a court shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses as the court shall deem
proper; and provided further that, if the Claim involves Indemnitee by reason of
his position with an entity or enterprise described in clause (ii) or (iii) of
this Section 10.2(a) and if Indemnitee may be entitled to indemnification with
respect to such Claim from such entity or enterprise, Indemnitee shall be
entitled to indemnification hereunder only (x) if he has applied to such entity
or enterprise for indemnification with respect to the Claim and (y) to the
extent that indemnification to which he would be entitled hereunder but for this
proviso exceeds the indemnification paid by such other entity or enterprise.
(b) For purposes of this Section, the Standard of Conduct is met when
conduct by an Indemnitee with respect to which a Claim is asserted was conduct
that he reasonably believed to be in, or not opposed to, the best interest of
the Corporation, and, in the case of a Claim which is a criminal action or
proceeding, conduct that the Indemnitee had no reasonable cause to believe was
unlawful. The termination of any Claim by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not meet the Standard of
Conduct.
(c) Promptly upon becoming aware of the existence of any Claim,
Indemnitee shall notify the Chief Executive Officer of the existence of the
Claim, who shall promptly advise the members of the Board of Directors thereof
and that establishing the Determining Body will be a matter presented at the
next regularly scheduled meeting of the Board of Directors. After the
Determining Body has been established the Chief Executive Officer shall inform
Indemnitee thereof and Indemnitee shall immediately notify the Determining Body
of all facts relevant to the Claim known to such Indemnitee. Within 60 days of
the receipt of such notice and information, together with such additional
information as the Determining Body may request of Indemnitee, the Determining
Body shall report to Indemnitee of its determination whether Indemnitee has met
the Standard of Conduct. The Determining Body may extend the period of time for
determining whether the Standard of Conduct has been met, but in no event shall
such period of time be extended beyond an additional 60 days.
(d) If, after determining that the Standard of Conduct has been met,
the Determining Body obtains facts of which it was not aware at the time it made
such determination, the Determining Body on its own motion, after notifying the
Indemnitee and providing him an opportunity to be heard, may, on the basis of
such facts, revoke such determination, provided that, in the absence of actual
fraud by Indemnitee, no such revocation may be made later than 30 days after
final disposition of the Claim.
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<PAGE>
(e) Indemnitee shall promptly inform the Determining Body upon his
becoming aware of any relevant facts not theretofore provided by him to the
Determining Body, unless the Determining Body has obtained such facts by other
means.
(f) In the case of any Claim not involving a proposed, threatened or
pending criminal proceeding (i) if Indemnitee has, in the good faith judgment of
the Determining Body, met the Standard of Conduct, the Corporation may, in its
sole discretion, assume all responsibility for the defense of the Claim, and, in
any event, the Corporation and Indemnitee each shall keep the other informed as
to the progress of the defense of the Claim, including prompt disclosure of any
proposals for settlement; provided that if the Corporation is a party to the
Claim and Indemnitee reasonably determines that there is a conflict between the
positions of the Corporation and Indemnitee with respect to the Claim, then
Indemnitee shall be entitled to conduct his defense with counsel of his choice;
and provided further that Indemnitee shall in any event be entitled at his
expense to employ counsel chosen by him to participate in the defense of the
Claim; and (ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation proposes a settlement
of the Claim and such settlement is acceptable to the person asserting the Claim
or the Corporation believes a settlement proposed by the person asserting the
Claim should be accepted, it shall inform Indemnitee of the terms of such
proposed settlement and shall fix a reasonable date by which Indemnitee shall
respond. If Indemnitee agrees to such terms, he shall execute such documents as
shall be necessary to make final the settlement. If Indemnitee does not agree
with such terms, Indemnitee may proceed with the defense of the Claim in any
manner he chooses, provided that if Indemnitee is not successful on the merits
or otherwise, the Corporation's obligation to indemnify such Indemnitee as to
any Expenses incurred by following his disagreement shall be limited to the
lesser of (A) the total Expenses incurred by Indemnitee following his decision
not to agree to such proposed settlement or (B) the amount that the Corporation
would have paid pursuant to the terms of the proposed settlement. If, however,
the proposed settlement would impose upon Indemnitee any requirement to act or
refrain from acting that would materially interfere with the conduct of
Indemnitee's affairs, Indemnitee shall be permitted to refuse such settlement
and proceed with the defense of the Claim, if he so desires, at the
Corporation's expense in accordance with the terms and conditions of these
Bylaws without regard to the limitations imposed by the immediately preceding
sentence. In any event, the Corporation shall not be obligated to indemnify
Indemnitee for an amount paid in settlement that the Corporation has not
approved.
(g) In the case of a Claim involving a proposed, threatened or pending
criminal proceeding, Indemnitee shall be entitled to conduct the defense of the
Claim and to make all decisions with respect thereto, with counsel of his
choice; provided that the Corporation shall not be obligated to indemnify
Indemnitee for an amount paid in settlement that the Corporation has not
approved.
