<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 29, 1997
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-2360 13-0871985
(State of Incorporation) (Commission (IRS employer
File Number) Identification No.)
ARMONK, NEW YORK 10504
(Address of principal executive offices) (Zip Code)
914-765-1900
(Registrant's telephone number)
<PAGE>
Item 5. Other Events.
On April 29, 1997 the stockholders of the company approved
amendments to the Certificate of Incorporation to increase the number
of authorized shares of common stock from 750 million to 1,875 million,
which is required to effect a two-for-one stock split approved by the company's
Board of Directors on January 28, 1997. In addition, the amendments
served to reduce the par value of the common shares from $1.25 per share to
$.50 per share.
Common stockholders of record at the close of business on May 9, 1997
will receive one additional share for each share held. Distribution of the
additional shares is presently expected to occur on May 27, 1997, and
will be effected in book-entry form, through the mailing of an account
statement to each stockholder of record as of the stock split record
date, crediting the additional shares of common stock as a result of the
stock split.
Item 7. Financial Statements, Pro-Forma Financial Information and
Exhibits.
(b) Pro-Forma Financial Information
The following is presented to reflect the two-for-one
stock split on a historical basis. (See attachments I
through V of this Form 8-K.)
I Consolidated Statement of Earnings for the years ended
December 31, 1996, 1995 and 1994.
II Consolidated Statement of Financial Position at
at December 31, 1996 and 1995.
III Computation of Fully Diluted Earnings Per Share for
1992 through 1996.
IV Five-year Comparison of Selected Financial Data
1992 through 1996.
V Selected Quarterly Data for 1996 and 1995.
(c) Exhibits
(3)(i) Certificate of Incorporation as amended through
May 2, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Registrant)
Date: May 7, 1997
By: /s/ John R. Joyce
-------------------------------
(John R. Joyce)
Vice President and Controller
<PAGE>
ATTACHMENT I
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(Dollars in millions For the Year-Ended December 31:
except per share amounts) ________________________________________
1996 1995 1994
Revenue: ________ ________ _________
Hardware sales $ 36,316 $ 35,600 $ 32,344
Services 15,873 12,714 9,715
Software 13,052 12,657 11,346
Maintenance 6,981 7,409 7,222
Rentals and financing 3,725 3,560 3,425
________ ________ ________
Total revenue 75,947 71,940 64,052
Cost:
Hardware sales 23,396 21,862 21,300
Services 12,647 10,042 7,769
Software 4,082 4,428 4,680
Maintenance 3,659 3,651 3,635
Rentals and financing 1,624 1,590 1,384
________ ________ ________
Total cost 45,408 41,573 38,768
________ ________ ________
Gross profit 30,539 30,367 25,284
Operating expenses:
Selling, general and
administrative 16,854 16,766 15,916
Research, development and
engineering 4,654 4,170 4,363
Purchased in-process research
and development 435 1,840 --
________ ________ ________
Total operating expenses 21,943 22,776 20,279
Operating income 8,596 7,591 5,005
Other income, principally interest 707 947 1,377
Interest expense 716 725 1,227
________ ________ ________
Earnings before income taxes 8,587 7,813 5,155
Provision for income taxes 3,158 3,635 2,134
________ ________ ________
Net earnings 5,429 4,178 3,021
Preferred stock dividends and
transaction costs 20 62 84
________ ________ ________
Net earnings applicable to
common shareholders $ 5,409 $ 4,116 $ 2,937
======== ======== ========
Net earnings per share
of common stock* $ 5.12 $ 3.61 $ 2.51
Average number of common shares
outstanding* 1,056,704,188 1,138,768,058 1,169,917,398
* Restated to reflect the two-for-one stock split of May 9, 1997.
