<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1996 PURSUANT TO SECTION 13
- --- OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission file number 1-6157
HELLER FINANCIAL, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 36-1208070
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 W. Monroe Street, Chicago, Illinois 60661
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(312) 441-7000
--------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former fiscal year,
if changed since last report)
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.
100 shares of Common Stock, $.25 par value, outstanding at July 31, 1996.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions, except for information on shares)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1996 1995
--------- ------------
(unaudited)
<S> <C> <C>
Cash and cash equivalents........................... $ 307 $ 599
Receivables (Note 2)
Commercial loans
Term loans........................................ 2,446 2,743
Revolving loans................................... 1,655 1,425
Real estate loans................................... 1,721 1,677
Equipment loans and leases.......................... 1,302 1,241
Factored accounts receivable........................ 914 816
Indirect consumer loans............................. 129 183
------ ------
Total receivables.............................. 8,167 8,085
Less: Allowance for losses of receivables (Note 2).. 230 229
------ ------
Net receivables................................ 7,937 7,856
Investments......................................... 771 693
Investments in international joint ventures......... 235 233
Other assets........................................ 225 257
------ ------
Total assets................................... $9,475 $9,638
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt
Commercial paper and short-term borrowings......... $2,440 $2,223
Notes and debentures (Note 3)...................... 4,768 5,145
------ ------
Total debt..................................... 7,208 7,368
Credit balances of factoring clients................ 522 497
Other payables and accruals......................... 267 343
------ ------
Total liabilities.............................. 7,997 8,208
Minority interest in equity of Heller International
Group, Inc......................................... 52 46
Stockholders' equity
Cumulative Perpetual Senior Preferred Stock, Series A
($.01 Par Value; stated value, $25; 8.125%;
5,000,000 shares authorized and outstanding)..... 125 125
Cumulative Convertible Preferred Stock, Series D
(No Par Value; 1/2% under prime; 1,000 shares
authorized and outstanding)...................... 25 25
Common Stock ($.25 Par Value; 1,000 shares
authorized; 100 shares outstanding) and
additional paid-in capital....................... 663 663
Retained earnings................................. 613 571
------ ------
Total stockholders' equity..................... 1,426 1,384
------ ------
Total liabilities and stockholders' equity..... $9,475 $9,638
====== ======
</TABLE>
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
2
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in millions)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
--------- --------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income................................................. $ 198 $ 214 $ 400 $ 420
Interest expense................................................ 111 119 223 231
----- ----- ----- -----
Net interest income........................................... 87 95 177 189
Fees and other income........................................... 31 28 63 72
Income of international joint ventures.......................... 11 9 20 17
----- ----- ----- -----
Operating revenues............................................ 129 132 260 278
Operating expenses.............................................. 60 52 119 102
Provision for losses............................................ 25 28 49 78
----- ----- ----- -----
Income before income taxes and minority interest.............. 44 52 92 98
Income tax provision............................................ 9 16 21 31
Minority interest in income of Heller International Group, Inc.. - 2 2 3
----- ----- ----- -----
Net income.................................................... $ 35 $ 34 $ 69 $ 64
===== ===== ===== =====
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF
CHANGES IN RETAINED EARNINGS
(in millions)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Retained earnings at December 31, 1995 and 1994...................... $ 571 $ 517
Net income........................................................ 69 64
Common stock dividends............................................ (24) (22)
Preferred stock dividends......................................... (6) (6)
Net changes in unrealized holding gains or losses on securities
available for sale, net of tax................................... 4 --
Deferred translation adjustment, net of tax....................... (1) 6
------ ------
Retained earnings at June 30, 1996 and 1995.......................... $ 613 $ 559
===== ======
</TABLE>
The retained earnings balance includes unrealized net gains (losses) on
securities available for sale of $(1) and $5, net of tax, at June 30, 1996 and
1995, respectively. Retained earnings also includes deferred foreign currency
translation adjustments of $(15) and $(11), net of tax, at June 30, 1996 and
1995, respectively.
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
3
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30,
-----------------------
1996 1995
----- -----
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................... $ 69 $ 64
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses........................................ 49 78
Losses from equity investments.............................. 29 18
Increase (decrease) in net deferred tax asset............... 1 (15)
Decrease in accounts payable and accrued liabilities........ (47) (24)
Undistributed income of international joint ventures........ (13) (12)
Decrease in interest payable................................ (10) --
Other....................................................... - 1
------- -----
Net cash provided by operating activities................. 78 110
INVESTING ACTIVITIES
Longer-term loans funded...................................... (1,354) (1,415)
Collections of principal...................................... 1,295 1,037
Sales of longer-term loans.................................... 325 233
Net increase in short-term loans and
advances to factoring clients................................ (416) (490)
Investment in equity interests, equipment on lease,
and other investments........................................ (85) (85)
Sales of investments and equipment on lease................... 58 50
Other......................................................... (31) (31)
------- ------
Net cash used for investing activities.................... (208) (701)
FINANCING ACTIVITIES
Senior note issues............................................ 133 489
Retirement of notes and debentures............................ (508) (171)
Increase in commercial paper and other short-term borrowings.. 217 275
Net decrease in advances to affiliates........................ 27 16
Dividends paid on common and preferred stock.................. (30) (28)
Other......................................................... (1) -
------- ------
Net cash provided by (used for) financing activities...... (162) 581
------- ------
Decrease in cash and cash equivalents........................... (292) (10)
Cash and cash equivalents at the beginning of the period........ 599 99
------- ------
Cash and cash equivalents at the end of the period.............. $ 307 $ 89
======= ======
</TABLE>
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
4
<PAGE>
HELLER FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
These consolidated condensed financial statements should be read in
conjunction with the financial statements and notes included in the annual
report on Form 10-K of Heller Financial, Inc. (the "Company") for the year ended
December 31, 1995. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included in these financial
statements and were of a normal, recurring nature. Certain prior year amounts
have been reclassified in order to conform to the current year's presentation.
(2) Impaired Receivables and Repossessed Assets
The Company does not recognize interest and fee income on impaired
receivables classified as nonearning and on repossessed assets, which are set
forth in the following table:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- -------------
(in millions)
<S> <C> <C>
Impaired receivables...................................... $ 306 $ 261
Repossessed assets........................................ 14 28
----- -----
Total nonearning assets.................................. $ 320 $ 289
===== =====
Ratio of total nonearning assets to total lending assets.. 3.9% 3.6%
===== =====
</TABLE>
A valuation allowance for repossessed assets of $2 million is included in
other assets on the balance sheet at December 31, 1995.
The average investment in nonearning impaired receivables was $285 million
for the six months ended June 30, 1996.
Loan Modifications--
The Company had $14 million of loans that are considered troubled debt
restructures at June 30, 1996 and December 31, 1995. The Company also had $16
million of loans at June 30, 1996 that were restructured at a market rate of
interest, written down from the original loan balance and returned to earning
status. The recorded investment of these receivables is expected to be fully
recoverable. Interest income of less than $1 million has been recorded on these
receivables under the modified terms. At June 30, 1996, the Company was not
committed to lend significant additional funds under the restructured
agreements.
Allowance for Losses--
The change in the allowance for losses of receivables during the six month
period included an additional provision of $45 million and gross writedowns and
recoveries of $72 million and $26 million, respectively. Impaired receivables
with identified reserve requirements were $259 million at June 30, 1996 and $234
million at December 31, 1995.
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- -------------
(in millions)
<S> <C> <C>
Identified reserve requirement for impaired receivables.. $ 73 $ 57
Additional allowance for losses of receivables........... 157 172
----- -----
Total allowance for losses of receivables............. $ 230 $ 229
===== =====
Ratio of allowance for losses of receivables to
nonearning impaired receivables....................... 75% 88%
===== =====
</TABLE>
5
<PAGE>
(3) Notes and Debentures
The Company issued and retired the following notes and debentures during
the six months ended June 30, 1996 (excluding unamortized premium and
discount) :
<TABLE>
<CAPTION>
Principal
Senior Debt - Notes and Debentures Amount
-------------
Issuances: (in millions)
<S> <C>
Variable rate medium-term notes due on various dates ranging from
January 22, 1997 to May 20, 1998................................. $ 57
6.27% medium-term notes due May 20, 1998........................... 20
6.56% medium-term notes due May 20, 1999........................... 31
6.57% medium-term notes due May 20, 1999........................... 25
----
$133
====
Retirements:
Variable rate medium-term notes due on various dates ranging from
May 6, 1996 to September 10, 1997................................ $270
Nikkei equity indexed medium-term notes due on December 20, 1999... 23
6.45% notes due February 15, 1997.................................. 10
9.22% medium-term notes due on March 28, 1996 and April 1, 1996.... 55
8.85% notes due April 15, 1996..................................... 100
9.31% notes due April 22, 1996..................................... 50
----
$508
====
</TABLE>
In April 1996, the Company replaced its existing bank credit facilities
with a new agreement that provides $2.3 billion of liquidity support at more
favorable terms to the Company. The modified terms of the agreement primarily
include reduced pricing and the ability to increase the aggregate facilities to
$3 billion.
(4) Derivative Financial Instruments Used for Risk Management Purposes
The Company entered into $210 million of interest rate swaps during the six
months ended June 30, 1996 to more closely match the interest rate and currency
characteristics of its debt and assets. These instruments had the effect of
converting $200 million of three- and six-month LIBOR based medium-term notes to
a fixed rate and $10 million of variable rate medium-term notes based on the
federal funds rate to a rate based on three month LIBOR.
