FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
________ ________
Commission File Number 1-2256
EXXON CORPORATION
__________________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
______________________________ _________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
_______________________________________________________________
(Address of principal executive offices) (Zip Code)
(972) 444-1000
__________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of September 30, 1999
_______________________________ ____________________________________
Common stock, without par value 2,427,785,330
<PAGE>
EXXON CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and nine months ended September 30, 1999 and 1998
Condensed Consolidated Balance Sheet 4
As of September 30, 1999 and December 31, 1998
Condensed Consolidated Statement of Cash Flows 5
Nine months ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
Index to Exhibits 21
<PAGE> -2-
EXXON CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
REVENUE 1999 1998 1999 1998
<S> ____ ____ ____ ____
Sales and other operating revenue, <C> <C> <C> <C>
including excise taxes $32,775 $27,907 $88,010 $86,047
Earnings from equity interests and
other revenue 297 589 1,368 1,778
_______ _______ _______ _______
Total revenue 33,072 28,496 89,378 87,825
_______ _______ _______ _______
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 14,867 10,973 37,265 34,463
Operating expenses 3,085 2,744 8,350 8,419
Selling, general and administrative
expenses 1,785 2,106 6,375 6,289
Depreciation and depletion 1,319 1,290 4,194 3,980
Exploration expenses, including dry holes 146 202 421 623
Interest expense 58 6 197 66
Excise taxes 3,760 3,395 10,718 10,449
Other taxes and duties 5,793 5,699 16,986 16,400
Income applicable to minority and
preferred interests 30 41 (31) 129
_______ _______ _______ _______
Total costs and other deductions 30,843 26,456 84,475 80,818
_______ _______ _______ _______
INCOME BEFORE INCOME TAXES 2,229 2,040 4,903 7,007
Income taxes 729 640 1,178 2,097
_______ _______ _______ _______
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,500 1,400 3,725 4,910
Cumulative effect of accounting
change - - - (70)
_______ _______ _______ _______
NET INCOME $ 1,500 $ 1,400 $ 3,725 $ 4,840
======= ======= ======= =======
NET INCOME PER COMMON SHARE (DOLLARS)
Before cumulative effect of
accounting change $ 0.62 $ 0.58 $ 1.54 $ 2.01
Cumulative effect of accounting
change - - - (0.03)
_______ _______ _______ _______
Net Income $ 0.62 $ 0.58 $ 1.54 $ 1.98
======= ======= ======= =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Before cumulative effect of
accounting change $ 0.61 $ 0.58 $ 1.52 $ 1.99
Cumulative effect of accounting
change - - - (0.03)
_______ _______ _______ _______
Net Income $ 0.61 $ 0.58 $ 1.52 $ 1.96
======= ======= ======= =======
Dividends per common share $ 0.41 $ 0.41 $ 1.23 $ 1.23
</TABLE>
<PAGE> -3-
EXXON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
<TABLE>
<CAPTION> Sept. 30, Dec. 31,
1999 1998
_________ ________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,151 $ 1,441
Other marketable securities 39 20
Notes and accounts receivable - net 10,778 9,512
Inventories
Crude oil, products and merchandise 4,220 4,896
Materials and supplies 675 709
Prepaid taxes and expenses 1,185 1,015
_______ _______
Total current assets 18,048 17,593
Property, plant and equipment - net 65,999 65,199
Investments and other assets 10,347 9,838
_______ _______
TOTAL ASSETS $94,394 $92,630
======= =======
LIABILITIES
Current liabilities
Notes and loans payable $ 4,820 $ 4,248
Accounts payable and accrued liabilities 15,410 13,825
Income taxes payable 1,349 1,339
_______ _______
Total current liabilities 21,579 19,412
Long-term debt 4,425 4,530
Annuity reserves, deferred credits and other liabilities 24,556 24,938
_______ _______
TOTAL LIABILITIES 50,560 48,880
_______ _______
SHAREHOLDERS' EQUITY
Preferred stock, without par value:
Authorized: 200 million shares
Outstanding: 1 million shares at Sept. 30, 1999 31
2 million shares at Dec. 31, 1998 105
Guaranteed LESOP obligation - (125)
Common stock, without par value:
Authorized: 3,000 million shares
Issued: 2,984 million shares 2,323 2,323
Earnings reinvested 55,312 54,575
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (1,040) (641)
Minimum pension liability adjustment (282) (282)
Common stock held in treasury:
556 million shares at Sept. 30, 1999 (12,510)
556 million shares at Dec. 31, 1998 (12,205)
_______ _______
TOTAL SHAREHOLDERS' EQUITY 43,834 43,750
_______ _______
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $94,394 $92,630
======= =======
</TABLE>
The number of shares of common stock issued and outstanding at September 30,
1999 and December 31, 1998 were 2,427,785,330 and 2,427,787,109, respectively.
<PAGE> -4-
EXXON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
<TABLE>
<CAPTION> Nine Months Ended
September 30,
_________________
1999 1998
____ ____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,725 $ 4,840
Depreciation and depletion 4,194 3,980
Changes in operational working capital, excluding
cash and debt 675 563
All other items - net (737) (31)
_______ _______
Net Cash Provided By Operating Activities 7,857 9,352
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (5,775) (5,835)
Sales of subsidiaries and property, plant and equipment 496 303
Other investing activities - net 72 (17)
_______ _______
Net Cash Used In Investing Activities (5,207) (5,549)
_______ _______
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 2,650 3,803
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 10 7
Reductions in long-term debt (197) (116)
Additions/(reductions) in short-term debt - net 642 (244)
Cash dividends to Exxon shareholders (2,989) (3,014)
Cash dividends to minority interests (62) (62)
Changes in minority interests and sales/(purchases)
of affiliate stock 44 (95)
Acquisitions of Exxon shares - net (414) (2,236)
_______ _______
Net Cash Used In Financing Activities (2,966) (5,760)
_______ _______
Effects Of Exchange Rate Changes On Cash 26 10
_______ _______
Increase/(Decrease) In Cash And Cash Equivalents (290) (1,947)
Cash And Cash Equivalents At Beginning Of Period 1,441 4,047
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,151 $ 2,100
======= =======
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 1,169 $ 1,727
Cash interest paid $ 247 $ 463
</TABLE>
<PAGE> -5-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis Of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be
read in the context of the consolidated financial statements and notes
thereto filed with the Securities and Exchange Commission in the
corporation's 1998 Annual Report on Form 10-K. In the opinion of the
corporation, the information furnished herein reflects all known
accruals and adjustments necessary for a fair statement of the results
for the periods reported herein. All such adjustments are of a normal
recurring nature. The corporation's exploration and production
activities are accounted for under the "successful efforts" method.
During the fourth quarter of 1998, Exxon de-consolidated the majority owned
power companies in Hong Kong and China. These financial statements reflect
the de-consolidation of these companies retroactive to January 1, 1998.
These affiliates are now accounted for as equity companies in compliance
with the Financial Accounting Standards Board Emerging Issues Task Force
ruling on Issue No. 96-16, which requires equity company reporting for a
majority owned affiliate when minority shareholders possess the right to
participate in significant management decisions. Exxon's 1998 net income
was not affected by the de-consolidation. The effect on Exxon's January 1,
1998 consolidated balance sheet related to the de-consolidation was a
decrease in total assets of $3.6 billion, including $4.2 billion of net
property, plant and equipment and a decrease in total liabilities of $3.6
billion, including $2.5 billion of short and long-term debt.
The American Institute of Certified Public Accountants' Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities", was
implemented in the fourth quarter of 1998, effective as of January 1, 1998.
This statement requires that costs of start-up activities and
organizational costs be expensed as incurred. The cumulative effect of this
accounting change on years prior to 1998 was a charge of $70 million (net
of $70 million income tax effect), or $0.03 per common share, that was
reflected in the first quarter of 1998. This new accounting requirement did
not have a significant effect on 1998 income before the cumulative effect
of the accounting change.
2. Recently Issued Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board released Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities
Information." This statement establishes accounting and reporting
standards for derivative instruments. The statement requires that an
entity recognize all derivatives as either assets or liabilities in the
financial statements and measure those instruments at fair value, and it
defines the accounting for changes in the fair value of the derivatives
depending on the intended use of the derivative. As amended by Financial
Accounting Standards Board Statement No. 137 issued in June 1999,
Statement No. 133 must be adopted beginning no later than 2001. No
decision has been made as to whether the corporation will adopt this
standard before 2001. Adoption of this statement is not expected to have a
material effect upon the corporation's operations or financial condition.
<PAGE> -6-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against Exxon Corporation and certain of its subsidiaries relating
to the accidental release of crude oil from the tanker Exxon Valdez in
1989. Essentially all of these lawsuits have now been resolved or are
subject to appeal.
On September 24, 1996, the United States District Court for the District
of Alaska entered a judgment in the amount of $5.058 billion in the Exxon
Valdez civil trial that began in May 1994. The District Court awarded
approximately $19.6 million in compensatory damages to fisher plaintiffs,
$38 million in prejudgment interest on the compensatory damages and $5
billion in punitive damages to a class composed of all persons and
entities who asserted claims for punitive damages from the corporation as
a result of the Exxon Valdez grounding. The District Court also ordered
that these awards shall bear interest from and after entry of the
judgment. The District Court stayed execution on the judgment pending
appeal based on a $6.75 billion letter of credit posted by the
corporation. Exxon has appealed the judgment. Exxon has also appealed the
District Court's denial of its renewed motion for a new trial. The Ninth
Circuit heard oral arguments on the appeals on May 3, 1999. The
corporation continues to believe that the punitive damages in this case
are unwarranted and that the judgment should be set aside or substantially
reduced by the appellate courts.
On January 29, 1997, a settlement agreement was concluded resolving all
remaining matters between Exxon and various insurers arising from the
Valdez accident. Under terms of this settlement, Exxon received $480
million. Final income statement recognition of this settlement continues
to be deferred in view of uncertainty regarding the ultimate cost to the
corporation of the Valdez accident.
The ultimate cost to the corporation from the lawsuits arising from the
Exxon Valdez grounding is not possible to predict and may not be resolved
for a number of years.