<PAGE>
ATTACHMENT II
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
(Dollars in millions) At December 31 At December 31
1996 1995
_______________ ______________
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,687 $ 7,259
Marketable securities 450 442
Notes and accounts receivable - trade,
net of allowances 16,515 16,450
Sales-type leases receivable 5,721 5,961
Other accounts receivable 931 991
Inventories 5,870 6,323
Prepaid expenses and other current assets 3,521 3,265
________ ________
Total current assets 40,695 40,691
Plant, rental machines and other property 41,893 43,981
Less: Accumulated depreciation 24,486 27,402
________ ________
Plant, rental machines and other property - net 17,407 16,579
Software, less accumulated
amortization (1996, $12,199; 1995, $11,276) 1,435 2,419
Investments and sundry assets 21,595 20,603
________ ________
Total assets $ 81,132 $ 80,292
======== ========
</TABLE>
<PAGE>
ATTACHMENT II
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollars in millions) At December 31 At December 31
1996 1995
_______________ ______________
<S> <C> <C>
Current liabilities:
Taxes $ 3,029 $ 2,634
Short-term debt 12,957 11,569
Accounts payable 4,767 4,511
Compensation and benefits 2,950 2,914
Deferred income 3,640 3,469
Other accrued expenses and liabilities 6,657 6,551
________ ________
Total current liabilities 34,000 31,648
Long-term debt 9,872 10,060
Other liabilities 14,005 14,354
Deferred income taxes 1,627 1,807
________ ________
Total liabilities 59,504 57,869
Contingencies
Stockholders' equity:
Preferred stock - par value $.01 per share 253 253
Shares authorized: 150,000,000
Shares issued: 1996 - 2,610,711
1995 - 2,610,711
Common stock - par value $.50* per share 7,752 7,488
Shares authorized: 1,875,000,000*
Shares issued: 1996 - 1,018,141,084*
1995 - 1,096,398,026*
Retained earnings 11,189 11,630
Translation adjustments 2,401 3,036
Treasury stock, at cost (135) (41)
Shares: 1996 - 2,179,066*
1995 - 849,166*
Net unrealized gain on marketable securities 168 57
________ ________
Total stockholders' equity 21,628 22,423
________ ________
Total liabilities and stockholders' equity $ 81,132 $ 80,292
======== ========
</TABLE>
* Restated to reflect the two-for-one stock split of May 9, 1997.
<PAGE>
ATTACHMENT III
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
UNDER TREASURY STOCK METHOD SET FORTH IN
ACCOUNTING PRINCIPLES BOARD OPINION NO. 15
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31:
____________________________________________________________________________
1996 1995 1994 1993** 1992**
_____________ _____________ _____________ _____________ ____________
<S> <C> <C> <C> <C> <C>
Number of shares on
which published
earnings per share
is based:
Average outstanding
during year*......... 1,056,704,188 1,138,768,058 1,169,917,398 1,146,478,480 1,141,792,978
Add--Incremental
shares under stock
compensation and stock
purchase plans*........ 23,004,716 18,446,278 8,616,538 - -
--Incremental
shares related to
5 3/4% CGI convertible
bonds* (average) ...... - 10,582,196 15,430,782 - -
____________ _____________ _____________ _____________ _____________
Number of shares on
which fully
diluted earnings
per share is
based*................. 1,079,708,904 1,167,796,532 1,193,964,718 1,146,478,480 1,141,792,978
============= ============= ============= ============= =============
Net earnings (loss)
applicable to common
shareholders
(millions) ............ $ 5,409 $ 4,116 $ 2,937 $ (8,148) $ (4,965)
-- Net earnings (loss)
effect of interest
on 5 3/4% CGI
convertible bonds
(millions) ............ - 1 19 - -
_____________ _____________ _____________ _____________ ____________
Net earnings (loss)
on which fully
diluted earnings per
share is based
(millions) ............ $ 5,409 $ 4,117 $ 2,956 $ (8,148) $ (4,965)
============= ============= ============= ============= ============
Fully diluted
earnings (loss)
per share*............. $ 5.01 $ 3.53 $ 2.48 $ (7.11) $ (4.35)
Published earnings
(loss) per share*...... $ 5.12 $ 3.61 $ 2.51 $ (7.11) $ (4.35)
</TABLE>
____________________________
* Restated to reflect the two-for-one stock split of May 9, 1997.
** In 1993 and 1992, incremental shares under stock plans and the effect
of the convertible debentures and bonds were not considered for the
fully diluted earnings per share calculation due to their antidilutive
effect.
As such, the amounts reported for primary and fully diluted earnings
per share are the same.
<PAGE>
ATTACHMENT IV
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
(UNAUDITED)
FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in millions
except per share amounts)
For the year: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Revenue $ 75,947 $ 71,940 $ 64,052 $ 62,716 $ 64,523
Net earnings (loss) before
changes in accounting principles 5,429 4,178 3,021 (7,987) (6,865)
Per share of common stock* 5.12 3.61 2.51 (7.01) (6.01)
Effect of accounting changes** - - - (114) 1,900
Per share of common stock* - - - (.10) 1.66
Net earnings (loss) 5,429 4,178 3,021 (8,101) (4,965)
Per share of common stock* 5.12 3.61 2.51 (7.11) (4.35)
Cash dividends paid on common stock 686 572 585 905 2,765
Per share of common stock* .65 .50 .50 .79 2.42
Investment in plant, rental machines
and other property 5,883 4,744 3,078 3,232 4,698
Return on stockholders' equity 24.8% 18.5% 14.3% - -
At end of year:
Total assets $ 81,132 $ 80,292 $ 81,091 $ 81,113 $ 86,705
Net investment in plant, rental
machines and other property 17,407 16,579 16,664 17,521 21,595
Working capital 6,695 9,043 12,112 6,052 2,955
Total debt 22,829 21,629 22,118 27,342 29,320
Stockholders' equity 21,628 22,423 23,413 19,738 27,624
</TABLE>
* Restated to reflect the two-for-one stock split of May 9, 1997.