The Company invests in and operates commercial finance companies
internationally. In order to minimize the effect of movements in exchange rates
on its financial results, the Company periodically enters into forward currency
exchange contracts and options. These financial instruments serve as hedges of
its investment in international subsidiaries and joint ventures or effectively
hedge the translation of the related foreign currency income. The Company held
$232 million of forward contracts and $15 million of purchased options at June
30, 1996.
(5) Statement of Cash Flows
Noncash investing activities which occurred during the six month period
ended June 30, 1996 include $9 million of receivables which were classified as
repossessed assets. For the six month periods ended June 30, 1996 and 1995, the
Company paid income taxes to its Parent of $53 million and $44 million,
respectively, of which $25 million paid in 1996 was related to 1995 income tax
provisions.
6
<PAGE>
(6) Accounting Developments
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment. Whenever
events indicate that the carrying amount of an asset may not be recoverable, an
impairment loss should be recorded based on the fair value of the asset. The
statement also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The Company had previously recognized impairment
of long-lived assets when events indicated that the carrying amount may not be
recoverable. Consequently, the adoption of this statement did not have a
material impact on the Company's consolidated financial statements.
Effective January 1, 1996, the Company adopted the provisions of Financial
Accounting Standards ("SFAS") No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 requires that a separate asset be recognized for rights to
service mortgage loans for others, however those servicing rights are acquired.
The total cost of the mortgage loan is required to be allocated between the
servicing rights and the loans, without the servicing rights, based on their
relative fair values. The adoption of this statement did not have a material
impact on the Company's consolidated financial statements.
The Financial Accounting Standards Board has released Statement of
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996. This statement provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. The Company is currently assessing the impact of this statement.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
Percent Percent
1996 1995 Change 1996 1995 Change
----- ----- ------- ----- ----- -------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Interest income......................... $ 198 $ 214 (7)% $ 400 $ 420 (5)%
Interest expense........................ 111 119 (7) 223 231 (3)
----- ----- ----- -----
Net interest income.................... 87 95 (8) 177 189 (6)
Fees and other income................... 31 28 11 63 72 (13)
Income of international joint ventures.. 11 9 22 20 17 18
----- ----- ----- -----
Operating revenues..................... 129 132 (2) 260 278 (6)
Operating expenses...................... 60 52 15 119 102 17
Provision for losses.................... 25 28 (11) 49 78 (37)
----- ----- ----- -----
Income before taxes and minority
interest............................. 44 52 (15) 92 98 (6)
Income tax provision.................... 9 16 (44) 21 31 (32)
Minority interest in income of Heller
International Group, Inc............... - 2 - 2 3 (33)
----- ----- ----- ----
Net income........................... $ 35 $ 34 3% $ 69 $ 64 8%
===== ===== ===== =====
</TABLE>
Net income for the six months ended June 30, 1996 increased 8% over the
prior year period due to lower provisions for losses and income taxes which were
partially offset by a decline in operating revenues and continued spending for
developing businesses. Net income for the second quarter of 1996 increased by $1
million or 3% resulting from a decline in the provision for losses and income
tax provision, partially offset by lower net interest income and continued
spending for developing businesses.
Net interest income declined by 8% and 6% for the second quarter and six
months ended June 30, 1996, respectively. The decline in interest income
reflects competitive pricing pressures, the continued shift of the portfolio to
lower risk, lower priced asset based products, reduced fee accelerations on loan
payoffs and a decline in market interest rates compared to the prior year.
Interest expense has declined as the higher levels of debt issued to fund asset
growth are more than offset by a lower effective interest rate than the prior
year.
Fees and other income increased slightly during the second quarter of 1996
due primarily to gains realized on real estate and equity investments. Fees and
other income declined for the six months ended June 30, 1996 as higher net gains
on the sale of investments were offset by a decline in prepayment fees and
participation income. Gross gains realized from the sale of investments of $45
million and $29 million were offset by losses and writedowns of $29 million and
$18 million for the six months ended June 30, 1996 and 1995, respectively.
Income of international joint ventures increased for the quarter and six
months ended June 30, 1996 due to earnings growth primarily from European joint
ventures.
Operating expenses were higher principally due to continued investment in
the growing asset based businesses, increased expenditures for marketing and
systems development, and the impact of consolidation of the Mexico subsidiary.
The provision for losses decreased for the second quarter and for the six
months ended June 30, 1996 reflecting continued strong credit performance of the
post-1990 lending assets and $26 million of recoveries in the first six months
of 1996 as compared to $6 million in 1995. These recoveries were primarily from
pre-1990 assets. The post-1990 portfolio continued to demonstrate excellent
credit quality requiring only $13 million of net writedowns for the six months
ended June 30, 1996.
8
<PAGE>
The Company's effective income tax rate decreased to 23% for the six months
ended June 30, 1996 from 32% for the same period in 1995. The Company's
effective income tax rate remained below statutory rates due to the utilization
of tax benefits and favorable tax issue resolution. The Company's provision for
income taxes for the six months ended June 30, 1995 was lower than the statutory
rate due to certain state tax adjustments.
PORTFOLIO COMPOSITION
In line with the Company's strategy to build a more balanced, lower-risk
portfolio and diversify its sources of income, the asset based finance portfolio
grew by 16%, and has become the largest product category at 38% of the Company's
portfolio as of June 30, 1996. Total lending assets and investments grew by $148
million or 2% for the six months ended June 30, 1996 as growth in asset based
finance and in investments was partially offset by continued runoff and
resolution in the pre-1990 corporate finance and real estate portfolios.
<TABLE>
<CAPTION>
Lending Assets and Investments as of
June 30, December 31,
-------------- --------------
1996 Percent 1995 Percent
------ ------- ------ ------
BY PRODUCT CATEGORY: (dollars in millions)
<S> <C> <C> <C> <C>
Asset based finance.............................. $3,482 38% $3,003 33%
Corporate finance................................ 2,710 29 3,092 34
Real estate finance.............................. 2,015 22 1,966 22
International factoring and asset based finance.. 535 6 506 6
Specialized finance and investments.............. 445 5 472 5
------ --- ------ -----
Total lending assets and investments............ $9,187 100% $9,039 100%
====== === ====== =====
BY ASSET TYPE:
Receivables...................................... $8,167 89% $8,085 89%
Repossessed assets............................... 14 - 28 1
------ --- ------ -----
Total lending assets............................ $8,181 89% $8,113 90%
Investments...................................... 771 8 693 8
International joint ventures..................... 235 3 233 2
------ --- ------ -----
Total investments............................... $1,006 11% $ 926 10%
------ --- ------ -----
Total lending assets and investments............ $9,187 100% $9,039 100%
====== === ====== =====
</TABLE>
The asset based lending portfolio is comprised of factored accounts
receivable, secured working capital finance, vendor finance program loans and
leases, equipment loans and leases to end-users, small business finance
activities and indirect consumer finance. The following provides a breakdown
among the Company's various asset based product groups:
<TABLE>
<CAPTION>
Lending Assets and Investments as of
June 30, December 31,
-------------- ---------------
1996 Percent 1995 Percent
------ ------- ------ -------
(dollars in millions)
<S> <C> <C> <C> <C>
Current Asset Management Group......... $ 913 26% $ 802 27%
Business Credit........................ 786 22 601 20
Vendor Finance Division................ 654 19 663 22
Commercial Equipment Finance Division.. 647 19 543 18
First Capital.......................... 344 10 208 7
Sales Finance.......................... 138 4 186 6
------ --- ------ -----
Total lending assets and investments.. $3,482 100% $3,003 100%
====== === ====== =====
</TABLE>
During the six months ended June 30, 1996 growth in asset based lending
assets and investments totaled $479 million and was distributed among most of
the asset based product groups. Lending assets and investments for Current Asset
Management Group, Business Credit, Commercial Equipment Finance Division and
First Capital increased due to strong new business fundings during the six month
period. Lending assets and investments of the Sales Finance portfolio decreased
from year end 1995 levels primarily due to a paydown as a result of one
borrower's securitization, the proceeds of which were used to pay down its
working capital facility. The Company achieved these levels of funding while
continuing to maintain strong credit disciplines in all of its asset based
9
<PAGE>
businesses. This is evidenced by these portfolios having less than $3 million in
net write downs for the first six months of 1996. Nonearning assets in these
portfolios have remained stable from year end levels and are below 1% of lending
assets. At June 30, 1996, the Company had contractually committed to finance an
additional $950 million to new and existing asset based finance borrowers.
Corporate finance lending assets and investments decreased by $382 million
as fundings of $383 million were offset by portfolio runoff in pre- and post-
1990 accounts and syndications in the post-1990 portfolio. The Company continues
to maintain strong credit disciplines on lending multiples and on average hold
sizes and utilizes syndication capabilities to effectively manage customer
concentration levels. At June 30, 1996, the Company was contractually committed
to finance an additional $690 million to new and existing corporate finance
borrowers. Corporate financings are generally considered by certain regulatory
agencies as highly leveraged transactions.
The real estate portfolio increased slightly as fundings of $389 million
were diversified among various property types. Fundings, primarily in the self
storage, industrial, manufactured housing, hotel and apartment property types
were offset by continued strong liquidity in the entire portfolio. This
liquidity is demonstrated by the sale of $49 million of receivables during the
six months ended June 30, 1996 and the continued runoff of pre-1990 accounts.
Unfunded contractual loan commitments to new and existing borrowers were $225
million at June 30, 1996.
The Company's obligation to fund loan commitments is generally contingent
upon the maintenance of specific credit standards by the borrowers.
Total revenues include interest income and net fees and other income from
domestic and consolidated international operations, and the Company's share of
the net income of its international joint ventures.
