<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
--------------------
Commission file number 1-9924
--------------------
Travelers Group Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
(212) 816-8000
(Registrant's telephone number, including area code)
--------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
Common stock outstanding as of April 30, 1997: 641,265,946
<PAGE>
Travelers Group Inc.
TABLE OF CONTENTS
------------------
Part I - Financial Information
<TABLE>
<CAPTION>
Item 1. Financial Statements: PAGE NO.
________
<S> <C>
Condensed Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 1997 and 1996 3
Condensed Consolidated Statement of Financial Position -
March 31, 1997 (Unaudited) and December 31, 1996 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Three Months Ended March 31, 1997 5
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements - (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II - Other Information
Item 1. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 29
Item 6. Exhibits and Reports on Form 8-K 30
Exhibit Index 31
Signatures 32
</TABLE>
2
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
- ------------------------------------------------------------ ----------------- ----------------
<S> <C> <C>
REVENUES
Insurance premiums $2,224 $1,256
Commissions and fees 877 888
Interest and dividends 1,568 1,126
Finance related interest and other charges 306 284
Principal transactions 264 278
Asset management and administration fees 376 317
Other income 313 366
- ------------------------------------------------------------ ----------------- ----------------
Total revenues 5,928 4,515
- ------------------------------------------------------------ ----------------- ----------------
EXPENSES
Policyholder benefits and claims 1,905 1,271
Non-insurance compensation and benefits 984 972
Insurance underwriting, acquisition and operating 805 506
Interest 653 497
Provision for consumer finance credit losses 72 68
Other operating 441 401
- ------------------------------------------------------------ ----------------- ----------------
Total expenses 4,860 3,715
- ------------------------------------------------------------ ----------------- ----------------
Income before income taxes and minority interest 1,068 800
Provision for income taxes (377) (280)
Minority interest, net of income taxes (49) -
- ------------------------------------------------------------ ----------------- ----------------
Net income $ 642 $ 520
============================================================ ================= ================
Net income per share of common stock
and common stock equivalents $ 0.96 $ 0.77
============================================================ ================= ================
Weighted average number of common shares outstanding
and common stock equivalents (millions) 646.5 637.5
============================================================ ================== ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions of dollars)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1997 1996
- --------------------------------------------------------------------------------- ---------------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents
(including $1,266 and $1,256 segregated under federal and other regulations) $ 1,776 $ 1,868
Investments and real estate held for sale:
Fixed maturities, primarily available for sale at market value
(amortized cost - $43,401 and $43,277) 43,192 43,998
Equity securities, at market (cost - $1,279 and $1,113) 1,296 1,157
Mortgage loans 3,750 3,812
Real estate held for sale 763 695
Policy loans 1,902 1,910
Short-term and other 5,878 5,173
- --------------------------------------------------------------------------------- ---------------------- -----------------
Total investments and real estate held for sale 56,781 56,745
- --------------------------------------------------------------------------------- ---------------------- -----------------
Securities borrowed or purchased under agreements to resell 26,545 25,280
Brokerage receivables 7,914 7,305
Trading securities owned, at market value 12,247 12,465
Net consumer finance receivables 8,247 7,885
Reinsurance recoverables 10,285 10,234
Value of insurance in force and deferred policy acquisition costs 2,646 2,563
Cost of acquired businesses in excess of net assets 2,902 2,933
Separate and variable accounts 9,353 9,023
Other receivables 5,440 4,869
Other assets 9,808 9,897
- --------------------------------------------------------------------------------- ---------------------- -----------------
Total assets $153,944 $151,067
================================================================================= ====================== =================
LIABILITIES
Investment banking and brokerage borrowings $ 3,752 $ 3,217
Short-term borrowings 2,112 1,557
Long-term debt 10,882 11,327
Securities loaned or sold under agreements to repurchase 26,588 24,449
Brokerage payables 4,690 5,809
Trading securities sold not yet purchased, at market value 8,634 8,378
Contractholder funds 13,666 13,621
Insurance policy and claims reserves 44,200 43,944
Separate and variable accounts 9,309 8,949
Accounts payable and other liabilities 15,211 14,702
- --------------------------------------------------------------------------------- ---------------------- -----------------
Total liabilities 139,044 135,953
- --------------------------------------------------------------------------------- ---------------------- -----------------
ESOP Preferred stock -- Series C (net of note guarantee of $17 and $35) 142 129
- --------------------------------------------------------------------------------- ---------------------- -----------------
TRV-obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely junior subordinated debt securities of TRV 1,000 1,000
- --------------------------------------------------------------------------------- ---------------------- -----------------
TAP-obligated mandatorily redeemable preferred securities of subsidiary trusts
holding solely junior subordinated debt securities of TAP 900 900
- --------------------------------------------------------------------------------- ---------------------- -----------------
STOCKHOLDERS' EQUITY
Preferred stock, at aggregate liquidation value 675 675
Common stock ($.01 par value; authorized shares: 1.5 billion;
issued shares: 1997 - 743,142,534 shares and 1996 - 743,082,134 shares) 7 7
Additional paid-in capital 7,433 7,217
Retained earnings 7,977 7,452
Treasury stock, at cost (1997 - 102,127,812 shares and 1996 - 105,503,401 shares) (2,614) (2,446)
Unrealized gain (loss) on investment securities (131) 469
Other, principally unearned compensation (489) (289)
- --------------------------------------------------------------------------------- ---------------------- -----------------
Total stockholders' equity 12,858 13,085
- --------------------------------------------------------------------------------- ---------------------- -----------------
Total liabilities and stockholders' equity $153,944 $151,067
================================================================================= ====================== =================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(In millions of dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997 Amount Shares
- --------------------------------------------------------------------------------- --------------------- ---------------------
PREFERRED STOCK, AT AGGREGATE LIQUIDATION VALUE (in thousands)
<S> <C> <C>
Balance, beginning of year $ 675 8,700
- --------------------------------------------------------------------------------- ---------------------- -----------------
Balance, end of period 675 8,700
================================================================================= ===================== =====================
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 7,224 743,082
Issuance of shares pursuant to employee benefit plans 215
Other 1 61
- --------------------------------------------------------------------------------- --------------------- ---------------------
Balance, end of period 7,440 743,143
- --------------------------------------------------------------------------------- --------------------- ---------------------
RETAINED EARNINGS
Balance, beginning of year 7,452
Net income 642
Common dividends (96)
Preferred dividends (21)
- --------------------------------------------------------------------------------- ---------------------
Balance, end of period 7,977
- --------------------------------------------------------------------------------- ---------------------
TREASURY STOCK, AT COST
Balance, beginning of year (2,446) (105,503)
Issuance of shares pursuant to employee benefit plans, net of shares
tendered for payment of option exercise price and withholding taxes 74 8,016
Treasury stock acquired (242) (4,641)
- --------------------------------------------------------------------------------- --------------------- ---------------------
Balance, end of period (2,614) (102,128)
- --------------------------------------------------------------------------------- --------------------- ---------------------
UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Balance, beginning of year 469
Net change in unrealized gains and losses on investment securities, net of tax (600)
- --------------------------------------------------------------------------------- ---------------------
Balance, end of period (131)
- --------------------------------------------------------------------------------- ---------------------
OTHER, PRINCIPALLY UNEARNED COMPENSATION
Balance, beginning of year (289)
Issuance of restricted stock, net of amortization (198)
Other (2)
- --------------------------------------------------------------------------------- ---------------------
Balance, end of period (489)
- --------------------------------------------------------------------------------- ---------------------
TOTAL COMMON STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING $12,183 641,015
================================================================================= ===========================================
TOTAL STOCKHOLDERS' EQUITY $12,858
================================================================================= =====================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In millions of dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997 1996
- -------------------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income taxes and minority interest $ 1,068 $ 800
Adjustments to reconcile income before income
taxes and minority interest to net cash provided by (used in) operating
activities:
Amortization of deferred policy acquisition costs and value of insurance in force 354 190
Additions to deferred policy acquisition costs (446) (231)
Depreciation and amortization 92 87
Provision for consumer finance credit losses 72 68
Changes in:
Trading securities, net 474 1,084
Securities borrowed, loaned and repurchase agreements, net 874 295
Brokerage receivables net of brokerage payables (1,728) (2,110)
Insurance policy and claims reserves 313 (153)
Other, net (435) 1,179
- -------------------------------------------------------------------------------------- -------------------- --------------------
Net cash provided by (used in) operations 638 1,209
Income taxes paid (172) (178)
- -------------------------------------------------------------------------------------- -------------------- --------------------
Net cash provided by (used in) operating activities 466 1,031
- -------------------------------------------------------------------------------------- -------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Consumer loans originated or purchased (1,044) (609)
Consumer loans repaid or sold 666 599
Purchases of fixed maturities and equity securities (7,083) (5,456)
Proceeds from sales of investments and real estate:
Fixed maturities available for sale and equity securities 6,278 4,035
Mortgage loans 23 110
Real estate and real estate joint ventures 16 56
Proceeds from maturities of investments:
Fixed maturities 874 641
Mortgage loans 149 195
Other investments, primarily short-term, net (579) (294)
Other, net (121) (124)
- -------------------------------------------------------------------------------------- -------------------- --------------------
Net cash provided by (used in) investing activities (821) (847)
- -------------------------------------------------------------------------------------- -------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (117) (99)
Treasury stock acquired (242) (164)
Stock tendered for payment of withholding taxes (97) (87)
Issuance of long-term debt 316 650
Payments and redemptions of long-term debt (742) (210)
Net change in short-term borrowings (including investment banking and brokerage 1,090 (532)
borrowings)
Contractholder fund deposits 798 802
Contractholder fund withdrawals (727) (1,085)
Other, net (16) 92
- -------------------------------------------------------------------------------------- -------------------- --------------------
Net cash provided by (used in) financing activities 263 (633)
- -------------------------------------------------------------------------------------- -------------------- --------------------
Change in cash and cash equivalents (92) (449)
Cash and cash equivalents at beginning of period 1,868 1,866
- -------------------------------------------------------------------------------------- -------------------- --------------------
Cash and cash equivalents at end of period $ 1,776 $ 1,417
- -------------------------------------------------------------------------------------- -------------------- --------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 613 $ 491
====================================================================================== ==================== ====================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
The accompanying condensed consolidated financial statements as of March
31, 1997 and for the three-month periods ended March 31, 1997 and 1996 are
unaudited and include the accounts of Travelers Group Inc. (TRV) and its
subsidiaries (collectively, the Company). In the opinion of management all
adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation have been reflected. The accompanying condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's Annual Report to Stockholders for the year ended December 31,
1996.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles, but is not required for interim reporting purposes, has been
condensed or omitted.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
On April 2, 1996, Travelers Property Casualty Corp. (TAP), an indirect
majority-owned subsidiary of the Company, purchased from Aetna Services
Inc. all of the outstanding capital stock of The Aetna Casualty and Surety
Company and The Standard Fire Insurance Company (collectively, Aetna P&C)
for approximately $4.2 billion in cash. This acquisition was financed in
part by the issuance by TAP of common stock resulting in a minority
interest in TAP of approximately 18%. The acquisition was accounted for
under the purchase method of accounting and, accordingly, the condensed
consolidated financial statements include the results of Aetna P&C's
operations only from the date of acquisition.
2. AETNA P&C ACQUISITION - PRO FORMA RESULTS OF OPERATIONS
-------------------------------------------------------
The following unaudited pro forma information presents the results of
operations of the Company and Aetna P&C for the three months ended March
31, 1996, with pro forma adjustments as if the acquisition and transactions
related to the funding of the acquisition had been consummated as of the
beginning of the period presented. This pro forma information is not
necessarily indicative of what would have occurred had the acquisition and
related transactions been made on the date indicated, or of future results
of the Company.
Three Months Ended
March 31, 1996*
---------------------------
(in millions, except per share data)
Revenues $6,115
Net income $ 651
Net income per common share $ 0.98
* Historical results of Aetna P&C for the first quarter of 1996 include
$307 million ($200 million after tax) of realized investment gains.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
3. CHANGES IN ACCOUNTING PRINCIPLES AND ACCOUNTING STANDARDS NOT YET ADOPTED
-------------------------------------------------------------------------
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS No. 125). This
Statement establishes accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. These
standards are based on an approach that focuses on control. Under this
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS No. 125 provides
standards for distinguishing transfers of financial assets that are sales
from transfers that are secured borrowings. The requirements of FAS No. 125
are effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and are
to be applied prospectively. However, in December 1996 the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125," which delays until January 1, 1998 the effective
date for certain provisions. Earlier or retroactive application is not
permitted. The adoption of the provisions of this statement effective
January 1, 1997 did not have a material impact on results of operations,
financial condition or liquidity, and the Company is currently evaluating
the impact of the provisions whose effective date has been delayed until
January 1, 1998.
4. EARNINGS PER SHARE
------------------
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (FAS No. 128). This Statement
establishes standards for computing and presenting earnings per share (EPS)
and applies to entities with publicly held common stock. This Statement
simplifies the standards for computing earnings per share previously found
in Accounting Principles Board Opinion No. 15, "Earnings per Share"
(Opinion 15), and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic EPS.
It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised.
FAS No. 128 supersedes Opinion 15 and related accounting interpretations
and is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. However, an entity is permitted to disclose pro forma amounts
computed using this Statement in the notes to the financial statements in
periods prior to required adoption.
On a pro forma basis, for the three months ended March 31, 1997 and 1996
basic EPS is $1.01 and $0.81, respectively, and diluted EPS is $0.96 and
$0.77, respectively.
8
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
5. DEBT
----
Investment banking and brokerage borrowings consisted of the following:
(millions) MARCH 31, 1997 December 31, 1996
---------- --------------- -----------------
Commercial paper $3,421 $3,028
Bank loans and other borrowings 331 189
------------ -----------
$3,752 $3,217
============ ===========
Investment banking and brokerage borrowings are short term and include
commercial paper and bank loans and other borrowings used to finance Smith
Barney Holdings Inc.'s (Smith Barney) operations, including the securities
settlement process. The bank loans and other borrowings bear interest at
variable rates based primarily on the Federal Funds interest rate. Smith
Barney, through its subsidiary Smith Barney Inc., has a commercial paper
program that consists of both discounted and interest-bearing paper.
Smith Barney also has substantial borrowing arrangements consisting of
facilities that it has been advised are available, but where no
contractual lending obligation exists.
Short-term borrowings consisted of commercial paper outstanding as follows:
(millions) MARCH 31, 1997 December 31, 1996
---------- -------------- -----------------
Commercial Credit Company $2,112 $1,482
Travelers Property Casualty Corp. - 25
The Travelers Insurance Company - 50
------------ -----------
$2,112 $1,557
============ ===========
TRV, Commercial Credit Company (CCC), TAP and The Travelers Insurance
Company (TIC) issue commercial paper directly to investors. Each maintains
unused credit availability under its respective bank lines of credit at
least equal to the amount of its outstanding commercial paper. Each may
borrow under its revolving credit facilities at various interest rate
options and compensates the banks for the facilities through commitment
fees.
TRV, CCC and TIC have a five-year revolving credit facility with a
syndicate of banks to provide $1.0 billion of revolving credit, to be
allocated to any of TRV, CCC or TIC. The participation of TIC in this
agreement is limited to $250 million. This facility expires in June 2001.
Currently, $100 million is allocated to TRV, $850 million to CCC and $50
million to TIC. Under this facility TRV is required to maintain a certain
level of consolidated stockholders' equity (as defined in the agreement).
At March 31, 1997, this requirement was exceeded by approximately $4.5
billion. At March 31, 1997, there were no borrowings outstanding under this
facility.
As of May 6, 1997 CCC also has a committed and available revolving credit
facility on a stand-alone basis of $2.4 billion, which expires in May 2002.
CCC is limited by covenants in its revolving credit agreements as to the
amount of dividends and advances that may be made to its parent or its
affiliated companies. At March 31, 1997, CCC would have been able to remit
$315 million to its parent under its most restrictive covenants.
TAP has a five-year revolving credit facility in the amount of $500 million
with a syndicate of banks that expires in December 2001. Under this
facility TAP is required to maintain a certain
9
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
level of consolidated stockholders' equity (as defined in the agreement).
At March 31, 1997, this requirement was exceeded by approximately $3.0
billion. At March 31, 1997, there were no borrowings outstanding under this
facility.
Long-term debt, including its current portion, consisted of the following:
(millions) MARCH 31, 1997 December 31, 1996
---------- -------------- -----------------
Travelers Group Inc. $1,699 $1,903
Commercial Credit Company 5,400 5,750
Smith Barney Holdings Inc. 2,485 2,369
Travelers Property Casualty Corp. 1,249 1,249
The Travelers Insurance Group Inc. 49 56
------------ -----------
$10,882 $11,327
============ ===========
During the first three months of 1997, Smith Barney issued $316 million
of notes with varying interest rates and maturities.
Smith Barney has a $1.0 billion revolving credit agreement with a bank
syndicate that extends through May 1999, and has a $500 million, 364-day
revolving credit agreement that extends through May 1997. Any amounts
outstanding on the 364-day revolving credit agreement's termination date of
May 1997 are due in May 1998. At March 31, 1997, there were no borrowings
outstanding under either facility.
Smith Barney is limited by covenants in its revolving credit facility as to
the amount of dividends that may be paid to TRV. The amount of dividends
varies based upon, among other things, levels of net income of Smith
Barney. At March 31, 1997, Smith Barney would have been able to remit
approximately $718 million to TRV under its most restrictive covenants.
TIC is subject to various regulatory restrictions that limit the maximum
amount of dividends available to its parent without prior approval of the
Connecticut Insurance Department. A maximum of $507 million of statutory
surplus is available in 1997 for such dividends without Department
approval, of which $100 million has been paid during the first quarter of
1997.
TAP's insurance subsidiaries are subject to various regulatory restrictions
that limit the maximum amount of dividends available to be paid to their
parent without prior approval of insurance regulatory authorities. Dividend
payments to TAP from its insurance subsidiaries are limited to $647 million
in 1997 without prior approval of the Connecticut Insurance Department. TAP
has received $80 million of dividends from its insurance subsidiaries
during the first three months of 1997.
6. CONTINGENCIES
-------------
Certain subsidiaries of the Company are in arbitration with underwriters at
Lloyd's of London (Lloyd's) in New York State to enforce reinsurance
contracts with respect to recoveries for certain asbestos claims. The
dispute involves the ability to aggregate asbestos claims under a market
agreement between Lloyd's and those subsidiaries or under the applicable
reinsurance treaties. The Company believes that the outcome of the
arbitration is not likely to have a material adverse effect on its results
of operations, financial condition or liquidity.
10
<PAGE>
Notes to Condensed Consolidated Financial Statements (continued)
It is difficult to estimate the reserves for environmental and
asbestos-related claims due to the vagaries of court coverage decisions,
plaintiffs' expanded theories of liability, the risks inherent in major
litigation and other uncertainties. Conventional actuarial techniques are
not used to estimate such reserves.
The reserves carried for environmental and asbestos claims at March 31,
1997 are the Company's best estimate of ultimate claims and claim
adjustment expenses based upon known facts and current law. However, the
conditions surrounding the final resolution of these claims continues to
change. Currently, it is not possible to predict changes in the legal and
legislative environment and their impact on the future development of
asbestos and environmental claims. Such development will be affected by
future court decisions and interpretations and changes in legislation.
Because of these future unknowns, additional liabilities may arise
for amounts in excess of the current reserves. These additional
amounts, or a range of these additional amounts, cannot now be reasonably
estimated, and could result in a liability exceeding reserves by an amount
that would be material to the Company's operating results in a future
period. However, the Company believes that it is not likely that these
claims will have a material adverse effect on the Company's financial
condition or liquidity.
In the ordinary course of business TRV and/or its subsidiaries are also
defendants or co-defendants in various litigation matters, other than
those described above. Although there can be no assurances, the
Company believes, based on information currently available, that the
ultimate resolution of these legal proceedings would not be likely to have
a material adverse effect on the Company's results of operations, financial
condition or liquidity.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended March 31,
----------------------------------
(In millions, except per share amounts) 1997 1996
- ----------------------------------------------------------------------------
Revenues $5,928 $4,515
============== =============
Net income $ 642 $ 520
============== ==============
Earnings per share:
Net income $ 0.96 $ 0.77
============== =============
Weighted average number of
common shares outstanding
and common stock equivalents 646.5 637.5
============== =============
ACQUISITION
As discussed in Note 1 of Notes to the Condensed Consolidated Financial
Statements, on April 2, 1996, Travelers Property Casualty Corp. (TAP), an
indirect majority-owned subsidiary of Travelers Group Inc. (TRV), completed the
acquisition of the domestic property and casualty insurance subsidiaries of
Aetna Services Inc. (Aetna P&C) for approximately $4.2 billion in cash. This
acquisition was financed in part by the issuance by TAP of common stock
resulting in a minority interest in TAP of approximately 18%. The acquisition
was accounted for under the purchase method of accounting and, accordingly, the
condensed consolidated financial statements include the results of Aetna P&C's
operations only from the date of acquisition. TAP also owns The Travelers
Indemnity Company (Travelers Indemnity). Travelers Indemnity along with Aetna
P&C are the primary vehicles through which the Company engages in the property
and casualty insurance business.
RESULTS OF OPERATIONS
Consolidated net income for the quarter ended March 31, 1997 was $642 million,
and includes reported investment portfolio gains of $9 million after tax and
minority interest. This compares with net income of $520 million in the 1996
period, which included reported investment portfolio gains of $40 million after
tax. Excluding portfolio gains and losses, net income for the first quarter of
1997 was 32% above the comparable period in 1996, primarily reflecting increased
earnings in the insurance operations, the inclusion of the post-acquisition
results of operations of Aetna P&C and improved performance at Smith Barney.
12
<PAGE>
The following discussion presents in more detail each segment's performance.
SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
------------------------------------------------------------------
INVESTMENT SERVICES
Three Months Ended March 31,
-----------------------------------------------
1997 1996
- ------------------------------------------------------------------------
(millions) REVENUES NET INCOME Revenues Net Income
- ------------------------------------------------------------------------
Smith Barney $2,105 $239 $1,957 $224
========================================================================
SMITH BARNEY
Smith Barney reported net income of $239 million for the three months ended
March 31, 1997 as strong market activity prevailed through much of the quarter
before slowing in March. This represented a 7% increase over the $224 million
reported in the 1996 first quarter. Smith Barney's return on equity of 33.8% for
the first quarter of 1997 continues to be among the highest of its industry peer
group. Pre-tax profit margins increased to 24.2% in the first quarter of 1997,
up from 22.8% in the comparable prior year period.
SMITH BARNEY REVENUES
Three Months ended March 31,
--------------------------------
(millions) 1997 1996
- ------------------------------------------------------------------------------
Commissions $607 $605
Asset management and administration fees 376 317
Investment banking 264 277
Principal transactions 264 278
Interest income, net* 117 95
Other income 33 35
==============================================================================
Net revenues* $1,661 $1,607
==============================================================================
* Net of interest expense of $444 million and $350 million for the
three-month period ended March 31, 1997 and 1996, respectively. Revenues
included in the condensed consolidated statement of income are before
deductions for interest expense.