** 1993, postemployment benefits; 1992, income taxes.
<PAGE>
ATTACHMENT V
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
(UNAUDITED)
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
(Dollars in millions except
per share and stock prices)
Per Share Common Stock
Net
Gross Earnings Earnings Stock Prices#
Revenue Profit (Loss) (Loss) Dividends High Low
1996
<S> <C> <C> <C> <C> <C> <C> <C>
First quarter $ 16,559 $ 6,769 $ 774 $ .71* $ .125* $ 64.44* $ 41.56*
Second quarter 18,183 7,191 1,347 1.26* .175* 60.44* 48.06*
Third quarter 18,062 7,258 1,285 1.23* .175* 63.94* 44.56*
Fourth quarter 23,143 9,321 2,023 1.97* .175* 83.00* 61.56*
________ ________ _______ _______ ______
Total $ 75,947 $ 30,539 $ 5,429 $ 5.12** $ .65*
======== ======== ======= ======= ======
1995
First quarter $ 15,735 $ 6,664 $ 1,289 $ 1.06* $ .125* $ 42.56* $ 35.13*
Second quarter 17,531 7,631 1,716 1.49* .125* 49.69* 41.13*
Third quarter 16,754 6,921 (538) (.48)* .125* 57.31* 45.81*
Fourth quarter 21,920 9,151 1,711 1.54* .125* 51.19* 43.88*
________ ________ _______ _______ ______
Total $ 71,940 $ 30,367 $ 4,178 $ 3.61* $ .50*
======== ======== ======= ======= ======
</TABLE>
* Restated to reflect the two-for-one stock split of May 9, 1997.
** The sum of the quarter's earnings per share does not equal the year-
to-date earnings per share due to changes in average share calculations.
This in accordance with prescribed reporting requirements.
# The stock prices reflect the high and low prices for IBM's common stock
on the New York Stock Exchange composite tape for the last two years.
<PAGE>
EXHIBIT (3)(i)
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL BUSINESS MACHINES CORPORATION
Restated April 27, 1992
As Amended through May 2, 1997
<PAGE>
TABLE OF CONTENTS
Page
Article One
Name..................................................... 1
Article Two
Purposes & Powers........................................ 1
Article Three
Capital................................................... 1
Article Four
Shares................................................... 1
Article Five
Office................................................... 9
Article Six
Directors................................................ 9
Article Seven
Committees, Account Books,
Dividends, Qualification of
Directors, Payment of Directors.......................... 9
Article Eight
Contracts, Ratification.................................. 10
Article Nine
Agent for Service........................................ 10
Article Ten
Preemptive Rights........................................ 10
Article Eleven
Liability of Directors................................... 11
<PAGE>
Certificate of Incorporation
of
INTERNATIONAL BUSINESS MACHINES CORPORATION
ONE: The name of the corporation (hereinafter called "the
Corporation") is International Business Machines Corporation.
TWO: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized and to exercise powers granted
under the Business Corporation Law of the State of New York, provided that the
Corporation shall not engage in any act or activity requiring the consent or
approval of any state official, department, board, agency, or other body without
such consent or approval first being obtained.
THREE: The aggregate number of shares that the Corporation shall have
authority to issue is 2,025,000,000 shares, consisting of 1,875,000,000 shares
of the par value of $0.50 per share, which shall be designated "capital stock,"
and 150,000,000 shares of the par value of $.01 per share, which shall be
designated "preferred stock."
FOUR: (1) Subject to the provisions of the By-laws, as from time to time
amended, with respect to the closing of the transfer books and the fixing of a
record date, each share of the capital stock of the Corporation shall be
entitled to one vote on all matters requiring a vote of the stockholders and,
subject to the rights of the holders of any outstanding shares of preferred
stock issued under this Article FOUR, shall be entitled to receive such
dividends, in cash, securities, or property, as may from time to time be
declared by the Board of Directors. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
after payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled under this Article FOUR, the holders of
capital stock shall be entitled, to the exclusion of the holders of the
preferred stock of any series, to share ratably, according to the number of
shares held by them, in all remaining assets of the Corporation available for
distribution.