In each of the years 1999, 1998 and 1997, $70 million in payments were
made under the October 8, 1991 civil agreement and consent decree with the
U.S. and Alaska governments. These payments were charged against the
provision that was previously established to cover the costs of the
settlement.
German and Dutch affiliated companies are the concessionaires of a natural
gas field subject to a treaty between the governments of Germany and the
Netherlands under which the gas reserves in an undefined border or common
area were to be shared equally. Entitlement to the reserves was to be
determined by calculating the amount of gas which could be recovered from
the area. Based on the final reserve determination, the German affiliate
received more gas than its entitlement. Arbitration proceedings, as
provided in the agreements, were conducted to resolve issues concerning
the compensation for the overlifted gas.
<PAGE> -7-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
By final award, dated July 2, 1999, preceded by an interim award in 1996,
an arbitral tribunal established the full amount of the compensation for
the excess gas. This amount has now been paid, but the Dutch affiliate is
seeking to have the award set aside. Other substantive matters remain
outstanding, including recovery of royalties paid on such excess gas and
the taxes payable on the final compensation amount. The net financial
impact on the corporation of these items is not possible to predict at
this time. However, the ultimate outcome is not expected to have a
materially adverse effect upon the corporation's operations or financial
condition.
The U.S. Tax Court has decided the issue with respect to the pricing of
crude oil purchased from Saudi Arabia for the years 1979-1981 in favor of
the corporation. This decision is subject to appeal. Certain other issues
for the years 1979-1988 remain pending before the Tax Court. The ultimate
resolution of these issues is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
Claims for substantial amounts have been made against Exxon and certain of
its consolidated subsidiaries in other pending lawsuits, the outcome of
which is not expected to have a materially adverse effect upon the
corporation's operations or financial condition.
The corporation and certain of its consolidated subsidiaries are directly
and indirectly contingently liable for amounts similar to those at the
prior year-end relating to guarantees for notes, loans and performance
under contracts, including guarantees of non-U.S. excise taxes and customs
duties of other companies, entered into as a normal business practice,
under reciprocal arrangements.
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all
of which are expected to be fulfilled with no adverse consequences
material to the corporation's operations or financial condition.
The operations and earnings of the corporation and its affiliates
throughout the world have been, and may in the future be, affected from
time to time in varying degree by political developments and laws and
regulations, such as forced divestiture of assets; restrictions on
production, imports and exports; price controls; tax increases and
retroactive tax claims; expropriation of property; cancellation of
contract rights and environmental regulations. Both the likelihood of such
occurrences and their overall effect upon the corporation vary greatly
from country to country and are not predictable.
4. Nonowner Changes in Shareholders' Equity
The total nonowner changes in shareholders' equity for the three months
ended September 30, 1999 and 1998 were $2,059 million and $1,978 million,
respectively. The total nonowner changes in shareholders' equity for the
nine months ended September 30, 1999 and 1998 were $3,326 million and
$5,113 million, respectively. Total nonowner changes in shareholders'
equity include net income and the change in the cumulative foreign
exchange translation adjustment and minimum pension liability adjustment
components of shareholders' equity.
<PAGE> -8-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Earnings Per Share
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
1999 1998 1999 1998
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars, except per share
amounts and shares in millions)
NET INCOME PER COMMON SHARE
Income before cumulative effect of
accounting change $1,500 $1,400 $3,725 $4,910
Less: Preferred stock dividends - (2) (3) (8)
______ ______ ______ ______
Income available to common shares $1,500 $1,398 $3,722 $4,902
====== ====== ====== ======
Weighted average number of common shares
outstanding 2,428 2,435 2,428 2,443
Net income per common share
Before cumulative effect of accounting
change $ 0.62 $ 0.58 $ 1.54 $ 2.01
Cumulative effect of accounting change - - - (0.03)
______ ______ ______ ______
Net income $ 0.62 $ 0.58 $ 1.54 $ 1.98
====== ====== ====== ======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before cumulative effect of
accounting change $1,500 $1,400 $3,725 $4,910
Weighted average number of common shares
outstanding 2,428 2,435 2,428 2,443
Plus: Issued on assumed exercise of
stock options 27 26 26 26
Plus: Assumed conversion of preferred
stock 1 4 1 4
______ ______ ______ ______
Weighted average number of common shares
outstanding 2,456 2,465 2,455 2,473
====== ====== ====== ======
Net income per common share
Before cumulative effect of accounting
change $ 0.61 $ 0.58 $ 1.52 $ 1.99
Cumulative effect of accounting change - - - (0.03)
______ ______ ______ ______
Net income $ 0.61 $ 0.58 $ 1.52 $ 1.96
====== ====== ====== ======
</TABLE>
<PAGE> -9-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Disclosures about Segments and Related Information
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
1999 1998 1999 1998
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars)
EARNINGS AFTER INCOME TAX
(Before the cumulative effect of
accounting change)
Exploration and Production
United States $ 451 $ 211 $ 856 $ 625
Non-U.S. 563 274 1,488 1,454
Refining and Marketing
United States 118 142 214 468
Non-U.S. 19 439 207 1,347
Chemicals
United States 187 181 545 579
Non-U.S. 116 120 337 391
All Other 46 33 78 46
_______ _______ _______ _______
Corporate Total $ 1,500 $ 1,400 $ 3,725 $ 4,910
======= ======= ======= =======
SALES AND OTHER OPERATING REVENUE
Exploration and Production
United States $ 655 $ 524 $ 1,689 $ 1,703
Non-U.S. 2,038 1,616 5,442 5,702
Refining and Marketing
United States 5,340 3,619 13,193 11,870
Non-U.S. 21,732 19,412 59,667 58,154
Chemicals
United States 1,381 1,119 3,668 3,542
Non-U.S. 1,399 1,407 3,726 4,446
All Other 230 210 625 630
_______ _______ _______ _______
Corporate Total $32,775 $27,907 $88,010 $86,047
======= ======= ======= =======
INTERSEGMENT REVENUE
Exploration and Production
United States $ 954 $ 603 $ 2,215 $ 1,887
Non-U.S. 878 606 2,201 1,913
Refining and Marketing
United States 470 346 1,165 1,094
Non-U.S. 650 539 1,676 1,599
Chemicals
United States 308 405 909 1,211
Non-U.S. 226 182 559 555
All Other 26 32 82 101
</TABLE>
<PAGE> -10-
EXXON CORPORATION
7. Restructuring Charge
In the first quarter of 1999 the company recorded a $120 million after-tax
charge for the restructuring of Japanese refining and marketing operations
in its wholly owned Esso Sekiyu K.K. and 50.1 percent owned General Sekiyu
K.K. affiliates. The restructuring resulted in the reduction of
approximately 700 administrative, financial, logistics and marketing
service employee positions during the quarter. The Japanese affiliates
recorded a combined charge of $216 million (before tax) to selling, general
and administrative expenses for the employee related costs. Substantially
all cash expenditures anticipated in the restructuring provision have been
paid as of September 30, 1999. General Sekiyu also recorded a $211 million
(before tax) charge to depreciation and depletion for the write-off of
costs associated with the cancellation of a power plant project at the
Kawasaki terminal.
<PAGE> -11-
EXXON CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
<TABLE>
<CAPTION> Third Quarter First Nine Months
_______________ __________________
1999 1998 1999 1998
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars)
Petroleum and natural gas
Exploration and production
United States $ 451 $ 211 $ 856 $ 625
Non-U.S. 563 274 1,488 1,454
Refining and marketing
United States 118 142 214 468
Non-U.S. 19 439 207 1,347
______ ______ ______ ______
Total petroleum and natural gas 1,151 1,066 2,765 3,894
Chemicals
United States 187 181 545 579
Non-U.S. 116 120 337 391
Other operations 108 102 290 294
Corporate and financing (62) (69) (212) (248)
______ ______ ______ ______
Earnings before accounting change $1,500 $1,400 $3,725 $4,910
Cumulative effect of accounting change 0 0 0 (70)
______ ______ ______ ______
NET INCOME $1,500 $1,400 $3,725 $4,840
====== ====== ====== ======
</TABLE>
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Exxon Corporation estimated third quarter 1999 net income of $1,500 million, up
7 percent from $1,400 million in the third quarter of 1998. On a per share
basis, quarterly net income was $0.61 per share compared to $0.58 per share in
last year's third quarter.
Exxon's net income of $1.5 billion increased $100 million from the third
quarter of 1998. The improvement was driven by higher crude prices, which were
up about $8 per barrel on average. Upstream earnings more than doubled compared
to last year's third quarter and represented the highest third quarter upstream
results in 15 years. Record chemicals sales volumes and reduced operating
expenses across the segments also benefited earnings. However, depressed
downstream margins in all geographic areas, weaker chemicals margins and lower
coal prices continued to negatively affect total results. Unfavorable foreign
exchange effects also lowered earnings. With the improvement in oil prices,
third quarter results exceeded the second quarter of 1999 by $295 million or 24
percent, in contrast to the seasonal earnings decline normally seen from the
second to the third quarter of each year.
<PAGE> -12-
EXXON CORPORATION
Third quarter crude oil prices were up about $5 per barrel from the second
quarter of this year. U.S. gas prices also improved almost $0.50 per kcf
(thousand cubic feet) from the second quarter. However, natural gas prices were
still depressed in Europe as the impact of rising crude and petroleum product
reference prices have not yet been reflected in contractual prices. As crude
prices increased rapidly during the quarter, downstream earnings decreased
substantially versus the same period last year, reflecting the inability to
raise product prices in line with rising crude prices. Downstream margins in
all markets were depressed. International downstream earnings were also
adversely affected by foreign exchange effects. As a result of these factors,
third quarter downstream earnings, excluding non-recurring items, were the
lowest quarterly results in over a decade. Chemicals earnings were up slightly,
as record quarterly sales volumes and lower operating expenses offset the
impact of higher feedstock costs which depressed margins. Earnings from other
operations also improved slightly due to higher copper prices and volumes and
lower operating expenses.
During the quarter, Exxon continued its active investment program, spending
nearly $2.0 billion on capital and exploration projects.
OTHER COMMENTS ON THIRD QUARTER COMPARISON
Exploration and production earnings benefited from rising crude oil prices,
which averaged about $8 per barrel more than the third quarter of 1998. Natural
gas prices were higher in the U.S., but were lower in Europe. Exploration and
producing expenses were reduced versus the prior year.