<TABLE>
<CAPTION>
Total Revenues
For the Six Months Ended June 30,
-----------------------------------
1996 Percent 1995 Percent
------ --------- ----- ---------
(dollars in millions)
<S> <C> <C> <C> <C>
Asset based finance.............................. $ 171 35% $ 137 27%
Corporate finance................................ 148 31 201 39
Real estate finance.............................. 110 23 122 24
International factoring and asset based finance.. 39 8 29 6
Specialized finance and investments.............. 15 3 20 4
----- --- ----- ---
Total revenues.................................. $ 483 100% $ 509 100%
===== === ===== ===
</TABLE>
Total revenues decreased by $26 million or 5% from the prior year
principally reflecting a decline in interest income and lower net fees and other
income. As a result of funds growth, asset based finance has emerged as the
largest revenue producing asset class. This increased revenue is due to an
increase in interest income across all asset based finance product groups. This
is consistent with the Company's goal of diversifying its sources of income.
Interest income for corporate finance and real estate finance decreased by $57
million from the prior year as a result of lower levels of lending assets and
investments due to pre-1990 portfolio runoff, as well as lower interest rates.
Revenues for international factoring and asset based finance grew by 34% due
primarily to an increase in income from its consolidated subsidiaries in the
Asia/Pacific region, income from the European joint ventures, and the impact of
consolidating the Mexico subsidiary. Revenues from specialized finance and
investments were lower than the prior year due to the recognition of a one-time
prepayment fee of $6 million on a project investment in 1995.
10
<PAGE>
PORTFOLIO QUALITY
The Company continued to execute its strategy to pursue portfolio growth
through lower risk asset based products. These portfolios and those in corporate
finance and real estate finance funded under the Company's post-1990 revised
lending strategies continued to demonstrate strong credit quality.
<TABLE>
<CAPTION>
June 30, December 31,
--------- -------------
1996 1995
--------- -------------
(dollars in millions)
<S> <C> <C>
LENDING ASSETS AND INVESTMENTS:
Receivables............................................... $8,167 $8,085
Repossessed assets........................................ 14 28
------ ------
Total lending assets.................................... 8,181 8,113
Investments............................................... 1,006 926
------ ------
Total lending assets and investments.................... $9,187 $9,039
====== ======
NONEARNING ASSETS:
Impaired receivables...................................... $ 306 $ 261
Repossessed assets........................................ 14 28
------ ------
Total nonearning assets................................. $ 320 $ 289
====== ======
Ratio of nonearning impaired receivables to receivables... 3.7% 3.2%
====== ======
Ratio of total nonearning assets to total lending assets.. 3.9% 3.6%
====== ======
ALLOWANCES FOR LOSSES:
Allowance for losses of receivables....................... $ 230 $ 229
====== ======
RATIO OF ALLOWANCE FOR LOSSES OF RECEIVABLES TO:
Receivables............................................. 2.8% 2.8%
====== ======
Nonearning impaired receivables......................... 75% 88%
====== ======
DELINQUENCIES:
Earning loans delinquent 60 days or more................. $ 59 $ 117
===== ======
Ratio of earning loans delinquent 60 days or more to
receivables ........................................... 0.7% 1.4%
===== ======
For The Six Months
------------------
Ended June 30,
--------------
1996 1995
----- -----
(dollars in millions)
Net writedowns of lending assets:
Net writedowns on receivables............................ $ 46 $ 65
Net writedowns on repossessed assets..................... 3 4
----- -----
Total net writedowns................................... $ 49 $ 69
===== =====
Ratio of net writedowns to average lending assets
(annualized)............................................ 1.2% 1.7%
===== =====
Net writedowns on post-1990 lending assets................ $ 13 $ 13
===== =====
Ratio of post-1990 net writedowns to average total
lending assets (annualized)............................. 0.3% 0.3%
===== =====
</TABLE>
Nonearning assets continue to be principally comprised of pre-1990
corporate finance and real estate accounts. Pre-1990 nonearning assets totaled
$211 million or 66% of total nonearning assets at June 30, 1996. The performance
of the post-1990 portfolio continues to exceed management's expectations as
demonstrated by nonearning assets totaling $109 million or 1.3% of total lending
assets at June 30, 1996. This compares to post-1990 nonearning assets of $87
million or 1.1% of total lending assets at December 31, 1995.
Total net writedowns decreased $20 million for the six month period ended
June 30, 1996 due to recoveries recognized primarily on the pre-1990 accounts,
while strong credit performance continued on the post-1990 portfolio. Recoveries
during the first six months of 1996 were $26 million as compared with $6 million
in 1995.
11
<PAGE>
The post-1990 portfolio demonstrated excellent credit quality requiring only $13
million of net writedowns during the six months ended June 30, 1996.
Loans considered troubled debt restructures were $14 million, unchanged
from December 31, 1995. The Company also had $16 million of receivables at June
30, 1996 that were restructured at market rates of interest, written down from
the original loan balance and returned to earning status. The recorded
investment of these receivables is expected to be fully recoverable.
PRE-1990 PORTFOLIO PROFILE
- --------------------------
The Company continued its efforts to reduce the pre-1990 corporate finance
and real estate portfolios. The following table provides a breakdown of the pre-
1990 portfolio.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------- -------------
1996 1995
--------- -------------
<S> <C> <C>
Pre-1990 lending assets and investments........... $1,189 $1,526
====== ======
Pre-1990 nonearning assets........................ $ 211 $ 202
====== ======
Ratio of pre-1990 lending assets and investments
to total lending assets and investments.......... 12.9% 16.9%
====== ======
</TABLE>
A significant decrease of $337 million or 22% was realized on the pre-1990
portfolio due to the continued resolution and run-off of credits during the six
months ended June 30, 1996. The increase in pre-1990 nonearning assets is due to
the addition of certain corporate finance accounts.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996, the Company increased lending assets
and investments by $148 million, retired $508 million of senior notes, and paid
$30 million in dividends to common and preferred stockholders. To meet these
funding requirements, the Company supplemented its cash flow from operations by
increasing commercial paper and short-term borrowings by $217 million, reducing
cash and cash equivalents by $292 million and issuing $133 million of senior
notes and debentures.
Leverage and the proportion of commercial paper and short-term borrowings
to total debt continued at conservative levels during the first half of 1996.
The ratio of commercial paper and short-term borrowings to total debt was 34%
and 30% at June 30, 1996 and December 31, 1995, respectively. Leverage (net of
short-term investments) decreased from 5.0x at December 31, 1995 to 4.8x at June
30, 1996.
On April 10, 1996 the Company extended and amended its bank credit
facilities. The total bank credit facility of $2.3 billion is comprised of two
equal facilities, a 364-day facility expiring April 9, 1997 and a 5-year
facility expiring April 10, 2001. In addition, at June 30, 1996 the Company had
$493 million available under the factored accounts receivable sale program, $32
million in available foreign bank credit facilities for the consolidated
international subsidiaries, and $50 million available under the foreign currency
revolving credit facilities. Credit and sale facilities available from
unaffiliated financial institutions represent 115% of outstanding commercial
paper and short-term borrowings at June 30, 1996.
RISK MANAGEMENT
The Company uses derivatives as an integral part of its asset/liability
management program to reduce its overall level of financial risk arising from
normal business operations. These derivatives, particularly interest rate swap
agreements, are used to lower funding costs, diversify sources of funding or
alter interest rate exposure arising from mismatches between assets and
liabilities. The Company is not an interest rate swap dealer nor is it a trader
in derivative securities, and it has not used speculative derivative products
for the purpose of generating earnings from changes in market conditions.
Agreements entered into during the first six months of 1996 were entirely
related to accomplishing these risk management objectives and consisted of swap
agreements with aggregate notional amounts approximating $210 million.
12
<PAGE>
The Company invests in and operates commercial finance companies
internationally. Over the course of time, reported results from the operations
and investments in foreign countries may fluctuate in response to exchange rate
movements in relation to the U.S. dollar. While the Western European operations
and investments are the largest areas of the Company's international activities,
reported results will be influenced to a lesser extent by the exchange rate
movements in the currencies of other countries in which subsidiaries and
investments are located. To limit the effect of movements in exchange rates on
financial results, the Company periodically enters into forward currency
exchange contracts and purchases options. These financial instruments serve as
hedges of translation of its investment in international subsidiaries and joint
ventures or effectively hedge the translation of the related foreign currency
income. As of June 30, 1996, the Company held $232 million of forward currency
exchange contracts and $15 million of purchased options related to this purpose.
ACCOUNTING DEVELOPMENTS
Effective January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment. Whenever
events indicate that the carrying amount of an asset may not be recoverable, an
impairment loss should be recorded based on the fair value of the asset. The
statement also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The Company had previously recognized impairment
of long-lived assets when events indicated that the carrying amount may not be
recoverable. Consequently, the adoption of this statement did not have a
material impact on the Company's consolidated financial statements.
Effective January 1, 1996, the Company adopted the provisions of Financial
Accounting Standards ("SFAS") No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 requires that a separate asset be recognized for rights to
service mortgage loans for others, however those servicing rights are acquired.
The total cost of the mortgage loan is required to be allocated between the
servicing rights and the loans, without the servicing rights, based on their
relative fair values. The adoption of this statement did not have a material
impact on the Company's consolidated financial statements.