(2) The Board of Directors is authorized, at any time or from time to time, to
issue preferred stock and (I) to divide the shares of preferred stock into
series; (ii) to determine the designation for any such series by number, letter,
or title that shall distinguish such series from any other series of preferred
stock; (iii) to determine the number of shares in any such series (including a
determination that such series shall consist of a single share); and (iv) to
determine with respect to the shares of any series of preferred stock:
(a) whether the holders thereof shall be entitled to cumulative, noncumulative,
or partially cumulative dividends and, with respect to shares entitled to
dividends, the dividend rate or rates, including without limitation the methods
and procedures for determining such rate or rates, and any other terms and
conditions relating to such dividends;
(b) whether, and if so to what extent and upon what terms and conditions, the
holders thereof shall be entitled to rights upon the liquidation of, or upon any
1
<PAGE>
distribution of the assets of, the Corporation;
(c) whether, and if so upon what terms and conditions, such shares shall be
convertible into, or exchangeable for, other securities or property;
(d) whether, and if so upon what terms and conditions, such shares shall be
redeemable;
(e) whether the shares shall be subject to any sinking fund provided for the
purchase or redemption of such shares and, if so, the terms of such fund;
(f) whether the holders thereof shall be entitled to voting rights and, if so,
the terms and conditions for the exercise thereof, provided that the holders of
shares of preferred stock (i) will not be entitled to more than the lesser of
(x) one vote per $100 of liquidation value or (y) one vote per share, when
voting as a class with the holders of shares of capital stock, and (ii) will not
be entitled to vote on any matter separately as a class, except, to the extent
specified with respect to each series, (x) with respect to any amendment or
alteration of the provisions of this Certificate of Incorporation that would
adversely affect the powers, preferences, or special rights of the applicable
series of preferred stock or (y) in the event the Corporation fails to pay
dividends on any series of preferred stock in full for any six quarterly
dividend payment periods, whether or not consecutive, in which event the number
of directors may be increased by two and the holders of outstanding shares of
preferred stock then similarly entitled shall be entitled to elect the two
additional directors until full accumulated dividends on all such shares of
preferred stock shall have been paid; and
(g) whether the holders thereof shall be entitled to other preferences or rights
and, if so, the qualifications, limitations, or restrictions of such preferences
or rights.
(3) Provisions relating to the Series A 7-1/2% Preferred Stock.
(a) DESIGNATION, NUMBER, AND LIQUIDATION PREFERENCE. A series of preferred
stock is hereby designated "Series A 7-1/2% Preferred Stock". The number of
Shares constituting the Series A 7-1/2% Preferred Stock is 12,000,000. Shares
of the Series A 7-1/2% Preferred Stock shall have a par value of $.01 and a
liquidation preference of $100 per share. The number of authorized shares of
the Series A 7-1/2% Preferred Stock may be increased or decreased, in the
discretion of the Board of Directors, by amending this paragraph.
(b) DIVIDEND RATE.
(i) Shares of the Series A 7-1/2% Preferred Stock shall be entitled to receive
dividends at a fixed annual rate of $7.50 per share. Such dividends shall be
cumulative from the date of original issue of such shares and shall be payable,
when and as declared by the Board of Directors, quarterly for each of the
quarters ending March, June, September and December of each year, in arrears on
the first business day of each April, July, October and January, commencing July
1, 1993. Each such dividend shall be paid to the holders of record of shares of
the Series A 7-1/2% Preferred Stock as they appear on the stock register on the
applicable record date,
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which shall be the 15th day prior to the payment date thereof. Dividends on
account of arrears for any past dividend periods may be declared and paid at any
time, without reference to any regular dividend payment date, to holders of
record on such date as may be fixed by the Board of Directors which shall not
exceed 30 days preceding such dividend payment date thereof.
(ii) No dividends shall be declared or paid or set apart for payment on any
shares of any class or classes of stock of the Corporation or any series thereof
ranking, as to dividends, on a parity with or junior to the Series A 7-1/2%
Preferred Stock for any period unless full cumulative dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series A 7-1/2% Preferred
Stock for all dividend payment periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in full,
as aforesaid, upon the shares of the Series A 7-1/2% Preferred Stock and any
other shares of any class or classes of stock or series thereof ranking on a
parity as to dividends with the Series A 7-1/2% Preferred Stock, all dividends
declared upon shares of the Series A 7-1/2% Preferred Stock and any other shares
of such class or classes or series thereof ranking on a parity as to dividends
with the Series A 7-1/2% Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Series A 7-1/2% Preferred Stock
and such other shares shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of the Series A 7-1/2% Preferred Stock
and such other shares bear to each other. Holders of shares of the Series A 7-
1/2% Preferred Stock shall not be entitled to any dividend, whether payable in
cash, property or stock, in excess of full cumulative dividends, as herein
provided, on the Series A 7-1/2% Preferred Stock. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A 7-1/2% Preferred Stock which may be in arrears.