Liquids production decreased to 1,514 kbd (thousand barrels per day) compared
to 1,553 kbd in the third quarter of 1998, primarily due to lower liftings in
Alaska, Malaysia and Canada. The decline was partly offset by production from
new developments in the North Sea, the Gulf of Mexico and Azerbaijan. Fourth
quarter production is expected to increase due to the start-up of new
developments in Norway. Production from the Balder field began at the end of
September and the Jotun development started up at the end of October. Third
quarter natural gas production of 5,078 mcfd (million cubic feet per day) was
down 129 mcfd from the prior year.
Earnings from U.S. exploration and production were $451 million, an increase of
$240 million from last year. Outside the U.S., earnings from exploration and
production were $563 million, an increase of $289 million from the third
quarter of 1998.
Petroleum product sales of 5,431 kbd equaled last year's record third quarter
results. Downstream earnings declined as petroleum product prices were not
able to keep up with the steep increase in crude costs during the quarter.
Downstream earnings outside the U.S. were also adversely affected by
unfavorable foreign exchange effects.
In the U.S., refining and marketing earnings were $118 million, down $24
million from the prior year. Refining and marketing operations outside the U.S.
earned $19 million, a decrease of $420 million from 1998.
<PAGE> -13-
EXXON CORPORATION
Chemicals earnings were $303 million compared with $301 million in the same
quarter a year ago. Margins were compressed as feedstock costs increased faster
than product prices. Prime product sales volumes of 4,596 kt (thousand metric
tons) established a quarterly record and were 6 percent higher than the same
period a year ago. Chemicals operating expenses were reduced from the prior
year.
Earnings from other operations, including coal, minerals and power, totaled
$108 million, compared to $102 million in the third quarter of 1998. Earnings
improved on higher copper prices and volumes and continued reductions in
operating expenses.
Corporate and financing expenses of $62 million compared with $69 million in
the third quarter of last year.
During the third quarter of 1999, Exxon purchased 1.0 million shares of its
common stock for the treasury at a cost of $84 million, representing a
continuation of purchases to offset shares issued in conjunction with the
Company's benefit plans and programs. Purchases are made in open market and
negotiated transactions and may be discontinued at any time. As a consequence
of the proposed merger of Exxon and Mobil, the repurchase program to reduce the
number of Exxon shares outstanding was discontinued in December of 1998.
FIRST NINE MONTHS 1999 COMPARED WITH FIRST NINE MONTHS 1998
Net income was $3,725 million for the first nine months of 1999, a decrease of
23 percent from the $4,840 million earned in 1998. Net income for the first
nine months of 1999 included a $120 million charge for the restructuring of
Japanese operations, while the prior year period included a $70 million charge
relating to an accounting change. Excluding non-recurring items, net income for
the first nine months of 1999 declined 22 percent to $3,845 million or $1.57
per share, compared to $4,910 million or $1.99 per share last year.
Exploration and production earnings have increased due to the improvement in
crude prices. Crude oil realizations were up almost $3 per barrel versus the
first nine months of 1998. However, European gas prices were about 20 percent
lower than the previous year. Liquids production of 1,544 kbd compared to 1,595
kbd in the same period of 1998, primarily due to natural field declines, steps
to curtail marginal volumes in the low price environment of the first half of
the year and lower liftings in Canada. Partly offsetting this was increased
production from new developments in the North Sea, the Gulf of Mexico and
Azerbaijan. Worldwide natural gas production of 6,008 mcfd was essentially
unchanged from the prior year. Exploration and producing expenses were reduced
from prior year levels.
Earnings from U.S. exploration and production operations for the first nine
months were $856 million, an increase of $231 million from 1998. Outside the
U.S., exploration and production earnings were $1,488 million, up $34 million
from last year.
Petroleum product sales of 5,443 kbd increased 30 kbd over last year,
principally due to volume growth in North America. Earnings from U.S. refining
and marketing operations were $214 million, down $254 million from 1998,
reflecting the inability to pass through higher crude costs to the marketplace.
Outside the U.S., refining and marketing earnings for the first nine months,
excluding non-recurring items, decreased $1,020 million to $327 million, driven
by much lower margins, higher planned maintenance activities and unfavorable
foreign exchange effects. Reduced operating expenses provided some offset to
these factors.
<PAGE> -14-
EXXON CORPORATION
Chemicals earnings totaled $882 million for the first nine months of 1999
compared with $970 million last year. Industry margins declined versus last
year due to lower product prices and higher feedstock costs. Prime product
sales volumes of 13,428 kt were a record for the first nine months and
increased 4 percent over last year. Chemicals earnings also benefited from
lower operating expenses.
Earnings from other operations totaled $290 million, a decrease of $4 million
from the first nine months of 1998, reflecting depressed copper and coal
prices, offset by reduced operating expenses and higher production volumes.
1999 year-to-date production volumes for copper and coal were at record levels.
Corporate and financing expenses decreased $36 million to $212 million,
reflecting lower tax-related charges. During the period, the company's
operating segments continued to benefit from the impact of lower effective tax
rates and the favorable resolution of tax-related issues.
Net cash generation before financing activities was $2,650 million in the first
nine months of 1999 versus $3,803 million in the same period last year.
Operating activities provided net cash of $7,857 million, a decrease of $1,495
million from the prior year influenced by lower net income. Investing
activities used net cash of $5,207 million or $342 million less than a year
ago, reflecting higher proceeds from asset sales.
Net cash used in financing activities was $2,966 million in the first nine
months of 1999 versus $5,760 million in the same period last year, the decrease
due to lower purchases of shares of Exxon common stock and an increase in the
debt level in the current year versus a reduction in the debt level in the
prior year period. During the first nine months of 1999, Exxon purchased 7.5
million shares of its common stock for the treasury at a cost of $579 million,
representing a continuation of purchases to offset shares issued in conjunction
with the Company's benefit plans and programs. As a consequence of the proposed
merger of Exxon and Mobil, the repurchase program to reduce the number of Exxon
shares outstanding was discontinued in December of 1998.
Capital and exploration expenditures in this year's first nine months were
$6,602 million versus $7,079 million a year ago.
Total debt of $9.2 billion at September 30, 1999 increased $0.5 billion from
year-end 1998. The corporation's debt to total capital ratio was 16.8 percent
at the end of the third quarter of 1999, compared to 16.2 percent at year-end
1998.
Over the twelve months ended September 30, 1999, return on average
shareholders' equity was 12.0 percent. Return on average capital employed,
which includes debt, was 10.3 percent over the same time period.
Although the corporation issues long-term debt from time to time and maintains
a revolving commercial paper program, internally generated funds cover the
majority of its financial requirements.
Litigation and other contingencies are discussed in note 3 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future operating
results or future financial condition.
The corporation, as part of its ongoing asset management program, continues to
evaluate its mix of assets for potential upgrade. Because of the ongoing nature
of this program, dispositions will continue to be made from time to time which
will result in either gains or losses.
<PAGE> -15-
EXXON CORPORATION
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define a specific year. Absent corrective actions, a
computer program that has date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions to various activities and
operations.
The corporation initiated assessments in prior years to identify the work
efforts required to assure that systems supporting the business successfully
operate beyond the turn of the century. The scope of this work effort
encompasses business information systems, infrastructure, and technical and
field systems, including systems utilizing embedded technology, such as
microcontrollers. The program places particular emphasis on mission critical
systems, defined as those which could have a significant safety, environmental
or financial impact, should Year 2000 issues arise.
Plans for achieving Year 2000 compliance were finalized during 1997, and
implementation work has been underway since then. The initial phases of this
work, an inventory and assessment of potential problem areas in identified
mission critical systems, are complete. The modification and testing phases
related to identified mission critical systems are essentially complete.
Attention has also been focused on compliance attainment efforts of vendors and
others, including key system interfaces with customers and suppliers. Most key
suppliers and business partners have been contacted for clarification of their
Year 2000 plans and over 80 percent have confirmed that compliance plans are in
place. Follow-up discussions are being held with key suppliers when necessary
to gain satisfaction on their state of readiness. These reviews will continue
through 1999. Testing of critical third party products and services is
underway, including such areas as process control systems, credit card
processing, banking transactions and telecommunications.
Notwithstanding the substantive work efforts described above, the corporation
could potentially experience disruptions to some mission critical operations or
deliveries to customers as a result of Year 2000 issues, particularly in the
first few weeks of the year 2000. Such disruptions could include impacts from
potentially non-compliant systems utilized by suppliers, customers, government
entities or others. Given the diverse nature of Exxon's operations, the varying
state of readiness of different countries and suppliers, and the
interdependence of Year 2000 impacts, the potential financial impact or
liability associated with such disruptions cannot be reasonably estimated.
Exxon operating sites around the world, including those in developing
countries, are working with key suppliers in their respective countries to
address Year 2000 issues. In addition, Year 2000 Business Contingency
Guidelines are being used by operating organizations and affiliates, and
include specific reference to areas such as transportation, telecommunications
and utility services. Existing site contingency plans are being updated in
order to attempt to mitigate the extent of potential disruption to business
operations. This work is essentially complete with refinement of contingency
plans continuing through 1999.
<PAGE> -16-
EXXON CORPORATION
Through September 30, 1999, about $225 million of costs had been incurred in
the corporation's efforts to achieve Year 2000 compliant systems. The total
cost to the corporation of achieving Year 2000 compliant systems is currently
estimated to be $230 to $250 million, primarily over the 1997-1999 timeframe,
and is not expected to be a material incremental cost impacting Exxon's
operations, financial condition or liquidity.
FORWARD-LOOKING STATEMENTS
Statements in this report regarding future events or conditions are forward-
looking statements. Actual results, including projections of liquids production
levels and the impact of the Year 2000 Issue, could differ materially due to,
among other things, factors discussed in this report and in Item 1 of the
corporation's most recent Annual Report on Form 10-K.
<PAGE> -17-
EXXON CORPORATION
SPECIAL ITEMS
_____________
<TABLE>
<CAPTION>
Third Quarter First Nine Months
_________________ _____________________
1999 1998 1999 1998
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars)
REFINING & MARKETING
Non-U.S.