(h) After notification to the Corporation of the existence of a Claim,
Indemnitee may from time to time request of the Chief Executive Officer or, if
the Chief Executive Officer is a party to the Claim as to which indemnification
is being sought, any officer who is not a party to the Claim and who is
designated by the Chief Executive Officer (the "Disbursing Officer"), which
designation shall be made promptly after receipt of the initial request, that
the Corporation advance to Indemnitee the Expenses (other than fines, penalties,
judgments or amounts paid in settlement) that he incurs in pursuing a defense of
the Claim prior to the time that the Determining Body determines whether the
Standard of Conduct has been met. The Disbursing Officer shall pay to Indemnitee
the amount requested (regardless of Indemnitee's apparent ability to repay the
funds) upon receipt of an undertaking by or on behalf of Indemnitee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation under the circumstances, provided that if the
Disbursing Officer does not believe such amount to be
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<PAGE>
reasonable, he shall advance the amount deemed by him to be reasonable and
Indemnitee may apply directly to the Determining Body for the remainder of the
amount requested.
(i) After a determination that the Standard of Conduct has been met,
for so long as and to the extent that the Corporation is required to indemnify
Indemnitee under these Bylaws, the provisions of Paragraph (h) shall continue to
apply with respect to Expenses incurred after such time except that (i) no
undertaking shall be required of Indemnitee and (ii) the Disbursing Officer
shall pay to Indemnitee the amount of any fines, penalties or judgments against
him which have become final for which the Corporation is obligated to indemnify
him or any amount of indemnification ordered to be paid to him by a court.
(j) Any determination by the Corporation with respect to settlement of
a Claim shall be made by the Determining Body.
(k) The Corporation and Indemnitee shall keep confidential to the
extent permitted by law and their fiduciary obligations all facts and
determinations provided pursuant to or arising out of the operation of these
Bylaws and the Corporation and Indemnitee shall instruct its or his agents and
employees to do likewise.
10.3 ENFORCEMENT. (a) The rights provided by this Section shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under
this Section, Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against, any and all Expenses actually
and reasonably incurred by him in connection with such proceeding, but only if
he prevails therein. If it shall be determined that Indemnitee is entitled to
receive part but not all of the relief sought, then Indemnitee shall be entitled
to be reimbursed for all Expenses incurred by him in connection with such
proceeding if the indemnification amount to which he is determined to be
entitled exceeds 50% of the amount of his claim. Otherwise, the Expenses sought
incurred by Indemnitee in connection with such judicial adjudication shall be
appropriately prorated.
(c) In any judicial proceeding described in this subsection, the
Corporation shall bear the burden of proving that Indemnitee is not entitled to
Expenses sought with respect to any Claim.
10.4 SAVING CLAUSE. If any provision of this Section is determined by a
court having jurisdiction over the matter to require the Corporation to do or
refrain from doing any act that is in violation of applicable law, the court
shall be empowered to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification permitted by law
and such provision, as so modified or reformed, and the balance of this Section,
shall be applied in accordance with their terms. Without limiting the generality
of the foregoing, if any portion of this Section shall be invalidated on any
ground, the Corporation shall nevertheless indemnify and Indemnitee to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by law with respect to that
portion that has been invalidated.
10.5 NON-EXCLUSIVITY. (a) The indemnification and payment of Expenses
provided by or granted pursuant to this Section shall not be deemed exclusive of
any other rights to which Indemnitee is or may become entitled under any
statute, article of incorporation, bylaw, authorization of shareholders or
directors, agreement or otherwise.
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(b) It is the intent of the Corporation by this Section to indemnify
and hold harmless Indemnitee to the fullest extent permitted by law, so that if
applicable law would permit the Corporation to provide broader indemnification
rights than are currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee to the fullest extent permitted by applicable law
notwithstanding that the other terms of this Section would provide for lesser
indemnification.
10.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.
10.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify any
person not a director or officer of the Corporation to the extent authorized by
the Board of Directors or a committee of the Board expressly authorized by the
Board of Directors.
SECTION 11. CERTAIN QUALIFICATIONS
- -----------------------------------
No person shall be eligible for nomination, election or service as a
director of the Corporation who shall (i) in the opinion of the Board of
Directors fail to respond satisfactorily to the Corporation respecting any
inquiry of the Corporation for information to enable the Corporation to make any
certification required by the Federal Communications Commission under the
Anti-Drug Abuse Act of 1988 or to determine the eligibility of such persons
under this section; (ii) have been arrested or convicted of any offense
concerning the distribution or possession of, or trafficking in, drugs or other
controlled substances, provided that in the case of an arrest the Board of
Directors may in its discretion determine that notwithstanding such arrest such
persons shall remain eligible under this Section; or (iii) have engaged in
actions that could lead to such an arrest or conviction and that the Board of
Directors determines would make it unwise for such person to serve as a director
of the Corporation. Any person serving as a director of the Corporation shall
automatically cease to be a director on such date as he ceases to have the
qualifications set forth in this Section, and his position shall be considered
vacant within the meaning of the Articles of Incorporation of the Corporation.
ARTICLE III
-----------
COMMITTEES
----------
SECTION 1. COMMITTEES
- ----------------------
1.1 STANDING COMMITTEES. The Board of Directors shall have six standing
committees, the names, functions and powers of each of which shall be as
follows:
A. THE EXECUTIVE COMMITTEE Shall consist of not less than three Directors,
one of whom shall be the Chairman of the Board, who shall also serve as chairman
of the Executive Committee. To the full extent permitted by law and the Articles
of Incorporation, the Executive Committee shall have and may exercise all of the
powers of the Board in the management of the business and affairs of the
Corporation when the Board is not in session.