Revenues, net of interest expense, increased 3% to $1.661 billion for the 1997
first quarter compared to $1.607 billion in the 1996 first quarter. Commission
revenues were $607 million in the 1997 first quarter, slightly ahead of the $605
million in the 1996 comparable period, reflecting strong activity in listed and
over-the-counter securities, partially offset by declines in options and mutual
fund commissions. Annualized retail gross production per Financial Consultant
rose 8% to a record $392,000. Smith Barney currently has a sales force of
approximately 10,500 registered Financial Consultants working out of 443
domestic retail offices.
Asset management and administration fees rose 19% to a record $376 million,
reflecting broad growth in all recurring fee-based products -- led by a 30%
increase in managed accounts, a 24% increase in Consulting Group revenues, and a
10% increase in mutual fund and money market fund revenues. At March 31, 1997
internally managed assets reached a record $115.5 billion, and total fee-based
assets
13
<PAGE>
under management were a record $162.5 billion, up 13% and 16%, respectively,
from the comparable 1996 period.
Investment banking revenues totaled $264 million, a 5% decline over the
comparable 1996 period, primarily reflecting lower investment banking advisory
fees. Underwriting revenues were unchanged from the comparable 1996 period with
a decline in equity underwritings offset by an increase in fixed income and
other underwritings.
Principal transaction revenues were $264 million in the first quarter of 1997, a
5% decline over the comparable 1996 period, primarily because of a decline in
taxable fixed income and equity trading, that was offset to some extent by an
increase in municipal trading.
Net interest income reached $117 million, up 23% over the comparable 1996
period. The increase is primarily due to increased margin lending to clients and
increased taxable fixed income inventories.
Total expenses, excluding interest, increased less than 2% to $1.260 billion in
the 1997 first quarter from $1.240 billion in the comparable 1996 period.
Smith Barney's ratio of non-compensation expenses to net revenues was 20.7%
for the first quarter of 1997 compared to 20.3% in the comparable 1996
period. Smith Barney's ratio of compensation and benefit expense declined to
55.1% of net revenues, from 56.8% in the prior year period.
Smith Barney's business is significantly affected by the levels of activity in
the securities markets, which in turn are affected by the level and trend of
interest rates, the general state of the economy and the national and worldwide
political environments, among other factors. An increasing interest rate
environment could have an adverse impact on Smith Barney's businesses, including
commissions (which are linked in part to the economic attractiveness of
securities relative to time deposits) and investment banking (which is affected
by the relative benefit to corporations and public entities of issuing public
debt and/or equity versus other avenues for raising capital). Such effects,
however, could be at least partially offset by a strengthening U.S. economy that
would include growth in the business sector -- accompanied by an increase in the
demand for capital -- and an increase in the capacity of individuals to invest.
A declining interest rate environment could favorably impact Smith Barney's
business. Smith Barney's asset management business provides a more predictable
and steady income stream than its other businesses. Smith Barney continues to
maintain tight expense controls which management believes will help the firm
weather periodic downturns in market conditions.
Smith Barney's principal business activities are, by their nature, highly
competitive and subject to various risks, particularly volatile trading markets
and fluctuations in the volume of market activity. While higher volatility can
increase risk, it can also increase order flow, which drives many of Smith
Barney's businesses. Other market and economic conditions, and the size, number
and timing of transactions may also impact net income. As a result, revenues and
profitability can vary significantly from year to year, and from quarter to
quarter.
Note 19 of Notes to Consolidated Financial Statements included in the Company's
1996 Annual Report describes Smith Barney's activities in derivative financial
instruments, which are used primarily to facilitate customer transactions.
14
<PAGE>
ASSETS UNDER MANAGEMENT
At March 31,
----------------------
(billions) 1997 1996
------------------------------------------------------------
Smith Barney $115.5 $102.2
Travelers Life and Annuity (1) 21.4 21.6
------------------------------------------------------------
Total Assets Under Management (2) $136.9 $123.8
============================================================
(1) Part of the Life Insurance Services segment.
(2) Excludes assets under management at RCM Capital Management of $24.9 billion
in 1996 (sold in June 1996).
CONSUMER FINANCE SERVICES
Three Months Ended March 31,
---------------------------------------------------
(millions) 1997 1996
- ------------------------------------------------------------------------------
REVENUES NET INCOME Revenues Net income
- ------------------------------------------------------------------------------
Consumer Finance Services $377 $47 $348 $56
==============================================================================
Earnings in the first quarter of 1997 were lower than the comparable
period in 1996, as expected -- reflecting a higher provision for loan
losses in the 1997 quarter and favorable insurance experience in the 1996
quarter.
Consumer finance receivables, net of unearned finance charges grew $375.5
million during the first quarter of 1997, which represents an annualized growth
rate of 19%. This growth occurred primarily in real estate loans generated
through the Company's 857 branch office network and through Primerica Financial
Services (PFS).
Total net receivables were a record $8.447 billion at March 31, 1997, a 16%
increase from the prior year. The average yield, at 14.65%, was lower than the
1996 quarter's yield of 15.43%, mainly because of a shift in the portfolio mix
toward lower-risk / lower margin real estate loans. Sales of real estate-secured
($.M.A.R.T.--SM) loans sold exclusively through PFS continued at record levels
during the quarter. Travelers Bank credit card outstandings were $972 million,
up from $907 million at year-end 1996, as a result of strong credit card
originations.
Delinquencies in excess of 60 days were 2.25% as of March 31, 1997 -- lower
than the 2.38% at the end of 1996 and slightly higher than the 2.21% at the
end of the first quarter of 1996. The charge-off rate remained relatively
flat at 2.95%, compared to the 1996 fourth quarter, but was higher than the
comparable 1996 period's rate of 2.87%. This continues to reflect a high
level of personal bankruptcies throughout the credit industry. Reserves as a
percentage of net receivables remained at 2.97%, unchanged from year-end 1996
but up from 2.88% in the 1996 first quarter.
15
<PAGE>
As of, or for, the
Three Months Ended March 31,
---------------------------------------
1997 1996
---------------------------------------
Allowance for credit losses as % of
net outstandings 2.97% 2.88%
Charge-off rate for the period 2.95% 2.87%
60 + days past due on a contractual
basis as a % of gross consumer
finance receivables at quarter end 2.25% 2.21%
LIFE INSURANCE SERVICES
Three Months Ended March 31,
---------------------------------------------
1997 1996
---------------------------------------------
(millions) REVENUES NET INCOME Revenues Net income
- --------------------------------------------------------------------------------
Travelers Life and Annuity (1) $618 $ 105 $577 $ 86
Primerica Financial Services (2) 375 79 355 71
- --------------------------------------------------------------------------------
Total Life Insurance Services $993 $184 $932 $157
================================================================================
(1) Net income includes $4 million and $3 million, respectively, of reported
investment portfolio gains.
(2) Net income includes $1 million and $6 million, respectively, of reported
investment portfolio gains.
TRAVELERS LIFE AND ANNUITY
Travelers Life and Annuity consists of annuity, life and health products
marketed by The Travelers Insurance Company (TIC) under the Travelers name.
Among the range of products offered are fixed and variable deferred annuities,
payout annuities and term, universal and variable life and long-term care
insurance to individuals and small businesses. It also provides group pension
products, including guaranteed investment contracts, and group annuities to
employer-sponsored retirement and savings plans. These products are primarily
marketed through The Copeland Companies (Copeland), an indirect wholly owned
subsidiary of TIC, Smith Barney Financial Consultants and a nationwide network
of independent agents. The majority of the annuity business and a substantial
portion of the life business written by Travelers Life and Annuity is accounted
for as investment contracts, with the result that the premium deposits collected
are not included in revenues.
Earnings before portfolio gains increased 22% to $101 million in the first
quarter of 1997, from $83 million in the comparable 1996 period. Improved
earnings were largely driven by strong investment income, reflecting
repositioning of the investment portfolio over the past year. Earnings growth
attributable to strong sales of recently introduced products -- including less
capital-intensive variable life insurance and annuities -- was partially offset
by the gradual decline in the amount of higher margin business written several
years ago.
Deferred annuity policyholder account balances and benefit reserves at March 31,
1997 were $13.5 billion compared to $11.7 billion at March 31, 1996. Net written
premiums and deposits were $573.8
16
<PAGE>
million in the first quarter of 1997, up 18% from $487.7 million in the 1996
first quarter. Strong sales through Copeland, Smith Barney and a nationwide
network of independent agents, reflect the company's ongoing effort to build
market share by strengthening relationships in key distribution channels.
Future sales may also benefit from Moody's recently announced upgrade of
The Travelers Insurance Company's financial strength rating to Aa3.
Payout and group annuity net premiums and deposits (excluding those of
affiliates) totaled $647.2 million in the first quarter of 1997, up 35% from
$478.9 million in the first quarter of 1996, reflecting significantly higher
sales of variable rate guaranteed investment contracts. Policyholder account
balances and reserves declined to $11.1 billion at March 31, 1997, down from
$11.7 billion at March 31, 1996, but up $0.2 billion from year-end 1996,
reflecting the run-off of low margin guaranteed investment contracts written
in prior years offset by the strong sales of new variable rate guaranteed
investment contracts.
Face amount of individual life insurance issued during the first quarter of 1997
was $1.5 billion, even with the first quarter of 1996, bringing total life
insurance in force to $50.5 billion at March 31, 1997. Direct written premiums
and deposits (excluding single premium policies) for individual life insurance
were $73.1 million, up 5% in the first quarter of 1997 as compared to $69.9
million in the first quarter of 1996.
Net written premiums for the growing long-term care insurance line were $43.9
million in the first quarter of 1997, compared to $27.7 million in the first
quarter of 1996 as a result of record sales during the quarter, which improved
55% over the 1996 period.
PRIMERICA FINANCIAL SERVICES
Earnings before portfolio gains for the first quarter of 1997 increased 20% to
$78 million from $65 million in the 1996 first quarter, reflecting significantly
higher sales of mutual funds and consumer loans as well as continued growth in
life insurance in force and favorable mortality experience.
Face amount of new term life insurance sales was $12.0 billion in the first
quarter of 1997, relatively even with the $12.3 billion in the comparable 1996
quarter but lower than the $13.1 billion in the fourth quarter of 1996. Life
insurance in force reached $361.5 billion at March 31, 1997, up from $350.4
billion at March 31, 1996, and continued to reflect good policy persistency.
Sales of mutual funds (at net asset value) were $722 million for the first
quarter of 1997, a 27% increase over first quarter 1996 sales of $567
million, reflecting strong customer demand in the U.S. and Canada. Nearly 32%
of U.S. sales were from the Smith Barney products, predominantly The Concert
Series--SM, which PFS first introduced to its market in March 1996. Net
receivables from $.M.A.R.T.--SM and $.A.F.E.--SM consumer loans continued to
advance to $1.696 billion at the end of the first quarter of 1997, up 11%
from $1.524 billion at the end of the 1996 fourth quarter and up 34% from
$1.268 billion at the end of the 1996 first quarter. Earnings and assets
relating to these consumer loans are included in the Consumer Finance
segment. The PFS Secure--SM home and auto insurance products -- issued
through TAP -- continue to experience growth in applications and policies,
and as of March 31, 1997, had been introduced in 37 states and was sold
through 7,094 agents licensed to sell the product.
17
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------
(millions) 1997 1996
- -------------------------------------------------------------------------------------------------
NET Net
REVENUES INCOME Revenues income
(LOSS) (loss)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial (1) (2) $ 1,624 $201 $ 805 $ 94
Personal (1) (3) 805 105 373 22
Financing costs and other (1) 2 (33) - -
Minority interest - (49) - -
- -------------------------------------------------------------------------------------------------
Total Property & Casualty Insurance Services $2,431 $224 $1,178 $116
=================================================================================================
</TABLE>
(1) Before minority interest.
(2) Net income includes $8 million and $21 million, respectively, of
reported investment portfolio gains.
(3) Net income includes $3 million of reported investment portfolio losses in
1997.
Segment earnings exclude the property and casualty operations of Aetna P&C prior
to its acquisition on April 2, 1996. Certain production statistics related to
Aetna P&C operations are provided for comparative purposes for periods prior to
April 2, 1996 and are not reflected in such prior period revenues or operating
results.
For purposes of computing GAAP combined ratios, fee income is now allocated as a
reduction of losses and loss adjustment expenses and other underwriting
expenses. Previously fee income was included with premiums for purposes of
computing GAAP combined ratios. The 1996 GAAP combined ratios have been restated
to conform to the current year's presentation.
GAAP combined ratios differ from statutory combined ratios primarily due to the
deferral and amortization of certain expenses for GAAP reporting purposes only.
COMMERCIAL LINES
Earnings before portfolio gains/losses increased 166% to $193 million in the
first quarter of 1997 from $73 million in the first quarter of 1996, primarily
reflecting the post-acquisition results of operations of Aetna P&C and the
benefits of expense reduction initiatives associated with the integration of the
two companies.
Catastrophe losses, after taxes and reinsurance, in the first quarter of 1997
were $4.9 million (primarily related to tornadoes in the Midwest), compared to
catastrophe losses of $6.0 million in the comparable 1996 period.
Commercial Lines net written premiums for the first quarter of 1997 totaled
$1.338 billion, up $698 million from $640 million for the first quarter of 1996,
reflecting the acquisition of Aetna P&C, offset in part by the highly
competitive conditions in the marketplace and the Company's continuing focus on
profitability. In addition, the first quarter of 1997 net written premiums
included $142 million due to a change to conform Aetna P&C's and Travelers
Indemnity and its subsidiaries (Travelers P&C's) methods of recording certain
net written premiums. Previously, Aetna P&C had recorded written
18
<PAGE>
premiums when the premiums were billed. The Company conformed the Aetna P&C
method to the Travelers P&C method of recording written premiums when the
policies are written. The effect of this change on the condensed consolidated
financial statements was not significant. The Commercial Lines marketplace
continues to be highly competitive, although the broader industry and product
line expertise of the combined company contributed to solid performance in
the specialty and small accounts market segments.
On a combined total basis including Aetna P&C (for periods prior to April 2,
1996 for comparative purposes only), Commercial Lines net written premiums for
the first quarter of 1997 totaled $1.338 billion, compared to $1.253 billion for
the first quarter of 1996. This increase in net written premiums was due to the
conforming change outlined above, offset somewhat by the highly competitive
conditions in the marketplace and the Company's continuing focus on writing
profitable business.
Fee income for the first quarter of 1997 was $97 million, a $4 million increase
from the first quarter of 1996. This increase was the result of the acquisition
of Aetna P&C, mostly offset by the depopulation of involuntary pools as the loss
experience of workers' compensation improved and insureds moved to voluntary
markets, the Company's selective renewal activity to address the competitive
pricing environment and its continued success in lowering workers' compensation
losses of customers.
A significant component of Commercial Lines is National Accounts, which works
with national brokers and regional agents providing insurance coverages and
services, primarily workers' compensation, mainly to large corporations.
National Accounts also includes the alternative market business which covers
primarily workers' compensation products and services to voluntary and
involuntary pools. National accounts net written premiums of $221.6 million for
the first quarter of 1997 increased $25.7 million from the first quarter of
1996. On a combined total basis including Aetna P&C (for periods prior to April
2, 1996 for comparative purposes only), National Accounts net written premiums
were $221.6 million for the first quarter of 1997 compared to $274.3 million for
the first quarter of 1996. This decrease reflected the competitive marketplace.
National Accounts new business and business retention ratio were significantly
higher in the first quarter of 1997 compared to the first quarter of 1996,
reflecting an unusually low level of new business as well as an unusually low
retention ratio in the first quarter of 1996.
Commercial Accounts serves mid-sized businesses through a network of
independent agents and brokers. Commercial Accounts net written premiums were
$560.5 million in the 1997 first quarter compared to $201.6 million in the
1996 first quarter. On a combined total basis including Aetna P&C (for
periods prior to April 2, 1996 for comparative purposes only), Commercial
Accounts net written premiums were $560.5 million in the 1997 first quarter
compared to $440.9 million in the 1996 first quarter. This increase reflected
an increase of $127.0 million due to the change to conform Aetna P&C's with
Travelers P&C's methods of recording certain net written premiums and the
continued growth in programs designed to leverage underwriting experience in
specific industries, partially offset by the competitive marketplace. For the
first quarter of 1997, new premium business in Commercial Accounts has
significantly improved compared to the first quarter of 1996, reflecting the
acquisition of Aetna P&C and continued growth in programs designed
to leverage underwriting experience in specific industries. The Commercial
Accounts business retention ratio in the first quarter of 1997 has moderately
improved compared to the 1996 first quarter. Commercial Accounts continues to
focus on the retention of existing business while maintaining its product
pricing standards and its selective underwriting policy.
Select Accounts serves small businesses through a network of independent agents.
Select Accounts net written premiums were $363.7 million in the first quarter of
1997 compared to $140.9 million in the first quarter of 1996. On a combined
total basis including Aetna P&C (for periods prior to April 2,
19
<PAGE>
1996 for comparative purposes only), Select Accounts net written premiums of
$363.7 million for the first quarter of 1997 were $1.7 million above the
first quarter of 1996 premium levels. This increase reflects an increase of
$15.0 million due to the change to conform Aetna P&C's with Travelers P&C's
methods of recording certain net written premiums, mostly offset by the
competitive marketplace. New premium business in Select Accounts was
moderately higher in the 1997 first quarter compared to the 1996 first
quarter, which reflected an increase due to the acquisition of Aetna P&C,
partially offset by the competitive marketplace. The Select Accounts business
retention ratio was moderately higher in the 1997 first quarter compared to
the 1996 first quarter, reflecting the broader industry and product line
expertise of the combined company.
Specialty Accounts markets products to national, midsize and small customers and
distributes them through both wholesale brokers and retail agents and brokers
throughout the United States. Specialty Accounts net written premiums were
$192.6 million in the 1997 first quarter compared to $101.6 million in the 1996
first quarter. On a combined total basis including Aetna P&C (for periods prior
to April 2, 1996 for comparative purposes only), Specialty Accounts net written
premiums were $192.6 million in the 1997 first quarter compared to $175.5
million in the 1996 first quarter. The growth is primarily attributable to
increased writings of its excess and surplus lines business.
The statutory combined ratio for Commercial Lines in the first quarter of 1997
was 109.1% compared to 108.5% in the first quarter of 1996. The GAAP combined
ratio for Commercial Lines in the first quarter of 1997 was 107.4% compared to
107.8% in the first quarter of 1996.
PERSONAL LINES Earnings before portfolio gains/losses increased 386% to $108
million in the first quarter of 1997 from $22 million in the first quarter of
1996. Results for the 1996 first quarter reflect the impact of catastrophe
losses, after taxes and reinsurance, of $18 million. The strong operating
earnings reflect the post-acquisition results of operations of Aetna P&C, the
continued favorable prior year loss reserve development in personal
automobile lines and no catastrophe losses in 1997.
Net written premiums in the 1997 first quarter were $774.9 million, compared to
$341.2 million in the first quarter of 1996. This increase primarily reflects
the acquisition of Aetna P&C. On a combined total basis including Aetna P&C (for
periods prior to April 2, 1996 for comparative purposes only), Personal Lines
net written premiums for the first quarter of 1997 totaled $774.9 million
compared to $657.5 million for the first quarter of 1996. This increase reflects
a change in reinsurance agreements, growth in the affinity marketing and
Secure--SM programs, and good retention in traditional markets.
The statutory combined ratio for Personal Lines in the first quarter of 1997 was
90.1% compared to 105.3% in the 1996 first quarter. The GAAP combined ratio for
Personal Lines in the first quarter of 1997 was 88.6% compared to 103.5% in the
1996 first quarter. The decrease in the combined ratios in 1997 was due to the
favorable prior year loss development, primarily in the automobile bodily injury
line and no catastrophe losses in 1997.
20
<PAGE>
FINANCING COSTS AND OTHER
The primary component for the 1997 first quarter was interest expense of $26
million after tax, reflecting financing costs associated with the acquisition of
Aetna P&C.
ENVIRONMENTAL CLAIMS
The Company's reserves for environmental claims are not
established on a claim-by-claim basis. An aggregate bulk reserve is carried
for all of the Company's environmental claims that are in the dispute
process, until the dispute is resolved. This bulk reserve is established and
adjusted based upon the volume of in-process environmental claims and the
Company's experience in resolving such claims. At March 31, 1997,
approximately 12% of the net environmental reserves (i.e., approximately $143
million) are case reserves for resolved claims. The balance, approximately 88%
of the net environmental reserves (i.e., approximately $1.070 billion), is
carried in a bulk reserve and includes incurred but not yet reported
environmental claims for which the Company has not received any specific
claims.
The following table displays activity for environmental losses and loss expenses
and reserves for the three months ended March 31, 1997 and 1996.
ENVIRONMENTAL LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1997 March 31, 1996
------------------ ------------------
Beginning reserves:
Direct $ 1,369 $454
Ceded (127) (50)
----------- -----------
Net 1,242 404
Incurred losses and loss expenses:
Direct 18 20
Ceded (1) (3)
Losses paid:
Direct 50 35
Ceded (4) (1)
Ending reserves:
Direct 1,337 439
Ceded (124) (52)
----------- -----------
Net $1,213 $387
=========== ===========
ASBESTOS CLAIMS
At March 31, 1997, approximately 24% of the net asbestos reserves (i.e.,
approximately $252 million) are for pending asbestos claims. The balance,
approximately 76% (i.e., approximately $805 million) of the net asbestos
reserves, represents incurred but not yet reported losses.
The following table displays activity for asbestos losses and loss expenses and
reserves for the three months ended March 31, 1997 and 1996. In general, the
Company posts case reserves for pending asbestos claims within approximately 30
business days of receipt of such claims.
21
<PAGE>
ASBESTOS LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1997 March 31, 1996
------------------ ------------------
Beginning reserves:
Direct $ 1,443 $695
Ceded (370) (293)
----------- -----------
Net 1,073 402
Incurred losses and loss expenses:
Direct 20 16
Ceded (7) (5)
Losses paid:
Direct 52 24
Ceded (23) (18)
Ending reserves:
Direct 1,411 687
Ceded (354) (280)
----------- -----------
Net $1,057 $407
=========== ===========
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES
It is difficult to estimate the reserves for environmental and
asbestos-related claims due to the vagaries of court coverage decisions,
plaintiffs' expanded theories of liability, the risks inherent in major
litigation and other uncertainties. Conventional actuarial techniques are not
used to estimate such reserves.
The reserves carried for environmental and asbestos claims at March 31, 1997
are the Company's best estimate of ultimate claims and claim adjustment
expenses based upon known facts and current law. However, the conditions
surrounding the final resolution of these claims continues to change.
Currently, it is not possible to predict changes in the legal and legislative
environment and their impact on the future development of asbestos and
environmental claims. Such development will be affected by future court
decisions and interpretations and changes in legislation. Because of these
future unknowns, additional liabilities may arise for amounts in excess of
the current reserves. These additional amounts, or a range of these
additional amounts, cannot now be reasonably estimated, and could result in a
liability exceeding reserves by an amount that would be material to the
Company's operating results in a future period. However, the Company believes
that it is not likely that these claims will have a material adverse effect
on the Company's financial condition or liquidity.