Restructuring $ 0 $ 0 $ (120) $ 0
TOTAL INCLUDED IN EARNINGS ______ ______ ______ ______
BEFORE ACCOUNTING CHANGE 0 0 (120) 0
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 0 0 0 (70)
______ ______ ______ ______
TOTAL INCLUDED IN NET INCOME $ 0 $ 0 $ (120) $ (70)
====== ====== ====== ======
</TABLE>
<PAGE> -18-
EXXON CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the nine months ended September 30,
1999 does not differ materially from that discussed under Item 7A of
the registrant's Annual Report on Form 10-K for 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Refer to the relevant portions of Note 3 on pages 7 and 8 of this
Quarterly Report on Form 10-Q for information on legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 3(i) - Registrant's Restated Certificate of Incorporation, as
restated September 15, 1999.
Exhibit 27 - Financial Data Schedule (included only in the
electronic filing of this document).
b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during the
quarter.
<PAGE> -19-
EXXON CORPORATION
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.
EXXON CORPORATION
Date: November 12, 1999 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
<PAGE> -20-
EXXON CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX TO EXHIBITS
3(i). Registrant's Restated Certificate of Incorporation, as restated
September 15, 1999.
27. Financial Data Schedule (included only in the electronic filing of
this document).
<PAGE> -21-
RESTATED
CERTIFICATE OF INCORPORATION
of
EXXON CORPORATION
Exxon Corporation, a corporation organized and existing under the
laws of the State of New Jersey, restates and integrates its Certificate of
Incorporation, as heretofore restated and amended, to read in full as herein
set forth:
FIRST. The name of the corporation is:
EXXON CORPORATION
SECOND. The address of the corporation's registered office is 830
Bear Tavern Road, West Trenton, New Jersey 08628-1020. The name of the
corporation's registered agent at such address, upon whom process against the
corporation may be served, is Corporation Service Company.
THIRD. The purposes for which the corporation is organized are to
engage in any or all activities within the purposes for which corporations now
or at any time hereafter may be organized under the New Jersey Business
Corporation Act and under all amendments and supplements thereto, or any
revision thereof or any statute enacted to take the place thereof, including
but not limited to the following:
(1) To do all kinds of mining, manufacturing and trading
business; transporting goods and merchandise by land or water in any manner;
to buy, sell, lease and improve lands; to build houses, structures, vessels,
cars, wharves, docks and piers; to lay and operate pipelines; to erect and
operate telegraph and telephone lines and lines for conducting electricity; to
enter into and carry out contracts of every kind pertaining to its business;
to acquire, use, sell and grant licenses under patent rights; to purchase or
otherwise acquire, hold, sell, assign and transfer shares of capital stock and
bonds or other evidences of indebtedness of corporations, and to exercise all
the privileges of ownership including voting upon the securities so held; to
carry on its business and have offices and agencies therefor in all parts of
the world; and to hold, purchase, mortgage and convey real estate and personal
property within or without the State of New Jersey;
(2) To engage in any activities encompassed within this Article
Third directly or through a subsidiary or subsidiaries and to take any and all
acts deemed appropriate to promote the interests of such subsidiary or
subsidiaries, including, without limiting the foregoing, the following: making
contracts and incurring liabilities for the benefit of such subsidiary or
subsidiaries; transferring or causing to be transferred to any such subsidiary
or subsidiaries assets of this corporation; guaranteeing dividends on any
shares of the capital stock of any such subsidiary; guaranteeing the principal
and interest or either of the bonds, debentures, notes or other evidences of
indebtedness issued or obligations incurred by any such subsidiary or
<PAGE>
subsidiaries; securing said bonds, debentures, notes or other evidences of
indebtedness so guaranteed by mortgage of or security interest in the property
of this corporation; and contracting that said bonds, debentures, notes or
other evidences of indebtedness so guaranteed, whether secured or not, may be
convertible into shares of this corporation upon such terms and conditions as
may be approved by the board of directors;
(3) To guarantee the bonds, debentures, notes or other evidences
of indebtedness issued, or obligations incurred, by any corporation,
partnership, limited partnership, joint venture or other association in which
this corporation at the time such guarantee is made has a substantial interest
or where such guarantee is otherwise in furtherance of the interests of this
corporation; and
(4) To exercise as a purpose or purposes each power granted to
corporations by the New Jersey Business Corporation Act or by any amendment or
supplement thereto or by any statute enacted to take the place thereof,
insofar as such powers authorize or may hereafter authorize corporations to
engage in activities.
FOURTH. The aggregate number of shares which the corporation
shall have authority to issue is three billion two hundred million
(3,200,000,000) shares, divided into two hundred million (200,000,000) shares
of preferred stock without par value and three billion (3,000,000,000) shares
of common stock without par value.
(1) The board of directors of the corporation is authorized at
any time or from time to time (i) to divide the shares of preferred stock into
classes and into series within any class or classes of preferred stock; (ii)
to determine for any such class or series its designation, relative rights,
preferences and limitations; (iii) to determine the number of shares in any
such class or series (including a determination that such class or series
shall consist of a single share); (iv) to increase the number of shares of any
such class or series previously determined by it and to decrease such
previously determined number of shares to a number not less than that of the
shares of such class or series then outstanding; (v) to change the designation
or number of shares, or the relative rights, preferences and limitations of
the shares, of any theretofore established class or series no shares of which
have been issued; and (vi) to cause to be executed and filed without further
approval of the shareholders such amendment or amendments to the Restated
Certificate of Incorporation as may be required in order to accomplish any of
the foregoing. In particular, but without limiting the generality of the
foregoing, the board of directors is authorized to determine with respect to
the shares of any class or series of preferred stock:
(a) whether the holders thereof shall be entitled to
cumulative, non-cumulative or partially cumulative dividends or to no
dividends and, with respect to shares entitled to dividends, the dividend rate
or rates (which may be fixed or variable and may be made dependent upon facts
ascertainable outside of the Restated Certificate of Incorporation) and any
other terms and conditions relating to such dividends;
(b) whether the holders thereof shall be entitled to
receive dividends payable on a parity with or subordinate or in preference to
the dividends payable on any other class or series of shares of the
corporation;
<PAGE> - 2 -
(c) whether, and if so to what extent and upon what terms
and conditions, the holders thereof shall be entitled to preferential rights
upon the liquidation of, or upon any distribution of the assets of, the
corporation;
(d) whether, and if so upon what terms and conditions,
such shares shall be convertible into other securities;
(e) whether, and if so upon what terms and conditions,
such shares shall be redeemable;
(f) the terms and amount of any sinking fund provided for
the purchase or redemption of such shares; and
(g) the voting rights, if any, to be enjoyed by such
shares and the terms and conditions for the exercise thereof.
(2) Each holder of shares of common stock shall be entitled to
one vote for each share of common stock held of record by such holder on all
matters on which holders of shares of common stock are entitled to vote.
(3) No holder of any shares of common or preferred stock of the
corporation shall have any right as such holder (other than such right, if
any, as the board of directors in its discretion may determine) to purchase,
subscribe for or otherwise acquire any unissued or treasury shares, or any
option rights, or securities having conversion or option rights, of the
corporation now or hereafter authorized.
(4) The relative voting, dividend, liquidation and other rights,
preferences and limitations of the shares of the class of preferred stock
designated "Class A Preferred Stock" are as set forth in this Article FOURTH
and in Exhibit A to this Restated Certificate of Incorporation.
FIFTH. The following is a list of the names and residences of the
original shareholders, and of the number of shares held by each:
H.M. Flagler of New York City, One share.
Paul Babcock, Jr. of Jersey City, One share.
James McGee of Plainfield, New Jersey, One share.
Thos. C. Bushnell of Morristown, New Jersey, One share.
John D. Rockefeller of Cleveland, Ohio, }
Wm. Rockefeller of New York City, }
J.A. Bostwick of New York City, }
John D. Archbold of New York City, }
O.H. Payne of Cleveland, Ohio, }
Wm. G. Warden of Philadelphia, Pa., }
Benj. Brewster of New York City, }
Chas. Pratt of Brooklyn, N.Y., }
and H.M. Flagler of New York City. }
<PAGE> - 3 -
Trustees of Standard Oil Trust, twenty-nine thousand nine hundred and ninety-
six shares (29,996), of which twenty-one thousand seven hundred and twenty-
four shares (21,724) were issued for property purchased and necessary for the
business of this corporation.
SIXTH. The number of directors of the corporation as of
August 6, 1999 is 13 and their names and business office addresses are:
Dr. Michael J. Boskin Mr. Phillip E. Lippincott
Hoover Institution P. O. Box 2159
Stanford University Park City, Utah 84060
Stanford, California 94305-6010
Mr. Rene Dahan Mr. Harry J. Longwell
5959 Las Colinas Boulevard 5959 Las Colinas Boulevard
Irving, Texas 75039-2298 Irving, Texas 75039-2298
Mr. William T. Esrey Mrs. Marilyn Carlson Nelson
Sprint Corporation Carlson Companies, Inc.
2330 Shawnee Mission Pkwy. 1405 Xenium Lane North
Westwood, Kansas 66205 Plymouth, Minnesota 55441
Mr. Jess Hay Mr. Lee R. Raymond
Chase Tower 5959 Las Colinas Boulevard
2200 Ross Avenue Irving, Texas 75039-2298
Dallas, Texas 75201-2764
Mr. Walter V. Shipley
Mr. James R. Houghton The Chase Manhattan Corporation
80 East Market Street 270 Park Avenue
Corning, New York 14830 New York, New York 10017-2070
Mr. William R. Howell Mr. Robert E. Wilhem
6501 Legacy Drive 5959 Las Colinas Boulevard
Plano, Texas 75024-3698 Irving, Texas 75039-2298
Dr. Reatha Clark King
General Mills Foundation
One General Mills Blvd.
Minneapolis, Minnesota 55426
SEVENTH. The number of directors at any time may be increased or
diminished by vote of the board of directors, and in case of any such increase
the board of directors shall have power to elect each such additional director
to hold office until the next succeeding annual meeting of shareholders and
until his successor shall have been elected and qualified.