(iii) So long as any shares of the Series A 7-1/2% Preferred Stock are
outstanding, no dividend (other than a dividend in capital stock or in any other
shares ranking junior to the Series A 7-1/2% Preferred Stock as to dividends and
upon Liquidation (as defined in subsection (f)(i) and other than as provided in
paragraph (ii) of this subsection (b)) shall be declared or paid or set aside
for payment or other distribution declared or made upon the shares of capital
stock or upon any other shares ranking junior to or on a parity with the Series
A 7-1/2% Preferred Stock as to dividends or upon Liquidation, nor shall any of
the shares of capital stock or any other shares of the Corporation ranking
junior to or on a parity with the Series A 7-1/2% Preferred Stock as to
dividends or upon Liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by the Corporation (except by conversion
into or exchange for shares of the Corporation ranking junior to the Series A
7-1/2% Preferred Stock as to dividends and upon Liquidation) unless, in each
case, the full cumulative dividends on all outstanding shares of the Series A
7-1/2% Preferred Stock shall have been or contemporaneously are declared and
paid, or declared and a sum sufficient for payment thereof is set apart for
payment, for all past dividend payment periods.
(iv) Dividends payable on the Series A 7-1/2% Preferred Stock for any period
less than a full quarterly dividend period, and for the dividend period
beginning on the
3
<PAGE>
date of issuance of the shares of the Series A 7-1/2% Preferred Stock, shall be
computed on the basis of a 360-day year consisting of 12 30-day months. The
amount of dividends payable on shares of the Series A 7-1/2% Preferred Stock for
each full quarterly dividend period shall be computed by dividing by 4 the
annual rate per share set forth above in subsection (b)(i).
(c)REDEMPTION.
(i) The shares of the Series A 7-1/2% Preferred Stock shall not be redeemable
prior to July 1, 2001. On and after July 1, 2001, the Corporation, at its
option, may redeem shares of the Series A 7-1/2% Preferred Stock, as a whole or
in part, at any time or from time to time, at a redemption price per share of
$100 plus, in each case, accrued and unpaid dividends thereon to the date fixed
for redemption.
(ii) In the event that fewer than all the outstanding shares of the Series A
7-1/2% Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be redeemed
shall be determined by lot or pro rata as may be determined by the Board of
Directors or by any other method as may be determined by the Board of Directors
in its sole discretion to be equitable.
(iii) In the event the Corporation shall redeem shares of the Series A 7-1/2%
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 35 nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock register of the Depositary (as
provided in subsection (j)(iii) below). Each such mailed notice shall state:
(v) the redemption date; (w) the number of shares of the Series A 7-1/2%
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (x) the redemption price; (y) the place or places where certificates for
such shares are to be surrendered for payment of the redemption price; and (z)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date. No defect in the notice of redemption or in the mailing
thereof shall affect the validity of the redemption proceedings, and the failure
to give notice to any holder of shares of the Series A 7-1/2% Preferred Stock to
be so redeemed shall not affect the validity of the notice given to the other
holders of shares of the Series A 7-1/2% Preferred Stock to be so redeemed.
(iv) Notice having been mailed as aforesaid, then, notwithstanding that the
certificates evidencing the shares of the Series A 7-1/2% Preferred Stock shall
not have been surrendered, from and after the redemption date (unless default
shall be made by the Corporation in providing money for the payment of the
redemption price) dividends on the shares of the Series A 7-1/2% Preferred Stock
so called for redemption shall cease to accrue, and said shares shall no longer
be deemed to be outstanding, and all rights of the holders thereof as
stockholders (including dividend and voting rights) of the Corporation (except
the right to receive from the Corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors shall so require and the notice shall so state), such shares shall be
redeemed by the Corporation at the redemption price aforesaid. In
4
<PAGE>
case fewer than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
(v) Any shares of the Series A 7-1/2% Preferred Stock which shall at any time
have been redeemed shall, after such redemption, have the status of authorized
but unissued shares of preferred stock, without designation as to series until
such shares are once more designated as part of a particular series by the Board
of Directors.
(vi) Notwithstanding the foregoing provisions of this subsection (c), if any
dividends on the Series A 7-1/2% Preferred Stock are in arrears, no shares of
the Series A 7-1/2% Preferred Stock shall be redeemed unless all outstanding
shares of the Series A 7-1/2% Preferred Stock are simultaneously redeemed, and
the Corporation shall not purchase or otherwise acquire any shares of the Series
A 7-1/2% Preferred Stock; provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of the Series A 7-1/2% Preferred
Stock pursuant to a purchase or exchange offer made on the same terms to holders
of all outstanding shares of the Series A 7-1/2% Preferred Stock.
(d) CONVERSION. The holders of shares of the Series A 7-1/2% Preferred Stock
shall not have any rights herein to convert such shares into or exchange such
shares for shares of any other class or classes or of any other series of any
class or classes of stock of the Corporation.