CUMULATIVE INJURY OTHER THAN ASBESTOS (CIOTA)
Cumulative injury other than asbestos (CIOTA) claims are generally submitted to
the Company under general liability policies and often involve an allegation by
a claimant against an insured that the claimant has suffered injuries as a
result of long-term or continuous exposure to potentially harmful products or
substances. Such potentially harmful products or substances include, but are not
limited to, lead paint, pesticides, pharmaceutical products, silicone-based
personal products, solvents and other deleterious substances.
At March 31, 1997, approximately 19% of the net CIOTA reserves (i.e.,
approximately $214 million) are for pending CIOTA claims. The balance,
approximately 81% (i.e., approximately $903 million) of the net CIOTA reserves,
represents incurred but not yet reported losses for which the Company has not
received any specific claims.
22
<PAGE>
The following table displays activity for CIOTA losses and loss expenses and
reserves for the three months ended March 31, 1997 and 1996. In general, the
Company posts case reserves for pending CIOTA claims within approximately 30
business days of receipt of such claims.
CIOTA LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1997 March 31, 1996
------------------ ------------------
Beginning reserves:
Direct $1,560 $374
Ceded (446) -
----------- -----------
Net 1,114 374
Incurred losses and loss expenses:
Direct 6 21
Ceded - -
Losses paid:
Direct 8 8
Ceded (5) -
Ending reserves:
Direct 1,558 387
Ceded (441) -
----------- -----------
Net $1,117 $387
=========== ===========
CORPORATE AND OTHER
Three Months Ended March 31,
----------------------------------------------
(millions) 1997 1996
- -----------------------------------------------------------------------------
NET INCOME Net income
REVENUES (EXPENSE) Revenues (expense)
- -----------------------------------------------------------------------------
Total Corporate and Other(1) $22 $(52) $100 $(33)
=============================================================================
(1) Net income (expense) includes $10 million of reported investment portfolio
gains in 1996.
Corporate expenses (before reported portfolio gains) as a percentage of
operating earnings were down in the first quarter of 1997 compared to the first
quarter of 1996. Increased interest costs associated with higher debt levels in
1997 were partially offset by lower staff expenses in the corporate segment,
including the allocation of additional expenses to other operating segments.
LIQUIDITY AND CAPITAL RESOURCES
TRV services its obligations primarily with dividends and other advances that it
receives from subsidiaries. The subsidiaries' dividend-paying abilities are
limited by certain covenant restrictions in credit agreements and/or by
regulatory requirements. TRV believes it will have sufficient funds to meet
current and future commitments. Each of TRV's major operating subsidiaries
finances its operations on a stand-alone basis consistent with its
capitalization and ratings.
23
<PAGE>
TRAVELERS GROUP INC. (TRV)
TRV issues commercial paper directly to investors and maintains unused credit
availability under committed revolving credit agreements at least equal to the
amount of commercial paper outstanding.
TRV, Commercial Credit Company (CCC) and The Travelers Insurance Company (TIC)
have a five-year revolving credit facility with a syndicate of banks to provide
$1.0 billion of revolving credit, to be allocated to any of TRV, CCC or TIC. The
participation of TIC in this agreement is limited to $250 million. This facility
expires in June 2001. Currently $100 million is allocated to TRV, $850 million
to CCC and $50 million to TIC. Under this facility TRV is required to maintain a
certain level of consolidated stockholders' equity (as defined in the
agreement). At March 31, 1997 this requirement was exceeded by approximately
$4.5 billion. At March 31, 1997, there were no borrowings outstanding under this
facility.
Currently, TRV has unused credit availability of $100 million under the
five-year revolving credit facility. TRV may borrow under this revolving credit
facility at various interest rate options and compensates the banks for the
facility through commitment fees.
TRV as of May 7, 1997, had $1.0 billion available for debt offerings under its
shelf registration statements.
TRAVELERS PROPERTY CASUALTY CORP. (TAP)
TAP also issues commercial paper directly to investors and maintains unused
credit availability under a committed revolving credit agreement at least equal
to the amount of commercial paper outstanding.
TAP has a five-year revolving credit facility in the amount of $500 million with
a syndicate of banks that expires in December 2001. Under this facility TAP is
required to maintain a certain level of consolidated stockholders' equity (as
defined in the agreement). At March 31, 1997, this requirement was exceeded by
approximately $3.0 billion. At March 31, 1997 there were no borrowings
outstanding under this facility.
TAP's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to their parent
without prior approval of insurance regulatory authorities. Dividend payments to
TAP from its insurance subsidiaries are limited to $647 million in 1997 without
prior approval of the Connecticut Insurance Department. TAP has received $80
million of dividends from its insurance subsidiaries during the first three
months of 1997.
TAP as of May 7, 1997, had $750 million available for debt offerings under its
shelf registration statement.
COMMERCIAL CREDIT COMPANY (CCC)
CCC also issues commercial paper directly to investors and maintains unused
credit availability under committed revolving credit agreements at least equal
to the amount of commercial paper outstanding. As of May 6, 1997 CCC has unused
credit availability of $3.250 billion under five-year revolving credit
facilities, including the $850 million referred to above. CCC may borrow under
its revolving credit facilities at various interest rate options and compensates
the banks for the facilities through commitment fees.
CCC is limited by covenants in its revolving credit agreements as to the amount
of dividends and advances that may be made to its parent or its affiliated
companies. At March 31, 1997, CCC would have been able to remit $315 million to
its parent under its most restrictive covenants.
24
<PAGE>
CCC as of May 7, 1997, had $550 million available for debt offerings and $400
million available for trust preferred security offerings under its shelf
registration statements.
SMITH BARNEY HOLDINGS INC. (SMITH BARNEY) Smith Barney funds its day-to-day
operations through the use of commercial paper, collateralized and
uncollateralized borrowings (both committed and uncommitted), internally
generated funds, repurchase transactions, and securities lending
arrangements. The volume of Smith Barney's borrowings generally fluctuates in
response to changes in the amount of reverse repurchase transactions
outstanding, the level of securities inventories, customer balances and
securities borrowing transactions. Smith Barney has a $1.0 billion revolving
credit agreement with a bank syndicate that extends through May 1999, and has
a $500 million 364-day revolving credit agreement with a bank syndicate that
extends through May 1997. Any amounts outstanding on the 364-day revolving
credit agreement's termination date of May 1997 are due in May 1998. At March
31, 1997, there were no borrowings outstanding under either facility. Smith
Barney expects to amend these facilities to extend the maturities and amounts
available. Smith Barney also has substantial borrowing arrangements
consisting of facilities that it has been advised are available, but where no
contractual lending obligation exists.
Smith Barney, through its subsidiary Smith Barney Inc., issues commercial paper
directly to investors. As a policy, Smith Barney attempts to maintain sufficient
capital and funding sources in order to have the capacity to finance itself on a
fully collateralized basis at all times, including periods of financial stress.
In addition, Smith Barney monitors its leverage and capital ratios on a daily
basis.
Smith Barney is limited by covenants in its revolving credit facility as to the
amount of dividends that may be paid to TRV. At March 31, 1997, Smith Barney
would have been able to remit approximately $718 million to TRV under its most
restrictive covenants.
Smith Barney completed the following long-term debt offerings in 1997 and,
as of May 7, 1997, had $684 million available for debt offerings under its
shelf registration statement:
- S&P 500 Equity Linked Notes due March 11, 2002.........$ 66 million
- 7% Notes due March 15, 2004...........................$250 million
SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
Smith Barney engages in "matched book" transactions in government and
mortgage-backed securities as well as "conduit" transactions in corporate equity
and debt securities. These transactions are similar in nature. A "matched book"
transaction involves a security purchased under an agreement to resell (i.e.,
reverse repurchase transaction) and simultaneously sold under an agreement to
repurchase (i.e., repurchase transaction). A "conduit" transaction involves the
borrowing of a security from a counterparty and the simultaneous lending of the
security to another counterparty. These transactions are reported gross in the
Condensed Consolidated Statement of Financial Position and typically yield
interest spreads, generally ranging from 10 to 30 basis points. The interest
spread results from the net of interest received on the reverse repurchase or
security borrowed transaction and the interest paid on the corresponding
repurchase or security loaned transaction. Interest rates charged or credited in
these activities are usually based on current Federal Funds rates but can
fluctuate based on security availability and other market conditions. The size
of balance sheet positions resulting from these activities can vary
significantly depending primarily on levels of activity in the bond markets, but
would have a relatively smaller impact on net income.
THE TRAVELERS INSURANCE COMPANY (TIC)
At March 31, 1997, TIC had $22.9 billion of life and annuity product deposit
funds and reserves. Of that total, $12.4 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $10.5 billion is for life and
annuity products that are subject to discretionary withdrawal by
25
<PAGE>
the contractholder. Included in the amount that is subject to discretionary
withdrawal is $1.6 billion of liabilities that are surrenderable with market
value adjustments. Also included are an additional $5.3 billion of the life
insurance and individual annuity liabilities, which are subject to
discretionary withdrawal and have an average surrender charge of 5.4%. In the
payout phase, these funds are credited at significantly reduced interest
rates. The remaining $3.5 billion of liabilities is surrenderable without
charge. More than 18% of these relate to individual life products. These
risks would have to be underwritten again if transferred to another carrier,
which is considered a significant deterrent against withdrawal by long-term
policyholders. Insurance liabilities that are surrendered or withdrawn are
reduced by outstanding policy loans and related accrued interest prior to
payout.
TIC issues commercial paper to investors and maintains unused committed
revolving credit facilities at least equal to the amount of commercial paper
outstanding. Currently, TIC has unused credit availability of $50 million under
the five-year revolving credit facility referred to above.
TIC is subject to various regulatory restrictions that limit the maximum amount
of dividends available to its parent without prior approval of the Connecticut
Insurance Department. A maximum of $507 million of statutory surplus is
available in 1997 for such dividends without Department approval, of which $100
million has been paid during the first quarter of 1997.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Effective January 1, 1997 the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (FAS No. 125). This Statement establishes
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. These standards are based on an
approach that focuses on control. Under this approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
FAS No. 125 provides standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. The
requirements of FAS No. 125 are effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996, and are to be applied prospectively. However, in
December 1996 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 127, "Deferral of
the Effective Date of Certain Provisions of FASB Statement No.125,"
which delays until January 1, 1998 the effective date for certain
provisions. Earlier or retroactive application is not permitted. The
adoption of the provisions of this Statement effective January 1, 1997
did not have a material impact on results of operations, financial
condition or liquidity and the Company is currently evaluating the impact
of the provisions whose effective date has been delayed until January 1, 1998.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings per Share" (FAS No. 128). This Statement establishes
standards for computing and presenting earnings per share (EPS) and applies to
entities with publicly held common stock. This Statement simplifies the
standards for computing earnings per share previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share" (Opinion 15), and makes
them comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.
26
<PAGE>
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised.
FAS No. 128 supersedes Opinion 15 and related accounting interpretations and is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. However,
an entity is permitted to disclose pro forma amounts computed using this
Statement in the notes to the financial statements in periods prior to required
adoption.
On a pro forma basis, for the three months ended March 31, 1997 and 1996
basic EPS is $1.01 and $0.81, respectively, and diluted EPS is $0.96 and
$0.77, respectively.
27
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For information concerning several purported class action lawsuits
filed against Smith Barney Inc. in connection with three funds managed by
Hyperion Capital Management Inc., see the descriptions that appear in the fourth
paragraph on page 26 of the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, the first paragraph under the heading "Smith
Barney" on page 65 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, the first paragraph on page 34 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and the
third full paragraph on page 83 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, which descriptions are incorporated by
reference herein. A copy of the pertinent paragraphs of such filings is included
as an exhibit to this Form 10-Q. In March 1997, plaintiffs filed a petition for
certiorari with the U.S. Supreme Court.
For information concerning actions filed against a number of
broker-dealers, including Smith Barney Inc., relating to trading practices on
the National Association of Securities Dealers Automated Quotation system, see
the descriptions that appear in the third paragraph on page 16 of the Quarterly
Report on Form 10-Q of Smith Barney Holdings Inc. for the quarter ended
September 30, 1994, the last full paragraph on page 65 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 and the fourth full
paragraph on page 83 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, which descriptions are incorporated by reference
herein. A copy of the pertinent paragraphs of such filings is included as an
exhibit to this Form 10-Q. In November 1996, a class of plaintiffs was certified
and in April 1997, the class was expanded to include institutional plaintiffs.
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and premium
calculations on certain workers' compensation insurance, see the descriptions
that appear in the paragraph that begins on page 90 and ends on page 91 of the
Prospectus dated April 22, 1996 of Travelers Property Casualty Corp., the second
paragraph on page 35 of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, the second paragraph on page 34 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 and the
second paragraph on page 84 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, which descriptions are incorporated by reference
herein. A copy of the pertinent paragraphs of such filings is included as an
exhibit to this Form 10-Q. In April 1997, the purported class of Texas workers'
compensation insureds that filed a petition to intervene in Travelers Indemnity
-------------------
Company of Connecticut v. Texas Workers Compensation Insurance Facility withdrew
- -----------------------------------------------------------------------
its claims against the Company's subsidiaries. However, in May 1997, such
purported class filed a second amended petition in intervention alleging
substantially the same claims as the original petition but covering the periods
from 1992 through 1994.
For information concerning purported class actions filed against
Primerica Financial Services Inc., a subsidiary of the Company, in connection
with the purchase by individuals of interests in oil and gas rights owned by
Basic Energy and Affiliated Resources Inc. and a related complaint filed by the
National Association of Securities Dealers, Inc. (the "NASD"), see the
descriptions that appear in the second paragraph on page 30 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, the
fourth paragraph on page 25 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 and the third paragraph on page 34 of the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, which descriptions are incorporated by reference herein. A copy of the
pertinent paragraphs of such filings is included as an exhibit to this Form
28
<PAGE>
10-Q. The parties have reached settlements with the NASD and, subject to court
approval, in all of the class actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders was held on April
23, 1997. At the meeting, (i) an amendment to the Company's Certificate of
Incorporation to declassify the Board of Directors was approved, (ii) 21 persons
were elected as directors of the Company and (iii) the selection of KPMG Peat
Marwick LLP to serve as the independent auditors of the Company for 1997 was
ratified. The number of votes cast for, against or withheld, and the number of
abstentions with respect to each such matter is set forth below, as are the
number of broker non-votes, where applicable.
<TABLE>
<CAPTION>
FOR AGAINST/WITHHELD ABSTAINED BROKER NON-VOTES
------ ---------------- --------- ----------------
<S> <C> <C> <C> <C>
APPROVAL OF AMENDMENT TO
CERTIFICATE OF
INCORPORATION: 500,377,223 5,325,036 3,541,420 67,000,162
ELECTION OF DIRECTORS:
NOMINEE
-------
C. Michael Armstrong 572,526,217 3,717,624
Judith Arron 572,855,715 3,388,126
Kenneth J. Bialkin 568,657,353 7,586,488
Edward H. Budd 571,726,752 4,517,089
Joseph A. Califano, Jr. 572,847,317 3,396,524
Douglas D. Danforth 572,987,617 3,256,224
Robert F. Daniell 573,229,945 3,013,896
James Dimon 572,896,174 3,347,667
Leslie B. Disharoon 573,239,810 3,004,031
The Hon. Gerald R. Ford 572,633,685 3,610,156
Thomas Jones 573,153,960 3,089,881
Ann Dibble Jordan 573,021,594 3,222,247
Robert I. Lipp 572,916,430 3,327,411
Michael Masin 573,201,544 3,042,297
Dudley C. Mecum 573,217,956 3,025,885
Andrall E. Pearson 573,098,260 3,145,581
Frank J. Tasco 573,162,075 3,081,766
Linda J. Wachner 558,501,180 17,742,661
Sanford I. Weill 572,891,273 3,352,568
Joseph R. Wright, Jr. 573,055,429 3,188,412
Arthur Zankel 573,161,306 3,082,535
RATIFICATION OF AUDITORS: 573,599,621 1,142,395 1,501,825 0
</TABLE>
29
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended March 31, 1997.
30
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION OF EXHIBIT METHOD
------- ---------------------- ------
<S> <C> <C>
3.01 Restated Certificate of Incorporation of Travelers Group Inc. (the Electronic
"Company"), Certificate of Designation of Cumulative
Adjustable Rate Preferred Stock, Series Y, Certificate of
Amendment to the Restated Certificate of Incorporation, filed
April 24, 1996, and Certificate of Amendment to the Restated
Certificate of Incorporation, filed April 23, 1997.
3.02 By-Laws of the Company as amended and restated as of April 23, Electronic
1997.
11.01 Computation of Earnings Per Share. Electronic
12.01 Computation of Ratio of Earnings to Fixed Charges. Electronic
27.01 Financial Data Schedule. Electronic
99.01 The fourth paragraph on page 26 of the Company's Quarterly Report on Form Electronic
10-Q for the fiscal quarter ended September 30, 1993, the
first paragraph under the heading "Smith Barney" on page 65 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "Company's 1995 10-K"), the first
paragraph on page 34 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996 (the "Company's
9/30/96 10-Q") and the third full paragraph on page 83 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Company's 1996 10-K").
99.02 The third paragraph on page 16 of the Quarterly Report on Form 10-Q of Electronic
Smith Barney Holdings Inc. for the fiscal quarter ended September 30, 1994, the
last full paragraph on page 65 of the Company's 1995 10-K and the fourth
full paragraph on page 83 of the Company's 1996 10-K.
99.03 The paragraph that begins on page 90 and ends on page 91 of the Electronic
Prospectus dated April 22, 1996 of Travelers Property Casualty Corp., the
second paragraph on page 35 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1996, the second paragraph on page 34
of the Company's 9/30/96 10-Q and the second paragraph on page 84 of the
Company's 1996 10-K.
99.04 The second paragraph on page 30 of the Company's Quarterly Report on Form Electronic
10-Q for the fiscal quarter ended September 30, 1995, the fourth paragraph on
page 25 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 and the third paragraph on page 34 of the Company's
9/30/96 10-Q.
</TABLE>
The total amount of securities authorized pursuant to any instrument
defining rights of holders of long-term debt of the Company does not exceed 10%
of the total assets of the Company and its consolidated subsidiaries. The
Company will furnish copies of any such instrument to the Commission upon
request.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVELERS GROUP INC.
Date: May 13, 1997 By /s/ Heidi Miller
------------------------------
Heidi Miller
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1997 By /s/ Irwin Ettinger
------------------------------
Irwin Ettinger
Executive Vice President
(Chief Accounting Officer)
32
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT FILING
NUMBER DESCRIPTION OF EXHIBIT METHOD
------- ---------------------- ------
<S> <C> <C>
3.01 Restated Certificate of Incorporation of Travelers Group Inc. (the Electronic
"Company"), Certificate of Designation of Cumulative
Adjustable Rate Preferred Stock, Series Y, Certificate of
Amendment to the Restated Certificate of Incorporation, filed
April 24, 1996, and Certificate of Amendment to the Restated
Certificate of Incorporation, filed April 23, 1997.
3.02 By-Laws of the Company as amended and restated as of April 23, Electronic
1997.
11.01 Computation of Earnings Per Share. Electronic
12.01 Computation of Ratio of Earnings to Fixed Charges. Electronic
27.01 Financial Data Schedule. Electronic
99.01 The fourth paragraph on page 26 of the Company's Quarterly Report on Form Electronic
10-Q for the fiscal quarter ended September 30, 1993, the first
paragraph under the heading "Smith Barney" on page 65 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "Company's 1995 10-K"), the first
paragraph on page 34 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996 (the "Company's
9/30/96 10-Q") and the third full paragraph on page 83 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Company's 1996 10-K").
99.02 The third paragraph on page 16 of the Quarterly Report on Form 10-Q of Electronic
Smith Barney Holdings Inc. for the fiscal quarter ended September 30, 1994, the
last full paragraph on page 65 of the Company's 1995 10-K and the fourth
full paragraph on page 83 of the Company's 1996 10-K.
99.03 The paragraph that begins on page 90 and ends on page 91 of the Electronic
Prospectus dated April 22, 1996 of Travelers Property Casualty Corp., the
second paragraph on page 35 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1996, the second paragraph on page 34
of the Company's 9/30/96 10-Q and the second paragraph on page 84 of the
Company's 1996 10-K.
99.04 The second paragraph on page 30 of the Company's Quarterly Report on Form Electronic
10-Q for the fiscal quarter ended September 30, 1995, the fourth paragraph on
page 25 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 and the third paragraph on page 34 of the Company's
9/30/96 10-Q.
</TABLE>
The total amount of securities authorized pursuant to any instrument
defining rights of holders of long-term debt of the Company does not exceed 10%
of the total assets of the Company and its consolidated subsidiaries. The
Company will furnish copies of any such instrument to the Commission upon
request.
<PAGE>
EXHIBIT 3.01
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
TRAVELERS GROUP INC.
-------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-------------------------
TRAVELERS GROUP INC., a Delaware corporation (the "Corporation") does
hereby certify as follows:
FIRST: Article SEVENTH is hereby amended to read in its entirety as
follows:
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. At each annual meeting, each
director shall be elected for a one-year term. A director shall hold office
until the annual meeting held the year in which his or her term expires and
until his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors that results
from an increase in the number of directors may be filled by a majority of
the Board of Directors then in office, provided that a quorum is present,
and any other vacancy occurring in the Board of Directors may be filled by
a majority of the directors then in office, even if less than a quorum, or
a sole remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his or her predecessor. Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of
Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the terms of
this Restated Certificate of Incorporation applicable thereto.
SECOND: The foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, Travelers Group Inc. has caused this certificate
to be executed in its corporate name this 23rd day of April, 1997.
TRAVELERS GROUP INC.
By: /s/ Charles O. Prince, III
-------------------------------
Charles O. Prince, III
Executive Vice President and
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
TRAVELERS GROUP INC.
---------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
---------------------
TRAVELERS GROUP INC., a Delaware corporation (the "Corporation") does
hereby certify as follows:
FIRST: The first sentence of paragraph A, Article FOURTH of the
Restated Certificate of Incorporation is hereby amended to read in its entirety
as set forth below:
The total number of shares of Common Stock which the Corporation
shall have authority to issue is One Billion Five Hundred Million
(1,500,000,000) shares of Common Stock having a par value of one cent
($.01) per share.
SECOND: The foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, Travelers Group Inc. has caused this certificate to
be executed in its corporate name this 24th day of April, 1996.
TRAVELERS GROUP INC.
By: /s/ Charles O. Prince, III
----------------------------
Charles O. Prince, III
Senior Vice President and
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
THE TRAVELERS INC.
-------------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
-------------------------------------------------
THE TRAVELERS INC., a Delaware corporation (the "Corporation")
does hereby certify as follows:
FIRST: Article FIRST of the Restated Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety
as set forth below:
FIRST: The name of the Corporation is:
TRAVELERS GROUP INC.
SECOND: The foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, The Travelers Inc. has caused this
certificate to be executed in its corporate name this 26th day of April,
1995.
THE TRAVELERS INC.