The board of directors, by the affirmative vote of a majority of
the directors in office, may remove a director or directors for cause where,
in the judgment of such majority, the
<PAGE> - 4 -
continuation of the director or directors in office would be harmful to the
corporation and may suspend the director or directors for a reasonable period
pending final determination that cause exists for such removal.
The board of directors from time to time shall determine whether
and to what extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the corporation, or any of them,
shall be open to the inspection of the shareholders; and no shareholder shall
have any right of inspecting any account or book or document of the
corporation, except as conferred by statute or authorized by the board of
directors, or by a resolution of the shareholders.
EIGHTH. The following action may be taken by the affirmative vote
of a majority of the votes cast by the holders of shares of the corporation
entitled to vote thereon:
(1) The adoption by the shareholders of a proposed amendment of
the certificate of incorporation of the corporation;
(2) The adoption by the shareholders of a proposed plan of merger
or consolidation involving the corporation;
(3) The approval by the shareholders of a sale, lease, exchange,
or other disposition of all, or substantially all, the assets of the
corporation otherwise than in the usual and regular course of business as
conducted by the corporation; and
(4) Dissolution.
NINTH. Except as otherwise provided by statute or by this
certificate of incorporation or the by-laws of the corporation as in each case
the same may be amended from time to time, all corporate powers may be
exercised by the board of directors. Without limiting the foregoing, the board
of directors shall have power, without shareholder action:
(1) To authorize the corporation to purchase, acquire, hold,
lease, mortgage, pledge, sell and convey such property, real, personal and
mixed, without as well as within the State of New Jersey, as the board of
directors may from time to time determine, and in payment for any property to
issue, or cause to be issued, shares of the corporation, or bonds, debentures,
notes or other obligations or evidence of indebtedness thereof secured by
pledge, security interest or mortgage, or unsecured; and
(2) To authorize the borrowing of money, the issuance of bonds,
debentures, notes and other obligations or evidences of indebtedness of the
corporation, secured or unsecured, and the inclusion of provisions as to
redeemability and convertibility into shares of stock of the corporation or
otherwise, and, as security for money borrowed or bonds, debentures, notes and
other obligations or evidences of indebtedness issued by the corporation, the
mortgaging or pledging of any property, real, personal, or mixed, then owned
or thereafter acquired by the corporation.
TENTH. To the full extent from time to time permitted by law, no
director or officer of the corporation shall be personally liable to the
corporation or its shareholders for damages for breach of any duty owed to the
corporation or its shareholders. Neither the
<PAGE> - 5 -
amendment or repeal of this Article, nor the adoption of any provision of
this certificate of incorporation inconsistent with this Article, shall
eliminate or reduce the protection afforded by this Article to a director
or officer of the corporation with respect to any matter which occurred,
or any cause of action, suit or claim which but for this Article would have
accrued or arisen, prior to such amendment, repeal or adoption.
<PAGE> - 6 -
EXHIBIT A
PART I
Class A Preferred Stock
Section 1. Designation and Amount; Special Purpose Restricted
_________ __________________________________________________
Transfer Issue.
______________
(A) The shares of this class of preferred stock shall be
designated as "Class A Preferred Stock" (referred to herein as the "Class A
Preferred Stock") and the aggregate number of shares constituting such class
which the Corporation shall have the authority to issue is 16,500,000. The
shares of this class shall have a stated value of $61.50 per share (the
"Stated Value").
(B) Shares of Class A Preferred Stock shall be issued only to a
trustee acting on behalf of the Plan (as defined in Section 9(F)(vii)). In the
event of any transfer of shares of Class A Preferred Stock to any person other
than the Corporation or the trustee of the Plan, the shares of Class A
Preferred Stock so transferred, upon such transfer and without any further
action by the Corporation or the holder, shall be automatically converted into
shares of the Corporation's Common Stock without par value (the "Common
Stock") pursuant to Section 5 hereof and no such transferee shall have any of
the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of Class A Preferred Stock hereunder but,
rather, only the powers and rights pertaining to the Common Stock into which
such shares of Class A Preferred Stock shall be so converted. In the event of
such a conversion, the transferee of the shares of Class A Preferred Stock
shall be treated for all purposes as the record holder of the shares of Common
Stock into which such shares of Class A Preferred Stock have been
automatically converted as of the date of such transfer; provided, however,
________ _______
that the pledge of Class A Preferred Stock as collateral under any credit
agreement for the financing or refinancing of the initial purchase of the
Class A Preferred Stock by the Plan shall not constitute a transfer for
purposes of this Section 1. Certificates representing shares of Class A
Preferred Stock shall be legended to reflect such restrictions on transfer.
Notwithstanding the foregoing provisions of this Section 1 (B), shares of
Class A Preferred Stock (i) upon allocation to the account of a participant in
the Plan, shall be converted into shares of Common Stock pursuant to Section 5
hereof and the shares of Common Stock issued upon such conversion may be
transferred by the holder thereof as permitted by law and (ii) shall be
redeemable by the Corporation upon the terms and conditions provided by
Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
_________ ___________________________
(A) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Class A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
available under applicable law and the Certificate of Incorporation,
cumulative cash dividends ("Preferred Dividends") in an amount per share equal
to $4.68 per annum and no more, payable (x) monthly in arrears, one-twelfth on
the 20th day of each month, commencing on July 20, 1989 and ending on June 20,
1990, and thereafter (y) quarterly in arrears, one-quarter on the 20th day of
each March, June, September and December in each year (each such monthly and
quarterly date a "Dividend Payment Date"), to holders of record at the start
of business on such Dividend Payment Date. In the event that any Dividend
Payment Date shall occur on any day other than a "Business Day" (as defined in
Section 9(F)(i)),
<PAGE> - 7 -
the dividend payment due on such Dividend Payment Date shall be paid on the
Business Day immediately succeeding such Dividend Payment Date. Preferred
Dividends shall begin to accrue on outstanding shares of Class A Preferred
Stock from the date of issuance of such shares of Class A Preferred Stock.
Preferred Dividends shall accrue on a daily basis whether or not the
Corporation shall have earnings or surplus at the time. Preferred Dividends
accrued after the date of issuance for any period less than a full monthly or
quarterly period, as the case may be, between Dividend Payment Dates shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
such a proportional dividend shall accrue for the period from the date of
issuance until the end of the dividend payment period in which such issuance
occurs. Accumulated but unpaid Preferred Dividends shall accumulate as of the
Dividend Payment Date on which they first become payable, but no interest
shall accrue on accumulated but unpaid Preferred Dividends.
(B) So long as any Class A Preferred Stock shall be outstanding,
no dividend shall be declared or paid or set apart for payment on any other
class of stock ranking on a parity with the Class A Preferred Stock as to
dividends ("Parity Stock"), unless there shall also be or have been declared
and paid or set apart for payment on the Class A Preferred Stock dividends
ratably in proportion to the respective amounts of dividends (a) accumulated
and unpaid through all dividend payment periods for the Class A Preferred
Stock ending on or before the dividend payment date of such Parity Stock and
(b) accumulated and unpaid on such Parity Stock through the dividend payment
period on such Parity Stock next preceding such dividend payment date. So long
as any Class A Preferred Stock shall be outstanding, in the event that full
cumulative dividends on the Class A Preferred Stock have not been declared and
paid or set apart for payment for all prior dividend payment periods, the
Corporation shall not declare or pay or set apart for payment any dividends or
make any other distributions on, or make any payment on account of the
purchase, redemption or other retirement of, any other class of stock or
series thereof of the Corporation ranking as to dividends junior to the Class
A Preferred Stock ("Junior Stock") until full cumulative and unpaid dividends
on the Class A Preferred Stock shall have been paid or declared and set apart
for payment; provided, however, that the foregoing shall not apply to (i) any
________ _______
dividend payable solely in any shares of any Junior Stock, or (ii) the
acquisition of shares of any Junior Stock either (x) pursuant to any employee
or director incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement) of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted or (y) in
exchange solely for shares of any other Junior Stock.
Section 3. Voting Rights. The holders of shares of Class A
_________ _____________
Preferred Stock shall have the following voting rights:
(A) The holders of Class A Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together as one class with the holders of Common Stock and
any other class or series of preferred stock so voting as one class. Each
share of the Class A Preferred Stock shall entitle the holder thereof to a
number of votes equal to the number of shares of Common Stock into which such
share of Class A Preferred Stock could be converted pursuant to the first
sentence of Section 5(A) hereof on the record date for determining the
shareholders entitled to vote, rounded to the nearest one-tenth of a vote; it
being understood that whenever the "Conversion Ratio" (as defined in Section 5
hereof) is adjusted pursuant to Section 9 hereof, the voting rights of the
Class A Preferred Stock shall also be similarly adjusted.
<PAGE> - 8 -
(B) Except as otherwise required by law, holders of Class A
Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with holders
of Common Stock or any other class or series of preferred stock) for the
taking of any corporate action.
Section 4. Liquidation, Dissolution or Winding-Up.
_________ ______________________________________
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the holders of Class A Preferred Stock shall be
entitled to receive out of assets of the Corporation which remain after
satisfaction in full of all valid claims of creditors of the Corporation and
which are available for payment to shareholders, and subject to the rights of
the holders of any class of stock of the Corporation ranking senior to or on a
parity with the Class A Preferred Stock in respect of distributions upon
liquidation, dissolution or winding-up of the Corporation, before any amount
shall be paid or distributed among the holders of Common Stock or any other
class of stock ranking junior to the Class A Preferred Stock in respect of
distributions upon liquidation, dissolution or winding-up of the Corporation,
liquidating distributions in an aggregate amount of $61.50 per share of Class
A Preferred Stock plus an amount equal to all accrued and unpaid dividends
thereon to the date fixed for distribution, and no more. If upon any
liquidation, dissolution or winding-up of the Corporation, the amounts payable
with respect to the Class A Preferred Stock and any other class of stock
ranking as to any such distribution on a parity with the Class A Preferred
Stock are not paid in full, the holders of the Class A Preferred Stock and
such other class of stock shall share ratably in any distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount to which they are entitled as
provided by the foregoing provisions of this Section 4(A), the holders of
shares of Class A Preferred Stock shall not be entitled to any further right
or claim to any of the remaining assets of the Corporation.