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B. THE COMPENSATION COMMITTEE Shall consist of two or more Directors (the
exact number of which shall be set from time to time by the Board), each of whom
shall (i) be a "disinterested person" as defined in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended, and (ii) not serve, and shall
not have served in the past, as an officer or employee of the Corporation or any
of its subsidiaries. The Compensation Committee is empowered to:
1. after receiving and considering the recommendations of the Chief
Executive Officer, determine from time to time the salary of the
Corporation's executive officers (as defined in Section 1.2 of
Article I of these Bylaws) and the fees of the Corporation's
directors;
2. administer each of the Corporation's incentive compensation plans and
stock-based plans (including its 1983 Restricted Stock Plan, Key
Employee Incentive Compensation Plan, 1988 Incentive Compensation
Program, 1990 Incentive Compensation Program, 1995 Incentive
Compensation Plan and any successor plans), and exercise all powers
provided for in such plans;
3. approve any (i) proposed plan or arrangement offering or providing
any benefits to one or more of the Corporation's executive officers
or directors (other than any plan or arrangement offering benefits
that do not discriminate in scope, terms or operation in favor of
executive officers or directors and that are generally available to
all salaried employees) and (ii) proposed amendment or change to any
such plan or arrangement;
4. approve any (i) proposed employment or severance contract between the
Corporation and an executive officer or proposed executive officer
thereof and (ii) proposed extension or material amendment thereto;
5. issue executive compensation reports to the Corporation's
shareholders in the manner required under the rules and regulations
of the U.S. Securities and Exchange Commission;
6. retain independent consultants and legal advisors who will report
directly to the Compensation Committee and be paid with funds of the
Corporation; and
7. if requested by the Board, (i) review, determine or approve the
compensation of any non-executive officer of the Corporation or any
officer of the Corporation's subsidiaries, (ii) review, determine or
approve any proposed amendments, contributions or changes to any of
the Corporation's employee benefit plans, welfare plans, insurance or
other benefit arrangements that are not directly administered or
monitored by the Compensation Committee pursuant to the powers
granted in paragraphs 2 and 3 above, and (iii) perform such other
services as may be delegated to it by the Board.
No action of the type described in paragraphs 1 - 6 shall be valid unless
it has been approved by the Compensation Committee. All actions of the
Compensation Committee shall be subject to ratification by the full Board of
Directors unless the Compensation Committee reasonably determines that
submitting a matter to the full Board of Directors for ratification would
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be prohibited by, or contrary to the intents and purposes of, any laws, rules,
or regulations that require or contemplate that such matter be authorized by
independent directors.
C. THE NOMINATING COMMITTEE Shall consist of two or more Directors and
shall perform the following functions:
1. To consider and recommend to the Board nominees for election by
shareholders or for appointment by the remaining Directors to fill
vacancies on the Board;
2. To review and consider the performance of and to recommend the
appointment or reappointment of officers of the Corporation.
D. The Audit Committee shall consist of two or more Directors, none of whom
shall otherwise be employed by the Corporation, and shall have the following
responsibilities:
1. To recommend to the Board the engagement or discharge of the
Corporation's independent auditor of its financial statements;
2. To direct and supervise all investigations into matters relating to
or rising from the performance and results of each independent audit;
3. To review with the Corporation's independent auditor the plan and
results of each independent audit engagement;
4. To review the scope, adequacy and results of the Corporation's
internal auditing procedures;
5. To review and to approve or disapprove each service to be performed
for the Corporation by the independent auditor before such service is
performed; except that the Committee is authorized to permit the
President or the Chief Financial Officer to engage the independent
auditor or perform any category of service specified by the Committee
under circumstances deemed appropriate by the Audit Committee;
6. To review the degree of independence of the independent auditor;
7. To consider the range of audit and non-audit fees; and
8. To review the adequacy of the Corporation's system of internal
accounting controls.
E. THE INSURANCE EVALUATION COMMITTEE Shall consist of two or more
Directors, and shall have the following responsibilities:
1. To review periodically the Corporation's insurance programs and to
advise and recommend any action deemed appropriate with respect
thereto; and
2. To review periodically the Corporation's insurance needs and to
advise and recommend any action deemed appropriate with respect
thereto.
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F. The Shareholder Relations Committee shall consist of three or more
non-officer directors and shall have the authority of the Board of Directors
with respect to investigating, inquiring into and considering issues related to
certain shareholders' interest and rights and considering and acting upon
shareholder matters as assigned, from time to time, by the Chairman of the
Board.
1.2 Special Purpose Committees. The Board may authorize on an ad hoc basis
special pricing committees in connection with the issuance of securities or such
other special purpose committees as may be necessary or appropriate in
connection with the Board's management of the business and affairs of the
Corporation.
SECTION 2. APPOINTMENT AND REMOVAL OF COMMITTEE MEMBERS
- --------------------------------------------------------
Subject to Section 5 below, Directors shall be appointed to or removed from
a committee only upon the affirmative votes of:
1. A majority of the Directors then in office; and
2. A majority of the Continuing Directors, voting as a separate group.
Each member of a committee shall hold office during the term designated by
the Board.