/s/ Charles O. Prince, III
By: ____________________________
Charles O. Prince, III
Senior Vice President and
Secretary
<PAGE>
Certificate of Designation
of
Cumulative Adjustable Rate Preferred Stock, Series Y
of
The Travelers Inc.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
The Travelers Inc., a Delaware corporation (the
"Corporation"), hereby certifies that:
1. The Restated Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation") fixes the
total number of shares of all classes of capital stock that
the Corporation shall have the authority to issue at five
hundred million (500,000,000) shares of common stock, par
value $.01 per share ("Common Stock"), and thirty million
(30,000,000) shares of preferred stock, par value $1.00 per
share ("Preferred Stock").
2. The Certificate of Incorporation expressly
grants to the Board of Directors of the Corporation (the
"Board of Directors") authority to provide for the issuance of
the shares of Preferred Stock in series, and to establish from
time to time the number of shares to be included in each such
series and to fix the designation, powers, preferences and
rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon the
Board of Directors by the Certificate of Incorporation, the
Board of Directors, by action duly taken on March 23, 1994,
adopted resolutions providing for the Cumulative Adjustable
Rate Preferred Stock, Series Y (the "Series Y Preferred
Stock") as follows:
RESOLVED, that an issue of a series of
Preferred Stock is hereby provided for, and the number of
shares to be included in such series is established, and
the designation, powers, preference and rights, and
qualifications, limitations or restrictions of such
series are fixed hereby as follows:
CUMULATIVE ADJUSTABLE RATE PREFERRED STOCK, SERIES Y
1. Designation and Number of Shares. The
designation of such series shall be Cumulative
Adjustable Rate Preferred Stock, Series Y (the "Series Y
Preferred Stock"), and the number of shares constituting
such series shall be 5,000. Shares of the Series Y
Preferred Stock shall have a par value of $1.00 per
share, and the amount of $100,000 shall be the
"liquidation value" of each share of the Series Y
Preferred Stock.
<PAGE>
The number of authorized shares of Series Y Preferred Stock
may be reduced (but not below the number of shares thereof
then outstanding) by further resolution duly adopted by the
Board of Directors or the Executive Committee and by the
filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that
such reduction has been so authorized, but the number of
authorized shares of Series Y Preferred Stock shall not be
increased.
2. Dividends. (a) Dividends on each share
of Series Y Preferred Stock shall be payable with respect
to each quarter beginning on the last day of March, June,
September and December of each year and ending on the day
immediately prior to the first day of the next succeeding
period ("Quarterly Dividend Period"), in arrears, payable
commencing on June 30, 1994, and on each September 30,
December 31, March 31 and June 30 thereafter with respect
to the quarter then ended, provided that if such day is
not a Business Day (as hereinafter defined), such
dividend shall be paid on the next succeeding Business
Day (each a "Dividend Payment Date"), at a rate per annum
equal to the Applicable Rate (as determined in accordance
with paragraph (b) or (c) of this Section 2, as
applicable) in effect for the Quarterly Dividend Period
to which such dividend relates, multiplied by the
liquidation value of each such share. Such dividends
shall be cumulative from March 31, 1994, and shall be
payable, when and as declared by the Board of Directors,
out of assets legally available for such purpose, on each
Dividend Payment Date as set forth above. Each such
dividend shall be paid to the holders of record of shares
of the Series Y Preferred Stock as they appear on the
books of the Corporation on such record date, not
exceeding 30 days preceding the payment date thereof, as
shall be fixed in advance by the Board of Directors of
the Corporation. Dividends in arrears for any past
Quarterly 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, not
exceeding 45 days preceding the payment date thereof, as
may be fixed by the Board of Directors of the
Corporation.
(b) The Applicable Rate for each Quarterly
Dividend Period commencing prior to December 31, 1995
shall be 4.85%.
(c) The Applicable Rate for each Quarterly
Dividend Period commencing on or after December 31, 1995,
shall be equal to the greater of (i) the Short Term Rate
(as hereinafter defined) on the Business Day immediately
preceding the Dividend Payment Date for the immediately
preceding Quarterly Dividend Period (the "Dividend Reset
Date"), and (ii) 4.85%.
(d) "Short Term Rate" shall mean a rate equal
to (i) 85% of the Commercial Paper Rate (as hereinafter
defined) if on the Dividend Reset Date either (x) the
rating for the Preferred Stock of the Corporation
published by Moody's Investors Service Inc. ("Moody's")
is "A2" or lower or the rating for the Preferred Stock of
the Corporation published by Standard & Poor's
Corporation ("S&P") is "A" or lower, or (y) the Preferred
Stock of the Corporation is not rated by both Moody's and
S&P, and (ii) 78% of the Commercial Paper Rate if the
rating for the Preferred Stock of the
2
<PAGE>
Corporation published by Moody's is "Aa2" or higher and the
rating for the Preferred Stock of the Corporation published by
S&P is "AA" or higher.
(e) "Commercial Paper Rate" shall mean, on any
Dividend Reset Date, a rate equal to the Money Market
Yield (calculated as described below) of the 90-day rate
for commercial paper, as made available and subsequently
published in H.15(519) under the heading "Commercial
Paper" for such date. In the event that such rate is not
made available by 3:00 P.M., New York City time, on such
Dividend Reset Date, then the Commercial Paper Rate shall
be the Money Market Yield of the 90-day rate on such
Dividend Reset Date for commercial paper as made
available and subsequently published in Composite Quota-
tions under the heading "Commercial Paper." If by 3:00
P.M., New York City time, on such Dividend Reset Date
such rate has not yet been made available in either
H.15(519) or Composite Quotations, the Commercial Paper
Rate for such Dividend Reset Date shall be the Money
Market Yield of the arithmetic mean of the offered rates
as of 11:00 A.M., New York City time, on such Dividend
Reset Date of three leading dealers of commercial paper
in the city of New York selected by the Corporation for
90-day commercial paper placed for an industrial issuer
whose senior unsecured bond rating is "AA" or the equiva-
lent from a nationally recognized securities rating
agency; provided, however, that if the dealers selected
as aforesaid are not quoting as mentioned in this
sentence, the Commercial Paper Rate with respect to such
Dividend Reset Date will be the Commercial Paper Rate in
effect on the immediately preceding Dividend Reset Date.
(f) "Money Market Yield" shall be a yield
(expressed as a percentage) calculated in accordance with
the following formula:
x
Money Market Yield = ----------------- x 100
360 - (D x M)
where "D" refers to the per annum rate for the commercial
paper quoted on a bank discount basis and expressed as a
decimal; and "M" refers to the actual number of days in
the interest period for which interest is being calcu-
lated.
(g) "Business Day" means any day that is not a
Saturday, Sunday or a legal holiday in the State of New
York.
(h) Dividends payable on the Series Y
Preferred Stock for any Quarterly Dividend Period ending
prior to December 31, 1995 shall be computed on the basis
of one-fourth of the Applicable Rate. Dividends payable
on the Series Y Preferred Stock for any Quarterly
Dividend Period beginning on or after December 31, 1995
shall be computed on the basis of the actual number of
days elapsed in the period for which such dividends are
payable (whether a full or partial Quarterly Dividend
Period) and based upon a year of 360 days. If the
Corporation determines in good faith that for any reason
the Applicable Rate cannot be determined for any
Quarterly Dividend Period, then the
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<PAGE>
Applicable Rate in effect for the preceding Quarterly Dividend
Period shall be continued for such Quarterly Dividend Period.
3. Optional Redemption. (a) The
Corporation, at its sole option, out of funds legally
available therefor, may redeem shares of the Series Y
Preferred Stock, in whole or in part, on any Dividend
Payment Date on or after December 31, 1995, at a
redemption price of $100,000 per share, plus, in each
case, an amount equal to accrued and unpaid dividends
thereon to the date fixed for redemption (the "Redemption
Price").
(b) In the event that fewer than all the
outstanding shares of the Series Y Preferred Stock are to
be redeemed, the shares to be redeemed from each holder
of record 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.
(c) In the event the Corporation shall redeem
shares of the Series Y Preferred Stock, written notice of
such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 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 books of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the
number of shares of the Series Y Preferred Stock to be
redeemed and, in the case of a partial redemption
pursuant to Section 3(b) hereof, the identification (by
the number of the certificate or otherwise) of the shares
of Series Y Preferred Stock to be redeemed; (iii) the
Redemption Price; (iv) the place or places where
certificates for such shares are to be surrendered for
payment of the Redemption Price; and (v) that dividends
on the shares to be redeemed will cease to accrue on such
redemption date.
(d) If notice of redemption shall have been
duly given, and if, on or before the redemption date
specified therein, all funds necessary for such
redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the
pro rata benefit of the holders of the shares called for
redemption, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for
shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for
redemption shall no longer be deemed outstanding on and
after such redemption date, and all rights with respect
to such shares shall forthwith on such redemption date
cease and terminate, except only the right of the holders
thereof to receive the amount payable on redemption
thereof, without interest.
If such notice of redemption shall have been
duly given or if the Corporation shall have given to the
bank or trust company hereinafter referred to irrevocable
authorization promptly to give such notice, and if on or
before the redemption date specified therein the funds
necessary for such redemption shall have been deposited
by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the
shares called for redemption, then, notwithstanding that
any certificate for shares so called for redemption shall
not have been surrendered for cancellation, from and
after the time of such deposit, all shares so called for
redemption shall no longer be
4
<PAGE>
deemed to be outstanding and all rights with respect to such
shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or
trust company at any time after the time of such deposit the
funds so deposited, without interest. The aforesaid bank or
trust company shall be a bank or trust company organized and
in good standing under the laws of the United States of
America or of the State of New York, doing business in the
Borough of Manhattan, The city of New York, having capital
surplus and undivided profits aggregating at least $50,000,000
according to its latest published statement of condition, and
shall be identified in the notice of redemption. Any interest
accrued on such funds shall be for the benefit of the
Corporation. Any funds so set aside or deposited, as the case
may be, and unclaimed at the end of one year from such
redemption date shall, to the extent permitted by law, be
released or repaid to the Corporation, after which repayment
the holders of the shares so called for redemption shall look
only to the Corporation for payment thereof.
(e) Notwithstanding the foregoing provisions
of this Section 3, unless the full cumulative dividends
on all outstanding shares of the Series Y Preferred Stock
shall have been paid or contemporaneously are declared
and paid for all past Quarterly Dividend Periods, no
shares of the Series Y Preferred Stock shall be redeemed
unless all outstanding shares of the Series Y Preferred
Stock are simultaneously redeemed, and neither the
Corporation nor a subsidiary of the Corporation shall
purchase or otherwise acquire for valuable consideration
any shares of the Series Y Preferred Stock, provided,
however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series Y
Preferred Stock pursuant to a purchase or exchange offer
made on the same terms to holders of all the outstanding
shares of the Series Y Preferred Stock and mailed to the
holders of record of all such outstanding shares at such
holders' addresses as the same appear on the books of the
Corporation and provided further that if some, but less
than all, of the shares of the Series Y Preferred Stock
are to be purchased or otherwise acquired pursuant to
such purchase or exchange offer and the number of shares
so tendered exceeds the number of shares so to be
purchased or otherwise acquired by the Corporation, the
shares of the Series Y Preferred Stock so tendered will
be purchased or otherwise acquired by the Corporation on
a pro rata basis according to the number of such shares
duly tendered by each holder so tendering shares of the
Series Y Preferred Stock for such purchase or exchange.
(f) If all the outstanding shares of the
Series Y Preferred Stock shall not have been redeemed on
or prior to March 30, 1999, each holder of the shares of
the Series Y Preferred Stock remaining outstanding shall
have the right to require that the Corporation
repurchase, on the Business Day next following such date
or on the Business Day next following each fifth
anniversary of such date thereafter (the "Repurchase
Date"), all but not less than all of such holder's then
outstanding shares at a purchase price (the "Purchase
Price") in cash equal to 100% of the aggregate
liquidation value of such shares, together with all
accrued and unpaid dividends on such shares to but not
including the Repurchase Date, in accordance with the
procedures set forth below.
(g) Not less than 30 or more than 60 days
prior to the Repurchase Date any holder who desires to
cause the Corporation to repurchase such holder's shares
of
5
<PAGE>
Series Y Preferred Stock shall send by first-class mail,
postage prepaid, to the Corporation at its principal executive
offices, a notice stating (i) that such holder desires to
cause the Corporation to repurchase such holder's shares of
Series Y Preferred Stock, (ii) the number of shares to be
repurchased, and (iii) the Repurchase Date. Holders electing
to have shares of the Series Y Preferred Stock repurchased
will be required to surrender the certificate or certificates
representing such shares to the Corporation at least five
business days prior to the Repurchase Date, and on the
Repurchase Date the Corporation shall pay to such holder the
Purchase Price.
(h) Any shares of the Series Y Preferred Stock
that shall at any time have been redeemed or repurchased
shall, after such redemption or repurchase, have the
status of authorized but unissued shares of Preferred
Stock, without designation as to series until such shares
are once again designated as part of a particular series
by the Board of Directors.
4. Conversion or Exchange; Sinking Fund. The
holders of shares of the Series Y 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
capital stock of the Corporation; nor shall the holders
of shares of the Series Y Preferred Stock be entitled to
the benefits of a sinking fund in respect of their shares
of the Series Y Preferred Stock.
5. Voting. (a) Except as otherwise provided
in this Section 5 or as otherwise required by law, the
Series Y Preferred Stock shall have no voting rights.
(b) If six quarterly dividends (whether or not
consecutive) payable on shares of Series Y Preferred
Stock are in arrears at the time of the record date to
determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors
of the Corporation shall be increased by two, and the
holders of shares of Series Y Preferred Stock (voting
separately as a class with the holders of shares of any
one or more other series of Preferred Stock upon which
like voting rights have been conferred and are
exercisable) shall be entitled at such annual meeting of
stockholders to elect two directors of the Corporation,
with the remaining directors of the Corporation to be
elected by the holders of shares of any other class or
classes or series of stock entitled to vote therefor. In
any such election, holders of shares of Series Y
Preferred Stock shall have one vote for each share held.
At all meetings of stockholders at which
holders of Preferred Stock shall be entitled to vote for
Directors as a single class, the holders of a majority of
the outstanding shares of all classes and series of
capital stock of the Corporation having the right to vote
as a single class shall be necessary to constitute a
quorum, whether present in person or by proxy, for the
election by such single class of its designated
Directors. In any election of Directors by stockholders
voting as a class, such Directors shall be elected by the
vote of at least a plurality of shares held by such
stockholders present or represented at the meeting. At
any such meeting, the election of Directors by
stockholders voting as a class shall be valid
notwithstanding that a quorum of other
6
<PAGE>
stockholders voting as one or more classes may not be present
or represented at such meeting.
(c) Any director who has been elected by the
holders of shares of Series Y Preferred Stock (voting
separately as a class with the holders of shares of any
one or more other series of Preferred Stock upon which
like voting rights have been conferred and are
exercisable) may be removed at any time, with or without
cause, only by the affirmative vote of the holders of the
shares at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such
director at a special meeting of such holders called for
that purpose, and any vacancy thereby created may be
filled by the vote of such holders. If a vacancy occurs
among the Directors elected by such stockholders voting
as a class, other than by removal from office as set
forth in the preceding sentence, such vacancy may be
filled by the remaining Director so elected, or his or
her successor then in office, and the Director so elected
to fill such vacancy shall serve until the next meeting
of stockholders for the election of Directors.
(d) The voting rights of the holders of Series
Y Preferred Stock to elect Directors as set forth above
shall continue until all dividend arrearages on the
Series Y Preferred Stock have been paid or declared and
set apart for payment. Upon the termination of such
voting rights, the terms of office of all persons who may
have been elected pursuant to such voting rights shall
immediately terminate, and the number of directors of the
Corporation shall be decreased by two.
(e) Without the consent of the holders of
shares entitled to cast at least two-thirds of the votes
entitled to be cast by the holders of the total number of
shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the
holders of shares of Series Y Preferred Stock being
entitled to cast one vote per share, the Corporation may
not:
(i) create any class of stock that shall
have preference as to dividends or distributions of
assets over the Series Y Preferred Stock; or
(ii) alter or change the provisions of the
Certificate of Incorporation (including any
Certificate of Amendment or Certificate of
Designation relating to the Series Y Preferred
Stock) so as to adversely affect the powers,
preferences or rights of the holders of shares of
Series Y Preferred Stock; provided, however, that if
such creation or such alteration or change would
adversely affect the powers, preferences or rights
of one or more, but not all, series of Preferred
Stock at the time outstanding, such alteration or
change shall require consent of the holders of
shares entitled to cast at least two-thirds of the
votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as
a class.
6. Liquidation Rights. (a) Upon the
dissolution, liquidation or winding up of the
Corporation, the holders of the shares of the Series Y
Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution
7
<PAGE>
to stockholders, before any payment or distribution shall be
made on the Common Stock or on any other class or series of
stock ranking junior to shares of the Series Y Preferred Stock
as to amounts distributable on dissolution, liquidation or
winding up, $100,000 per share, plus an amount equal to all
dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final distribution.
(b) Neither the merger or consolidation of the
Corporation into or with any other corporation nor the
merger or consolidation of any other corporation into or
with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or
involuntary, of the Corporation for the purpose of this
Section 6.
(c) After the payment to the holders of the
shares of the Series Y Preferred Stock of the full
preferential amounts provided for in this Section 6, the
holders of the Series Y Preferred Stock as such shall
have no right or claim to any of the remaining assets of
the Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of
the Series Y Preferred Stock upon any dissolution,
liquidation or winding up of the Corporation, whether
voluntary or involuntary, shall be insufficient to pay in
full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 6, the holders
of shares of the Series Y Preferred Stock and of any
shares of Preferred Stock of any series or any other
stock of the Corporation ranking, as to the amounts
distributable upon dissolution, liquidation or winding
up, on a parity with the Series Y Preferred Stock, shall
share ratably in any distribution in proportion to the
full respective preferential amounts to which they are
entitled.
7. Ranking of Stock of the Corporation. In
respect of the Series Y Preferred Stock, any stock of any
class or classes of the Corporation shall be deemed to
rank:
(a) prior to the shares of Series Y Preferred
Stock, either as to dividends or upon liquidation, if the
holders of such stock shall be entitled to either the
receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of
shares of the Series Y Preferred Stock;
(b) on a parity with shares of the Series Y
Preferred Stock, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend
payment dates, redemption amounts per share or
liquidation values per share or sinking fund provisions,
if any, are different from those of the Series Y
Preferred Stock, if the holders of such stock shall be
entitled to either the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary, as
the case may be, in proportion to their respective
dividend rates or liquidation values, without preference
or priority, one over the other, as between the holders
of such stock and the holders of shares of the Series Y
Preferred Stock, provided in any such case such stock
does not rank prior to the Series Y Preferred Stock; and
8
<PAGE>
(c) junior to shares of the Series Y Preferred
Stock, as to dividends and upon liquidation, if such
stock shall be Common Stock or if the holders of shares
of the Series Y Preferred Stock shall be entitled to
receipt of dividends and of amounts distributable upon
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of
such stock.
The Series Y Preferred Stock is on a parity
with the 8.125% Cumulative Preferred Stock, Series A; the
5.50% Convertible Preferred Stock, Series B; the $4.53
ESOP Convertible Preferred Stock, Series C; the 9.25%
Preferred Stock, Series D; and the $45,000 Cumulative
Redeemable Preferred Stock, Series Z, of the Corporation
heretofore authorized for issuance by the Corporation.
8. Definition. When used herein, the term
"subsidiary" shall mean any corporation a majority of
whose voting stock ordinarily entitled to elect directors
is owned, directly or indirectly, by the Corporation.
9. Limitation on Dividends on Junior Stock.
So long as any shares of Series Y Preferred Stock shall
be outstanding, without the consent of the holders of
two-thirds of the shares of the Series Y Preferred Stock
then outstanding the Corporation shall not declare any
dividends on the Common Stock or any other stock of the
Corporation ranking as to dividends or distributions of
assets junior to the Series Y Preferred Stock (the Common
Stock and any such other stock being herein referred to
as "Junior Stock"), or make any payment on account of, or
set apart money for, a sinking fund or other similar fund
or agreement for the purchase, redemption or other
retirement of any shares of Junior Stock, or make any
distribution in respect thereof, whether in cash or
property or in obligations or stock of the Corporation,
other than a distribution of Junior Stock (such
dividends, payments, setting apart and distributions
being herein called "Junior Stock Payments"), unless the
following conditions shall be satisfied at the date of
such declaration in the case of any such dividend, or the
date of such setting apart in the case of any such fund,
or the date of such payment or distribution in the case
of any other Junior Stock Payment:
(a) full cumulative dividends shall have been
paid or declared and set apart for payment on all
outstanding shares of Preferred Stock other than Junior
Stock; and
(b) the Corporation shall not be in default or
in arrears with respect to any sinking fund or other
similar fund or agreement for the purchase, redemption or
other retirement of any shares of Preferred Stock other
than Junior Stock;
provided, however, that any funds theretofore deposited
in any sinking fund or other similar fund with respect to
any Preferred Stock in compliance with the provisions of
such sinking fund or other similar fund may thereafter be
applied to the purchase or redemption of such Preferred
Stock in accordance with the terms of such sinking fund
or other similar fund regardless of whether at the time
of such application full cumulative dividends upon
9
<PAGE>
shares of Series Y Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set
apart for payment by the Corporation.
10. Waiver, Modification and Amendment.
notwithstanding any other provisions relating to the
Series Y Preferred Stock, any of the rights or benefits
of the holders of the Series Y Preferred Stock may be
waived, modified or amended with the consent of the
holders of all of the then outstanding shares of Series Y
Preferred Stock. Any such waiver, modification or
amendment shall be deemed to have the same effect as
satisfaction in full of any such right or benefit as
though actually received by such holders.
The Travelers Inc. has caused this Certificate
to be duly executed by its Senior Vice President, and attested
by its Assistant Secretary this 30th day of March, 1994.
THE TRAVELERS INC.
/s/ Charles O. Prince, III
By ______________________________
Charles O. Prince, III
Senior Vice President
Attest:
/s/ Mark J. Amrhein
______________________________
Mark J. Amrhein
Assistant Secretary
10
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE TRAVELERS INC.
The Travelers Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
The name of the corporation is The Travelers Inc.
(hereinafter the "Corporation") and the date of filing of its original
Certificate of Incorporation with the Delaware Secretary of State is March
8, 1988. The name under which the Corporation filed its Certificate of
Incorporation is Commercial Credit Group, Inc.
The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated and integrated, but not amended,
to read as herein set forth in full:
FIRST: The name of the Corporation is:
THE TRAVELERS INC.
SECOND: The registered office of the Corporation is to be located at
the Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, in the county of New Castle, in the State of Delaware. The
name of its registered agent at that address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: A. The total number of shares of Common Stock which the
Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares of Common Stock having a par value of one cent ($.01)
per share. The total number of shares of Preferred Stock which the
Corporation shall have the authority to issue is Thirty Million
(30,000,000) shares having a par value of one dollar ($1.00) per share.
B. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The authority of the
Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
<PAGE>
(i) The number of shares constituting that series and the
distinctive designation of that series.