(B) Neither the merger, consolidation or combination of the
Corporation with or into any other corporation, nor the sale, lease, transfer
or other exchange of all or any portion of the assets of the Corporation (or
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 dissolution, liquidation
or winding-up of the affairs of the Corporation for purposes of this Section
4, but the holders of Class A Preferred Stock shall nevertheless be entitled
in the event of any such transaction to the rights provided by Section 8
hereof.
(C) Written notice of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, stating the payment date or
dates when, and the place or places where, the amounts distributable to
holders of Class A Preferred Stock and any other class or series of preferred
stock in such circumstances shall be payable, and stating that, except in the
case of Class A Preferred Stock represented by uncertificated shares, such
payment will be made only after the surrender (or submission for notation of
any partial payment) of such holder's certificates representing shares of
Class A Preferred Stock, shall be given by first class mail, postage prepaid,
mailed not less than twenty (20) days prior to any payment date stated
therein, to the holders of Class A Preferred Stock, at the address shown on
the books of the Corporation or any transfer agent for the Class A Preferred
Stock.
<PAGE> - 9 -
Section 5. Conversion into Common Stock.
_________ ____________________________
(A) A holder of shares of Class A Preferred Stock shall be
entitled at any time, but not later than the close of business on the
Redemption Date (as hereinafter defined) of such shares pursuant to Section 6,
7 or 8 hereof, to cause any or all of such shares to be converted into a
number of shares of Common Stock for each share of Class A Preferred Stock
which initially shall be one and which shall be adjusted as hereinafter
provided (and, as so adjusted, is hereinafter sometimes referred to as the
"Conversion Ratio"). In addition to the foregoing and subject to Section 5(B)
hereof, a holder of shares of Class A Preferred Stock upon allocation of such
shares to the account of a participant in the Plan shall be required to
convert each such share of Class A Preferred Stock into the greater of (i)
that number of shares of Common Stock which shall be the quotient obtained by
dividing the Stated Value of each share of Class A Preferred Stock by the
greater of (x) $15 divided by the Conversion Ratio or (y) the average of the
high and low sales prices for a share of Common Stock on the trading day next
preceding the Conversion Date (as hereinafter defined) on which one or more
sales of shares of Common Stock occur, all as reported on the Composite Tape
(as hereinafter defined), or (ii) that number of shares of Common Stock equal
to the Conversion Ratio. The Corporation's determination in good faith in
respect of the number of shares to be issued upon any and all conversions
pursuant to the preceding sentence shall be conclusive.
(B) Any holder of shares of Class A Preferred Stock desiring or
required to convert such shares into shares of Common Stock shall surrender
the certificate or certificates representing the shares of Class A Preferred
Stock being converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto) in
case of a request for registration in a name other than that of such holder,
at the offices of the Corporation or the transfer agent for the Common Stock
accompanied by written notice of conversion. Such notice of conversion shall
specify (i) the number of shares of Class A Preferred Stock to be converted,
and the name or names in which such holder wishes the certificate or
certificates for Common Stock and for any shares of Class A Preferred Stock
not to be so converted to be issued (or the name or names in which ownership
of such shares is to be registered in the event that they are to be
uncertificated), (ii) the address or addresses to which such holder wishes
delivery to be made of such new certificates to be issued upon such
conversion, and (iii) whether the conversion is being effected pursuant to the
second sentence of Section 5(A) hereof.
(C) A conversion of shares of Class A Preferred Stock into shares
of Common Stock pursuant to Section 5(A) shall be effective immediately before
the close of business on the day of the later of (i) the surrender to the
Corporation of the certificate or certificates for the shares of Class A
Preferred Stock to be converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating thereto) in
case of a request for registration in a name other than that of such holder
and (ii) the giving of the notice of conversion as provided herein (the
"Conversion Date"). On and after such Conversion Date, the person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock.
(D) Promptly after the Conversion Date for shares of Class A
Preferred Stock to be converted, the Corporation or the transfer agent for the
Common Stock shall issue and send by hand delivery (with receipt to be
acknowledged) or by first class mail, postage prepaid, to the holder of such
shares or to such holder's designee, at the address designated by such holder, a
<PAGE> - 10 -
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled upon conversion. In the event that there
shall have been surrendered a certificate or certificates representing shares
of Class A Preferred Stock only part of which are to be converted, the
Corporation or the transfer agent for the Common Stock shall issue and deliver
to such holder or such holder's designee a new certificate or certificates
representing the number of shares of Class A Preferred Stock which shall not
have been converted.
(E) The Corporation shall not be obligated to deliver to holders
of Class A Preferred Stock any fractional share or shares of Common Stock
issuable upon any conversion of such shares of Class A Preferred Stock, but in
lieu thereof may make a cash payment in respect thereof in any manner
permitted by law. The determination in good faith by the Corporation of the
amount of any such cash payments shall be conclusive.
(F) The Corporation shall at all times reserve and keep available
out of its authorized and unissued and/or treasury Common Stock solely for
issuance upon the conversion of shares of Class A Preferred Stock as herein
provided, free from any preemptive rights, the maximum number of shares of
Common Stock as shall from time to time be issuable upon the conversion of all
shares of Class A Preferred Stock then outstanding.
Section 6. Redemption at the Option of the Corporation.
_________ ___________________________________________
(A) The Class A Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation at any time at the Stated Value,
plus an amount equal to all accrued and unpaid dividends thereon to the date
fixed for redemption (the close of business on such date being referred to as
the "Redemption Date"); provided that such redemption may be made on or after
________
December 20, 1990 and prior to July 20, 1995 only if (i) the Corporation shall
have requested that the trustee of the Plan repay the indebtedness incurred by
such trustee to purchase the shares of Class A Preferred Stock and (ii) either
(x) Section 404(k) of the Code (as hereinafter defined) is repealed or amended
or the Internal Revenue Service or the Treasury Department promulgates a
Revenue Ruling or Regulation or a federal Court of Appeals issues a decision
involving the Corporation, at any time on or after December 20, 1990 and prior
to July 20, 1995 with the effect that less than 100% of the dividends payable
on the shares of any capital stock of the Corporation including, without
limitation, Class A Preferred Stock or Common Stock held in the Plan is
deductible by the Corporation, when paid to participants in the Plan or their
beneficiaries or used to repay indebtedness as described in Section 404(k) of
the Code, from its gross income for purposes of determining its liability for
the federal income tax imposed by Section 11 of the Code or (y) the Code is
amended at any time on or after December 20, 1990 and prior to July 20, 1995
(other than to change the rate of any existing tax imposed by the Code) or the
Internal Revenue Service or the Treasury Department promulgates a Revenue
Ruling or Regulation or a federal Court of Appeals issues a decision involving
the Corporation, with the effect that the Corporation's liability for the
alternative minimum tax imposed by Section 55 of the Code, the general federal
income tax imposed by Section 11 of the Code or any other tax hereafter
imposed by the Code is increased solely by reason of its claiming a deduction
in respect of dividends paid on the shares of any capital stock of the
Corporation including, without limitation, Class A Preferred Stock or Common
Stock held in the Plan in a manner consistent with Section 404(k) of the Code.
Payment of the redemption price shall be made by the Corporation in cash or
shares of Common Stock or a combination thereof, as permitted by paragraph (C)
of this Section 6. From and after the Redemption Date, dividends on shares of
Class A Preferred Stock called for redemption will cease to accrue, such
shares will no longer be
<PAGE> - 11 -
deemed to be outstanding and all rights in respect of such shares of the
Corporation shall cease, except the right to receive the redemption price.
No interest shall accrue at the redemption price after the Redemption Date.
If less than all of the outstanding shares of Class A Preferred Stock are to
be redeemed, the Corporation shall either redeem a portion of the shares of
each holder determined pro rata based on the number of shares held by each
holder or shall select the shares to be redeemed by lot or as may be
otherwise determined by the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of redemption
pursuant to paragraph (A) of this Section 6 will be sent to the holders of
Class A Preferred Stock at the address shown on the books of the Corporation
or any transfer agent for the Class A Preferred Stock by first class mail,
postage prepaid, mailed not less than thirty (30) days nor more than sixty
(60) days prior to the Redemption Date. Such Class A Preferred Stock shall
continue to be entitled to the conversion rights provided in Section 5 hereof
through such Redemption Date. Each such notice shall state: (i) the Redemption
Date; (ii) the total number of shares of the Class A Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price and the intended form of payment; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; (v) that dividends on the shares to be redeemed will cease
to accrue on such Redemption Date; and (vi) a summary of the conversion rights
of the shares to be redeemed, the period within which conversion rights may be
exercised, and the Conversion Ratio in effect at the time. Upon surrender of
the certificate for any shares so called for redemption and not previously
converted (or upon giving the notice of redemption in the case of
uncertificated shares), but not earlier than the Redemption Date, the
Corporation shall pay to the holder of such shares or its designee the
redemption price set forth pursuant to this Section 6.
(C) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of Class A Preferred Stock
pursuant to Section 6 or 7 hereof in cash or in shares of Common Stock or in a
combination of such shares and cash, any such shares of Common Stock to be
valued for such purpose at their Fair Market Value (as defined in Section
9(F)(iii)) on the Redemption Date. Any shares of Common Stock so issued or
delivered (or issued or delivered pursuant to Section 7) shall be deemed to
have been issued or delivered to the holder of the Class A Preferred Stock as
of the Redemption Date and such holder shall be deemed to have become the
record holder thereof as of the Redemption Date.
Section 7. Other Redemption Rights.
_________ _______________________
Shares of Class A Preferred Stock shall be redeemed by the
Corporation for cash or, if the Corporation so elects, in shares of Common
Stock, or a combination of such shares and cash (any such shares of Common
Stock to be valued for such purpose in accordance with Section 6(C)), at a
redemption price equal to the Stated Value plus accrued and unpaid dividends
thereon to the date fixed for redemption, at the option of the holder, at any
time and from time to time upon notice to the Corporation given not less than
five (5) Business Days prior to the Redemption Date fixed by the holder in
such notice (i) in the event that the Plan is determined by the Internal
Revenue Service not to be qualified within the meaning of Sections 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended from time to time
(the "Code") or (ii) in the event that the Plan is terminated in accordance
with its terms.
<PAGE> - 12 -
Section 8. Consolidation, Combination, Merger, Etc.