The Financial Accounting Standards Board has released Statement of
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996. This statement provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. The Company is currently assessing the impact of this statement.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of stockholders held on May 23, 1996, the
following persons were elected as directors:
Richard J. Almeida Lauralee E. Martin
Hajime Maeda Kenji Miyamoto
Tsutomu Hayano Hideo Nakajima
Hidehiko Ide Osamu Ogura
Mark Kessel Masahiro Sawada
Tomonori Kobayashi Kenichi Tomita
Michael J. Litwin Mitchell F. Vernick
Dennis P. Lockhart
No other matters were acted upon.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3)(ii) Amended and Restated By-laws, effective June 17, 1996
(12) Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(27) Financial Data Schedule
(b) Reports on Form 8-K
On April 25, 1996, the Company filed with the U.S. Securities and Exchange
Commission a Current Report on Form 8-K, dated April 24, 1996, to announce the
Company's earnings for the quarter ended March 31, 1996.
On July 26, 1996, the Company filed with the U.S. Securities and Exchange
Commission a Current Report on Form 8-K, dated July 22, 1996, to announce the
Company's earnings for the quarter ended June 30, 1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
HELLER FINANCIAL, INC.
By: Lauralee E. Martin
-----------------------------------------
Lauralee E. Martin
Executive Vice President and
Chief Financial Officer
By: Lawrence G. Hund
------------------------------------------
Lawrence G. Hund
Senior Vice President, Controller and
Chief Accounting Officer
Date: July 31, 1996
15
<PAGE>
EXHIBIT (12)
HELLER FINANCIAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30, 1996
-------------
<S> <C>
Net income before income taxes and minority interest in
income of Heller International Group, Inc............................ $ 92
Add-Fixed charges
Interest and debt expense.............................................. 223
One-third of rentals................................................... 3
----
Total fixed charges............................................... 226
----
Net income, as adjusted.................................................. $318
Ratio of earnings to fixed charges....................................... 1.41x
=====
Preferred stock dividends on a pre-tax basis............................. 8
Total combined fixed charges and preferred stock dividends........ $234
----
Ratio of earnings to combined fixed charges and
Preferred stock dividends........................................... 1.36x
=====
</TABLE>
For purposes of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, "earnings" includes income before income taxes,
the minority interest in Heller International Group, Inc. income and fixed
charges. "Combined fixed charges and preferred stock dividends" includes
interest on all indebtedness, one third of annual rentals (approximate portion
representing interest) and preferred stock dividends on a pre-tax basis.
16
<PAGE>
VIA EDGAR
- ---------
July 31, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Heller Financial, Inc.
File No. 1-6157
---------------
Ladies and Gentlemen:
I enclosed herewith for filing on behalf of Heller Financial, Inc. (the
"Company") one conformed copy of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 (the "Form 10-Q"), together with all exhibits
thereto.
One manually signed complete copy of the Form 10-Q has been sent, under
cover of this letter, to the New York Stock Exchange, where securities of the
Company are listed.
Very truly yours,
David M. Sherbin
attachment
cc: New York Stock Exchange, Inc.
20 Broad Street
New York, New York 10005
17
<PAGE>
================================================================================
BY-LAWS
OF
HELLER FINANCIAL, INC.
(A DELAWARE CORPORATION)
ADOPTED:
June 17, 1996
================================================================================
18
<PAGE>
HELLER FINANCIAL, INC.
BY-LAWS
TABLE OF CONTENTS
================================
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
ARTICLE I. IDENTIFICATION; OFFICES 1
Section 1.01 Name 1
Section 1.02 Registered Office; Other Offices 1
ARTICLE II. MEETINGS OF STOCKHOLDERS 1
Section 2.01 Date, Place and Time of Annual Meetings 1
Section 2.02 Special Meetings of Stockholders 1
Section 2.03 Place of Special Meetings of Stockholders 1
Section 2.04 Notice of Meetings 1
Section 2.05 Adjournments 2
Section 2.06 Waiver of Notice 2
Section 2.07 Quorum 2
Section 2.08 Vote of Stockholders 2
Section 2.09 Proxies 3
Section 2.10 Action Without a Meeting 3
ARTICLE III. BOARD OF DIRECTORS 3
Section 3.01 Powers 3
Section 3.02 Number and Term of Office 3
Section 3.03 Election 3
Section 3.04 Resignation 3
Section 3.05 Removal 4
Section 3.06 Vacancies 4
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.07 Annual Meetings 4
Section 3.08 Regular Meetings 4
a. Board of Directors 4
b. Executive Committee 4
Section 3.09 Special Meetings 4
a. Board of Directors 4
b. Executive Committee 5
Section 3.10 Notice of Certain Annual and Special Meetings 5
Section 3.11 Waiver of Notice 5
Section 3.12 Quorum and Manner of Acting 5
Section 3.13 Action Without a Meeting 5
Section 3.14 Telephonic Meetings 5
Section 3.15 Committees 6
a. Executive Committee 6
b. Compensation Committee 6
c. Audit Committee 7
d. Miscellaneous Committees 7
e. Removal 7
Section 3.16 Directors' Fees 7
ARTICLE IV. OFFICERS 8
Section 4.01 Elected Officers 8
Section 4.02 Election 8
Section 4.03 Term and Removal 8
Section 4.04 Compensation 8
Section 4.05 Powers and Duties 8
a. Chairman of the Board of the Board 8
b. Vice Chairmen 9
c. President 9
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
d. Senior Group Presidents 9
e. Group Presidents 9
f. Executive Vice Presidents 10
g. Senior Vice Presidents 10
h. Controller 10
i. Treasurer 10
j. Secretary 11
k. Director of Taxes 11
l. General Counsel and Deputy General Counsels 12
Section 4.06 Appointed Officers 12
Section 4.07 Group/Divisional Officers 12
Section 4.08 Voting Corporation's Securities 12
ARTICLE V. SHARE CERTIFICATES 13
Section 5.01 Form; Signature 13
Section 5.02 Signatures of Former Officer, Transfer Agent
or Registrar 13
Section 5.03 Transfers of Shares 13
Section 5.04 Closing the Transfer Books 13
Section 5.05 Lost, Stolen or Destroyed Stock Certificates 14
Section 5.06 Transfer Agent and Registrar 14
Section 5.07 Registered Stock 14
ARTICLE VI. INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS; INSURANCE 14
Section 6.01 Third Party Proceedings 14
Section 6.02 Derivative Shareholder Liability 14
Section 6.03 Indemnification Upon Success on the Merits 15
Section 6.04 Indemnification in Other Circumstances 15
Section 6.05 Payment of Defense Expenses in Advance 15
Section 6.06 Insurance 16
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.07 No Waiver of Rights 16
ARTICLE VII: DIVIDENDS 16
ARTICLE VIII. MISCELLANEOUS 16
Section 8.01 Fiscal Year 16
Section 8.02 Seal 16
Section 8.03 Power to Amend 16
Section 8.04 Promulgation of Corporate Calendar 16
ARTICLE IX. EMERGENCY BY-LAWS 17
</TABLE>
22
<PAGE>
BY-LAWS OF
HELLER FINANCIAL, INC.
----------------------
ARTICLE I: IDENTIFICATION; OFFICES
SECTION 1.01. Name. The name of the corporation is Heller Financial, Inc. (the
"Corporation").
SECTION 1.02. Registered Office; Other Offices. The registered office of the
Corporation in the State of Delaware shall be established and maintained at the
office of The Corporation Trust Company in the City of Wilmington, County of New
Castle, and The Corporation Trust Company shall be the Registered Agent of the
Corporation in charge thereof. The Corporation may have such other offices at
such other place or places, within or without the State of Delaware, as the
business of the Corporation may from time to time require.
ARTICLE II: MEETINGS OF STOCKHOLDERS
SECTION 2.01. Date, Place and Time of Annual Meetings. The Annual Meeting of
Stockholders of the Corporation (hereinafter called the "Annual Meeting of
Stockholders") shall be held on the date during the month of April, May or June
and at the time and place designated by the Chairman of the Board of Directors
("Chairman of the Board") by notice to the Stockholders entitled to vote not
more than sixty days prior to the date of the meeting. In the event the
Chairman of the Board fails to so designate, the Annual Meeting of Stockholders
shall be held on the first Wednesday of May of each year, at the principal
business office of the Corporation at the hour of 9:00 a.m., unless that date is
a legal holiday, in which event the Annual Meeting of Stockholders shall be held
on the next succeeding day not a legal holiday. The Chairman of the Board of
this Corporation may, upon notice to the stockholders pursuant to Section 2.04,
change the date to a different day in April, May or June, along with the place
and time of the Annual Meeting of Stockholders.
SECTION 2.02. Special Meetings of Stockholders. A special meeting of
stockholders ("Special Meeting of Stockholders") may be called at any time by
(i) the Chairman of the Board, the Vice Chairman or the President, (ii) three or
more directors, or (iii) the holders of record of a majority of the outstanding
shares having voting power.
SECTION 2.03. Place of Special Meetings of Stockholders. A Special Meeting of
Stockholders shall be held at such place, within or outside the State of
Delaware, as may be fixed from time to time by the person or persons calling
such meetings, or, if not so fixed, at the principal business office of the
Corporation in the State of Illinois.
SECTION 2.04. Notice of Meetings. Except as otherwise permitted by statute,
written notice stating the place, date and hour of each Annual or Special
Meeting of Stockholders shall be given personally or by first-class mail
(airmail in the case of international communications) or by telegram, telex or
similar method to each stockholder entitled to vote thereat, not less than 10
and not more than 60 days prior to the meeting. The notice of any Special
Meeting of Stockholders shall also state the purpose or purposes for which the
meeting is called and indicate that it is being issued by or upon the request of
the person or persons calling the meeting. If mailed, such notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Notice of a Special Meeting of Stockholders may be given by the person or
persons calling the meeting, or upon the written request of such person or
persons, such notice shall be given by the Secretary on behalf of such person
or persons. If the person or persons calling a Special Meeting of Stockholders
give notice thereof, they shall forward a copy thereof to the Secretary. Every
request to the Secretary for the giving of notice of a Special Meeting of
Stockholders shall state the purpose or purposes of such meeting.