(ii) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(iv) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such
conversion or exchange, including provision for adjustment of
the conversion or exchange rate in such events as the Board of
Directors shall determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the manner of selecting shares for
redemption if less than all shares are to be redeemed, the date
or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption
dates;
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amount of such sinking fund;
(vii) The right of the shares of that series to the benefit
of conditions and restrictions upon the creation of indebtedness
of the Corporation or any subsidiary, upon the issue of any
additional stock (including additional shares of such series or
any other series) and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption
or other acquisition by the Corporation or any subsidiary of any
outstanding stock of the Corporation;
(viii) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and
(ix) Any other relative, participating, optional or other
special rights, qualifications, limitations or restrictions of
that series.
C. Dividends on outstanding shares of Preferred Stock shall be
paid, or declared and set apart for payment, before any dividends shall be
paid or declared and set apart for payment on outstanding shares of Common
2
<PAGE>
Stock. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to
pay such holders the full preferential amount to which they are entitled,
then such assets shall be distributed ratably among the shares of all
series of Preferred Stock in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with
respect thereto.
D. Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise) or
which, if convertible or exchangeable, have been converted into or
exchanged for shares of stock of any other class or classes shall have the
status of authorized and unissued shares of Preferred Stock of the same
series and may be reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions and the restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of Preferred Stock.
E. Subject to the provisions of any applicable law or except as
otherwise provided by the resolution or resolutions providing for the issue
of any series of Preferred Stock, the holders of outstanding shares of
Common Stock shall exclusively possess voting power for the election of
directors and for all other purposes, each holder of record of shares of
Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
F. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, after payment
shall have been made to the holders of Preferred Stock of the full amount
of dividends to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of Preferred Stock, the
holders of Common Stock shall be entitled, to the exclusion of the holders
of Preferred Stock of any and all series, to receive such dividends as from
time to time may be declared by the Board of Directors.
G. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, in the event of
any liquidation, dissolution or winding up of the Corporation, whether
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
pursuant to the resolution or resolutions providing for the issue of any
series of Preferred Stock, the holders of Common Stock shall be entitled,
to the exclusion of the holders of Preferred Stock of any and all series,
to share ratably according to the number of shares of Common Stock held by
them, in all remaining assets of the Corporation available for
distribution.
3
<PAGE>
H. The issuance of any shares of Common Stock or Preferred Stock
authorized hereunder and any other actions permitted to be taken by the
Board of Directors pursuant to this Article FOURTH must be authorized by
the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of
the entire Board of Directors or by a committee of the Board of Directors
constituted by the affirmative vote of at least sixty-six and two-thirds
percent (66 2/3%) of the entire Board of Directors.
I. Notwithstanding any other provision of this Certificate of
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of the shares entitled to vote at an
election of directors shall be required to amend, alter, change or repeal,
or adopt any provision as part of this Certificate of Incorporation
inconsistent with the purpose and intent of, section B through I of this
Article FOURTH.
J. 8.125% CUMULATIVE PREFERRED STOCK, SERIES A
1. Designation and Number of Shares. The designation of such
series shall be 8.125% Cumulative Preferred Stock, Series A (the "Series A
Preferred Stock"), and the number of shares constituting such series shall
be 1,200,000. The number of authorized shares of Series A Preferred Stock
may be reduced (but not below the number of shares thereof then
outstanding) by further resolution duly adopted by the Board of Directors
or the Executive Committee and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized, but the number of
authorized shares of Series A Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series A Preferred
Stock shall be cumulative from the date of original issue of such share and
shall be payable, when and as declared by the Board of Directors out of
funds legally available therefor, in cash on March 1, June 1, September 1
and December 1 of each year, commencing September 1, 1992.
Each quarterly period beginning on February 15, May 15, August
15 and November 15 in each year and ending on and including the day next
preceding the first day of the next such quarterly period shall be a
"Dividend Period." If a share of Series A Preferred Stock is outstanding
during an entire Dividend Period, the dividend payable on such share on the
first day of the calendar month immediately following the last day of such
Dividend Period shall be $5.078125 (or one-fourth of 8.125% of the
Liquidation Preference (as defined in Section 7) for such share). If a
share of Series A Preferred Stock is outstanding for less than an entire
Dividend Period, the dividend payable on such share on the first day of the
calendar month immediately following the last day of such Dividend Period
on which such share shall be outstanding shall be the product of $5.078125
multiplied by the ratio (which shall not exceed one) that the number of
days that such share was outstanding during such Dividend Period bears to
the number of days in such Dividend Period.
4
<PAGE>
Each dividend on the shares of Series A Preferred Stock shall be
paid to the holders of record of shares of Series A Preferred Stock as they
appear on the stock register of the Corporation on such record date, not
more than 60 days nor less than 10 days preceding the payment date of such
dividend, as shall be fixed in advance by the Board of Directors. 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, not exceeding 45 days preceding the
payment date thereof, as may be fixed in advance by the Board of Directors.
If there shall be outstanding shares of any other class or
series of preferred stock of the Corporation ranking on a parity as to
dividends with the Series A Preferred Stock, the Corporation, in making any
dividend payment on account of arrears on the Series A Preferred Stock or
such other class or series of preferred stock, shall make payments ratably
upon all outstanding shares of Series A Preferred Stock and such other
class or series of preferred stock in proportion to the respective amounts
of dividends in arrears upon all such outstanding shares of Series A
Preferred Stock and such other class or series of preferred stock to the
date of such dividend payment.
Holders of shares of Series A Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in
excess of full cumulative dividends on such shares. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend
payment that is in arrears.
3. Redemption. The Series A Preferred Stock is not subject to
any mandatory redemption pursuant to a sinking fund or otherwise. The
Corporation, at its option, may redeem shares of Series A Preferred Stock,
as a whole or in part, at any time or from time to time on or after July
28, 1997, at a price of $250 per share, plus accrued and accumulated but
unpaid dividends thereon to but excluding the date fixed for redemption
(the "Redemption Price").
If the Corporation shall redeem shares of Series A Preferred
Stock pursuant to this Section 3, notice of such redemption shall be given
by first class mail, postage prepaid, not less than 30 or more than 90 days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as shown on the stock register of the
Corporation. Each such notice shall state: (a) the redemption date; (b) the
number of shares of Series A Preferred Stock to be redeemed and, if less
than all such shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (c) the Redemption Price;
(d) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; and (e) that dividends on
the shares to be redeemed will cease to accrue on such redemption date.
Notice having been mailed as aforesaid, 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 Series A
Preferred Stock so called for redemption shall cease to accrue, and such
shares shall no longer be deemed to be outstanding, and all rights of the
5
<PAGE>
holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the Redemption Price) shall cease. Upon
surrender in accordance with such 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), the Corporation
shall redeem such shares at the Redemption Price. If less than all the
outstanding shares of Series A Preferred Stock are to be redeemed, the
Corporation shall select those shares to be redeemed from outstanding
shares of Series A Preferred Stock not previously called for redemption by
lot or pro rata (as nearly as may be) or by any other method determined by
the Board of Directors to be equitable.
The Corporation shall not redeem less than all the outstanding
shares of Series A Preferred Stock pursuant to this Section 3, or purchase
or acquire any shares of Series A Preferred Stock otherwise than pursuant
to a purchase or exchange offer made on the same terms to all holders of
shares of Series A Preferred Stock, unless full cumulative dividends shall
have been paid or declared and set apart for payment upon all outstanding
shares of Series A Preferred Stock for all past Dividend Periods, and
unless all matured obligations of the Corporation with respect to all
sinking funds, retirement funds or purchase funds for all series of
Preferred Stock then outstanding have been met.
4. Shares to be Retired. All shares of Series A Preferred Stock
redeemed by the Corporation shall be retired and canceled and shall be
restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be reissued.
5. Conversion or Exchange. The holders of shares of Series A
Preferred Stock shall not have any rights to convert any such shares into
or exchange any such shares for shares of any other class or series of
capital stock of the Corporation.
6. Voting. Except as otherwise provided in this Section 6 or as
otherwise required by law, the Series A Preferred Stock shall have no
voting rights.
If six quarterly dividends (whether or not consecutive) payable
on shares of Series A Preferred Stock are in arrears at the time of the
record date to determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors of the Corporation
shall be increased by two, and the holders of shares of Series A Preferred
Stock (voting separately as a class with the holders of shares of any one
or more other series of Preferred Stock upon which like voting rights have
been conferred and are exercisable) shall be entitled at such annual
meeting of stockholders to elect two directors of the Corporation, with the
remaining directors of the Corporation to be elected by the holders of
shares of any other class or classes or series of stock entitled to vote
therefor. In any such election, holders of shares of Series A Preferred
Stock shall have one vote for each share held.
6
<PAGE>
At all meetings of stockholders at which holders of Preferred
Stock shall be entitled to vote for Directors as a single class, the
holders of a majority of the outstanding shares of all classes and series
of capital stock of the Corporation having the right to vote as a single
class shall be necessary to constitute a quorum, whether present in person
or by proxy, for the election by such single class of its designated
Directors. In any election of Directors by stockholders voting as a class,
such Directors shall be elected by the vote of at least a plurality of
shares held by such stockholders present or represented at the meeting. At
any such meeting, the election of Directors by stockholders voting as a
class shall be valid notwithstanding that a quorum of other stockholders
voting as one or more classes may not be present or represented at such
meeting.
Any director who has been elected by the holders of shares of
Series A Preferred Stock (voting separately as a class with the holders of
shares of any one or more other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable) may be removed at
any time, with or without cause, only by the affirmative vote of the
holders of the shares at the time entitled to cast a majority of the votes
entitled to be cast for the election of any such director at a special
meeting of such holders called for that purpose, and any vacancy thereby
created may be filled by the vote of such holders. If a vacancy occurs
among the Directors elected by such stockholders voting as a class, other
than by removal from office as set forth in the preceding sentence, such
vacancy may be filled by the remaining Director so elected, or his
successor then in office, and the Director so elected to fill such vacancy
shall serve until the next meeting of stockholders for the election of
Directors.
The voting rights of the holders of the Series A Preferred Stock
to elect Directors as set forth above shall continue until all dividend
arrearages on the Series A Preferred Stock have been paid or declared and
set apart for payment. Upon the termination of such voting rights, the
terms of office of all persons who may have been elected pursuant to such
voting rights shall immediately terminate, and the number of directors of
the Corporation shall be decreased by two.
Without the consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of the
total number of shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the holders of shares
of Series A Preferred Stock being entitled to cast one vote per share, the
Corporation may not:
(i) create any class of stock that shall have preference
as to dividends or distributions of assets over the Series A
Preferred Stock; or
(ii) alter or change the provisions of the Certificate of
Incorporation (including any Certificate of Amendment or
Certificate of Designation relating to the Series A Preferred
7
<PAGE>
Stock) so as to adversely affect the powers, preferences or
rights of the holders of shares of Series A Preferred Stock;
provided, however, that if such creation or such alteration or change would
adversely affect the powers, preferences or rights of one or more, but not
all, series of Preferred Stock at the time outstanding, such alteration or
change shall require consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as a class.
7. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of Series A Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders,
before any distribution of assets shall be made to the holders of the
Common Stock or of any other shares of stock of the Corporation ranking as
to such distribution junior to the Series A Preferred Stock, a liquidating
distribution in an amount equal to $250 per share (the "Liquidation
Preference") plus an amount equal to any accrued and accumulated but unpaid
dividends thereon to the date of final distribution. The holders of the
Series A Preferred Stock shall not be entitled to receive the Liquidation
Preference and such accrued dividends, however, until the liquidation
preference of any other class of stock of the Corporation ranking senior to
the Series A Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution are
insufficient to pay in full the amounts payable with respect to the Series
A Preferred Stock and any other shares of stock of the Corporation ranking
as to any such distribution on a parity with the Series A Preferred Stock,
the holders of the Series A Preferred Stock and of such other shares shall
share ratably in any distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled.
After payment to the holders of the Series A Preferred Stock of
the full preferential amounts provided for in this Section 7, the holders
of the Series A Preferred Stock shall be entitled to no further
participation in any distribution of assets by the Corporation.
Consolidation or merger of the Corporation with or into one or
more other corporations, or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation, shall not be deemed or construed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 7 if the preferences or special voting rights of the holders of
shares of Series A Preferred Stock are not impaired thereby.
8. Limitation on Dividends on Junior Stock. So long as any
Series A Preferred Stock shall be outstanding the Corporation shall not
8
<PAGE>
declare any dividends on the Common Stock or any other stock of the
Corporation ranking as to dividends or distributions of assets junior to
the Series A Preferred Stock (the Common Stock and any such other stock
being herein referred to as "Junior Stock"), or make any payment on account
of, or set apart money for, a sinking fund or other similar fund or
agreement for the purchase, redemption or other retirement of any shares of
Junior Stock, or make any distribution in respect thereof, whether in cash
or property or in obligations or stock of the Corporation, other than a
distribution of Junior Stock (such dividends, payments, setting apart and
distributions being herein called "Junior Stock Payments"), unless the
following conditions shall be satisfied at the date of such declaration in
the case of any such dividend, or the date of such setting apart in the
case of any such fund, or the date of such payment or distribution in the
case of any other Junior Stock Payment:
(i) full cumulative dividends shall have been paid or
declared and set apart for payment on all outstanding shares of
Preferred Stock other than Junior Stock; and
(ii) the Corporation shall not be in default or in arrears
with respect to any sinking fund or other similar fund or
agreement for the purchase, redemption or other retirement of
any shares of Preferred Stock other than Junior Stock;
provided, however, that any funds theretofore deposited in any sinking fund
or other similar fund with respect to any Preferred Stock in compliance
with the provisions of such sinking fund or other similar fund may
thereafter be applied to the purchase or redemption of such Preferred Stock
in accordance with the terms of such sinking fund or other similar fund
regardless of whether at the time of such application full cumulative
dividends upon shares of Series A Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set apart for
payment by the Corporation.
K. 5.50% CONVERTIBLE PREFERRED STOCK, SERIES B
1. Designation and Number of Shares. The designation of such
series shall be 5.50% Convertible Preferred Stock, Series B (the "Series B
Convertible Preferred Stock"), and the number of shares constituting such
series shall be 2,500,000. The number of authorized shares of Series B
Convertible Preferred Stock may be reduced (but not below the number of
shares thereof then outstanding) by further resolution duly adopted by the
Board of Directors or the Executive Committee and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of Series B Convertible Preferred Stock
shall not be increased.
2. Dividends. Dividends on each share of Series B Convertible
Preferred Stock shall be cumulative from the date of original issue of such
share and shall be payable, when and as declared by the Board of Directors
9
<PAGE>
out of funds legally available therefor, in cash on March 1, June 1,
September 1 and December 1 of each year, commencing September 1, 1993.
Each quarterly period beginning on February 15, May 15, August
15 and November 15 in each year and ending on and including the day next
preceding the first day of the next such quarterly period shall be a
"Dividend Period." If a share of Series B Convertible Preferred Stock is
outstanding during an entire Dividend Period, the dividend payable on such
share on the first day of the calendar month immediately following the last
day of such Dividend Period shall be $.6875 (or one-fourth of 5.50% of the
Liquidation Preference (as defined in Section 6) for such share). If a
share of Series B Convertible Preferred Stock is outstanding for less than
an entire Dividend Period, the dividend payable on such share on the first
day of the calendar month immediately following the last day of such Divi-
dend Period on which such share shall be outstanding shall be the product
of $.6875 multiplied by the ratio (which shall not exceed one) that the
number of days that such share was outstanding during such Dividend Period
bears to the number of days in such Dividend Period.
Each dividend on the shares of Series B Convertible Preferred
Stock shall be paid to the holders of record of shares of Series B Con-
vertible Preferred Stock as they appear on the stock register of the
Corporation on such record date, not more than 60 days nor less than 10
days preceding the payment date of such dividend, as shall be fixed in
advance by the Board of Directors. 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, not exceeding 45 days preceding the payment date thereof, as may
be fixed in advance by the Board of Directors.
If there shall be outstanding shares of any other class or
series of preferred stock of the Corporation ranking on a parity as to
dividends with the Series B Convertible Preferred Stock, the Corporation,
in making any dividend payment on account of arrears on the Series B
Convertible Preferred Stock or such other class or series of preferred
stock, shall make payments ratably upon all outstanding shares of Series B
Convertible Preferred Stock and such other class or series of preferred
stock in proportion to the respective amounts of dividends in arrears upon
all such outstanding shares of Series B Convertible Preferred Stock and
such other class or series of preferred stock to the date of such dividend
payment.
Holders of shares of Series B Convertible Preferred Stock shall
not be entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends on such shares. No interest,
or sum of money in lieu of interest, shall be payable in respect of any
dividend payment that is in arrears.
3. Redemption. The Series B Convertible Preferred Stock is not
subject to any mandatory redemption pursuant to a sinking fund or
otherwise. The Corporation, at its option, may redeem shares of Series B
Convertible Preferred Stock, as a whole or in part, at any time or from
10
<PAGE>
time to time on or after July 30, 1996 at the following redemption prices
per share (expressed as a percentage of the Liquidation Preference (as
defined in Section 6 hereof)), if redeemed during the 12-month period
beginning July 30 of the year indicated:
Year Redemption Price
---- ----------------
1996 103.85%
1997 103.30%
1998 102.75%
1999 102.20%
2000 101.65%
2001 101.10%
2002 100.55%
and thereafter at a price of $50.00 per share, plus, in each case, accrued
and accumulated but unpaid dividends thereon to but excluding the date
fixed for redemption (the "Redemption Price").
If the Corporation shall redeem shares of Series B Convertible
Preferred Stock pursuant to this Section 3, notice of such redemption shall
be given by first class mail, postage prepaid, not less than 30 or more
than 90 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as shown on the stock
register of the Corporation. Each such notice shall state: (a) the
redemption date; (b) the number of shares of Series B Convertible Preferred
Stock to be redeemed and, if less than all such shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (c) the Redemption Price; (d) the place or places where certifi-
cates for such shares are to be surrendered for payment of the Redemption
Price; and (e) that dividends on the shares to be redeemed will cease to
accrue on such redemption date. Notice having been mailed as aforesaid,
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 Series B Convertible Preferred Stock so called
for redemption shall cease to accrue, and such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the Redemption Price) shall cease. Upon surrender in accor-
dance with such 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), the Corporation shall
redeem such shares at the Redemption Price. If less than all the outstand-
ing shares of Series B Convertible Preferred Stock are to be redeemed, the
Corporation shall select those shares to be redeemed from outstanding
shares of Series B Convertible Preferred Stock not previously called for
redemption by lot or pro rata (as nearly as may be) or by any other method
reasonably determined by the Board of Directors in good faith to be
equitable.
The Corporation shall not redeem less than all the outstanding
shares of Series B Convertible Preferred Stock pursuant to this Section 3,
or purchase or acquire any shares of Series B Convertible Preferred Stock
11
<PAGE>
otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Series B Convertible Preferred Stock,
unless full cumulative dividends shall have been paid or declared and set
apart for payment upon all outstanding shares of Series B Convertible
Preferred Stock for all past Dividend Periods, and unless all matured
obligations of the Corporation with respect to all sinking funds,
retirement funds or purchase funds for all series of Preferred Stock then
outstanding have been met.
4. Shares to be Retired. All shares of Series B Convertible
Preferred Stock redeemed by the Corporation shall be retired and canceled
and shall be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be
reissued.
5. Voting. Except as otherwise provided in this Section 5 or as
otherwise required by law, the Series B Convertible Preferred Stock shall
have no voting rights.
If six quarterly dividends (whether or not consecutive) payable
on shares of Series B Convertible Preferred Stock are in arrears at the
time of the record date to determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors of the Corporation
shall be increased by two, and the holders of shares of Series B
Convertible Preferred Stock (voting separately as a class with the holders
of shares of any one or more other series of Preferred Stock upon which
like voting rights have been conferred and are exercisable) shall be enti-
tled at such annual meeting of stockholders to elect two directors of the
Corporation, with the remaining directors of the Corporation to be elected
by the holders of shares of any other class or classes or series of stock
entitled to vote therefor. In any such election, holders of shares of
Series B Convertible Preferred Stock shall have one vote for each share
held.
At all meetings of stockholders at which holders of Preferred
Stock shall be entitled to vote for Directors as a single class, the
holders of a majority of the outstanding shares of all classes and series
of capital stock of the Corporation having the right to vote as a single
class shall be necessary to constitute a quorum, whether present in person
or by proxy, for the election by such single class of its designated
Directors. In any election of Directors by stockholders voting as a class,
such Directors shall be elected by the vote of at least a plurality of
shares held by such stockholders present or represented at the meeting. At
any such meeting, the election of Directors by stockholders voting as a
class shall be valid notwithstanding that a quorum of other stockholders
voting as one or more classes may not be present or represented at such
meeting.
Any director who has been elected by the holders of shares of
Series B Convertible Preferred Stock (voting separately as a class with the
holders of shares of any one or more other series of Preferred Stock upon
which like voting rights have been conferred and are exercisable) may be
12
<PAGE>
removed at any time, with or without cause, only by the affirmative vote of
the holders of the shares at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such director at a
special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If a vacancy
occurs among the Directors elected by such stockholders voting as a class,
other than by removal from office as set forth in the preceding sentence,
such vacancy may be filled by the remaining Director so elected, or his
successor then in office, and the Director so elected to fill such vacancy
shall serve until the next meeting of stockholders for the election of
Directors.
The voting rights of the holders of the Series B Convertible
Preferred Stock to elect Directors as set forth above shall continue until
all dividend arrearages on the Series B Convertible Preferred Stock have
been paid or declared and set apart for payment. Upon the termination of
such voting rights, the terms of office of all persons who may have been
elected pursuant to such voting rights shall immediately terminate, and the
number of directors of the Corporation shall be decreased by two.
Without the consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of the
total number of shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the holders of shares
of Series B Convertible Preferred Stock being entitled to cast one vote per
share, the Corporation may not:
(i) create any class of stock that shall have preference
as to dividends or distributions of assets over the Series B
Convertible Preferred Stock; or
(ii) alter or change the provisions of the Certificate of
Incorporation (including any Certificate of Amendment or Certif-
icate of Designation relating to the Series B Convertible Pre-
ferred Stock) so as to adversely affect the powers, preferences
or rights of the holders of shares of Series B Convertible Pre-
ferred Stock;
provided, however, that if such creation or such alteration or change would
adversely affect the powers, preferences or rights of one or more, but not
all, series of Preferred Stock at the time outstanding, such alteration or
change shall require consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as a class.
6. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of Series B Convertible Preferred Stock shall be entitled to re-
ceive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of assets shall be made to the
holders of the Common Stock or of any other shares of stock of the
Corporation ranking as to such distribution junior to the Series B Convert-
ible Preferred Stock, a liquidating distribution in an amount equal to
13
<PAGE>
$50.00 per share (the "Liquidation Preference") plus an amount equal to any
accrued and accumulated but unpaid dividends thereon to the date of final
distribution. The holders of the Series B Convertible Preferred Stock
shall not be entitled to receive the Liquidation Preference and such
accrued dividends, however, until the liquidation preference of any other
class of stock of the Corporation ranking senior to the Series B Con-
vertible Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution are
insufficient to pay in full the amounts payable with respect to the Series
B Convertible Preferred Stock and any other shares of stock of the
Corporation ranking as to any such distribution on a parity with the Series
B Convertible Preferred Stock, the holders of the Series B Convertible Pre-
ferred Stock and of such other shares shall share ratably in any
distribution of assets of the Corporation in proportion to the full respec-
tive preferential amounts to which they are entitled.