SECTION 3. PROCEDURES FOR COMMITTEES
- -------------------------------------
Each committee shall keep written minutes of its meetings. All action taken
by a committee shall be reported to the Board of Directors at its next meeting,
whether regular or special. Failure to keep written minutes or to make such a
report shall not affect the validity of action taken by a committee. Each
committee shall adopt such regulations (not inconsistent with the Articles of
Incorporation, these Bylaws or any regulations specified for such committee by
the Board of Directors) as it shall deem necessary for the proper conduct of its
functions and the performance of its responsibilities.
SECTION 4. MEETINGS
- --------------------
A majority of the members of any committee shall constitute a quorum and
action by a majority (or by any super majority required by law, the Articles of
Incorporation, these Bylaws or any applicable resolution adopted by the Board of
Directors) of a quorum at any meeting of a committee shall be deemed action by
the committee. The committee may also take action without meeting if all members
thereof consent in writing thereto. Meetings of a committee may be held by
telephone conference calls or other communications equipment provided each
person participating may hear and be heard by all other meeting participants.
SECTION 5. AUTHORITY OF CHAIRMAN TO APPOINT COMMITTEES
- -------------------------------------------------------
Whenever the Board of Directors is not in session, the Chairman may fill
vacancies in any committees and may create such new committees as he deems
necessary or useful and appoint Directors as members thereof. Any such action by
the Chairman, and any action taken by such new committee, shall be subject to
ratification or disapproval by the Board at its next meeting.
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ARTICLE IV
----------
SHAREHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETINGS
- -----------------------------
Unless otherwise required by law or these By-laws, all meetings of the
shareholders shall be held at the principal office of the Corporation or at such
other place, within or without the State of Louisiana, as may be designated by
the Board of Directors.
SECTION 2. ANNUAL MEETING
- --------------------------
An annual meeting of the shareholders shall be held on the date and at the
time as the Board of Directors shall designate for the purpose of electing
directors and for the transaction of such other business as may be properly
brought before the meeting. If no annual shareholders' meeting is held for a
period of 18 months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of the Secretary of
State of the State of Louisiana.
SECTION 3. SPECIAL MEETINGS
- ----------------------------
Special meetings of the shareholders, for any purpose or purposes, may be
called by the Chairman of the Board, the President or the Board of Directors.
Subject to the terms of any outstanding class or series of Preferred Stock that
entitles the holders thereof to call special meetings, the holders of a majority
of the Total Voting Power shall be required to cause the Secretary of the
Corporation to call a special meeting of shareholders pursuant to La. R.S.
12:73B (or any successor provision). Such requests of shareholders must state
the specific purpose or purposes of the proposed special meeting, and the
business to be brought before such meeting by the shareholders shall be limited
to such purpose or purposes.
SECTION 4. NOTICE OF MEETINGS
- ------------------------------
Except as otherwise provided by law, the authorized person or persons
calling a shareholders' meeting shall cause written notice of the time and place
of the meeting to be given to all shareholders of record entitled to vote at
such meeting at least 10 days and not more than 60 days prior to the day fixed
for the meeting. Notice of the annual meeting need not state the purpose or
purposes thereof, unless action is to be taken at the meeting as to which notice
is required by law, the Articles of Incorporation or the Bylaws. Notice of a
special meeting shall state the purpose or purposes thereof. Any previously
scheduled meeting of the shareholders may be postponed, and (unless provided
otherwise by law or the Articles of Incorporation) any special meeting of the
shareholders may be canceled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
shareholders.
SECTION 5. NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER BUSINESS
- ----------------------------------------------------------------------
5.1 BUSINESS BROUGHT BEFORE MEETINGS. At any meeting of the shareholders,
only such business shall be conducted as shall have been properly brought before
the meeting. Nominations for the election of directors at a meeting at which
directors are to be elected may be made by or at the direction of the Board of
Directors, or a committee duly appointed thereby, or by
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any shareholder of record entitled to vote generally for the election of
directors who complies with the procedures set forth below. Other matters to be
properly brought before a meeting of the shareholders must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, including matters covered by Rule 14a-8 of the
Securities and Exchange Commission, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by any shareholder of record entitled to
vote at such meeting who complies with the procedures set forth below.
5.2 Required Notice. A notice of the intent of a shareholder to make a
nomination or to bring any other matter before the meeting shall be made in
writing and received by the Secretary of the Corporation not more than 210 days
and not less than 70 days in advance of the first anniversary of the preceding
year's annual meeting of shareholders or, in the event of a special meeting of
shareholders or an annual meeting scheduled to be held either 30 days earlier or
later than such anniversary date, such notice shall be received by the Secretary
of the Corporation within 15 days of the earlier of the date on which notice of
such meeting is first mailed to shareholders or public disclosure of the meeting
date is made. In no event shall the public announcement of an adjournment of a
shareholders' meeting commence a new time period for the giving of a
shareholder's notice as described above.
5.3 CONTENTS OF NOTICE. Every such notice by a shareholder shall set forth:
(a) the name, age, business address and residential address of the
shareholder of record who intends to make a nomination or bring up any other
matter, and any beneficial owner or other person acting in concert with such
shareholder;
(b) a representation that the shareholder is a holder of record of
shares of the Corporation's capital stock that accord such shareholder the
voting rights specified in paragraph 5.1 above and that the shareholder intends
to appear in person at the meeting to make the nomination or bring up the matter
specified in the notice;
(c) with respect to notice of an intent to make a nomination, a
description of all agreements, arrangements or understandings among the
shareholder, any person acting in concert with the shareholder, each proposed
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the shareholder;
(d) with respect to notice of an intent to make a nomination, (i) the
name, age, business address and residential address of each person proposed for
nomination, (ii) the principal occupation or employment of such person, (iii)
the class and number of shares of capital stock of the Corporation of which such
person is the beneficial owner, and (iv) any other information relating to such
person that would be required to be disclosed in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had such
nominee been nominated by the Board of Directors; and
(e) with respect to notice of an intent to bring up any other matter, a
complete and accurate description of the matter, the reasons for conducting such
business at the meeting, and any material interest in the matter of the
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made.