SECTION 2.05. Adjournments. When a meeting is adjourned to another date, hour
or place, notice need not be given of the adjourned meeting if the date, hour
and place thereof are announced at the meeting at which the adjournment is
taken. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
23
<PAGE>
vote at the adjourned meeting. At the adjourned meeting any business may be
transacted which might have been transacted at the original meeting.
SECTION 2.06. Waiver of Notice. Notice of meeting need not be given to any
stockholder who submits a written waiver of notice, signed in person or by
proxy, whether before or after the meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of stockholders need be specified
in any written waiver of notice. Attendance of a stockholder at a meeting, in
person or by proxy, shall constitute a waiver of notice of such meeting, except
when the stockholder attends a meeting for the express purpose of objecting, at
the beginning of such meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 2.07. Quorum. At all meetings of stockholders, except as otherwise
required by statute, the presence of holders of a majority of the shares
entitled to vote thereat, present in person or by proxy, shall be requisite and
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat may adjourn such meeting from time to time
in accordance with Section 2.05 of these By-laws until the number of votes
requisite to constitute a quorum shall be present.
SECTION 2.08. Vote of Stockholders. When a quorum is present or represented at
any meeting, the vote of the holders of a majority of the shares entitled to
vote thereat shall decide any question brought before such meeting, unless the
question is one upon which a vote of a different percent of shares is required
by statute or these By-laws, in which case the vote of such different percent of
shares shall be required. Each stockholder of record on the applicable record
date shall be entitled at every meeting of stockholders to one vote for every
share standing in his name on the record of stockholders. Voting at meetings of
stockholders need not be by written ballot, unless the holders of a majority of
the shares entitled to vote thereat shall so determine.
SECTION 2.09. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Every proxy must be in writing and signed by the stockholder or his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable for the period stated therein if the proxy states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may remain
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
SECTION 2.10. Action Without a Meeting. Any action required or permitted to be
taken at any Annual or Special Meeting of Stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Such written
consent shall be filed with the records of the Corporation.
ARTICLE III: BOARD OF DIRECTORS
SECTION 3.01. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all the powers of the Corporation and do all lawful acts and things which are
not expressly reserved to the stockholders by law, by the Certificate of
Incorporation or by these By-laws.
SECTION 3.02. Number and Term of Office. Except as hereinafter provided,
directors shall be elected at the Annual Meeting of the Stockholders; each
director so elected shall serve for one year and until his successor is elected
and qualified. The number of directors shall be not less than ten (10) nor more
than eighteen (18), the exact number from time to time to be established by the
Board of Directors, or its Executive Committee, by appropriate resolution. The
directors have power from time to time, and at any time, other than when the
stockholders are assembled in a meeting, regular or special, to increase above
eighteen (18) or decrease below ten (10) their own number by an amendment to
these By-laws. The number of directors shall never be fewer than one (1).
24
<PAGE>
SECTION 3.03. Election. At each meeting of the stockholders for the election
of directors, at which a quorum is present, the persons receiving a plurality of
the votes cast by the holders of shares entitled to vote in the election shall
be elected as directors.
SECTION 3.04. Resignation. Any director may at any time resign from the Board
of Directors by delivering a written notice to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Such resignation shall
take effect at the time specified therein, or, if not so specified, upon receipt
of such notice by the Board of Directors, the Chairman of the Board, the
President or the Secretary. Unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 3.05. Removal. Any director or directors may be removed, with or
without cause, by vote of the holders of a majority of the shares then entitled
to vote at an election of directors at any Special Meeting of the Stockholders
or without a meeting pursuant to Section 2.10.
SECTION 3.06. Vacancies. If one or more vacancies occur in the Board of
Directors by reason of death, resignation, expansion of the Board of Directors
or otherwise, except insofar as otherwise provided in the case of a vacancy or
vacancies occurring by reason of removal by the stockholders, the remaining
directors, or the Executive Committee, although less than a quorum, may elect,
by a majority vote, a successor or successors for the unexpired term or terms.
In the case of the removal of a director under Section 3.05, successors may be
elected at the same Special Meeting of Stockholders (or without a meeting under
Section 2.10) by the holders of a majority of the shares, or to the extent
vacancies are not thereby filled, the remaining directors although less than a
quorum, may elect by a majority vote, to fill any vacancy or vacancies created
by the removal. Any director elected to fill a vacancy shall hold office until
the next meeting of stockholders at which the election of directors is the
regular order of business, and until his successor has been elected and
qualified.
SECTION 3.07. Annual Meetings. A newly elected Board of Directors shall meet
in order to organize, to designate the Chairman of the Board, to elect officers
and to transact such other business as may properly come before it. Such annual
meeting of the Board of Directors may be held without notice if it shall be held
on the day fixed for the Annual Meeting of Stockholders and as soon as
practicable after the time and at the place fixed for such stockholders'
meeting. If such annual meeting of the Board of Directors shall not be held at
such date, hour and place, it shall be held whenever called by the Chairman of
the Board or by any two directors at such place, within or without the State of
Delaware, and at such time as shall be determined by the person or persons
calling such meeting.
SECTION 3.08. Regular Meetings.
a. Board of Directors. Regular meetings of the Board of Directors shall,
unless otherwise by written notice to each director, either personally, or by
mail or telegraph, be held at the office of the Corporation in Chicago,
Illinois, annually, immediately following the Annual Meeting of Stockholders and
at such other dates as the Chairman of the Board shall establish by promulgation
of the corporate calendar and amendments thereto.
b. Executive Committee. Regular meetings of the Executive Committee of
the Board of Directors shall, unless otherwise by written notice to each
director who is a member of the Executive Committee, either personally, or by
mail or telegraph, be held at the office of the Corporation in Chicago,
Illinois, annually, immediately following the annual meeting of the Board of
Directors and at such other dates as the Chairman of the Board of the Executive
Committee may establish by notice to the members of the Executive Committee or
as the Chairman of the Board may establish by promulgation of the corporate
calendar.
SECTION 3.09. Special Meetings.
a. Board of Directors. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board, by the President or by any
two directors at such place, within or without the State of Delaware, and at
such time as shall be determined by the person or persons calling such meeting.
b. Executive Committee. Special meetings of the Executive Committee of
the Board of Directors shall be held whenever called by the Chairman of the
Executive Committee or by any two directors who are
25
<PAGE>
members of the Executive Committee at such place, within or without the State
of Delaware, and at such time as shall be determined by the person or persons
calling such meeting.
SECTION 3.10. Notice of Certain Annual and Special Meetings. Notice of any
special meeting and of any annual meeting which does not take place on the day
fixed for the Annual Meeting of Stockholders and as soon as practicable after
the time and at the place fixed for such stockholder meeting shall be given by
first-class mail (airmail in the case of international communications) to each
director, addressed to him at his residence or usual place of business, not
later than the fifth day before the day on which such meeting is to be held, or
shall be sent to him at such place by telegram, telex or similar method, or be
delivered personally or by telephone, not later than the third day before the
day on which such meeting is to be held. Such notice shall state the place,
date and hour of the meeting, and promulgation and delivery of the corporate
calendar shall constitute notice to the directors hereunder.
SECTION 3.11. Waiver of Notice. Notice of a meeting need not be given to any
director who submits a written waiver of such notice, signed by him, whether
before or after such meeting. Neither the business to be transacted at, nor the
purpose of, any meeting of the directors need be specified in any written waiver
of notice with respect to such meeting. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except when the director
attends such meeting for the express purpose of objecting, at the beginning of
such meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 3.12. Quorum and Manner of Acting. At any meeting of the Board of
Directors, the presence of a majority of the total number of directors shall be
requisite and constitute a quorum for the transaction of business. The vote of
the majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. A majority of the directors
present, whether or not a quorum is present, may adjourn any meeting to another
time and place. Notice in accordance with Section 3.10 of these By-laws of any
adjournment of any meeting of the Board of Directors to another time or place
shall be given to the directors who were not present at the time of such
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
SECTION 3.13. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee, as the case may be.
SECTION 3.14. Telephonic Meetings. Members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.15. Committees.
a. Executive Committee. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate from among its members an Executive
Committee to consist of one or more directors and may designate one or more
directors as alternate members of such committee, who may replace any absent or
disqualified member at any meeting thereof. In the absence or disqualification
of a member of the Executive Committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. The Executive Committee, to the extent permitted by law, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
Specifically, but not by way of limitation, the Executive Committee shall have
the power and authority to declare dividends, to authorize the issuance of stock
and to adopt certificates of ownership and merger pursuant to Section 253 of the
Delaware Corporation Law. The Executive Committee shall designate from its
members a Chairman of the Executive Committee. The Chairman of the Executive
Committee may be removed, with or without cause, by vote of the majority of the
Executive Committee. The Executive Committee shall record minutes of each
meeting of the Executive Committee and shall submit the same to the Board of
Directors at the next meeting of the Board of Directors following such meeting
of the Executive Committee. At all meetings of the Executive Committee, a
majority of the total number of the members thereof shall constitute a quorum
for the transaction of business. The vote of the majority of the members of the
Executive Committee present at a meeting
26
<PAGE>
at which a quorum is present shall be the act of the Executive Committee.