_________ _______________________________________
(A) In the event that the Corporation shall consummate any
consolidation, combination, merger or substantially similar transaction,
pursuant to which the outstanding shares of Common Stock are by operation of
law exchanged solely for or changed, reclassified or converted solely into
stock of any successor or resulting corporation (including the Corporation)
that constitutes "qualifying employer securities" with respect to a holder of
Class A Preferred Stock within the meaning of Section 409(1) of the Code and
Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provisions of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, the shares of Class A Preferred
Stock of such holder shall in connection therewith be exchanged for or
converted into preferred stock of such successor or resulting corporation,
having in respect of such corporation insofar as possible the same powers,
preferences and relative, participating, optional or other special rights
(including the redemption rights provided by Sections 6, 7 and 8 hereof), and
the qualifications, limitations or restrictions thereon, that the Class A
Preferred Stock had immediately prior to such transaction, except that after
such transaction each share of the Class A Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section 5
hereof, into the number and kind of qualifying employer securities so
receivable by a holder of the number of shares of Common Stock into which such
shares of Class A Preferred Stock could have been converted pursuant to the
first sentence of Section 5(A) hereof immediately prior to such transaction;
provided, however, that if by virtue of the structure of such transaction, a
________ _______
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, such
holder of shares of Class A Preferred Stock shall be entitled to make an
equivalent election as to the nature and kind of consideration it shall
receive, and if such election cannot practicably be made by the holders of the
Class A Preferred Stock, then the shares of Class A Preferred Stock shall, by
virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be convertible into or exchangeable for the aggregate amount of
qualifying employer securities (payable in like kind and proportion)
receivable by a holder of the number of shares of Common Stock into which such
shares of Class A Preferred Stock could have been converted immediately prior
to such transaction if such holder of Common Stock failed to exercise any
rights of election to receive any kind or amount of qualifying employer
securities receivable upon such transaction (provided that, if the kind or
________
amount of qualifying employer securities receivable upon such transaction is
not the same for each non-electing share, then the kind and amount of
qualifying employer securities receivable upon such transaction for each such
non-electing share shall be the kind and amount so receivable per share by a
plurality of the non-electing shares). The conversion rights of the class of
preferred stock of such successor or resulting corporation for which the Class
A Preferred Stock is exchanged or into which it is converted, shall
successively be subject to adjustments pursuant to Section 9 hereof after any
such transactions as nearly equivalent as practicable to the adjustments
provided for by such Section prior to such transaction. The Corporation shall
not consummate any such merger, consolidation or similar transaction unless
the successor or resulting corporation shall have agreed to recognize and
honor the rights of the holders of Class A Preferred Stock set forth in this
Section 8(A).
(B) In the event that the Corporation shall consummate any
consolidation, combination, merger or substantially similar transaction,
pursuant to which the outstanding shares of Common Stock are by operation of
law exchanged for or changed, reclassified or converted into other stock or
securities or cash or any other property, or any combination thereof,
<PAGE> - 13 -
other than solely qualifying employer securities (as referred to in Section
8(A)) and cash payments, if applicable, in lieu of fractional shares,
outstanding shares of Class A Preferred Stock shall, without any action on the
part of the Corporation or any holder thereof (but subject to Section 8(C)),
be deemed to have been converted pursuant to the first sentence of Section
5(A) hereof immediately prior to the consummation of such merger,
consolidation, combination or similar business combination transaction into
the number of shares of Common Stock into which such shares of Class A
Preferred Stock could have been converted pursuant to the first sentence of
Section 5(A) hereof at such time so that each share of Class A Preferred Stock
shall, by virtue of such transaction and on the same terms as apply to the
holders of Common Stock, be converted into or exchanged for the aggregate
amount of stock, securities, cash or other property (payable in like kind and
proportion) receivable by a holder of the number of shares of Common Stock
into which such share of Class A Preferred Stock could have been converted
pursuant to the first sentence of Section 5(A) hereof immediately prior to
such transaction; provided, however, that if by virtue of the structure of
________ _______
such transaction, a holder of Common Stock is required to make an election
with respect to the nature and kind of consideration to be received in such
transaction, the holder of Class A Preferred Stock shall be entitled to make
an equivalent election as to the kind of consideration it shall receive, and
if such election cannot practicably be made by the holders of the Class A
Preferred Stock, then the shares of Class A Preferred Stock shall, by virtue
of such transaction and on the same terms as apply to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind and proportion)
receivable by a holder of the number of shares of Common Stock into which such
shares of Class A Preferred Stock could have been converted immediately prior
to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of stock, securities, cash or
other property receivable upon such transaction (provided that, if the kind or
________ ____
amount of stock, securities, cash or other property receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of stock, securities, cash or other property receivable upon such
transaction for each such non-electing share shall be the kind and amount so
receivable per share by a plurality of the non- electing shares).
(C) In the event the Corporation shall enter into any agreement
providing for any consolidation, combination, merger or substantially similar
transaction described in Section 8(B), then the Corporation shall as soon as
practicable thereafter (and in any event at least twenty (20) Business Days
before consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of Class A Preferred Stock and each
holder shall have the right to elect, by written notice to the Corporation, to
receive, upon consummation of such transaction (if and when such transaction
is consummated), from the Corporation or the successor of the Corporation, in
redemption and retirement of such Class A Preferred Stock, a cash payment
equal to the amount payable in respect of shares of Class A Preferred Stock
upon redemption pursuant to Section 6(A) hereof as if the date of the
consummation of such transaction was the Redemption Date. No such notice of
redemption shall be effective unless given to the Corporation prior to the
close of business on the second Business Day prior to consummation of such
transaction, unless the Corporation or the successor of the Corporation shall
waive such prior notice, but any notice of redemption so given prior to such
time may be withdrawn by notice of withdrawal given to the Corporation prior
to the close of business on the second Business Day prior to consummation of
such transaction.
<PAGE> - 14 -
Section 9. Anti-dilution Adjustments.
_________ _________________________
(A) In the event the Corporation shall, at any time or from time
to time while any of the shares of the Class A Preferred Stock are
outstanding, (i) pay a dividend or make a distribution in respect of the
Common Stock in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, in each case whether by reclassification of shares,
recapitalization of the Corporation (including a recapitalization effected by
a merger or consolidation to which Section 8 hereof does not apply) or
otherwise, the Conversion Ratio in effect immediately prior to such action
shall be adjusted by multiplying such Conversion Ratio 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 outstanding immediately before such event. An
adjustment made pursuant to this Section 9(A) shall be given effect, upon
payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or
distribution (on a retroactive basis) and in the case of a subdivision or
combination shall become effective immediately as of the effective date
thereof.
(B) In the event the Corporation shall, at any time or from time
to time while any shares of Class A Preferred Stock are outstanding, issue
rights, options or warrants to all holders of its outstanding Common Stock,
without any charge to such holders, entitling them (for a period expiring
within forty-five (45) days after the record date mentioned below) to
subscribe for or purchase shares of Common Stock at a price per share which is
more than 2% lower at the record date mentioned below than the then Current
Market Price per share of Common Stock, the Conversion Ratio in effect
immediately prior to such action shall, subject to paragraphs (D) and (E) of
this Section 9, be adjusted by multiplying such Conversion Ratio by a fraction
(i) the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants plus
the number of additional shares of Common Stock issued upon exercise thereof,
and (ii) the denominator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total
number of shares of Common Stock so issued would purchase at the then Current
Market Price per share of Common Stock. Such adjustment shall be made whenever
such rights, options or warrants have expired, and shall become effective
retroactively immediately after the record date for the determination of
shareholders entitled to receive such rights, options or warrants on the basis
of the number of rights, options or warrants actually exercised.
(C) In the event the Corporation shall, at any time or from time
to time while any of the shares of Class A Preferred Stock are outstanding,
make an Extraordinary Distribution (as defined in Section 9(F)(ii)) in respect
of the Common Stock, whether by dividend, distribution, reclassification of
shares or recapitalization of the Corporation (other than a recapitalization
or reclassification effected by a merger, combination or consolidation to
which Section 8 hereof applies), the Conversion Ratio in effect immediately
prior to such Extraordinary Distribution shall, subject to paragraphs (D) and
(E) of this Section 9, be adjusted by multiplying such Conversion Ratio by a
fraction, the numerator of which shall be the product of (i) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution and (ii) the Fair Market Value of a share of Common Stock on the
Valuation Date (as defined in Section 9(F)(vi)) with respect to an
Extraordinary Distribution, and the
<PAGE> - 15 -
denominator of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution
and (y) the Fair Market Value of a share of Common Stock on the Valuation Date
with respect to an Extraordinary Distribution, minus (ii) the Fair Market
_____
Value of the Extraordinary Distribution on the Valuation Date. The
Corporation shall send each holder of Class A Preferred Stock notice of its
intent to make any Extraordinary Distribution at the same time as, or as soon
as practicable after, such intent is first communicated (including by
announcement of a record date in accordance with the rules of the principal
stock exchange on which the Common Stock is listed or admitted to trading)
to holders of Common Stock. Such notice shall indicate the intended record
date and the amount and nature of such dividend or distribution, and the
Conversion Ratio in effect at such time.
(D) Notwithstanding any other provisions of this Section 9, the
Corporation shall not be required to make any adjustment of the Conversion
Ratio unless such adjustment would require an increase or decrease of at least
one percent (1%) in the Conversion Ratio. Any lesser adjustment shall be
carried forward and shall be made no later than the time of, and together
with, the next subsequent adjustment which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease of at
least one percent (1%) in the Conversion Ratio.
(E) The Corporation shall be entitled to make such additional
adjustments in the Conversion Ratio, in addition to those required by the
foregoing provisions of this Section 9, as shall be necessary in order that
any dividend or distribution in shares of capital stock of the Corporation,
subdivision, reclassification or combination of shares of stock of the
Corporation or any recapitalization of the Corporation shall not be taxable to
holders of the Common Stock.
(F) For purposes of this Exhibit A, the following definitions
shall apply:
(i) "Business Day" shall mean each day that is not a
Saturday, Sunday or a day which state or federally chartered banking
institutions in New York are required or authorized to be closed.