After payment to the holders of the Series B Convertible Pre-
ferred Stock of the full preferential amounts provided for in this Section
6, the holders of the Series B Convertible Preferred Stock shall be
entitled to no further participation in any distribution of assets by the
Corporation.
Consolidation or merger of the Corporation with or into one or
more other corporations, or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation, shall not be deemed or construed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 6 if the preferences or special voting rights of the holders of
shares of Series B Convertible Preferred Stock are not impaired thereby.
7. Limitation on Dividends on Junior Stock. So long as any
Series B Convertible Preferred Stock shall be outstanding, the Corporation
shall not declare any dividends on the Common Stock or any other stock of
the Corporation ranking as to dividends or distributions of assets junior
to the Series B Convertible Preferred Stock (the Common Stock and any such
other stock being herein referred to as "Junior Stock"), or make any
payment on account of, or set apart money for, a sinking fund or other
similar fund or agreement for the purchase, redemption or other retirement
of any shares of Junior Stock, or make any distribution in respect thereof,
whether in cash or property or in obligations or stock of the Corporation,
other than a distribution of Junior Stock (such dividends, payments,
setting apart and distributions being herein called "Junior Stock
Payments"), unless the following conditions shall be satisfied at the date
of such declaration in the case of any such dividend, or the date of such
setting apart in the case of any such fund, or the date of such payment or
distribution in the case of any other Junior Stock Payment:
14
<PAGE>
(i) full cumulative dividends shall have been paid or de-
clared and set apart for payment on all outstanding shares of
Preferred Stock other than Junior Stock; and
(ii) the Corporation shall not be in default or in arrears
with respect to any sinking fund or other similar fund or agree-
ment for the purchase, redemption or other retirement of any
shares of Preferred Stock other than Junior Stock;
provided, however, that any funds theretofore deposited in any sinking fund
or other similar fund with respect to any Preferred Stock in compliance
with the provisions of such sinking fund or other similar fund may
thereafter be applied to the purchase or redemption of such Preferred Stock
in accordance with the terms of such sinking fund or other similar fund re-
gardless of whether at the time of such application full cumulative
dividends upon shares of Series B Convertible Preferred Stock outstanding
to the last dividend payment date shall have been paid or declared and set
apart for payment by the Corporation.
8. Conversion Rights. The shares of Series B Convertible Pre-
ferred Stock shall be convertible, in whole or in part, at the option of
the holder(s) thereof, into shares of Common Stock subject to the following
terms and conditions:
(a) The shares of Series B Convertible Preferred Stock
shall be convertible at the office of any transfer agent of the
Corporation, and at such other office or offices, if any, as the
Board of Directors may designate, into fully paid and nonassess-
able shares (calculated as to each conversion to the nearest
1/100 of a share) of common stock, $.01 par value per share, of
the Corporation ("Common Stock") at the rate of that number of
shares of Common Stock for each share of Series B Convertible
Preferred Stock that is equal to $50.00 divided by the Conver-
sion Price applicable per share of Common Stock at the time of
conversion (the "Conversion Price"). The Conversion Price shall
initially be $49.00. The Conversion Price shall be adjusted in
certain instances as provided below.
(b) In order to convert shares of Series B Convertible
Preferred Stock into Common Stock, the holder thereof shall
surrender the certificate or certificates evidencing such shares
of Series B Convertible Preferred Stock at the office of the
transfer agent for the Series B Convertible Preferred Stock,
which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank,
or accompanied by proper instruments of transfer to the Corpora-
tion or in blank, accompanied by (i) an irrevocable written
notice to the Corporation that the holder elects so to convert
such shares of Series B Convertible Preferred Stock and specify-
ing the name or names (with address or addresses) in which a
certificate or certificates evidencing shares of Common Stock
are to be issued and (ii) if required pursuant to paragraph (p)
15
<PAGE>
of this Section 8, an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corpora-
tion demonstrating that such taxes have been paid).
A payment or adjustment shall not be made by the Corpora-
tion upon any conversion on account of any dividends accrued on
the shares of Series B Convertible Preferred Stock surrendered
for conversion or on account of any dividends on the Common
Stock issued upon conversion.
Shares of Series B Convertible Preferred Stock shall be
deemed to have been converted immediately prior to the close of
business on the day of the surrender of such shares for
conversion in accordance with the foregoing provisions, and the
person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the conversion date, the
Corporation shall issue and shall deliver at such office a
certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with
payment in lieu of any fraction of a share, as hereinafter
provided, to the person or persons entitled to receive the same.
In case shares of Series B Convertible Preferred Stock are
called for redemption, the right to convert such shares shall
cease and terminate at the close of business on the date fixed
for redemption, unless default shall be made in payment of the
Redemption Price.
(c) In case the Corporation shall pay or make a dividend
or other distribution on any class of capital stock of the
Corporation in Common Stock, the Conversion Price in effect at
the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other distri-
bution shall be reduced to a price determined by multiplying
such Conversion Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such reduction to become effective at the opening
of business on the day following the date fixed for such deter-
mination. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjust-
ed to be the Conversion Price which would then be in effect if
such date fixed for the determination of stockholders entitled
to receive such dividend or other distribution had not been
fixed, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any conversion of
the Series B Convertible Preferred Stock prior to the date such
subsequent adjustment is made. For the purposes of this para-
graph (c), the number of shares of Common Stock at any time
16
<PAGE>
outstanding shall not include shares held in the treasury of the
Corporation, but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of
Common Stock.
(d) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less
than the Average Market Price (as defined below) of Common Stock
on the date fixed for the determination of stockholders entitled
to receive such rights or warrants, the Conversion Price in ef-
fect at the close of business on the date fixed for such
determination shall be reduced to a price determined by multi-
plying such Conversion Price by a fraction of which the numera-
tor shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of
the offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at such
Average Market Price and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase, such
reduction to become effective at the opening of business on the
day following the date fixed for such determination. To the
extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be
in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the Con-
version Price shall again be adjusted to be the Conversion Price
which would then be in effect if the date fixed for the determi-
nation of stockholders entitled to receive such rights or war-
rants had not been fixed, but such subsequent adjustment shall
not affect the number of shares of Common Stock issued upon any
conversion of the Series B Convertible Preferred Stock prior to
the date such subsequent adjustment is made. For the purposes
of this paragraph (d), the number of shares of Common Stock at
any time outstanding shall not include shares held in the
treasury of the Corporation, but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. As used herein the term "Average Market
Price" of the Common Stock shall mean the average of the daily
reported closing sales prices, regular way, per share of the
Common Stock on the New York Stock Exchange (the "NYSE") or, if
the Common Stock is not principally traded on the NYSE, such
other market on which the Common Stock is listed or principally
traded, for the 10 consecutive trading days prior to the date of
determination.
17
<PAGE>
(e) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the close of business on the date
upon which such subdivision becomes effective shall be propor-
tionately reduced, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the
close of business on the date upon which such combination be-
comes effective shall be proportionately increased, such reduc-
tion or increase, as the case may be, to become effective at the
opening of business on the day following the date upon which
such subdivision or combination becomes effective.
(f) In case the Corporation shall, by dividend or other-
wise, distribute to all holders of its Common Stock evidences of
its indebtedness or assets (including securities, but excluding
(i) any rights or warrants referred to in paragraph (d) of this
Section 8, (ii) any dividend or distribution paid in cash or
other property out of the retained earnings of the Corporation
and (iii) any dividend or distribution referred to in paragraph
(c) of this Section 8), then either (at the option of the Corpo-
ration) (A) the Corporation shall elect to include in such
distribution the holders of Series B Convertible Preferred Stock
(as of the record date for such distribution) as if such holders
had converted all shares of Series B Convertible Preferred Stock
into Common Stock immediately prior to such record date (such
conversion assumed to be made at the Conversion Price in effect
without regard to the adjustment provided in the following
clause (B)), or (B) the Conversion Price shall be reduced to a
price determined by multiplying the Conversion Price in effect
at the close of business on the date fixed for the determination
of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Average Market
Price per share of the Common Stock on the date fixed for such
determination less the then fair market value (as reasonably
determined in good faith by the Board of Directors) on such date
of the portion of the assets or evidences of indebtedness so to
be distributed applicable to one share of Common Stock and the
denominator shall be such Average Market Price per share of the
Common Stock, such adjustment to become effective at the opening
of business on the day following the date fixed for the
determination of stockholders entitled to receive such
distribution. In the event that such dividend or distribution
is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in
effect if such date fixed for the determination of stockholders
entitled to receive such dividend or other distribution had not
been fixed, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any conversion of
the Series B Convertible Preferred Stock prior to the date such
subsequent adjustment is made. If the Corporation makes an
election under clause (A) of this paragraph (f) with respect to
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<PAGE>
any such distribution payable on the Series B Convertible
Preferred Stock (an "Elected Corporation Dividend"), the
Corporation may in lieu of such distribution elect to pay to the
holder of any share of Series B Convertible Preferred Stock the
fair market value (determined as provided above) of such Elected
Corporation Dividend in cash (the "Cash Equivalent").
(g) The reclassification (including any reclassification
upon a consolidation or merger in which the Corporation is the
continuing corporation, but not including any transactions for
which an adjustment is provided in paragraph (i) below) of
Common Stock into securities including other than Common Stock
shall be deemed to involve (i) a distribution of such securities
other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled
to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (f) of this
Section 8) and (ii) a subdivision or combination, as the case
may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and
the effective date of such reclassification shall be deemed to
be "the date upon which such subdivision becomes effective" or
"the day upon which such combination becomes effective," as the
case may be, and "the date upon which such subdivision or combi-
nation becomes effective" within the meaning of paragraph (e) of
this Section 8).
(h) The Corporation may make such reductions in the Con-
version Price, in addition to those required by paragraphs (c),
(d), (e), (f) and (g) above, as it considers to be advisable in
order that any event treated for Federal income tax purposes as
a dividend of stock or stock rights shall not be taxable to the
recipients.
(i) In case of any consolidation of the Corporation with,
or merger of the Corporation into, any other corporation, part-
nership, joint venture, association or other entity (a "Per-
son"), any merger of another Person into the Corporation (other
than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of
Common Stock) or any sale or transfer of all or substantially
all of the assets of the Corporation, then each share of Series
B Convertible Preferred Stock shall be convertible only into the
kind and amount (if any) of securities, cash or other property
receivable upon such consolidation, merger, sale or transfer by
a holder of the number of shares of Common Stock into which such
share of Series B Convertible Preferred Stock was convertible
immediately prior to such consolidation, merger, sale or trans-
fer. The above provisions of this paragraph (i) shall similarly
apply to successive consolidations, mergers, sales or transfers.
19
<PAGE>
(j) No adjustment in the Conversion Price shall be re-
quired unless such adjustment would require an increase or
decrease of at least 1% in the Conversion Price; provided,
however, that any adjustments which by reason of this subpara-
graph (j) are not required to be made shall be carried forward
and taken into account in determining whether any subsequent
adjustment shall be required.
(k) Notwithstanding any other provision of this Section 8,
no adjustment to the Conversion Price shall reduce the Conver-
sion Price below the then par value per share of the Common
Stock, and any such purported adjustment shall instead reduce
the Conversion Price to such par value.
(l) Whenever the Conversion Price is adjusted as herein
provided the Corporation shall compute the adjusted Conversion
Price in accordance with this Section 8 and shall prepare a
certificate signed by the Treasurer of the Corporation setting
forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the transfer agent or
agents for the Series B Convertible Preferred Stock and a copy
mailed as soon as practicable to the holders of record of the
shares of Series B Convertible Preferred Stock.
(m) In case:
(i) the Corporation shall declare a dividend (or any
other distribution) on its Common Stock payable otherwise
than in cash out of its retained earnings; or
(ii) the Corporation shall authorize the granting to
the holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights; or
(iii) of any reclassification of the capital stock of
the Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation
is required, or of the sale or transfer of all or
substantially all of the assets of the Corporation; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall cause to be filed
with the transfer agent or agents, if any, for the Series B
Convertible Preferred Stock, and shall cause to be mailed to the
holders of record of the outstanding shares of Series B Convert-
ible Preferred Stock, at least 30 days (or 15 days in any case
20
<PAGE>
specified in clause (i) or (ii) above) prior to the applicable
record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, trans-
fer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up
(but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice).
(n) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized
but unissued Common Stock, for the purpose of effecting the
conversion of shares of Series B Convertible Preferred Stock,
the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series B Convertible Preferred
Stock then outstanding.
(o) No fractional shares of Common Stock shall be issued
upon conversion, but, instead of any fraction of a share which
would otherwise be issuable, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the
same fraction of the market price per share of Common Stock (as
determined in good faith by the Board of Directors or in any
manner prescribed by the Board of Directors) at the close of
business on the day of conversion.
(p) The Corporation will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common
Stock on conversion of shares of Series B Convertible Preferred
Stock pursuant hereto. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the shares of Series B
Convertible Preferred Stock so converted were registered, and no
such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of
any such tax, or has established to the satisfaction of the
Corporation that such tax has been paid.
(q) For the purpose of this Section 8, the term "Common
Stock" shall include any stock of any class of the Corporation
which has no preference in respect of dividends or of amounts
21
<PAGE>
payable in the event of any voluntary or involuntary liquida-
tion, dissolution or winding up of the Corporation and which is
not subject to redemption by the Corporation. However, shares
issuable on conversion of shares of Series B Convertible Pre-
ferred Stock shall include only shares of the class designated
as Common Stock of the Corporation as of July 31, 1993, or
shares of any class or classes resulting from any reclassifica-
tion or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation and which are not subject to redemption by
the Corporation; provided that if at any time there shall be
more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from
all such reclassifications bears to the total number of shares
of all such classes resulting from all such reclassifications.
(r) In any case in which this Section 8 shall require that
an adjustment shall become effective on the day following a
record date for an event, the Corporation may defer until the
occurrence of such event (i) issuing to the holder of any share
of Series B Convertible Preferred Stock, if such share is con-
verted after such record date and before the occurrence of such
event, the additional Common Stock (and associated Elected
Corporation Dividend or Cash Equivalent, if any) issuable upon
such conversion by reason of the adjustment required by such
event over and above Common Stock (and associated Elected Corpo-
ration Dividend or Cash Equivalent, if any) issuable upon such
conversion before giving effect to such adjustment and (ii) pay-
ing to such holders any amount in cash in lieu of a fractional
share of Common Stock pursuant to paragraph (p) of this Section
8; provided that upon request of any such holder, the Corpo-
ration shall deliver to such holder a due bill or other ap-
propriate instrument evidencing such holder's right to receive
such additional Common Stock and such cash, upon the occurrence
of the event requiring such adjustment.
9. Sinking Fund. The Series B Convertible Preferred Stock shall
not be subject to any right of mandatory payment or prepayment (except for
liquidation, dissolution or winding up of the Corporation) or to any
sinking fund.
10. Ranking. The Series B Convertible Preferred Stock shall
rank on a parity with the Corporation's 8.125% Cumulative Preferred Stock,
Series A and $45,000 Cumulative Redeemable Preferred Stock, Series Z with
respect to dividends and distributions of assets upon liquidation,
dissolution or winding up of the Corporation.
11. Exchanges. Certificates representing shares of Series B
Convertible Preferred Stock shall be exchangeable, at the option of the
holder, for a new certificate or certificates of the same or different
22
<PAGE>
denominations representing in the aggregate the same number of shares of
Series B Convertible Preferred Stock.
L. $ 4.53 ESOP CONVERTIBLE PREFERRED STOCK, SERIES C
1. Designation, Issuance and Transfer. (a) There shall be a
series of Preferred Stock, the designation of which shall be
"$4.53 ESOP Convertible Preferred Stock, Series C" (hereinafter
called the "Series C Preferred Stock") and the number of
authorized shares constituting the Series C Preferred Stock
shall be eight million (8,000,000). Shares of the Series C
Preferred Stock shall have a stated value of $53.25 per share.
The number of authorized shares of the Series C Preferred Stock
may be reduced by resolution duly adopted by the Board of
Directors, or by a duly authorized committee thereof, and by the
filing, pursuant to the provisions of the General Corporation
Law of the State of Delaware, of a certificate of amendment to
the Certificate of Incorporation of the Corporation, as
theretofore amended, stating that such reduction has been so
authorized, but the number of authorized shares of the Series C
Preferred Stock shall not be increased.
(b) Shares of Series C Preferred Stock shall be issued
only to Shawmut Bank Connecticut, National Association, as
trustee (the "Trustee") acting on behalf of the employee stock
ownership feature of The Travelers Savings, Investment and Stock
Ownership Plan, as amended from time to time or any successor to
such plan (the "Plan"), or any successor trustee under the Plan.
In the event of any transfer of shares of Series C Preferred
Stock to any person other than the Trustee, other than a pledge
of the shares of Series C Preferred Stock by the Trust in
connection with the financing or refinancing of the purchase by
the Trustee of shares of $4.53 Series A ESOP Convertible
Preference Stock (without par value) of The Travelers
Corporation (the "Series A Preference Stock"; such shares of
Series A Preference Stock having been assumed by the Corporation
and become shares of Series C Preferred Stock pursuant to the
terms of such Series A Preference Stock) or of shares of Series
C Preferred Stock, the shares of the Series C Preferred Stock so
transferred, upon such transfer and without any further action
by the Corporation or the holder, shall be automatically
converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series C Preferred
Stock into shares of Common Stock pursuant to paragraph 4 of
this Section L and no such transferee shall have any of the
voting powers, preferences or rights of shares of Series C
Preferred Stock hereunder, but rather, only the powers and
rights pertaining to the Common Stock into which such shares of
Series C Preferred Stock shall be so converted. Notwithstanding
the foregoing provisions of this paragraph 1(b), shares of
Series C Preferred Stock may be converted into shares of Common
Stock as provided by paragraph 4 of this Section L and the
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<PAGE>
shares of Common Stock issued upon such conversion may be
transferred by the holder thereof as permitted by law.
2. Dividend Rate. (a) Dividends on each share of the Series
C Preferred Stock shall accrue from the date of its original
issue (for purposes of this paragraph 2(a), the date of original
issue of the Series C Preferred Stock shall be the date of
commencement of the full quarterly period ending April 1, 1994)
in the amount of $4.53 per annum per share (the "Rate"). Such
dividends shall be cumulative from the date of original issue
and shall be payable, when and as declared by the Board of
Directors, out of assets legally available for such purpose, on
January 1, April 1, July 1 and October 1 of each year,
commencing April 1, 1994 (each such date being hereinafter
individually a "Dividend Payment Date" and collectively the
"Dividend Payment Dates"), except that if such date is a Sunday
or legal holiday then such dividend shall be payable on the
first immediately succeeding calendar day which is not a Sunday
or legal holiday. Each such dividend shall be paid to the
holders of record of shares of the Series C Preferred Stock as
they appear on the books of the Corporation on such Dividend
Payment Date, or such other date as shall be fixed by the Board
of Directors as the record date. Dividends in arrears may be
declared and paid at any time, without reference to any regular
Dividend Payment Date, to holders of record on the payment date
(which payment date may be fixed by the Board of Directors as
the record date), or such other date as may be fixed by the
Board of Directors as the record date.
(b) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on Preferred Stock of
any other series ranking on a parity with the Series C Preferred
Stock as to dividends and upon liquidation for any period unless
full cumulative dividends have been or contemporaneously are
declared and paid on the Series C Preferred Stock through the
latest Dividend Payment Date. When dividends are not paid in
full, as aforesaid, upon the shares of the Series C Preferred
Stock and any such other series of Preferred Stock, all
dividends declared upon shares of the Series C Preferred Stock
and such other series of Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on the
Series C Preferred Stock and such other series of Preferred
Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of the Series C
Preferred Stock and such other series of Preferred Stock bear to
each other. Holders of shares of the Series C Preferred Stock
shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends, as
herein provided, on the Series C 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 C Preferred
Stock which may be in arrears.
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<PAGE>
(c) So long as any shares of the Series C Preferred Stock
are outstanding, no dividend (other than a dividend in Common
Stock or in any other stock of the Corporation ranking junior to
the Series C Preferred Stock as to dividends and upon
liquidation and other than as provided in paragraph 2(b) of this
Section L) shall be declared or paid or set aside for payment,
and no other distribution shall be declared or made upon the
Common Stock or upon any other stock of the Corporation ranking
junior to or on a parity with the Series C Preferred Stock as to
dividends or upon liquidation, nor shall any Common Stock nor
any other stock of the Corporation ranking junior to or on a
parity with the Series C 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 shares of any such stock)
by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to the Series C
Preferred Stock as to dividends and upon liquidation), unless,
in each case, the full cumulative dividends on all outstanding
shares of the Series C Preferred Stock shall have been paid or
contemporaneously are declared and paid through the latest
Dividend Payment Date.
(d) Dividends payable on the Series C Preferred Stock for
any full quarterly period shall be computed by dividing the Rate
by four (for purposes of this paragraph 2(d), the Series C
Preferred Stock shall be deemed to have been outstanding for the
full quarterly period ending April 1, 1994). Subject to the
preceding sentence, dividends payable on the Series C Preferred
Stock for any period less than a full quarterly period shall be
computed on the basis of a 360-day year of 30-day months.
3. Redemption. (a) The shares of Series C Preferred Stock
shall not be redeemable before January 1, 1998 except as set
forth in paragraphs 3(b), 3(c), 3(d) and 3(e) of this Section L.
On or after January 1, 1998, the Corporation, at its sole
option, may redeem the Series C Preferred Stock as a whole or in
part at a price of $53.25 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption.
(b) The shares of Series C Preferred Stock shall be
redeemable by the Corporation, at its sole option, at any time
and from time to time if there is a change in the Federal tax
law of the United States of America which has the effect of
precluding the Corporation from claiming any of the tax
deductions for dividends paid on the Series C Preferred Stock
when such dividends are used as provided under Section 404(k)(2)
of the Internal Revenue Code of 1986, as amended, and as in
effect on the date shares of Series C Preferred Stock are
initially issued (for this purpose, such date of initial
issuance being the date of the original issuance of the Series A
Preference Stock), at the higher of (i) $53.25 per share plus
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<PAGE>
accrued and unpaid dividends thereon to the date fixed for
redemption or (ii) the fair market value per share of the Series
C Preferred Stock as determined by an independent appraiser,
appointed by the Trustee in accordance with the provisions of
the Plan, as of the most recent Valuation Date, as defined in
the Plan.
(c) The shares of Series C Preferred Stock shall be
redeemable in whole at any time upon the commencement of any
action by a governmental authority having jurisdiction which may
result in the divestiture or other material change in the
business of the Corporation or any subsidiary by reason of the
issuance of the Series C Preferred Stock. At such time as the
shares of Series C Preferred Stock shall be redeemable pursuant
to this paragraph 3(c), the Corporation, at its sole option, may
redeem the Series C Preferred Stock at the following redemption
prices per share plus, in each case, accrued and unpaid
dividends thereon to the date fixed for redemption.
If redeemed during the twelve-month period beginning January 1,
Year Price
---- -----
1994 $55.52
1995 $54.95
1996 $54.38
1997 $53.82
and $53.25 if redeemed on or after January 1, 1998.