Meetings of the Executive Committee shall, unless otherwise by written notice
to the members of the Executive Committee, either personally, or by mail or
telegraph, be held on such dates and times and at such places as set forth in
the corporate calendar, and amendments thereto, as promulgated by the Chairman
of the Board.
b. Compensation Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate from among its members a
Compensation Committee to consist of one or more directors and may designate one
or more directors as alternate members of such committee, who may replace any
absent or disqualified member at any meeting thereof. In the absence or
disqualification of a member of the Compensation Committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. The Compensation Committee shall have
the power and authority to set and determine (and to delegate the authority to
set and determine) all matters relating to employees' compensation and benefits
including, without limitation, matters of corporate policy over salary, bonuses,
benefits, perquisites, and the like, and to establish and amend (and to delegate
the authority to establish and amend) the compensation of all officers of the
Corporation. The Compensation Committee shall designate from its members a
Chairman of the Compensation Committee. The Chairman of the Compensation
Committee may be removed, with or without cause, by vote of the majority of the
Compensation Committee. The Compensation Committee shall record minutes of each
meeting of the Compensation Committee. At all meetings of the Compensation
Committee, a majority of the total number of the members thereof shall
constitute a quorum for the transaction of business. The vote of the majority
of the members of the Compensation Committee present at a meeting at which a
quorum is present shall be the act of the Compensation Committee. Meetings of
the Compensation Committee shall, unless otherwise by written notice to the
members of the Compensation Committee, either personally, or by mail or
telegraph, be held on such dates and times and at such places as set forth in
the corporate calendar, and amendments thereto, as promulgated by the Chairman
of the Board.
c. Audit Committee. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate from among its members an Audit
Committee to consist of one or more directors and may designate one or more
directors as alternate members of such committee, who may replace any absent or
disqualified member at any meeting thereof. In the absence or disqualification
of a member of the Audit Committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. The Audit Committee shall have such duties, power and authority with
respect to the choice of the Corporation's auditors and reviews of the
Corporation's financial statements as may, by resolution, be delegated by the
Board of Directors from time to time. The Audit Committee shall designate from
its members a Chairman of the Audit Committee. The Chairman of the Audit
Committee may be removed, with or without cause, by vote of the majority of the
Audit Committee. The Audit Committee shall record minutes of each meeting of
the Audit Committee and shall submit the same to the Board of Directors at the
next meeting of the Board of Directors following such meeting of the Audit
Committee. At all meetings of the Audit Committee, a majority of the total
number of the members thereof shall constitute a quorum for the transaction of
business. The vote of the majority of the members of the Audit Committee
present at a meeting at which a quorum is present shall be the act of the Audit
Committee. Meetings of the Audit Committee shall, unless otherwise by written
notice to the members of the Audit Committee, either personally, or by mail or
telegraph, be held on such dates and times and at such places as set forth in
the corporate calendar, and amendments thereto, as promulgated by the Chairman
of the Board.
d. Miscellaneous Committees. The Board of Directors shall have the power
to appoint or provide for from time to time any such other committees consisting
of such directors, officers or other persons and having such powers and
functions in the management of the Corporation as may be provided by the Board
of Directors and as may be permitted by law, and from time to time to suspend or
discontinue the powers and duties of such committees. If the members of any
such committee consist of directors, the resolution of the Board of Directors
designating such members shall be adopted by a majority of the entire Board of
Directors.
e. Removal. Any member of the Executive Committee or any other committee
appointed or provided for by the Board of Directors, or the entire membership of
the Executive Committee or of such other committee may be removed, with or
without cause, by the vote of the majority of the Board of Directors.
27
<PAGE>
SECTION 3.16. Directors' Fees. The fees and compensation of the directors of
the Corporation shall be determined by the vote of the stockholders.
ARTICLE IV: OFFICERS
SECTION 4.01. Elected Officers. The elected officers of the Corporation
consist of the Chairman of the Board, who shall be termed "Chairman of the Board
of the Board" (and is sometimes referred to as "Chairman of the Board"); one or
more Vice Chairmen of the Board (sometimes referred to as "Vice Chairman of the
Board"); one or more Presidents; one or more Executive Vice Presidents; one or
more Senior Vice Presidents; a Treasurer; a Secretary; a Controller; a Director
of Taxes; a General Counsel; and one or more Deputy General Counsels.
SECTION 4.02. Election. The Board of Directors at the first meeting after each
Annual Meeting of the Stockholders (a) shall elect by ballot a Chairman of the
Board from among the members of the Board, and a Secretary, Controller, General
Counsel and Treasurer, and (b) may elect (i) one or more Vice Chairmen from
among the members of the Board; and (ii) one or more Presidents including
Senior Group Presidents or Group Presidents; one or more Executive Vice
Presidents; one or more Senior Vice Presidents; and one or more Deputy General
Counsels who need not be members of the Board.
SECTION 4.03. Term and Removal. The term of office of each officer elected
pursuant to Section 4.02 or appointed pursuant to Section 4.06 of this Article
shall expire on the day of the next annual election. Any officer may be removed
from office, either with or without cause or hearing, at any time by the
affirmative vote of a majority of the members of the Board of Directors then in
office. A vacancy in any office arising from any cause may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 4.04. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors; provided, however, that
the Board of Directors may authorize the Chairman of the Board, or the
Compensation Committee of the Board of Directors, to fix the compensation of
any or all officers.
SECTION 4.05. Powers and Duties. The powers and duties of the respective
officers of the Corporation are as follows:
a. Chairman of the Board. The Chairman of the Board, unless the Board
of Directors shall otherwise provide by resolution, shall be the chief executive
officer of the Corporation. The Chairman of the Board shall preside at all
meetings whether of the stockholders or the Board of Directors. In the absence
of the Chairman of the Board, or in the event of his or her inability or refusal
to act, the Board of Directors may by vote designate a Vice Chairman to preside
at any such meeting, whether of the stockholders or of the Board of Directors.
In the absence of any Vice Chairman, or in the event of his or her inability or
refusal to act, the Board of Directors may by vote designate from among its
members a director to preside at any such meeting, whether of the stockholders
or of the Board of Directors. The Chairman of the Board, subject to the power
of the Board of Directors to manage the business and affairs of the Corporation
or to delegate such power to other officers or employees, shall have general and
active supervision over and direction of the business, property and affairs of
the Corporation and shall see that resolutions of the Board of Directors are
carried into effect. The Chairman of the Board shall execute certificates,
contracts, bonds, mortgages, notes, guaranties and other instruments and
documents for and on behalf of the Corporation and under the seal of the
Corporation where so required. He or she shall have the authority to cause the
employment of such employees of the Corporation, other than officers elected by
the Board of Directors, as the conduct of the business of the Corporation may
require, and to fix their compensation and the compensation of all appointed
Officers of the Corporation; to remove or suspend any employee who shall not
have been elected by the Board of Directors; and to suspend for cause, pending
final action by the Board of Directors, any officer who shall have been elected
by the Board of Directors. The Chairman of the Board shall make reports to the
Board of Directors as well as the stockholders and shall perform all other
duties and exercise all other powers usually pertaining to the offices of
Chairman of the Board and chief executive officer of a corporation, and shall
perform such further duties and exercise such further powers as may be assigned
to him from time to time by the Board of Directors. If there shall be a vacancy
in the position of Chairman of the Board, such vacancy may be filled by the
Board of Directors. The Chairman of the Board may be removed, with or without
cause, by vote of the majority of the Board of Directors.
28
<PAGE>
b. Vice Chairmen. There may be one or more Vice Chairmen of the
Corporation. The Vice Chairmen shall execute certificates, contracts, bonds,
mortgages, notes, guaranties and other instruments and documents for and on
behalf of the Corporation and under the seal of the Corporation where so
required. In the absence of the Chairman of the Board or in the event of his or
her inability to act or refusal to act, his or her duties shall be performed and
his or her powers may be exercised by such Vice Chairman of the Board as shall
be designated by the Board of Directors or, failing such designation, by the
Vice Chairmen in order of their election to that office.
c. President. The President shall, in the absence of the Chairman of the
Board and the Vice Chairman of the Board, or in the event of their inability or
refusal to act, perform the duties and exercise the powers of the Chairman of
the Board described in Section 4.06 hereof. The President has the same power as
the Chairman of the Board to execute certificates, contracts, bonds, mortgages,
notes, guaranties and other instruments and documents for and on behalf of the
Corporation and under the seal of the Corporation where so required. The
President shall make reports to the Board of Directors as well as the
stockholders and shall perform such other duties as are incidental to the office
of President or are properly required of the President by the Chairman of the
Board or the Board of Directors.
d. Senior Group Presidents. The Senior Group Presidents of the several
operating groups of the Corporation shall have and exercise general supervision
over and direction of the operations of their respective groups and the groups
of the Group Presidents reporting to them, in all cases under the direction of
the Chairman, and shall have the power to execute certificates, contracts,
bonds, mortgages, notes, guaranties and other instruments and documents for and
on behalf of the corporation and under the seal of the Corporation and shall
perform such other duties as required of them by the Chairman of the Board.
e. Group Presidents. The Presidents of the several operating groups of
the Corporation shall have and exercise general supervision over and direction
of the operations of their respective groups, in all cases under the direction
of the Chairman, and shall have the power to execute certificates, contracts,
bonds, mortgages, notes, guaranties and other instruments and documents for and
on behalf of the Corporation and under the seal of the Corporation and shall
perform such other duties as required of them by the Chairman or the Board of
Directors. Presidents of divisions of a group of the Corporation shall have the
same duties and authorities as the Executive Vice Presidents of the Corporation.