-15-
<PAGE>
5.4 OTHER REQUIRED INFORMATION. Notice of an intent to make a nomination
shall be accompanied by the written consent of each nominee to serve as a
director of the Corporation if so elected and an affidavit of each such nominee
certifying that he meets the qualifications specified in Section 11 of Article
II of these Bylaws. The Corporation may require any proposed nominee to furnish
such other information or certifications as may be reasonably required by the
Corporation to determine the eligibility and qualifications of such person to
serve as a director.
5.5 DISQUALIFICATION OF CERTAIN PROPOSALS. With respect to any proposal by
a shareholder to bring before a meeting any matter other than the nomination of
directors, the following shall govern:
(a) If the Secretary of the Corporation has received sufficient notice
of a proposal that may properly be brought before the meeting, a proposal
sufficient notice of which is subsequently received by the Secretary and that is
substantially duplicative of the first proposal shall not be properly brought
before the meeting. If in the judgment of the Board of Directors a proposal
deals with substantially the same subject matter as a prior proposal submitted
to shareholders at a meeting held within the preceding five years, it shall not
be properly brought before any meeting held within three years after the latest
such previous submission if (i) the proposal was submitted at only one meeting
during such preceding period and it received affirmative votes representing less
than 3% of the total number of votes cast in regard thereto, (ii) the proposal
was submitted at only two meetings during such preceding period and it received
at the time of its second submission affirmative votes representing less than 6%
of the total number of votes cast in regard thereto, or (iii) the proposal was
submitted at three or more meetings during such preceding period and it received
at the time of its latest submission affirmative votes representing less than
10% of the total number of votes cast in regard thereto.
(b) Notwithstanding compliance with all of the procedures set forth
above in this Section, no proposal shall be deemed to be properly brought before
a meeting of shareholders if, in the judgment of the Board, it is not a proper
subject for action by shareholders under Louisiana law.
5.6 POWER TO DISREGARD PROPOSALS. At the meeting of shareholders, the
chairman shall declare out of order and disregard any nomination or other matter
not presented in accordance with the foregoing procedures or which is otherwise
contrary to the foregoing terms and conditions.
5.7 RIGHTS OF SHAREHOLDERS UNDER FEDERAL PROXY RULES. Nothing in this
Section shall be deemed to modify any rights or obligations of shareholders with
respect to requesting inclusion of proposals in the Corporation's proxy
statement or soliciting their own proxies pursuant to the proxy rules of the
Securities and Exchange Commission.
5.8 RIGHTS OF PREFERRED SHAREHOLDERS. Nothing in this Section shall be
deemed to modify any rights of holders of any outstanding class or series of
Preferred Stock to elect directors or bring other matters before a shareholders'
meeting in the manner specified by the terms and conditions governing such
stock.
SECTION 6. QUORUM
- ------------------
6.1 ESTABLISHMENT OF QUORUM. At all meetings of shareholders, the holders
of a majority of the Total Voting Power shall constitute a quorum to organize
the meeting, provided, however, that at any meeting the notice of which sets
forth any matter that, by law or the Articles of Incorporation, must be approved
by the affirmative vote of the holders of a specified percentage
-16-
<PAGE>
in excess of a majority of the Total Voting Power present or represented at the
shareholders' meeting, the holders of that specified percentage shall constitute
a quorum, and further provided that when specified business is to be voted on by
a class or series of stock voting as a class, the holders of a majority of the
voting power of such class or series shall constitute a quorum of such class or
series for the transaction of such business. Shares of Voting Stock as to which
the holders have voted or abstained from voting with respect to any matter
considered at a meeting, or which are subject to Non-Votes (as defined in
Section 6.3 below), shall be counted as present for purposes of constituting a
quorum to organize a meeting.
6.2 WITHDRAWAL. If a quorum is present or represented at a duly organized
meeting, such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, or the refusal of any shareholders present to vote.
6.3 NON-VOTES. As used in these Bylaws, "Non-Votes" shall mean the number
of votes as to which the record holder or proxy holder of shares of Capital
Stock has been precluded from voting thereon (whether by law, regulations of the
Securities and Exchange Commission, rules or bylaws of any national securities
exchange or other self-regulatory organization, or otherwise), including without
limitation votes as to which brokers may not or do not exercise discretionary
voting power under the rules of the New York Stock Exchange with respect to any
matter for which the broker has not received voting instructions from the
beneficial owner of the voting shares.
SECTION 7. VOTING POWER PRESENT OR REPRESENTED
- -----------------------------------------------
For purposes of determining the amount of Total Voting Power present or
represented at any annual or special meeting of shareholders with respect to
voting on any particular matter, shares as to which the holders have abstained
from voting, and shares which are subject to Non-Votes (as defined in Section
6.3), will be treated as not present and not cast.