(d) The shares of Series C Preferred Stock shall be
redeemed by the Corporation at a redemption price which shall
be the higher of (i) $53.25 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption or (ii) the
fair market value per share of the Series C Preferred Stock as
determined by an independent appraiser appointed by the Trustee
in accordance with the provisions of the Plan, as of the most
recent Valuation Date, as defined in the Plan, at the option of
the holder, at any time and from time to time upon notice to
the Corporation given not less than five business days prior to
the date fixed by the holder in such notice for such
redemption, upon certification by such holder to the
Corporation, when and to the extent necessary for such holder
to provide for distributions required to be made to
participants under, or to satisfy an investment election
provided to participants in accordance with, the Plan.
(e) At the option of the holder, the shares of Series C
Preferred Stock shall be redeemed in whole by the Corporation
at a redemption price of $53.25 per share plus accrued and
unpaid dividends thereon to the date fixed for redemption, at
any time (i) upon a Change in Control of the Corporation or
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<PAGE>
(ii) in the event that the Plan is not initially determined by
the Internal Revenue Service to be qualified within the meaning
of Sections 401(a) and 4975(e)(7) of the Internal Revenue Code
of 1986, as amended, upon notice to the Corporation given not
less than five business days prior to the date fixed by the
holder in such notice for such redemption.
For purposes of this paragraph (e), a "Change in Control" will
be deemed to have occurred upon either of the following:
(i) The date of public disclosure that any person
or group of persons (excluding persons or entities
affiliated with the Corporation) directly or indirectly
acquires actual or beneficial ownership of 30% or more of
the combined voting power of the Corporation's outstanding
securities entitled to vote in the election of members of
the Board of Directors, or the right to obtain such
ownership; or
(ii) The date Incumbent Directors cease to
constitute a majority of the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to (i) above solely because 30% or
more of the combined voting power of the Corporation's
outstanding securities entitled to vote in the election of
members of the Board of Directors is acquired by a person, the
majority interest in which is held, directly or indirectly, by
the Corporation, or by one or more employee benefit plans
maintained by the Corporation or an affiliated employer, the
majority interest in which is held, directly or indirectly, by
the Corporation.
For the purposes of this definition, the term "person" shall
have the same meaning as set forth in Section 3(a) of the
Securities Exchange Act of 1934, as amended, and in the
regulations promulgated thereunder.
For purposes of this definition, the term "Incumbent Directors"
shall mean the Board of Directors on December 31, 1993, to the
extent that they continue to serve as members thereof. Any
individual who becomes a member of such Board after December
31, 1993, if his or her election or nomination for election as
a director was approved by a majority of the then Incumbent
Directors, is an Incumbent Director.
(f) Except with respect to subparagraph 3(e)(i) of this
Section L, the Corporation, at its option, may make payment of
the redemption price required upon redemption of shares of
Series C Preferred Stock in cash or in shares of Common Stock,
or in a combination of such shares and cash, any such shares of
Common Stock to be valued for such purpose at the current
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market price as determined pursuant to paragraphs 4(d) and 9 of
this Section L, provided, however, that in calculating the
current market price, the five consecutive business days
preceding and including the date of redemption shall be used.
Payment of the redemption price required upon redemption of
shares of Series C Preferred Stock pursuant to subparagraph
3(e)(i) of this Section L shall be made in cash.
(g) In the event the Corporation shall redeem shares of
the Series C Preferred Stock, notice of such redemption shall
be given by first class mail, postage prepaid, mailed not less
than 20 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 books of the
Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of the Series C Preferred Stock
to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv)
whether such payment shall be in cash or shares of Common
Stock, or in a combination of such shares and cash; (v) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price; (vi) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date; and (vii) the conversion rights of the
shares to be redeemed, the period within which conversion
rights may be exercised, the conversion price and the number of
shares of Common Stock issuable upon conversion of a share of
Series C Preferred Stock at the time.
(h) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money or shares of Common Stock for
the payment of the redemption price of the shares called for
redemption) dividends on the shares of the Series C 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 preferred stockholders 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 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.
(i) Any shares of the Series C Preferred Stock which
shall at any time have been redeemed or repurchased by the
Corporation, or surrendered to the Corporation upon conversion
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or otherwise acquired by the Corporation shall, upon such
redemption, repurchase, surrender or other acquisition, be
retired and thereafter 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 or a duly
authorized committee thereof.
(j) Notwithstanding the foregoing provisions of this
paragraph 3, unless the full cumulative dividends on all
outstanding shares of the Series C Preferred Stock shall have
been paid or contemporaneously are declared and paid through
the latest Dividend Payment Date, no shares of the Series C
Preferred Stock shall be redeemed, except at the option of the
holder pursuant to paragraph 3(d) and paragraph 3(e) of this
Section L, unless all outstanding shares of the Series C
Preferred Stock are simultaneously redeemed, and the
Corporation shall not purchase or otherwise acquire any shares
of the Series C Preferred Stock; provided, however, that the
foregoing shall not prevent the purchase or acquisition of
shares of the Series C Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all
outstanding shares of the Series C Preferred Stock.
(k) Any redemption, repurchase or other acquisition by,
or any surrender upon conversion to, the Corporation of shares
of Series C Preferred Stock may, to the extent required to be
made out of funds legally available for such purpose, be made
to the extent of any unreserved and unrestricted capital
surplus attributable to such shares in addition to any other
surplus, profits, earnings or other funds or amounts legally
available for such purpose.
4. Conversion. (a) The holder of any shares of the Series
C Preferred Stock at his option may at any time (except that if
any such shares shall have been called for redemption, then, as
to such shares, such right shall terminate at the close of
business on the date fixed for such redemption, unless default
shall be made by the Corporation in providing money or shares
of Common Stock for the payment of the redemption price of the
shares called for redemption) convert the stated value of all
such shares into a number of fully paid and nonassessable
shares of Common Stock determined by dividing the stated value
of the shares surrendered for conversion by the Conversion
Price fixed or determined pursuant to paragraph 4(d) and
paragraph 9 of this Section L. Such right shall be exercised by
the surrender of the shares so to be converted to the
Corporation at any time during normal business hours at the
office of the Corporation, accompanied by written notice of
such holder's election to convert and (if so required by the
Corporation) by instruments of transfer, in form satisfactory
to the Corporation, duly executed by the registered holder or
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by his duly authorized attorney, and transfer tax stamps or
funds therefor, if required pursuant to paragraph 4(i) of this
Section L.
(b) As promptly as practicable after the surrender for
conversion of the shares of the Series C Preferred Stock in the
manner provided in paragraph 4(a) of this Section L and the
payment in cash of any amount required by the provisions of
paragraphs 4(a) and 4(h) of this Section L, the Corporation
will deliver or cause to be delivered to or upon the written
order of the holder of such shares, certificates representing
the number of full shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the shares, and all rights of the holder of such
shares as a holder of such shares shall cease at such time and
the person or persons in whose name or names the certificates
for such shares of Common Stock are to be issued shall be
treated for all purposes as having become the record holder or
holders thereof at such time and such conversion shall be at
the Conversion Price (as hereinafter defined) in effect at such
time; provided, however, that any such surrender and payment on
any date when the stock transfer books of the Corporation shall
be closed shall constitute the person or persons in whose name
or names the certificates for such shares of Common Stock are
to be issued as the record holder or holders thereof for all
purposes immediately prior to the close of business on the next
succeeding day on which such stock transfer books are opened
and such conversion shall be at the Conversion Price in effect
at such time on such succeeding day.
If the last day for the exercise of the conversion right shall
be other than a business day, then such conversion right may be
exercised on the next succeeding business day.
(c) No adjustments in respect of dividends shall be
made upon the conversion of the shares of the Series C
Preferred Stock.
(d) The initial Conversion Price shall be $66.21 per
share of the Common Stock. The Conversion Price shall be
subject to adjustment as provided in paragraph 9.
(e) No fractional shares of stock shall be issued upon
the conversion of shares of the Series C Preferred Stock. If
any fractional interest in a share of Common Stock would,
except for the provisions of this paragraph 4(e), be
deliverable upon the conversion of shares, the Corporation
shall in lieu of delivering the fractional share therefor,
adjust such fractional interest by payment to the holder of
such surrendered share or shares of an amount in cash equal
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<PAGE>
(computed to the nearest cent) to the current market value of
such fractional interest, computed on the basis of the last
reported sale price regular way of Common Stock on the New York
Stock Exchange, or, if not reported for such Exchange, on the
Composite Tape, on the business day prior to the date of
conversion, or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked
quotations on the New York Stock Exchange, or, if the Common
Stock is not listed on such Exchange or no such quotations are
available, the last sale price in the over-the-counter market
reported by the National Association of Securities Dealers
Automated Quotations System, or if not reported by such System,
the average of the high bid and low asked quotations in the
over-the-counter market as reported by National Quotation
Bureau, Incorporated, or similar organization, or if no such
quotations are available, the fair market price as determined
by the Corporation (whose determination shall be conclusive).
(f) The Corporation covenants that it will at all times
reserve and keep available, solely for the purpose of issue
upon conversion of the outstanding shares of the Series C
Preferred Stock, such number of shares of Common Stock as shall
be issuable upon the conversion of all such outstanding shares,
provided that nothing contained herein shall be construed to
preclude the Corporation from satisfying its obligations in
respect of (i) such reservation by reserving purchased shares
of Common Stock which are held in the treasury of the
Corporation and (ii) conversion of any shares of the Series C
Preferred Stock by delivery of purchased shares of Common Stock
which are held in the treasury of the Corporation.
The Corporation covenants that if any shares of Common Stock
required to be reserved for purposes of conversion of the
shares hereunder require registration with or approval of any
governmental authority under any Federal or state law before
such shares may be issued upon conversion, the Corporation will
cause such shares to be duly registered or approved, as the
case may be.
The Corporation will endeavor to list the shares of Common
Stock required to be delivered upon conversion of shares prior
to such delivery upon each national securities exchange upon
which the outstanding Common Stock is listed at the time of
such delivery.
The Corporation covenants that all shares of Common Stock which
shall be issued upon conversion of the shares of Series C
Preferred Stock will upon issue be fully paid and
nonassessable.
(g) Before taking any action which would cause an
adjustment reducing the Conversion Price below the then par
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<PAGE>
value of the Common Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at
the Conversion Price as so adjusted.
(h) The issuance of certificates for shares of Common
Stock upon conversion or payment of the redemption price shall
be made without charge for any stamp or other similar tax in
respect of such issuance. However, if any such certificate is
to be issued in a name other than that of the holder of the
share or shares converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any
tax which may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the
Corporation that such tax has been paid.
(i) Notwithstanding anything elsewhere contained in
this Certificate of Incorporation, any funds which at any time
shall have been deposited or set aside by the Corporation or on
its behalf with any paying agent or otherwise for the purpose
of paying dividends on or the redemption price of any of the
shares of the Series C Preferred Stock and which shall not be
required for such purposes because of the conversion of such
shares, as provided in this paragraph 4, shall, upon delivery
to the paying agent of evidence satisfactory to it of such
conversion, after such conversion be repaid to the Corporation
by the paying agent.
(j) In case:
(i) the Corporation shall take any action which
would require an adjustment in the Conversion Price
pursuant to paragraph 9 of this Section L; or
(ii) the Corporation shall authorize the
granting to the holders of its Common Stock of rights or
warrants to subscribe for or purchase any shares of stock
of any class or of any other rights and notice thereof
shall be given to holders of Common Stock; or
(iii) there shall be any capital reorganization
or reclassification of the Common Stock (other than a
subdivision or combination of the outstanding Common Stock
and other than a change in par value or from par value to
no par value or from no par value to par value of the
Common Stock), or any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation is required, or any sale or
transfer of all or substantially all of the assets of the
Corporation; or
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(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be given to the holders of
the shares of the Series C Preferred Stock at least ten days
prior to the applicable date hereinafter specified, a notice of
(x) the date on which a record is to be taken for the purpose
of any distribution or grant to holders of Common Stock, or, if
a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such distribution
or grant are to be determined or (y) the date on which such
reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding up. Failure to give such notice or any defect
therein shall not affect the legality or validity of any
proceedings described in clauses (i), (ii), (iii) or (iv) of
this paragraph 4(j).
5. Voting. The shares of the Series C Preferred Stock shall be
entitled to vote for the election of directors and on all other matters
submitted to a vote of stockholders of the Corporation. Each share of the
Series C Preferred Stock shall be entitled to 1.3 votes per share when
voting together as a single class with shares of Common Stock, such voting
rights to be adjusted as the Conversion Price is adjusted pursuant to
paragraphs 4(d) and 9 of this Section L. Such shares shall vote jointly as
a single class with shares of Common Stock and not as a separate class
except as otherwise expressly provided for in the General Corporation Law
of the State of Delaware; provided, however, that whether or not the
General Corporation Law of the State of Delaware so provides, the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of the Series C Preferred Stock and all other series of Preferred
Stock ranking on a parity with the Series C Preferred Stock as to dividends
and upon liquidation, voting together as a class, shall be required for the
Corporation to create a new class or increase an existing class of stock
having rights in respect of the payment of dividends or in liquidation
prior to the Series C Preferred Stock or any other series of Preferred
Stock ranking on a parity with the Series C Preferred Stock as to dividends
and upon liquidation, to issue any preferred stock of the Corporation
ranking prior to the Series C Preferred Stock either as to dividends or
upon liquidation, or to change the terms, limitations or relative rights or
preferences of the Series C Preferred Stock or any other series of
Preferred Stock ranking on a parity with the Series C Preferred Stock as to
dividends and upon liquidation, either directly or by increasing the
relative rights of the shares of another class. When the shares of Series C
Preferred Stock are entitled to vote together with any other series of
Preferred Stock, shares of Series C Preferred Stock shall be entitled to
one vote per share.
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6. Liquidation Rights. (a) Upon the dissolution, liquidation
or winding up of the Corporation, whether voluntary or
involuntary, the holders of the shares of the Series C
Preferred Stock shall be entitled to receive out of the assets
of the Corporation available for distribution to stockholders,
before any payment or distribution shall be made on the Common
Stock or on any other class of stock ranking junior to the
Preferred Stock upon liquidation, the amount of $53.25 per
share, plus accrued and unpaid dividends thereon to the date of
final distribution.
(b) Neither the sale, lease or exchange (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets 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 dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this paragraph 6.
(c) After the payment to the holders of the shares of
the Series C Preferred Stock of the full preferential amounts
provided for in this paragraph 6, the holders of the Series C
Preferred Stock as such shall have no right or claim to any of
the remaining assets of the Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of the
Series C Preferred Stock upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts
to which such holders are entitled pursuant to paragraph 6(a)
of this Section L, no such distribution shall be made on
account of any shares of any other series of Preferred Stock or
any other class of stock of the Corporation, in either case
ranking on a parity with the shares of the Series C Preferred
Stock upon such dissolution, liquidation or winding up, unless
proportionate distributive amounts shall be paid on account of
the shares of the Series C Preferred Stock, ratably, in
proportion to the full distributable amounts to which holders
of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
7. Ranking. For purposes of the foregoing paragraphs 1 through
6 of this Section L, any stock of any class or classes of the Corporation
shall be deemed to rank:
(a) prior to the shares of the Series C 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
dissolution, liquidation or winding up of the Corporation,
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<PAGE>
whether voluntary or involuntary, as the case may be, in
preference or priority to the holders of shares of the Series C
Preferred Stock;
(b) on a parity with shares of the Series C 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 C Preferred Stock,
if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary
or involuntary, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the
holders of such stock and the holders of shares of the Series C
Preferred Stock; and
(c) junior to shares of the Series C Preferred Stock,
either as to dividends or upon liquidation, if such class or
classes shall be Common Stock or if the holders of shares of
the Series C Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary
or involuntary, as the case may be, in preference or priority
to the holders of shares of such class or classes.
Notwithstanding any other provision of this Section L or of Section M, the
Series C Preferred Stock shall rank on a parity (within the meaning of
paragraph 7(b) of this Section L) with the Corporation's 8.125% Cumulative
Preferred Stock, Series A, 5.50% Convertible Preferred Stock, Series B,
$45,000 Cumulative Redeemable Preferred Stock, Series Z and 9.25% Preferred
Stock, Series D as to dividends and distributions of assets.
8. Consolidation, Merger, etc. (a) In the event that the
Corporation shall consummate any consolidation or merger or
similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely
for or changed, reclassified or converted solely into stock of
any successor or resulting corporation (including the
Corporation) that constitutes "qualifying employer securities"
with respect to a holder of Series C Preferred Stock within the
meaning of Section 409(1) of the Internal Revenue Code of 1986,
as amended, and Section 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended, or any successor
provisions of law, and, if applicable, for a cash payment in
lieu of fractional shares, if any, the Series C Preferred Stock
of such holder shall, in connection with such consolidation,
merger or similar business combination, be assumed by and shall
become preferred stock of such successor or resulting
corporation, having in respect of such corporation, insofar as
possible, the same powers, preferences and relative,
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participating, optional or other special rights (including the
redemption rights provided by paragraph 3 of this Section L),
and the qualifications, limitations or restrictions thereon,
that the Series C Preferred Stock had immediately prior to such
transaction, except that after such transaction each share of
Series C Preferred Stock shall be convertible, otherwise on the
terms and conditions provided by paragraph 4 of this Section L,
into the number and kind of qualifying employer securities so
receivable by a holder of the number of shares of Common Stock
into which such Series C Preferred Stock could have been
converted immediately prior to such transaction; provided,
however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an
election with respect to the nature and kind of consideration
to be received in such transaction, which election cannot
practicably be made by the holders of the Series C Preferred
Stock, then the Series C Preferred Stock shall, by virtue of
such transaction and on the same terms as apply to the holders
of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of
shares of Common Stock into which such Series C Preferred Stock
could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of
election to receive any kind or amount of stock, securities,
cash or other property (other than such qualifying employer
securities and a cash payment, if applicable, in lieu of
fractional shares) receivable upon such transaction (provided
that, if the kind or amount of qualifying employer securities
receivable upon such transaction is not the same for each
non-electing share, then the kind and amount so receivable upon
such transaction for each non-electing share shall be the kind
and amount so receivable per share by the plurality of the
non-electing shares). The rights of the Series C Preferred
Stock as preferred stock of such successor or resulting
corporation shall successively be subject to adjustments
pursuant to paragraphs 4 and 9 of this Section L after any such
transaction as nearly equivalent as practicable to the
adjustment provided for by such paragraph prior to such
transaction. The Corporation shall not consummate any such
merger, consolidation or similar transaction unless all then
outstanding Series C Preferred Stock shall be assumed and
authorized by the successor or resulting corporation as
aforesaid.
(b) In the event that the Corporation shall consummate
any consolidation or merger or similar business combination,
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged for or changed, reclassified or
converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such
consideration which is constituted solely of qualifying
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employer securities (as referred to in paragraph 8(a) of this
Section L) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series C Preferred
Stock shall, without any action on the part of the Corporation
or any holder thereof (but subject to paragraph 8(c) of this
Section L), be automatically converted by virtue of such
merger, consolidation or similar transaction immediately prior
to such consummation into the number of shares of Common Stock
into which such Series C Preferred Stock could have been
converted at such time so that each share of Series C Preferred
Stock shall, by virtue of such transaction and on the same
terms as apply to the holders of Common Stock, be converted
into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind)
receivable by a holder of the number of shares of Common Stock
into which such shares of Series C Preferred Stock could have
been converted immediately prior to such transaction; provided,
however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an
election with respect to the nature and kind of consideration
to be received in such transaction, which election cannot
practicably be made by the holder of the Series C Preferred
Stock, then the Series C Preferred Stock shall, by virtue of
such transaction and on the same terms as apply to the holders
of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of
shares of Common Stock into which such Series C Preferred Stock
could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of
election as to the kind or amount of stock, securities, cash or
other property receivable upon such transaction (provided that,
if the kind or amount of stock, securities, cash or other
property receivable upon such transaction is not the same for
each non-electing share, then the kind and amount of stock,
securities, cash or other property receivable upon such
transaction for each non-electing share shall be the kind and
amount so receivable per share by a plurality of the
non-electing shares).
(c) In the event the Corporation shall enter into any
agreement providing for any consolidation or merger or similar
business combination described in paragraph 8(b) of this
Section L, then the Corporation shall as soon as practicable
thereafter (and in any event at least ten business days before
consummation of such transaction) give notice of such agreement
and the material terms thereof to each holder of Series C
Preferred Stock and each such holder shall have the right to
elect, by written notice to the Corporation, to receive, upon
consummation of such transaction (if and when such transaction
is consummated), from the Corporation or the successor of the
Corporation, in redemption of such Series C Preferred Stock, a
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cash payment equal to the following redemption prices per
share, plus, in each case, accrued and unpaid dividends thereon
to the date fixed for redemption.
If redeemed during the twelve-month period beginning January 1,
Year Price
---- -----
1994 . . . . $ 55.52
1995 . . . . $ 54.95
1996 . . . . $ 54.38
1997 . . . . $ 53.82
and $53.25 if redeemed on or after January 1, 1998.
No such notice of redemption shall be effective unless given to the
Corporation prior to the close of business on the fifth business day prior
to consummation of such transaction, unless the Corporation or the
successor of the Corporation shall waive such prior notice, but any notice
of redemption so given prior to such time may be withdrawn by notice of
withdrawal given to the Corporation prior to the close of business on the
fifth business day prior to consummation of such transaction.
9. Anti-dilution Adjustments. (a) In the event the
Corporation shall, at any time or from time to time while any
of the Series C Preferred Stock is outstanding, (i) pay a
dividend or make a distribution in respect of the Common Stock
in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock or (iii) combine the outstanding shares
of Common Stock into a smaller number of shares, in each case
whether by reclassification of shares, recapitalization of the
Corporation (including a recapitalization effected by a merger
or consolidation to which paragraph 8 of this Section L does
not apply) or otherwise, the Conversion Price in effect
immediately prior to such action shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately before such event, and the denominator of which is
the number of shares of Common Stock outstanding immediately
after such event. An adjustment made pursuant to this paragraph
9(a) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of
stockholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or
combination shall become effective immediately as of the
effective date thereof.
(b) In the event that the Corporation shall, at any
time or from time to time while any of the Series C Preferred
Stock is outstanding, issue to holders of shares of Common
Stock as a dividend or distribution, including by way of a
reclassification of shares or a recapitalization of the
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Corporation, any right or warrant to purchase shares of Common
Stock (but not including as such a right or warrant any
security convertible into or exchangeable for shares of Common
Stock) at a purchase price per share less than the Fair Market
Value (as hereinafter defined) of a share of Common Stock on
the date of issuance of such right or warrant, then, subject to
the provisions of paragraphs 9(e) and 9(f) of this Section L,
the Conversion Price shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the number of
shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such
issuance for the maximum aggregate consideration payable upon
exercise in full of all such rights or warrants, and the
denominator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock that
could be acquired upon exercise in full of all such rights and
warrants.