f. Executive Vice Presidents. The Executive Vice Presidents shall be
authorized to execute certificates, contracts, bonds, mortgages, notes,
guaranties and other instruments and documents for and on behalf of the
Corporation and under the seal of the Corporation where so required. They
shall also be authorized to perform all duties that from time to time may be
prescribed by the Directors, the Chairman of the Board or the Senior Group
President or Group President for their respective operating group.
g. Senior Vice Presidents. The Senior Vice Presidents shall be
authorized to execute certificates, contracts, bonds, mortgages, notes,
guaranties and other instruments and documents for and on behalf of the
Corporation and under the seal of the Corporation where so required. They
shall also be authorized to perform all duties that from time to time may
be prescribed by the Board of Directors, the Chairman of the Board, or the
President.
h. Controller. The Controller shall have the responsibility for
supervision and management of all accounting and bookkeeping functions of the
Corporation and of all of its subsidiaries; shall keep or cause to be kept,
such books of record of all the income, expenses, losses, gains, assets and
liabilities of the Corporation; shall have custody of the accounting records of
the Corporation; shall render to the Chairman of the Board, the President and
the Board of Directors at meetings of the Board of Directors or whenever else it
may be required, an account of all transactions and the financial condition of
the Corporation, and shall perform all other duties and exercise all other
powers usually pertaining to the office of controller of a corporation and shall
perform such other duties and exercise such other powers as may be assigned by
the Board of Directors, the Chairman of the Board, or the President. The
Controller shall be authorized to appoint, pursuant to Section 4.06, one or more
Assistant Controllers who shall perform such duties and exercise such powers as
may be assigned to them from time to time by the Board of Directors, the
Chairman of the Board, the President or the Controller. In the absence of the
Controller or in the event of his inability or refusal to act, his duties shall
be performed and his powers may be exercised by such Assistant Controller as
shall be designated by the Chairman of the Board or, failing such designation,
by the
29
<PAGE>
Assistant Controllers in order of their election to that office. If there shall
be a vacancy in the office of Assistant Controller, such person as shall be
designated by the Chairman of the Board shall perform the duties and exercise
the powers of Assistant Controller.
i. Treasurer. The Treasurer has custody of the corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in any depositories that are authorized by
the Board of Directors; shall disburse the funds of the Corporation as may be
directed by the Board of Directors; shall keep a full and accurate account of
all monies received and paid on account of the Corporation; and shall render to
the Chairman of the Board, the President and the Board of Directors an account
of all such transactions at meetings of the Board of Directors or whenever it
shall be required. The Treasurer shall perform all other duties and exercise
all other powers usually pertaining to the office of the treasurer of a
corporation and shall perform such other duties and exercise such other powers
as may be assigned to him or her from time to time by the Board of Directors,
the Chairman of the Board, or the President. The Treasurer shall appoint,
pursuant to Section 4.06, one or more Assistant Treasurers who shall perform
such duties and exercise such powers as may be assigned to them from time to
time by the Board of Directors, the Chairman of the Board, the President or the
Treasurer. In the absence of the Treasurer or in the event of his or her
inability or refusal to act, his or her duties shall be performed and his or her
powers may be exercised by such Assistant Treasurer as shall be designated by
the Chairman of the Board or, failing such designation, by the Assistant
Treasurers in the order of their election to that office. If there shall be a
vacancy in the office of Assistant Treasurer, such person as shall be designated
by the Chairman of the Board shall perform the duties and exercise the powers of
Assistant Treasurer.
j. Secretary. The Secretary shall attend all meetings of the stockholders
and Board of Directors, and act as clerk thereof, and record all votes and
minutes of all proceedings in a book to be kept for that purpose and shall, when
requested, perform like duties for all committees of the Board of Directors.
The Secretary shall give, or cause to be given, notice of meetings of the
stockholders and meetings of the Board of Directors and committees thereof if
such notice is required by law or pursuant to these By-laws or the rules of
procedure of any such committee. The Secretary shall keep in safe custody the
seal of the Corporation, and shall have authority to affix the same to any
instrument and to attest the same. He or she shall keep and account for all
books, documents, papers and records of the Corporation, except those for which
some other officer is properly accountable. He or she shall generally perform
such duties and exercise such powers usually pertaining to the office of
secretary of a corporation. He or she shall perform such further duties and
exercise such further powers as may be assigned to him from time to time by the
Board of Directors, the Chairman of the Board, or the President. The Secretary
shall appoint, pursuant to Section 4.06, one or more Assistant Secretaries who
shall perform such duties and exercise such powers as may be assigned to them
from time to time by the Board of Directors, the Chairman of the Board, the
President or the Secretary. The Secretary and Assistant Secretaries, in
addition to their other powers and duties, shall have the authority to execute
powers of attorney on behalf of the Corporation. In the absence of the
Secretary or in the event of his or her inability or refusal to act, his or her
duties shall be performed and his or her powers may be exercised by such
Assistant Secretary as shall be designated by the Chairman of the Board or,
failing such designation, by the Assistant Secretaries in the order of their
election to that office. If there shall be a vacancy in the office of Assistant
Secretary, such person as shall be designated by the Chairman of the Board shall
perform the duties and exercise the powers of Assistant Secretary.
k. Director of Taxes. The Director of Taxes shall have the responsibility
of supervision of the tax department of the Corporation and shall advise and
consult with the Chairman of the Board, the President and the General Counsel on
all tax matters affecting the Corporation and its subsidiaries and shall advise
and consult with the Chairman of the Board and the President on matters of
corporate tax policy; cause compliance with laws and regulations in respect of
taxes due; shall select counsel to represent the Corporation in, and shall
manage administrative appeals and tax litigation involving, the Corporation;
shall render to the General Counsel, the Chairman of the Board, the President
and the Board of Directors an account of all tax matters affecting the
Corporation; and shall perform all other duties and exercise all other powers
usually pertaining to the office of director of taxes of a corporation including
the signing of all returns, waivers, consents and any other tax forms on behalf
of the Corporation and all its subsidiaries, and shall perform such other duties
and exercise such other powers as may be assigned by the Board of Directors, the
Chairman of the Board, the President or the General Counsel.
l. General Counsel and Deputy General Counsels. General Counsel shall have
the responsibility for supervision and management of all legal functions of the
Corporation and all its subsidiaries; shall select attorneys to represent the
Corporation in such matters as he or she shall determine and shall manage their
30
<PAGE>
services; shall cause to be negotiated and documented all transactions entered
into or involving the Corporation; shall render to the Chairman of the Board,
the President and the Board of Directors at meetings of the Board of Directors
or whenever else it may be required, an account of all legal matters of or
affecting the Corporation and shall perform all other duties and exercise all
other powers usually pertaining to the office of general counsel of a
corporation and shall perform such other duties and exercise such other powers
as may be assigned by the Board of Directors, the Chairman of the Board, or the
President. Deputy General Counsels shall supervise and manage the legal
functions of the operating division, office or branch of the Corporation
designated by and under the direction of the General Counsel, and the Deputy
General Counsels shall perform such duties and exercise such powers as may be
assigned to them from time to time by the Board of Directors, the Chairman of
the Board, the President, or the General Counsel. In the absence of the General
Counsel or in the event of his or her inability or refusal to act, his or her
duties shall be performed and his or her powers may be exercised by such Deputy
General Counsel as shall be designated by the Chairman of the Board or, failing
such designation, by the Deputy General Counsels in order of their election to
that office. If there shall be a vacancy in the office of General Counsel, such
person as shall be designated by the Chairman of the Board shall perform the
duties and exercise the powers of General Counsel.
SECTION 4.06. Appointed Officers. The Chairman of the Board without further
approval, and the President, managers of corporate staff departments and the
Secretary may appoint (with the prior approval of the Chairman of the Board)
vice presidents, assistant vice presidents, associate general counsels, senior
counsels, counsels, attorneys, assistant controllers, assistant treasurers,
assistant secretaries and other appropriate titled officers to assist them in
their respective duties. Unless otherwise provided by the elected officer making
the appointment, the powers and duties of the appointed officers shall be those
approved by the Chairman of the Board and on file with the Secretary.
SECTION 4.07. Group/Divisional Officers. Officers of the Corporation,
appointed, pursuant to Section 4.06 above, may be designated as officers of
a particular group or division of the Corporation. When officers are so
designated, their powers and duties shall be those of an officer with the same
title as described in Section 4.06 above, as the case may be, but such powers
and duties shall be limited to the activities of their respective group or
division.
SECTION 4.08. Voting Corporation's Securities. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board or the Chairman of the Board's
designee for this specific purpose has full power and authority on behalf of the
Corporation to attend and to act and to vote at all meetings of security holders
of the corporations in which the Corporation may hold securities, and at those
meetings, the Chairman of the Board or the Chairman of the Board's designee
shall possess and may exercise any and all rights and powers incident to the
ownership of the securities, and which as the owner thereof, the Corporation may
have possessed and exercised, if present. The Board of Directors or the
Executive Committee by resolution from time to time may confer powers upon any
other person or persons.
ARTICLE V: SHARE CERTIFICATES
SECTION 5.01. Form; Signature. The shares of the Corporation shall be
represented by certificates; provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman of the Board or Vice Chairman of the Board, Chief Executive
Officer, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary of an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all the signatures on the certificate may be a facsimile.
SECTION 5.02. Signatures of Former Officer, Transfer Agent or Registrar. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if such person or entity
were such officer, transfer agent or registrar at the date of issue.