SECTION 8. VOTING REQUIREMENTS
- -------------------------------
When a quorum is present at any meeting, the vote of the holders of a
majority of the Total Voting Power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Directors shall be elected by
plurality vote.
SECTION 9. PROXIES
- -------------------
At any meeting of the shareholders, every shareholder having the right to
vote shall be entitled to vote in person or by proxy appointed by an instrument
in writing subscribed by such shareholder and bearing a date not more than 11
months prior to the meeting, unless the instrument provides for a longer period,
but in no case will an outstanding proxy be valid for longer than three years
from the date of its execution. The person appointed as proxy need not be a
shareholder of the Corporation.
SECTION 10. ADJOURNMENTS
- -------------------------
10.1 ADJOURNMENTS OF MEETINGS. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being given unless a new
record date is fixed for the
-17-
<PAGE>
adjourned meeting, but any meeting at which directors are to be elected shall be
adjourned only from day to day until such directors shall have been elected.
10.2 LACK OF QUORUM. If a meeting cannot be organized because a quorum has
not attended, those present may adjourn the meeting to such time and place as
they may determine, subject, however, to the provisions of Section 10.1 hereof.
In the case of any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less that a quorum as
fixed in Section 6.1 hereof, shall nevertheless constitute a quorum for the
purpose of electing directors.
SECTION 11. WRITTEN CONSENTS
- -----------------------------
Any action required or permitted to be taken at any annual or special
meeting of shareholders may be taken only upon the vote of the shareholders,
present in person or represented by duly authorized proxy, at an annual or
special meeting duly noticed and called, as provided in these Bylaws, and may
not be taken by a written consent of the shareholders pursuant to the Business
Corporation Law of the State of Louisiana.
SECTION 12 LIST OF SHAREHOLDERS
- --------------------------------
At every meeting of shareholders, a list of shareholders entitled to vote,
arranged alphabetically and certified by the Secretary or by the agent of the
Corporation having charge of transfers of shares, showing the number and class
of shares held by each shareholder on the record date for the meeting, shall be
produced on the request of any shareholder.
SECTION 13. PROCEDURE AT SHAREHOLDERS' MEETINGS
- ------------------------------------------------
The Chairman of the Board, or in his absence, the Vice Chairman, shall
preside as chairman at all shareholders' meetings. The organization of each
shareholders' meeting and all matters relating to the manner of conducting the
meeting shall be determined by the chairman, including the order of business,
the conduct of discussion and the manner of voting. Meetings shall be conducted
in a manner designed to accomplish the business of the meeting in a prompt and
orderly fashion and to be fair and equitable to all shareholders, but it shall
not be necessary to follow Roberts' Rules of Order or any other manual of
parliamentary procedure.
ARTICLE V
---------
CERTIFICATES OF STOCK
Certificates of stock issued by the Corporation shall be numbered and shall
be entered into the books of the Corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
President or any Vice-President and by the Treasurer, Secretary or any Assistant
Secretary, all in the manner required by law.
-18-
<PAGE>
ARTICLE VI
----------
REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly shall not
be bound to recognize any beneficial, equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by the laws of Louisiana.
ARTICLE VII
-----------
LOSS OF CERTIFICATE
Any person claiming a certificate of stock to be lost or destroyed shall
make an affidavit or affirmation of that fact, and the Board of Directors, the
General Counsel or the Secretary may, in his or its discretion, require the
owner of the lost of destroyed certificate or his legal representative, to give
the Corporation a bond, in such sum as the Board of Directors, the General
Counsel or the Secretary may require, to indemnify the Corporation against any
claim that may be made against the Corporation on account of the alleged loss or
destruction of any such certificate; a new certificate of the same tenor and for
the same number of shares as the one alleged to be lost or destroyed, may be
issued without requiring any bond when, in the judgment of the Board of
Directors, the General Counsel or the Secretary, it is proper to do so.
ARTICLE VIII
------------
CHECKS
All checks, drafts and notes of the Corporation shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate.
ARTICLE IX
----------
DIVIDENDS
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meetings, pursuant to law.
ARTICLE X
---------
INAPPLICABILITY OF LOUISIANA CONTROL SHARE STATUTE
Effective May 23, 1995, the provisions of La. R.S. 12:135 through 12:140.2
shall not apply to control share acquisitions of shares of the Corporation's
Capital Stock.
-19-
<PAGE>
ARTICLE XI
----------
CERTAIN DEFINITIONS
The terms Capital Stock, Continuing Directors, Total Voting Power and
Voting Stock shall have the meanings ascribed to them in the Articles of
Incorporation, provided, however, that for purposes of Sections 3 and 6 of
Article IV of these Bylaws, Total Voting Power shall mean the total number of
votes that holders of Capital Stock are entitled to cast generally in the
election of directors.
ARTICLE XII
-----------
AMENDMENTS
These Bylaws may only be altered, amended or repealed in the manner
specified in the Articles of Incorporation.
-20-
<PAGE>
Exhibit 10
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, which is dated as of July 2, 1996 (the
"Agreement"), is by and between Century Telephone Enterprises, Inc., a Louisiana
corporation (the "Company"), and Jim D. Reppond ("Consultant").