(e) VOTING. The shares of the Series A 7-1/2% Preferred Stock shall not have
any voting powers either general or special, except as required by law and
except that:
(i) So long as any of the shares of the Series A 7-1/2% Preferred Stock are
outstanding, the consent of the holders of at least two-thirds of all the shares
of the Series A 7-1/2% Preferred Stock at the time outstanding, given in person
or by proxy, either in writing or by a vote at a meeting called for the purpose
at which the holders of shares of the Series A 7-1/2% Preferred Stock shall vote
together as a separate class, shall be necessary for authorizing, effecting or
validating the amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation or of any certificate amendatory thereof or
supplemental thereto (including any certificate of amendment or any similar
document relating to any series of preferred stock) which would adversely affect
the powers, preferences or special rights of the Series A 7-1/2% Preferred
Stock, including the creation or authorization of any class of stock that ranks
senior to the Preferred Stock with respect to dividends or upon Liquidation.
Any amendment or any resolution or action of the Board of Directors which would
create or issue any series of preferred stock out of the authorized shares of
preferred stock, or which would authorize, create or issue any shares or class
of stock (whether or not already authorized), ranking junior to or on a parity
with the Series A 7-1/2% Preferred Stock with respect to the payment of
dividends and distributions and distributions upon any Liquidation, shall not be
considered to affect adversely the powers, preferences or special rights of the
outstanding shares of the Series A 7-1/2% Preferred Stock;
(ii) In the event that the Corporation shall have failed to declare and pay or
set apart
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for payment in full the dividends accumulated on the outstanding shares of the
Series A 7-1/2% Preferred Stock for any six quarterly dividend payment periods,
whether or not consecutive, and all such preferred dividends remain unpaid (a
"Preferred Dividend Default"), the number of directors of the Corporation shall
be increased by two and the holders of outstanding shares of the Series A 7-1/2%
Preferred Stock, voting together as a class with all other series of preferred
stock then entitled to vote on the election of such directors, shall be entitled
to elect such two additional directors until the full dividends accumulated on
all outstanding shares of the Series A 7-1/2% Preferred Stock have been declared
and paid in full. Upon the occurrence of a Preferred Dividend Default, the
Board of Directors shall within 10 business days (any day other than a day which
is a Saturday, Sunday or legal holiday on which banks are open for business in
New York, New York) of such default call a special meeting of the holders of
shares of the Series A 7-1/2% Preferred Stock and all other holders of a series
of preferred stock who are then entitled to participate in the election of such
directors for the purpose of electing the additional directors provided by the
foregoing provisions; provided that, in lieu of holding such meeting, the
holders of record of a majority of the outstanding shares of the Series A 7-1/2%
Preferred Stock and all other series of preferred stock who are then entitled to
participate in the election of such directors may, by action taken by written
consent as permitted by law and this Certificate of Incorporation and the
By-laws of the Corporation, elect such additional directors. If and when all
accumulated dividends on the shares of the Series A 7-1/2% Preferred Stock have
been declared and paid or set aside for payment in full, the holders of shares
of the Series A 7-1/2% Preferred Stock shall be divested of the special voting
rights provided by this paragraph, subject to revesting in the event of each and
every subsequent Preferred Dividend Default. Upon termination of such special
voting rights attributable to all holders of shares of the Series A 7-1/2%
Preferred Stock and any other series of preferred stock, the term of office of
each director elected by the holders of shares of the Series A 7-1/2% Preferred
Stock and such parity stock (hereinafter referred to as a "Preferred Stock
Director") pursuant to such special voting rights shall forthwith terminate and
the number of directors of the Company shall, without further action, be reduced
by two, subject always to the increase in the number of directors pursuant to
the foregoing provisions in case of a future Preferred Dividend Default. Any
Preferred Stock Director may be removed at any time with or without cause by,
and shall not be removed otherwise than by, the vote of the holders of record of
a majority of the outstanding shares of the Series A 7-1/2% Preferred Stock and
all other series of preferred stock who were entitled to participate in such
Preferred Stock Director's election, voting as a separate class, at a meeting
called for such purpose or by written consent as permitted by law and this
Certificate of Incorporation and the By-laws of the Corporation. So long as a
Preferred Dividend Default shall continue, any vacancy in the office of a
Preferred Stock Director may be filled by written consent of the Preferred Stock
Director remaining in office or, if none remains in office, by vote of the
holders of record of a majority of the outstanding shares of the Series A 7-1/2%
Preferred Stock and all other series of preferred stock who are then entitled to
participate in the election of such Preferred Stock Directors as provided above.
As long as a Preferred Dividend Default shall continue, holders of shares of the
Series A 7-1/2% Preferred Stock shall not, as such stockholders, be entitled to
vote on the election or removal of directors other than Preferred Stock
Directors, but shall not be divested of any other voting rights provided to such
stockholders by law with respect to any other matter to be acted
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upon by the stockholders of the Corporation. The Preferred Stock Directors
shall each be entitled to one vote per director on any matter.
(f) LIQUIDATION RIGHTS.