31
<PAGE>
SECTION 5.03. Transfers of Shares. All transfers of shares of the stock of the
Corporation are subject to the terms conditions and restrictions, if any, of the
Certificate of Incorporation or any amendment therefor. Transfers of shares of
the capital stock of the Corporation shall be made on the books of the
Corporation by the registered holder thereof, or by his attorney thereunder
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, or with a Transfer Clerk or a Transfer Agent appointed as in
Section 5.06 of this Article, and, if certificated shares, on surrender of the
certificate or certificates for the shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock are registered on
the books of the Corporation shall be considered the owner thereof for all
purposes as regards the Corporation; but whenever any transfer of shares is made
for collateral security, and not absolutely, that fact, if known, to the
Secretary, shall be stated in the entry of transfer. The Board may, from time
to time, make any additional rules and regulations as it may deem expedient, not
inconsistent with these By laws, concerning the issue, transfer and registration
of certificates for shares of the stock of the Corporation.
SECTION 5.04. Closing the Transfer Books. The Board of Directors may close the
stock transfer books of the Corporation for a period not exceeding fifty days
preceding (a) the date of any stockholders' meeting, (b) the last date on which
the consent or dissent of stockholders may be effectively expressed for any
purpose without a meeting, or (c) the date fixed for payment of any dividend or
the making of any distribution or for the delivery of evidences of rights or
evidences of interest arising out of any change, conversion, or exchange of
capital stock. In lieu of closing the stock transfer books the Board may in its
discretion fix a date not more than fifty days before any of the foregoing dates
as the time as of which stockholders entitled to notice of and to vote at the
meeting or whose consent or dissent is required or may be expressed for any
purpose, or who are entitled to receive dividends, distributions, rights or
interests shall be determined; and all persons who are holders of record of
voting stock at the date so established by the Board and no other shall be
entitled to notice of and to vote at the meeting or to express their consent or
dissent, as the case may be, and only stockholders of record at the time so
fixed are entitled to receive the dividend, distribution, rights or interests.
SECTION 5.05. Lost, Stolen or Destroyed Stock Certificates. Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 5.06. Transfer Agent and Registrar. The Board of Directors may appoint
one or more Transfer Clerks or one or more Transfer Agents and one or more
Registrars.
SECTION 5.07. Registered Stock. The Corporation shall be protected in treating
the persons in whose names shares stand on the record of stockholders as the
owners thereof for all purposes; and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
ARTICLE VI: INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS; INSURANCE
SECTION 6.01. Third Party Proceedings. The Corporation shall, in accordance
with Section 6.03 or 6.04 of these bylaws, indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was a director, officer, employee,
attorney or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, attorney or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in
32
<PAGE>
a manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, have reasonable cause to believe that his or her conduct was
unlawful.
SECTION 6.02 Derivative Shareholder Liability. The Corporation shall, in
--------------------------------
accordance with Section 6.03 or 6.04 of these bylaws, indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee, attorney or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee, attorney or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 6.03 Indemnification Upon Success on the Merits. To the extent that a
------------------------------------------
director, officer, employee, attorney or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 6.01 and 6.02, or in the defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 6.04 Indemnification in Other Circumstances. Any indemnification under
--------------------------------------
Sections 6.01 and 6.02 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, attorney or agent is proper
in the circumstances because he has met the applicable standard of conduct set
forth in Sections 6.01 and 6.02. Such determination shall be made (1) by the
Board of Directors of the Corporation, or its Executive Committee, by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders of the Corporation.
Nothing contained herein shall be deemed a limitation on the Corporation's
ability to provide indemnifications in the ordinary course of its business.
SECTION 6.05 Payment of Defense Expenses in Advance. The Corporation shall pay
--------------------------------------
or reimburse the reasonable expenses incurred by a director, officer, employee,
attorney or agent who is a party or threatened to be made a party to an action,
suit, or proceeding in advance of final disposition of the proceeding if all of
the following apply:
(a) The person furnishes the Corporation a written affirmation of his or her
good faith belief that he or she has met the applicable standard of conduct
set forth in Section 6.01 and 6.02.
(b) The person furnishes the Corporation a written undertaking, executed
personally or on his or her behalf, to repay the advance if it shall
ultimately be determined by the Board or the Executive Committee thereof,
or by a court of competent jurisdiction, that he or she is not entitled to
be indemnified by the Corporation as authorized by these By-laws.
(c) No determination is made by the Board or the Executive Committee thereof,
or by a court of competent jurisdiction, that the person is precluded from
obtaining indemnification under this Section or the Delaware General
Corporation Law.
SECTION 6.06 Insurance. The Corporation has the power to purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee,
attorney or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, attorney or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation has the power
to indemnify him against such liability under the provisions of these By-laws.
33
<PAGE>
SECTION 6.07 No Waiver of Rights. The indemnification provided for in this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, attorney or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII. DIVIDENDS
SECTION 7. Dividends. The Board of Directors of the Corporation may declare and
pay dividends upon the shares of the Corporation's capital stock in any form
determined by the Board of Directors, in the manner and upon the terms and
conditions provided by law.
ARTICLE VIII: MISCELLANEOUS
SECTION 8.01. Fiscal Year. The Fiscal Year of the Corporation shall be the
calendar year.
SECTION 8.02. Seal. The Corporation shall have a seal in such form as the
Board of Directors shall approve. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
SECTION 8.03. Power to Amend. These By-laws may be adopted, amended or repealed
by the Board of Directors, to the extent provided in the Certificate of
Incorporation, or by the vote of stockholders.
SECTION 8.04. Promulgation of Corporate Calendar. On or before January 20th of
every calendar year, the Chairman of the Board shall promulgate the corporate
calendar for that calendar year. The calendar shall set forth the dates, places
and times for the Annual Meeting of Stockholders, meetings of the Board of
Directors and meetings of the various committees of the Board of Directors.
Copies of the corporate calendar shall be delivered to each director and
stockholder entitled to notice of meetings. In the event an individual becomes a
director subsequent to promulgation of the corporate calendar, he or she shall
be provided a copy of the corporate calendar at the time of appointment. The
Chairman of the Board may amend the corporate calendar at any time by giving
notice to every individual entitled to notice of the meeting whose date, place
or time is being amended.
ARTICLE IX: EMERGENCY BY-LAWS
SECTION 9. Emergency By-Laws. The provisions of this Article IX, adopted
pursuant to the authority of Section 109 of the Delaware Corporation Law, shall
become operative during any emergency resulting from an attack on the United
States or on a locality in which the Corporation conducts its business or
customarily holds meetings of its Board of Directors or stockholders, or during
any nuclear or atomic disaster, or during the existence of any catastrophe, or
other similar emergency condition, resulting in the death, disability or
inability to convene or function of a quorum of the Board of Directors. In any
such event, the following procedures shall govern the conduct of the business
and affairs of the Corporation:
(a) A meeting of the Board of Directors or of any committee thereof may be
called by any officer or director upon notice to such directors as it may
be feasible to reach at the time and by such means as may be feasible at
the time including publication or radio.
(b) The director or directors in attendance at any meeting called as aforesaid
shall constitute a quorum, and may take such action as may, in his or their
judgment, be necessary to carry on the functions of the Board of Directors
during the period the emergency continues.
(c) In the event no member of the Board of Directors is present to constitute a
quorum at any meeting of the Board of Directors during the emergency
period, the three senior officers of the Corporation who are present shall
be considered in order or rank, as set forth in paragraph d. hereof, and
within the same rank in order of seniority of appointment, directors for
such meeting.
34
<PAGE>
(d) During the emergency period, the duties, powers and functions of any
officer of the Corporation who has been killed or disabled, or is unable
for any reason to perform his duties, shall devolve upon and be assumed by
the officer next in rank, in the order of their respective seniority by
first election, in accordance with the following table of sequence:
Chairman of the Board
Vice Chairmen
President
Executive Vice Presidents
Senior Vice Presidents
Other Vice Presidents
Assistant Vice Presidents
Secretary
Treasurer
Controller
Duties, powers and functions of any division officer similarly unable to perform
shall devolve upon and be assumed by the officer next in rank, in accordance
with the same sequence. New officers may be elected, or the accession of
officers ratified, at the next regular meeting of the Board of Directors, or at
a special meeting called for that purpose. However, as to third persons, the
performance of the duties of an officer by one acting pursuant to this Article
shall be conclusive evidence of his authority to do so.
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HELLER
FINANCIAL, INC. QUARTERLY REPORT FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1996
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<INT-BEARING-DEPOSITS> 307
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 26
<INVESTMENTS-HELD-FOR-SALE> 206
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,167
<ALLOWANCE> (230)
<TOTAL-ASSETS> 9,475
<DEPOSITS> 0
<SHORT-TERM> 2,440
<LIABILITIES-OTHER> 789
<LONG-TERM> 4,768
<COMMON> 663
0
150
<OTHER-SE> 613
<TOTAL-LIABILITIES-AND-EQUITY> 9,475
<INTEREST-LOAN> 400
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 400
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 223
<INTEREST-INCOME-NET> 177
<LOAN-LOSSES> 47
<SECURITIES-GAINS> 0<F1>
<EXPENSE-OTHER> 121
<INCOME-PRETAX> 92
<INCOME-PRE-EXTRAORDINARY> 69
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69<F3>
<EPS-PRIMARY> 0.00<F2>
<EPS-DILUTED> 0.00<F2>
<YIELD-ACTUAL> 4.48
<LOANS-NON> 306
<LOANS-PAST> 29
<LOANS-TROUBLED> 14
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 229
<CHARGE-OFFS> 72
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 230
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 230
<FN>
<F1> The Company is a finance company whose normal operations do
not include the trading of investment securities.
<F2> Earnings per share information not provided as Heller Financial,
Inc. has only one common shareholder.
<F3> Net income is net of $21 million income tax provision and $2
million of minority interest in international income.
</FN>
</TABLE>