(ii) "Extraordinary Distribution" shall mean any dividend or
other distribution (effected while any of the shares of Class A Preferred
Stock are outstanding) of (x) cash to the extent that such dividend or
distribution when added to the amount of all cash dividends and distributions
paid during the preceding period of twelve (12) calendar months exceeds
fifteen percent (15%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the declaration date for such Extraordinary
Distribution and/or (y) any shares of capital stock of the Corporation (other
than shares of Common Stock), other securities of the Corporation, evidences
of indebtedness of the Corporation or any other person or any other property
(including shares of any subsidiary of the Corporation), or any combination
thereof, but excluding rights, options or warrants to which Section 9(B)
refers (without regard to the subscription or purchase price provided for
therein).
(iii) "Fair Market Value" shall mean, as to shares of Common
Stock or any other class of publicly traded capital stock or securities of the
Corporation or any other issuer which are publicly traded, the average of the
Current Market Prices of such shares or securities for each day of the
Adjustment Period. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair
<PAGE> - 16 -
value thereof as determined by an independent investment banking or appraisal
firm experienced in the valuation of such securities or property, which firm
shall be selected in good faith by the Board of Directors of the Corporation
or a committee thereof, or, if no such investment banking or appraisal firm is
in the good faith judgment of the Board of Directors or such committee
available to make such determination, as determined in good faith by the Board
of Directors of the Corporation or such committee.
(iv) "Current Market Price" of publicly traded shares of
Common Stock or any other class of capital stock or other security of the
Corporation or any other issuer shall mean (I) the last reported sales price,
regular way, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in either case as reported
on the Composite Tape for New York Stock Exchange transactions (the "Composite
Tape") or, (II) if such security is not listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), on the principal national securities
exchange on which such security is listed or admitted to trading or, (III) if
not listed or admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ National Market System") or, (IV) if such
security is not quoted on the NASDAQ National Market System, the average of
the closing bid and asked prices on each such day in the over-the-counter
market as reported by NASDAQ or, (V) if bid and asked prices for such security
on each such day shall not have been reported through NASDAQ, the average of
the bid and asked prices for such day as furnished by any NYSE member firm
regularly making a market in such security selected for such purposes by the
Board of Directors of the Corporation or a committee thereof, in each case, on
each trading day during the Adjustment Period; provided, however, in
________ _______
determining the Current Market Price, the value (as reasonably determined by
the Board of Directors of the Corporation or a committee thereof) of any "due-
bill" or similar instrument which is then associated with a share of Common
Stock or any other class of capital stock or other security, shall be
deducted.
(v) "Adjustment Period" shall mean the period of five (5)
consecutive trading days preceding, and including, the date as of which the
Fair Market Value of a security is to be determined.
(vi) "Valuation Date" with respect to an Extraordinary
Distribution shall mean the date that is five (5) Business Days prior to the
record date for such Extraordinary Distribution.
(vii) "Plan" shall mean collectively the Corporation's
Thrift and ESOP plans and its Thrift and ESOP Trust.
(G) Whenever an adjustment to the Conversion Ratio and the
related voting rights of the Class A Preferred Stock is required pursuant
hereto, the Corporation shall forthwith deliver to the transfer agent(s) for
the Common Stock and the Class A Preferred Stock and file with the Secretary
of the Corporation, a statement signed by an officer of the Corporation
stating the adjusted Conversion Ratio determined as provided herein, and the
voting rights (as appropriately adjusted), of the Class A Preferred Stock.
Such statement shall set forth in reasonable detail such facts as shall be
necessary to show the reason and the manner of computing such adjustment
including any determination of Fair Market Value involved in such
<PAGE> - 17 -
computation. Promptly after each adjustment to the Conversion Ratio and the
related voting rights of the Class A Preferred Stock, the Corporation shall
mail a notice thereof and of the then prevailing Conversion Ratio to each
holder of Class A Preferred Stock.
Section 10. Ranking; Cancellation of Shares.
__________ _______________________________
(A) The Class A Preferred Stock shall rank senior to the Common
Stock as to the payment of dividends and senior to the Common Stock as to the
distribution of assets on liquidation, dissolution and winding-up of the
Corporation, and, unless otherwise provided in the Certificate of
Incorporation, as the same may be amended, the Class A Preferred Stock shall
rank on a parity with all other classes or series of the Corporation's
preferred stock, as to payment of dividends and the distribution of assets on
liquidation, dissolution or winding-up.
(B) Any shares of Class A Preferred Stock acquired by the
Corporation by reason of the conversion or redemption of such shares as
provided hereby, or otherwise so acquired, shall be cancelled as shares of
Class A Preferred Stock and restored to the status of authorized but unissued
shares of preferred stock of the Corporation, undesignated as to classes or
series, and may thereafter be reissued as part of a new class or series of
such preferred stock as permitted by law.
Section 11. Miscellaneous.
__________ _____________
(A) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of
receipt thereof or three (3) Business Days after the mailing thereof if sent
by registered mail (unless first class mail shall be specifically permitted
for such notice under the terms of this Exhibit A) with postage prepaid,
addressed: (i) if to the Corporation, to its office at 1251 Avenue of the
Americas, New York, NY 10020 (Attention: Treasurer) or to the transfer agent
(if any) for the Class A Preferred Stock or (ii) if to any holder of the Class
A Preferred Stock or the Common Stock, as the case may be, to such holder at
the address of such holder as listed in the stock record books of the
Corporation (which may include the records of any transfer agent for the Class
A Preferred Stock or the Common Stock, as the case may be) or (iii) to such
other address as the Corporation shall have designated by notice similarly
given.
(B) In the event that, at any time as a result of an adjustment
made pursuant to Section 8 or 9, the holder of any share of the Class A
Preferred Stock upon thereafter surrendering such shares for conversion shall
become entitled to receive any shares or other securities of the Corporation
other than shares of Common Stock, the Conversion Ratio in respect of such
other shares or securities so receivable upon conversion of shares of Class A
Preferred Stock shall thereafter be adjusted, and shall be subject to further
adjustment from time to time, in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in
Sections 8 or 9, and the provisions of each of the other Sections hereof with
respect to the Common Stock shall apply on like or similar terms to any such
other shares or securities. Any determination in good faith by the Corporation
as to any adjustment of the Conversion Ratio pursuant to this Section 11 (B)
shall be conclusive.
(C) The Corporation shall pay any and all issuance, stock
transfer and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Class A Preferred Stock or Common Stock or
other securities issued upon conversion of Class A
<PAGE> - 18 -
Preferred Stock pursuant hereto or certificates representing such shares or
securities. The Corporation shall not, however, be required to pay any such
tax which may be payable in respect of any transfer involved in the issuance
or delivery of shares of Common Stock or other securities in a name other
then that in which the shares of Class A Preferred Stock with respect to
which such shares or other securities are issued or delivered were registered,
or in respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall
not be required to make any such issuance, delivery or payment unless and
until the person otherwise entitled to such issuance, delivery or payment has
paid to the Corporation the amount of any such tax for issuance, transfer or
documentary stamp taxes or has established, to the satisfaction of the
Corporation, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of Class A Preferred
Stock shall not by written notice designate the name in which (i) shares of
Common Stock or (ii) any other securities in accordance with this Exhibit A,
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Class A Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Corporation shall be entitled to register
such shares, and make such payment, in the name of the holder of such Class A
Preferred Stock as shown on the records of the Corporation and to send the
certificate or certificates representing such shares, or such payment, to the
address of such holder shown on the records of the Corporation.
(E) Unless otherwise provided in the Certificate of
Incorporation, as the same may be amended, all payments of (x) dividends upon
the shares of any class of stock and upon any other class of stock ranking on
a parity with such first class of stock with respect to such dividends shall
be made pro rata, so that amounts paid per share on such first class of stock
and such other class of stock shall in all cases bear to each other the same
ratio that the required dividends then payable per share on the shares of such
first class of stock and such other class of stock bear to each other and (y)
distributions on voluntary or involuntary dissolution, liquidation or winding-
up or otherwise made upon the shares of any class of stock and upon any other
class of stock ranking on a parity with such first class of stock with respect
to such distributions shall be made pro rata, so that amounts paid per share
on such first class of stock and such other class of stock shall in all cases
bear to each other the same ratio that the required distributions then payable
per share on the shares of such first class of stock and such other class of
stock bear to each other.
(F) The Corporation may appoint, and from time to time discharge
and change, a transfer agent for the Class A Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send
notice thereof by first class mail, postage prepaid, to each holder of record
of Class A Preferred Stock. So long as there is a transfer agent for a class
of stock, a holder thereof shall give any notices to the Corporation required
hereunder to the transfer agent at the address of the transfer agent last
given by the Corporation.
(G) If the Corporation and the holder so agree, any shares of
Class A Preferred Stock or any shares of Common Stock into which the shares of
Class A Preferred Stock shall be converted, may be uncertificated shares,
provided that the names of the holders of all uncertificated shares and the
________
number of such shares held by each holder shall be registered at the offices
of the Corporation or the transfer agent for such shares. In the event that
any shares shall
<PAGE> - 19 -
be uncertificated, all references herein to the surrender or issuance of
stock certificates shall have no application to such uncertificated shares.
<PAGE> - 20 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXXON'S
CONDENSED CONSOLIDATED BALANCE SHEET AT 9/30/99 AND EXXON'S CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED 9/30/99, THAT ARE
CONTAINED IN EXXON'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 9/30/99. THE
SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,151
<SECURITIES> 39
<RECEIVABLES> 7,800
<ALLOWANCES> 96
<INVENTORY> 4,895
<CURRENT-ASSETS> 18,048
<PP&E> 131,990
<DEPRECIATION> 65,991
<TOTAL-ASSETS> 94,394
<CURRENT-LIABILITIES> 21,579
<BONDS> 4,425
0
31
<COMMON> 2,323
<OTHER-SE> 41,480
<TOTAL-LIABILITY-AND-EQUITY> 94,394
<SALES> 88,010
<TOTAL-REVENUES> 89,378
<CGS> 37,265
<TOTAL-COSTS> 37,265
<OTHER-EXPENSES> 12,965
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> 4,903
<INCOME-TAX> 1,178
<INCOME-CONTINUING> 3,725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,725
<EPS-BASIC> 1.54
<EPS-DILUTED> 1.52
</TABLE>