WITNESSETH:
WHEREAS, Consultant has been employed by the Company and its predecessor
companies for over 36 years, most recently as Vice President;
WHEREAS, Consultant and the Company have entered into an agreement dated
December 31, 1994 (the "1994 Agreement"), which provides that Consultant will
retire as of the date hereof; and
WHEREAS, after the date hereof Consultant desires to assist the Company,
and the Company desires to engage Consultant, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein and in the 1994 Agreement, the parties hereto agree as follows:
1. Consulting Services to be Performed; Term; Compensation and Benefits.
(a) The Company hereby engages Consultant to serve as its consultant and
Consultant agrees to so serve for a period commencing on the date hereof and
ending on the tenth anniversary of the date hereof. Consultant agrees to perform
services regarding such matters and at such times as will be referred to him by
the President of the Company, including without limitation assisting the
executive officer or officers of the Company that are responsible for duties
previously performed by Consultant. Consultant agrees to devote such of his
time, skill, labor and attention to the performance of such services as may be
necessary or desirable to render the prompt and effective performance of his
duties hereunder, provided, however, that in no event shall Consultant be
obligated to (i) work more than 15 hours per week or 150 hours per year or (ii)
work from any location other than his principal residence, except for such trips
to the Company's principal or regional offices that the President of the Company
deems in good faith to be necessary or appropriate, which shall not exceed six
trips per year.
(b) Except as the Company may otherwise permit, Consultant shall
maintain in strict confidence and shall not disclose, directly or indirectly,
any non-public or proprietary information relating to the Company or its
affiliates ("Confidential Information") that Consultant (i) acquired in any
manner during the course of his employment by the Company or (ii) receives or
acquires in the course of rendering consulting services under this Agreement.
Consultant agrees that all Confidential Information is proprietary to the
Company. Consultant further agrees that he shall use all Confidential
Information (regardless of when and how acquired) solely in connection with the
rendering of consulting services under this Agreement. Consultant further agrees
that during the term of this Agreement, neither Consultant nor anyone acting in
concert
-1-
<PAGE>
with Consultant will solicit or induce, either directly or indirectly,
any employee of the Company or its affiliates to leave such employment.
(c) In exchange for Consultant's covenants and agreements hereunder,
the Company shall pay Consultant the following annual fees, payable annually in
advance, commencing with the initial annual payment which has been made
simultaneously with the execution of this Agreement:
Year Ending Year Ending
July 1 Fee July 1 Fee
----------- --------- ----------- ---------
1997 $ 14,000 2002 $ 16,230
1998 14,420 2003 16,717
1999 14,853 2004 17,218
2000 15,298 2005 17,735
2001 15,757 2006 18,267
(d) Consultant shall be entitled to reimbursement for all travel and
other out-of-pocket expenses reasonably incurred by him in the performance of
his duties hereunder, subject to his observance of any policies of general
application with respect thereto maintained by the Company.
2. Status of Consultant. (a) The Company and Consultant understand and
agree that Consultant is an independent contractor for withholding and other
employment tax purposes and is not an employee of the Company. Accordingly,
Consultant acknowledges and agrees that (i) he will not be treated as an
employee for purposes of any federal or state law regarding income tax
withholding or for purposes of contributions required under any unemployment,
insurance or compensatory program and (ii) he will be solely responsible for the
payment of any taxes or assessments imposed on account of the payment of
compensation to or the performance of consulting services by him pursuant to
this Agreement, including, without limitation, any unemployment insurance taxes,
federal, state or local income taxes, federal social security payments, or state
disability insurance taxes, all of which he expressly agrees to pay when such
taxes or assessments may become due.
(b) Consultant will not and has no authority to represent to others
that he is an employee of the Company. Except as expressly authorized in writing
by the Company, Consultant has no authority to bind or obligate the Company, to
participate in the management of the Company, to use the name of the Company or
any of its affiliates in any manner whatsoever, or to represent to others that
he has any such authority.
-2-
<PAGE>
(c) Consultant shall indemnify and hold harmless the Company from
any liabilities, claims, losses or expenses arising out of his breach of this
Section .
3. Termination of Consultancy Period. (a) Unless earlier
terminated pursuant to the provisions of paragraph (b), the terms and
provisions of this Agreement shall terminate on the tenth anniversary of the
date hereof.
(b) Notwithstanding anything to the contrary contained herein,
this Agreement may be terminated:
(i) Upon the parties' mutual written consent;
(ii) By the Company upon (A) Consultant's death, (B) the
Company's good faith determination that Consultant
has engaged in a pattern of habitual intoxication,
has abused or become addicted to a controlled
substance or has been convicted of a felony or (C)
Consultant's willful, unreasonable and uncorrected
refusal to provide the consulting services
contemplated hereunder, but not less than 45 days
after a written demand for performance is made by the
Company; or
(iii) By Consultant upon (A) the Company's failure to pay
Consultant any amounts owed hereunder, which failure
continues for a period of 45 days after Consultant gives
the Company notice thereof, or (B) any directive,
following a Change in Control of the Company (as defined
in the 1994 Agreement), requiring Consultant to perform
more duties, engage in more travel or otherwise
discharge more responsibilities than previously
performed, engaged in or discharged by Consultant prior
to the Change in Control of the Company.
(c) Upon any termination of this Agreement under paragraph
3(b)(iii), all payments under Section 1(c) not previously paid to Consultant
shall accelerate and shall become due and payable on the fifth business day
following Consultant's delivery of a notice terminating this Agreement. If any
court of competent jurisdiction finds that the Company has breached its
obligations to make any payment required under this paragraph (c), the amount
payable hereunder shall be trebled.