(i) Upon the dissolution, liquidation or winding up of the affairs of the
Corporation, whether voluntary or involuntary (collectively, a "Liquidation"),
after payment or provision for payment has been made of the debts and other
liabilities of the Corporation and payment or provision for payment has been
made on all amounts required to be paid in respect of all outstanding shares of
any class or classes of stock of the Corporation or series thereof ranking
senior to the shares of the Series A 7-1/2% Preferred Stock, the holders of the
shares of the Series A 7-1/2% Preferred Stock shall be entitled, subject to
paragraph (iv) of this subsection (f), to receive out of the assets of the
Corporation, before any payment or distribution shall be made on capital stock
or on any other class of stock ranking junior to preferred stock upon
Liquidation, the amount of $100 per share, plus a sum equal to all dividends
(whether or not earned or declared) on such shares accrued and unpaid thereon to
the date of final distribution.
(ii) Neither the sale, transfer or lease of all or any part of the property or
business of the Corporation, nor the merger or consolidation of the Corporation
into or with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a Liquidation
for the purposes of this subsection (f).
(iii) After the payment to the holders of the shares of the Series A 7-1/2%
Preferred Stock of the full preferential amounts provided for in this subsection
(f), the holders of the Series A 7-1/2% Preferred Stock as such shall have no
right or claim to any of the remaining assets of the Corporation and the shares
of the Series A 7-1/2% Preferred Stock shall no longer be deemed to be
outstanding or be entitled to any other powers, preferences, rights or
privileges, including voting rights, and such shares shall be surrendered for
cancellation to the Corporation.
(iv) In the event the assets of the Corporation available for distribution to
the holders of shares of the Series A 7-1/2% Preferred Stock upon any
Liquidation shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to paragraph (i) of this subsection (f), no such
distribution shall be made on account of any shares of any series of preferred
stock ranking on a parity with the shares of the Series A 7-1/2% Preferred Stock
upon such Liquidation unless proportionate distributive amounts shall be paid on
account of the shares of the Series A 7-1/2% Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such Liquidation.
(g) PRIORITY. Any shares of any class or classes of the Corporation or series
thereof shall be deemed to rank:
(i) prior to the shares of the Series A 7-1/2% Preferred Stock, either as to
dividends or upon Liquidation, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
Liquidation of the Corporation, in preference or priority to the holder of
shares of the Series A 7-1/2% Preferred
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Stock;
(ii) on a parity with shares of the Series A 7-1/2% Preferred Stock, either as
to dividends or upon Liquidation, whether or not the dividend rates, dividend
payment dates or redemption or Liquidation prices per share or sinking fund
provisions, if any, be different from those of the Series A 7-1/2% Preferred
Stock, if the holders of such shares shall be entitled to the receipt of
dividends or of amounts distributable upon Liquidation of the Corporation, in
proportion to their respective dividend rates or Liquidation prices, without
preference or priority, one over the other, as between the holders of such
shares and the holders of shares of the Series A 7-1/2% Preferred Stock; and
(iii) junior to shares of the Series A 7-1/2% Preferred Stock, either as to
dividends or upon Liquidation, if such class is capital stock or if the holders
of shares of the Series A 7-1/2% Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon Liquidation of the Corporation, in
preference or priority to the holders of shares of such class or classes.
(h) SINKING OR RETIREMENT FUND. The shares of the Series A 7-1/2% Preferred
Stock shall not be entitled to the benefit of a sinking or retirement fund to be
applied to the purchase or redemption of such shares.
(i) DISTRIBUTION TO CAPITAL STOCK HOLDERS. Distribution of any of the Series A
7-1/2% Preferred Stock or any other series of preferred stock may, in the
discretion of the Board of Directors, be made to the holders of shares of
capital stock.
(j) MISCELLANEOUS.
(i) Subject to paragraph (iii) of subsection (c) above, all notices referred to
herein shall be in writing, and all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three business days after the
mailing thereof if sent by registered mail (unless first-class mail shall be
specifically permitted for such notice under the terms of this Certificate of
Incorporation) with postage prepaid, addressed: if to the Corporation, to its
offices at Old Orchard Road, Armonk, New York 10504 (Attention: Secretary), if
to the Depositary (as defined in paragraph (iii) below), to such holder at the
address of such holder as listed in the stock book (which may include the
records of the Depositary if appropriate); or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.
(ii) In the event a holder of shares of the Series A 7-1/2% Preferred Stock
shall not by written notice designate the name to whom payment upon redemption
of any shares of the Series A 7-1/2% Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to register such
shares, and make such payment, in the name of the holder of such shares as shown
on the records of the Corporation and to send the certificate or certificates
representing such shares, or such payment, to the address of such holder shown
on the records of the Corporation.
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(iii) First Chicago Trust Company of New York shall be appointed the depositary
(the "Depositary") for the shares of the Series A 7-1/2% Preferred Stock. The
Depositary shall act as transfer agent, registrar and dividend disbursing agent
for the shares of the Series A 7-1/2% Preferred Stock.