(d) Sections 1(b), 2(c), 3(d), 4 and 5 shall survive any termination
of this Agreement, all of which shall be binding upon Consultant and his
personal or legal representatives, executors, administrators, heirs, devises,
legatees and permitted assigns.
4. Release. Consultant hereby reaffirms the representations,
warranties, covenants and agreements made by him under Section 7.02 of the
1994 Agreement, pursuant to which Consultant, among other things, released
the Company from various claims.
-3-
<PAGE>
5. Miscellaneous. (a) Any notice permitted or required to be delivered
under this Agreement by one party shall be in writing and shall be delivered by
hand, overnight delivery service or U.S. registered or certified mail, postage
prepaid with return receipt requested, to the other party at the address set
forth opposite such party's name on the signature page hereof until notice of a
change in address is delivered as provided in this Section . Notices shall be
deemed to be given, in the case of (i) by hand delivery, upon receipt; (ii)
overnight delivery service, on the business day after timely delivery to a
recognized overnight delivery service; and (iii) U.S. mail, upon the third
business day after deposit with the U.S. mail.
(b) This Agreement constitutes the entire understanding between the
Company and Consultant with respect to the matters provided for herein, and all
prior discussions, negotiations, commitments, writings and understandings
related hereto are hereby superseded. This Agreement shall not be amended or
modified except by the written agreement of the parties hereto.
(c) This Agreement shall be binding and inure to the benefit of the
Company and its successors and assigns. Consultant may not assign either his
rights or obligations hereunder without the prior written consent of the
Company.
(d) The construction and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Louisiana.
(e) The failure by any party to enforce any of its rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver. Waiver of any one breach shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
(f) The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(g) Consultant hereby acknowledges that he has read, understands and
expressly agrees to the terms of this Agreement, and has been advised and has
had an opportunity to consult with an attorney of his choice before executing
this Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
CENTURY TELEPHONE ENTERPRISES, INC.
Century Telephone Enterprises, Inc.
100 Century Park Drive
Monroe, Louisiana 71203 By: /s/ Glen F. Post, III
Attention: Glen F. Post, III ________________________________
Glen F. Post, III
Vice Chairman of the Board,
President and Chief Executive Officer
Jim D. Reppond
Red Barn Farm /s/ Jim D. Reppond
Old Sturkie Road _______________________________
Salem, Arkansas 72576 Jim D. Reppond
or
P.O. Box 9
Salem, Arkansas 72576
-5-
<PAGE>
Exhibit 11
CENTURY TELEPHONE ENTERPRISES, INC.
COMPUTATIONS OF EARNINGS PER SHARE
(UNAUDITED)
Three months Nine months
ended September 30 ended September 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
(Dollars, except per share amounts,
and shares in thousands)
Net income $36,350 31,880 98,956 85,047
Dividends applicable to
preferred stock (128) (29) (285) (86)
------- ------- ------- -------
Net income applicable to common
stock 36,222 31,851 98,671 84,961
Dividends applicable to preferred
stock 128 29 285 86
Interest on convertible securities,
net of taxes 145 47 435 573
------- ------- ------- -------
Net income as adjusted for purposes
of computing fully diluted earnings
per share $36,495 31,927 99,391 85,620
======= ======= ======= =======
Weighted average number of shares:
Outstanding during period 59,744 58,681 59,552 57,642
Common stock equivalent shares 697 425 639 528
Employee Stock Ownership Plan
shares not committed to be
released (330) (372) (338) (380)
------- ------- ------- -------
Number of shares for computing
primary earnings per share 60,111 58,734 59,853 57,790
Incremental common shares
attributable to additional
dilutive effect of convertible
securities 770 459 740 1,022
------- ------- ------- -------
Number of shares as
adjusted for purposes of
computing fully diluted
earnings per share 60,881 59,193 60,593 58,812
======= ======= ======= =======
Earnings per average common share $ .61 .54 1.66 1.47
======= ======= ======= =======
Primary earnings per share $ .60 .54 1.65 1.47
======= ======= ======= =======
Fully diluted earnings per share $ .60 .54 1.64 1.46
======= ======= ======= =======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET OF CENTURY TELEPHONE ENTERPRISES, INC.
AND SUBSIDIARIES AS OF SEPTEMBER 30, 1996 AND THE RELATED UNAUDITED CONSOLIDATED
STATEMENT OF INCOME FOR THE NINE MONTH PERIOD THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,478
<SECURITIES> 0
<RECEIVABLES> 61,768
<ALLOWANCES> 3,866
<INVENTORY> 7,108
<CURRENT-ASSETS> 104,112
<PP&E> 1,631,977
<DEPRECIATION> 518,676
<TOTAL-ASSETS> 1,960,785
<CURRENT-LIABILITIES> 149,470
<BONDS> 589,777
0
10,075
<COMMON> 59,809
<OTHER-SE> 939,658
<TOTAL-LIABILITY-AND-EQUITY> 1,960,785
<SALES> 0
<TOTAL-REVENUES> 555,448
<CGS> 0
<TOTAL-COSTS> 383,220
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,972
<INCOME-PRETAX> 157,309
<INCOME-TAX> 58,353
<INCOME-CONTINUING> 98,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,956
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.64
</TABLE>