FIVE: The town and county within the State of New York in which the office
of the Corporation is to be located is the Town of North Castle, County of
Westchester.
SIX: The number of directors of the Corporation shall be provided in its
By-laws, but not less than 9 nor more than 25.
SEVEN: The Board of Directors may designate from their number an executive
committee and one or more other committees, each of which shall consist of three
or more directors. All such committees, in the intervals between meetings of
the Board of Directors and to the extent provided in the By-laws or the
resolution of the Board of Directors establishing such a committee, shall have
all the authority and may exercise all the powers of the Board of Directors in
the management of the business and affairs of the Corporation to the extent
lawful under the Business Corporation Law of the State of New York.
The Board of Directors shall from time to time decide whether and to what extent
and at what times and under what conditions and requirements the accounts and
books of the Corporation, or any of them, except the stock book, shall be open
to the inspection of the stockholders, and no stockholder shall have any right
to inspect any books or documents of the Corporation except as conferred by
statute of the State of New York or authorized by the Board of Directors.
The Board of Directors may from time to time fix, determine, and vary the amount
of the working capital of the Corporation; may determine what part, if any, of
surplus shall be declared in dividends and paid to the stockholders; may
determine the time or times for the declaration and payment of dividends, the
amount thereof, and whether they are to be in cash, securities, or properties;
may direct and determine the use and disposition of any surplus or net profits
over and above the capital, and in its discretion may use or apply any such
surplus or accumulated profits in the purchase or acquisition of bonds or other
pecuniary obligations of the Corporation to such extent, and in such manner and
upon such terms as the Board of Directors may deem expedient.
Directors shall be stockholders, subject to the power of the Board of Directors
from time to time to prescribe a reasonable time after qualification within
which newly elected directors must become stockholders.
Each director, in consideration of serving as such, shall be entitled to receive
from the Corporation such amount per annum or such fees for attendance at
meetings of the stockholders or of the Board of Directors or of committees of
the Board of Directors, or both, as the Board of Directors shall from time to
time determine, together with reimbursement for the reasonable expenses incurred
in connection with the performance of duties. Nothing herein contained shall
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
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EIGHT: In the absence of fraud, any director of the Corporation individually,
or any firm or association of which any director is a member, or any corporation
of which any director is an officer, director, stockholder, or employee, or in
which such director is pecuniarily or otherwise interested, may be a party to,
or may be pecuniarily or otherwise interested in, any contract, transaction, or
act of the Corporation, and
(1) Such contract, transaction, or act shall not be in any way invalidated or
otherwise affected by that fact,
(2) Any such director of the Corporation may be counted in determining the
existence of a quorum at any meeting of the Board of Directors or of any
committee thereof that shall authorize any such contract, transaction, or act,
but may not vote thereon, and
(3) No director of the Corporation shall be liable to account to the Corporation
for any profit realized by such director from or through any such contract,
transaction, or act; provided, however, that if any such director of the
Corporation is so interested either individually or as a member of a firm or
association, or as the holder of a majority of the stock of any class of a
corporation, the contract, transaction, or act shall be duly authorized or
ratified by a majority of the Board of Directors who are not so interested and
who know of such director's interest therein.
To the extent permitted by law, any contract, transaction, or act of the
Corporation or of the Board of Directors or of any committee thereof that shall
be ratified, whether before or after judgment rendered in a suit with respect to
such contract, transaction, or act, by the holders of a majority of the stock of
the Corporation having voting power at any annual meeting or at any special
meeting called for such purpose, shall be as valid and as binding as though
ratified by every stockholder of the Corporation and shall constitute a complete
bar to any such suit or to any claim of execution in respect of any such
judgment; provided, however, that any failure of the stockholders to approve or
ratify such contract, transaction, or act, when and if submitted, shall not be
deemed in any way to invalidate the same or to deprive the Corporation, its
directors, officers, or employees of its or their right to proceed with such
contract, transaction, or act.
NINE: The Secretary of State of the State of New York is designated as the
agent of the Corporation upon whom process in any action or proceeding against
it may be served, and the address within the State to which the Secretary of
State shall mail a copy of process in any action or proceeding against the
Corporation that may be served upon the Secretary of State is Armonk, New York
10504.
TEN: The holders of shares of the Corporation shall have no preemptive or
preferential right to subscribe for or purchase any shares of the Corporation or
any rights or options to purchase shares of the Corporation or any shares or
other securities convertible into or carrying rights or options to purchase
shares of the Corporation.
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ELEVEN: Pursuant to Section 402(b) of the Business Corporation Law of the
State of New York, the liability of the Corporation's directors to the
Corporation or its stockholders for damages for breach of duty as a director
shall be eliminated to the fullest extent permitted by the Business Corporation
Law of the State of New York, as it exists on the date hereof or as it may
hereafter be amended. No amendment to or repeal of this Article shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
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