(c) In the event the Corporation shall, at any time or
from time to time while any of the shares of Series C Preferred
Stock are outstanding, issue, sell or exchange shares of Common
Stock (other than pursuant to any right or warrant to purchase
or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for
shares of Common Stock) and other than pursuant to any employee
or director incentive or benefit plan or arrangement, including
any employment, severance or consulting agreement, of the
Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted) for a consideration having a Fair Market
Value, on the date of such issuance, sale or exchange, less
than the Fair Market Value of such shares on the date of
issuance, sale or exchange, then, subject to the provisions of
paragraphs 9(e) and 9(f) of this Section L, the Conversion
Price shall be adjusted by multiplying such Conversion Price by
a fraction, the numerator of which shall be the sum of (i) the
Fair Market Value of all the shares of Common Stock outstanding
on the day immediately preceding the first public announcement
of such issuance, sale or exchange plus (ii) the Fair Market
Value of the consideration received by the Corporation in
respect of such issuance, sale or exchange of shares of Common
Stock, and the denominator of which shall be the product of (x)
the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (y) the sum of the
number of shares of Common Stock outstanding on such day plus
the number of shares of Common Stock so issued, sold or
exchanged by the Corporation. In the event the Corporation
shall, at any time or from time to time while any Series C
Preferred Stock is outstanding, issue, sell or exchange any
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right or warrant to purchase or acquire shares of Common Stock
(including as such a right or warrant any security convertible
into or exchangeable for shares of Common Stock), other than
any such issuance to holders of shares of Common Stock as a
dividend or distribution (including by way of a
reclassification of shares or a recapitalization of the
Corporation) and other than pursuant to any employee or
director incentive or benefit plan or arrangement (including
any employment, severance or consulting agreement) of the
Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted, for a consideration having a Fair Market
Value, on the date of such issuance, sale or exchange, less
than the Non-Dilutive Amount (as hereinafter defined), then,
subject to the provisions of paragraphs 9(e) and 9(f) of this
Section L, the Conversion Price shall be adjusted by
multiplying such Conversion Price by a fraction, the numerator
of which shall be the sum of (i) the Fair Market Value of all
the shares of Common Stock outstanding on the day immediately
preceding the first public announcement of such issuance, sale
or exchange plus (ii) the Fair Market Value of the
consideration received by the Corporation in respect of such
issuance, sale or exchange of such right or warrant plus (iii)
the Fair Market Value at the time of such issuance of the
consideration which the Corporation would receive upon exercise
in full of all such rights or warrants, and the denominator of
which shall be the product of (x) the Fair Market Value of a
share of Common Stock on the day immediately preceding the
first public announcement of such issuance, sale or exchange
multiplied by (y) the sum of the number of shares of Common
Stock outstanding on such day plus the maximum number of shares
of Common Stock which could be acquired pursuant to such right
or warrant at the time of the issuance, sale or exchange of
such right or warrant (assuming shares of Common Stock could be
acquired pursuant to such right or warrant at such time).
(d) In the event the Corporation shall, at any time or
from time to time while any of the Series C Preferred Stock is
outstanding, make an Extraordinary Distribution (as hereinafter
defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of
the Corporation (including a recapitalization or
reclassification effected by a merger or consolidation to which
paragraph 8 of this Section L does not apply) or effect a Pro
Rata Repurchase (as hereinafter defined) of Common Stock, the
Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall,
subject to paragraphs 9(e) and 9(f) of this Section L, be
adjusted by multiplying such Conversion Price by a fraction,
the numerator of which is the difference between (i) the
product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata
Repurchase multiplied by (y) the Fair Market Value of a share
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of Common Stock on the day before the ex-dividend date with
respect to an Extraordinary Distribution which is paid in cash
and on the distribution date with respect to an Extraordinary
Distribution which is paid other than in cash, or on the
applicable expiration date (including all extensions thereof)
of any tender offer which is a Pro Rata Repurchase, or on the
date of purchase with respect to any Pro Rata Repurchase which
is not a tender offer, as the case may be, and (ii) the Fair
Market Value of the Extraordinary Distribution minus the
aggregate amount of regularly scheduled quarterly dividends
declared by the Board of Directors and paid by the Corporation
in the twelve months immediately preceding such Extraordinary
Distribution or the aggregate purchase price of the Pro Rata
Repurchase, as the case may be, and the denominator of which
shall be the product of (a) the number of shares of Common
Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro
Rata Repurchase, the number of shares of Common Stock
repurchased by the Corporation multiplied by (b) the Fair
Market Value of a share of Common Stock on the day before the
ex-dividend date with respect to an Extraordinary Distribution
which is paid in cash and on the distribution date with respect
to an Extraordinary Distribution which is paid other than in
cash, or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro
Rata Repurchase which is not a tender offer, as the case may
be. The Corporation shall send each holder of Series C
Preferred Stock (i) notice of its intent to make any
Extraordinary Distribution and (ii) notice of any offer by the
Corporation to make a Pro Rata Repurchase, in each case at the
same time as, or as soon as practicable after, such offer is
first communicated (including by announcement of a record date
in accordance with the rules of any stock exchange on which the
Common Stock is listed or admitted to trading) to holders of
Common Stock. Such notice shall indicate the intended record
date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for
a Pro Rata Repurchase and the purchase price payable by the
Corporation pursuant to such offer, as well as the Conversion
Price and the number of shares of Common Stock into which a
share of Series C Preferred Stock may be converted at such
time.
(e) Notwithstanding any other provisions of this
paragraph 9, the Corporation shall not be required to make any
adjustment to the Conversion Price unless such adjustment would
require an increase or decrease of at least one percent (1%) in
the Conversion Price. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and
together with, the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall
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amount to an increase or decrease of at least one percent (1%)
in the Conversion Price.
(f) If the Corporation shall make any dividend or
distribution on the Common Stock or issue any Common Stock,
other capital stock or other security of the Corporation or any
rights or warrants to purchase or acquire any such security,
which transaction does not result in an adjustment to the
Conversion Price pursuant to the foregoing provisions of this
paragraph 9, the Board of Directors shall consider whether such
action is of such a nature that an adjustment to the Conversion
Price should equitably be made in respect of such transaction.
If in such case the Board of Directors determines that an
adjustment to the Conversion Price should be made, an
adjustment shall be made effective as of such date, as
determined by the Board of Directors. The determination of the
Board of Directors as to whether an adjustment to the
Conversion Price should be made pursuant to the foregoing
provisions of this paragraph 9(f), and, if so, as to what
adjustment should be made and when, shall be final and binding
on the Corporation and all stockholders of the Corporation. The
Corporation shall be entitled to make such additional
adjustments in the Conversion Price, in addition to those
required by the foregoing provisions of this paragraph 9, as
shall be necessary in order that any dividend or distribution
in shares of capital stock of the Corporation, subdivision,
reclassification or combination of shares of stock of the
Corporation or any recapitalization of the Corporation shall
not be taxable to the holders of the Common Stock.
(g) For purposes of this paragraph 9 the following
definitions shall apply:
"Business Day" shall mean each day that is not a
Saturday, Sunday or a day on which state or federally chartered
banking institutions in New York, New York are not required to
be open.
"Current Market Price" of publicly traded shares of
Common Stock or any other class of capital stock or other
security of the Corporation or any other issuer for any day
shall mean the last reported sales price, regular way, or, in
the event that no sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange
Composite Tape or, if such security is not listed or admitted
to trading on the New York Stock Exchange, on the principal
national securities exchange on which such security is listed
or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, on the NASDAQ National
Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and
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asked prices on each such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such
security on each such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly
making a market in such security selected for such purpose by
the Board of Directors or a committee thereof, in each case, on
each trading day during the Adjustment Period.
"Adjustment Period" shall mean the period of five
consecutive trading days preceding, and including, the date as
of which the Fair Market Value of a security is to be
determined. The "Fair Market Value" of any security which is
not publicly traded or of any other property shall mean the
fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of
Directors or a committee thereof, or, if no such investment
banking or appraisal firm is in the good faith judgment of the
Board of Directors or such committee available to make such
determination, as determined in good faith by the Board of
Directors or such committee.
"Extraordinary Distribution" shall mean any dividend or
other distribution to holders of Common Stock (effected while
any shares of the Series C Preferred Stock are outstanding) (i)
of cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and
distributions made during the preceding period of 12 months,
when combined with the aggregate amount of all Pro Rata
Repurchases (for this purpose, including only that portion of
the aggregate purchase price of such Pro Rata Repurchases which
is in excess of the Fair Market Value of the Common Stock
repurchased as determined on the applicable expiration date
(including all extensions thereof) of any tender offer or
exchange offer which is a Pro Rata Repurchase, or the date of
purchase with respect to any other Pro Rata Repurchase which is
not a tender offer or exchange offer made during such period),
exceeds twelve and one-half percent (12 1/2%) of the aggregate
Fair Market Value of all shares of Common Stock outstanding on
the day before the ex-dividend date with respect to such
Extraordinary Distribution which is paid in cash and on the
distribution date with respect to an Extraordinary Distribution
which is paid other than in cash, and/or (ii) of any shares of
capital stock of the Corporation (other than shares of Common
Stock), other securities of the Corporation (other than
securities of the type referred to in paragraphs 9(b) or 9(c)
of this Section L), evidences of indebtedness of the
Corporation or any other person or any other property
(including shares of any subsidiary of the Corporation) or any
combination thereof. The Fair Market Value of an Extraordinary
Distribution for purposes of paragraph 9(d) of this Section L
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shall be equal to the sum of the Fair Market Value of such
Extraordinary Distribution plus the amount of any cash
dividends which are not Extraordinary Distributions made during
such 12-month period and not previously included in the
calculation of an adjustment pursuant to paragraph 9(d) of this
Section L.
"Fair Market Value" shall mean, as to shares of Common
Stock or any other class of capital stock or securities of the
Corporation or any other issuer which are publicly traded, the
average of the Current Market Prices of such shares or
securities for each day of the Adjustment Period.
"Non-Dilutive Amount" in respect of an issuance, sale
or exchange by the Corporation of any right or warrant to
purchase or acquire shares of Common Stock (including any
security convertible into or exchangeable for shares of Common
Stock) shall mean the difference between (i) the product of the
Fair Market Value of a share of Common Stock on the day
preceding the first public announcement of such issuance, sale
or exchange multiplied by the maximum number of shares of
Common Stock which could be acquired on such date upon the
exercise in full of such rights and warrants (including upon
the conversion or exchange of all such convertible or
exchangeable securities), whether or not exercisable (or
convertible or exchangeable) at such date, and (ii) the
aggregate amount payable pursuant to such right or warrant to
purchase or acquire such maximum number of shares of Common
Stock; provided, however, that in no event shall the
Non-Dilutive Amount be less than zero. For purposes of the
foregoing sentence, in the case of a security convertible into
or exchangeable for shares of Common Stock, the amount payable
pursuant to a right or warrant to purchase or acquire shares of
Common Stock shall be the Fair Market Value of such security on
the date of the issuance, sale or exchange of such security by
the Corporation.
"Pro Rata Repurchase" shall mean any purchase of shares
of Common Stock by the Corporation or any subsidiary thereof,
whether for cash, shares of capital stock of the Corporation,
other securities of the Corporation, evidences of indebtedness
of the Corporation or any other person or any other property
(including shares of a subsidiary of the Corporation), or any
combination thereof, effected while any of the shares of Series
C Preferred Stock are outstanding, pursuant to any tender offer
or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision of law, or pursuant to any other offer
available to substantially all holders of Common Stock;
provided, however, that no purchases of shares by the
Corporation or any subsidiary thereof made in open market
transactions shall be deemed a Pro Rata Repurchase. For
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purposes of this paragraph 9(g), shares shall be deemed to have
been purchased by the Corporation or any subsidiary thereof "in
open market transactions" if they have been purchased
substantially in accordance with the requirements of Rule
10b-18 as in effect under the Exchange Act, on the date Series
C Preferred Stock is initially issued by the Corporation or on
such other terms and conditions as the Board of Directors or a
committee thereof shall have determined are reasonably designed
to prevent such purchases from having a material effect on the
trading market for the Common Stock.
(h) Whenever an adjustment to the Conversion Price and
the related voting rights of the Series C Preferred Stock is
required pursuant to this paragraph 9, the Corporation shall
forthwith place on file with the transfer agent for the Common
Stock and with the Secretary of the Corporation, a statement
signed by two officers of the Corporation stating the adjusted
Conversion Price determined as provided herein and the
resulting conversion ratio, and the voting rights (as
appropriately adjusted), of the Series C Preferred Stock. Such
statement shall set forth in reasonable detail such facts as
shall be necessary to show the reason and the manner of
computing such adjustment, including any determination of Fair
Market Value involved in such computation. Promptly after each
adjustment to the Conversion Price and the related voting
rights of the Series C Preferred Stock, the Corporation shall
mail a notice thereof and of the then prevailing conversion
ratio to each holder of Series C Preferred Stock.
M. 9.25% PREFERRED STOCK, SERIES D
1. Designation; Issuance and Transfer. There shall be a series
of Preferred Stock, the designation of which shall be "9.25% Preferred
Stock, Series D" (hereinafter called the "Series D Preferred Stock") and
the number of authorized shares constituting the Series D Preferred Stock
shall be 7,500,000. Shares of the Series D Preferred Stock shall have a
stated value of $50.00 per share. The number of authorized shares of the
Series D Preferred Stock may be reduced by resolution duly adopted by the
Board of Directors, or by a duly authorized committee thereof, and by the
filing, pursuant to the provisions of the General Corporation Law of the
State of Delaware, of a certificate of amendment to the Certificate of
Incorporation, as theretofore amended, stating that such reduction has been
so authorized, but the number of authorized shares of the Series D
Preferred Stock shall not be increased.
2. Dividend Rate. (a) Dividends on each share of the Series D
Preferred Stock shall accrue from the date of its original
issue (for purposes of this paragraph 2(a), the date of
original issue of the Series D Preferred Stock shall be the
date of commencement of the full quarterly period ending April
1, 1994) at a rate of 9.25% per annum per share (the "Rate")
applied to the stated value of each such share. Such dividends
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shall be cumulative from the date of original issue and shall
be payable, when and as declared by the Board of Directors, out
of assets legally available for such purpose, on January 1,
April 1, July 1 and October 1 of each year, commencing April 1,
1994 (each such date being hereinafter individually a "Dividend
Payment Date" and collectively the "Dividend Payment Dates"),
except that if such date is a Sunday or legal holiday then such
dividend shall be payable on the first immediately succeeding
calendar day which is not a Sunday or legal holiday. Each such
dividend shall be paid to the holders of record of shares of
the Series D Preferred Stock as they appear on the books of the
Corporation on such record date, not exceeding 45 days
preceding the payment date thereof, as shall be fixed by the
Board of Directors. Dividends in arrears may be declared and
paid at any time, without reference to any regular Dividend
Payment Date, to holders of record on such record date, not
exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(b) Except as hereinafter provided, no dividends shall
be declared or paid or set apart for payment on Preferred Stock
of any other series ranking on a parity with the Series D
Preferred Stock as to dividends and upon liquidation for any
period unless full cumulative dividends have been or
contemporaneously are declared and paid on the Series D
Preferred Stock through the latest Dividend Payment Date. When
dividends are not paid in full, as aforesaid, upon the shares
of the Series D Preferred Stock and any such other series of
Preferred Stock, all dividends declared upon shares of the
Series D Preferred Stock and such other series of Preferred
Stock shall be declared pro rata so that the amount of
dividends declared per share on the Series D Preferred Stock
and such other series of Preferred Stock shall in all cases
bear to each other the same ratio that accrued dividends per
share on the shares of the Series D Preferred Stock and such
other series of Preferred Stock bear to each other. Holders of
shares of the Series D Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends, as herein provided, on the
Series D 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 D Preferred Stock which may
be in arrears.
(c) So long as any shares of the Series D Preferred
Stock are outstanding, no dividend (other than a dividend in
Common Stock or in any other stock of the Corporation ranking
junior to the Series D Preferred Stock as to dividends and upon
liquidation and other than as provided in paragraph 2(b) of
this Section M) shall be declared or paid or set aside for
payment, and no other distribution shall be declared or made
upon the Common Stock or upon any other stock of the
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Corporation ranking junior to or on a parity with the Series D
Preferred Stock as to dividends or upon liquidation, nor shall
any Common Stock nor any other stock of the Corporation ranking
junior to or on a parity with the Series D 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 shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation
ranking junior to the Series D Preferred Stock as to dividends
and upon liquidation) unless, in each case, the full cumulative
dividends on all outstanding shares of the Series D Preferred
Stock shall have been paid or contemporaneously are declared
and paid through the latest Dividend Payment Date.
(d) Dividends payable on each share of Series D
Preferred Stock for any full quarterly period shall be computed
by dividing the Rate by four and multiplying the quotient by
the stated value of such share (for purposes of this paragraph
2(d), the Series D Preferred Stock shall be deemed to have been
outstanding for the full quarterly period ending April 1,
1994). Subject to the preceding sentence, dividends payable on
the Series D Preferred Stock for any period less than a full
quarterly period shall be computed on the basis of a 360-day
year of 30-day months.
3. Redemption. (a) The shares of Series D Preferred Stock
shall not be redeemable before July 1, 1997. On or after July
1, 1997, the Corporation, at its sole option, may redeem the
Series D Preferred Stock as a whole or in part at a price of
$50.00 per share plus accrued and unpaid dividends thereon to
the date fixed for redemption.
(b) In the event that fewer than all the outstanding
shares of the Series D 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,
except that, notwithstanding such method of determination, the
Corporation may redeem all shares of the Series D Preferred
Stock owned by all stockholders of a number of shares not to
exceed 100 as may be specified by the Corporation.
(c) In the event the Corporation shall redeem shares of
the Series D Preferred Stock, notice of such redemption shall
be given by first class mail, postage prepaid, mailed not less
than 30 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 books of the
Corporation. Each such notice shall state: (i) the redemption
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<PAGE>
date; (ii) the number of shares of the Series D Preferred Stock
to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date.
(d) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the
redemption price of the shares called for redemption) dividends
on the shares of the Series D 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 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 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.
(e) Any shares of the Series D Preferred Stock which
shall at any time have been redeemed, repurchased or otherwise
acquired by the Corporation shall, upon such redemption,
repurchase or other acquisition, be retired and thereafter 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 or a duly authorized committee thereof.
(f) Notwithstanding the foregoing provisions of this
paragraph 3, unless the full cumulative dividends on all
outstanding shares of the Series D Preferred Stock shall have
been paid or contemporaneously are declared and paid through
the last Dividend Payment Date, no shares of the Series D
Preferred Stock shall be redeemed unless all outstanding shares
of the Series D Preferred Stock are simultaneously redeemed,
and the Corporation shall not purchase or otherwise acquire any
shares of the Series D Preferred Stock; provided, however, that
the foregoing shall not prevent the purchase or acquisition of
shares of the Series D Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all
outstanding shares of the Series D Preferred Stock.
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(g) Any redemption, repurchase or other acquisition by
the Corporation of shares of Series D Preferred Stock may, to
the extent required to be made out of funds legally available
for such purpose, be made to the extent of any unreserved and
unrestricted capital surplus attributable to such shares in
addition to any other surplus, profits, earnings or other funds
or amounts legally available for such purpose.
4. Voting. The shares of the Series D Preferred Stock shall
not have any voting powers, either general or special, except that:
(a) If on the date used to determine stockholders of
record for any annual meeting of stockholders at which
directors are to be elected, a Default in Preferred Dividends
(as hereinafter defined) on the Series D Preferred Stock shall
exist, the number of directors constituting the Board of
Directors shall be increased by two, and the holders of the
Series D Preferred Stock and all other series of Preferred
Stock ranking on a parity with the Series D Preferred Stock as
to dividends and upon liquidation and upon which like voting
rights have been conferred and are exercisable (whether or not
the holders of such other series of Preferred Stock would be
entitled to vote for the election of directors if such Default
in Preferred Dividends did not exist) shall have the right at
such meeting, voting together as a single class without regard
to series, to the exclusion of the holders of Common Stock, to
elect two directors of the Corporation to fill such newly
created directorships. Each director elected by the holders of
shares of the Preferred Stock (herein called a "Preferred
Director") as aforesaid shall continue to serve as such
director for the full term for which he shall have been
elected, notwithstanding that prior to the end of such term a
Default in Preferred Dividends shall cease to exist. Any
Preferred Director may be removed by, and shall not be removed
except by, the vote of the holders of record of the outstanding
shares of the Series D Preferred Stock and all other series of
Preferred Stock ranking on a parity with the Series D Preferred
Stock as to dividends and upon liquidation, voting together as
a single class without regard to series, at a meeting of the
stockholders, or of the holders of shares of such Preferred
Stock, called for the purpose. So long as a Default in
Preferred Dividends on the Preferred Stock shall exist (i) any
vacancy in the office of a Preferred Director may be filled
(except as provided in the following clause (ii)) by an
instrument in writing signed by the remaining Preferred
Director and filed with the Corporation and (ii) in the case of
the removal of any Preferred Director, the vacancy may be
filled by the vote of the holders of the outstanding shares of
Preferred Stock entitled to vote with respect to the removal of
such Preferred Director, voting together as a single class
without regard to series, at the same meeting at which such
removal shall be voted. Each director appointed as aforesaid by
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the remaining Preferred Director shall be deemed, for all
purposes hereof, to be a Preferred Director. Whenever the term
of office of the Preferred Directors shall end and no Default
in Preferred Dividends shall exist, the number of directors
constituting the Board of Directors shall be reduced by two.
For the purposes hereof, a "Default in Preferred Dividends" on
any series of Preferred Stock shall be deemed to have occurred
whenever the amount of accrued and unpaid dividends upon such
series of the Preferred Stock shall be equivalent to six full
quarterly dividends or more, and, having so occurred, such
default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all shares of the Preferred
Stock of such series then outstanding shall have been paid
through the last Dividend Payment Date;
(b) Whether or not the General Corporation Law of the
State of Delaware so provides, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
Series D Preferred Stock and all other series of Preferred
Stock ranking on a parity with the Series D Preferred Stock as
to dividends and upon liquidation, voting together as a single
class without regard to series, shall be required for the
Corporation to create a new class or increase an existing class
of stock having rights in respect of the payment of dividends
or in liquidation prior to the Series D Preferred Stock or any
other series of Preferred Stock ranking on a parity with the
Series D Preferred Stock as to dividends and upon liquidation,
or to change the terms, limitations or relative rights or
preferences of the Series D Preferred Stock or any other series
of Preferred Stock ranking on a parity with the Series D
Preferred Stock as to dividends and upon liquidation, either
directly or by increasing the relative rights of the shares of
another class; and
(c) Whether or not the General Corporation Law of the
State of Delaware so provides, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
Series D Preferred Stock voting together as a single class
without regard to series with the holders of any one or more
other series of Preferred Stock ranking on a parity with the
Series D Preferred Stock as to dividends and upon liquidation
and similarly affected shall be required for authorizing,
effecting, or validating the amendment, alteration or repeal of
any of the provisions of the Certificate of Incorporation or of
any Certificate of Amendment thereof or any similar document
(including any Certificate of Amendment or any similar document
relating to any series of the Preferred Stock) which would
adversely affect the preferences, rights or privileges of the
Series D Preferred Stock.
(d) Whether or not the General Corporation Law of the
State of Delaware so provides, the affirmative vote of the
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holders of at least two-thirds of the outstanding shares of the
Series D Preferred Stock and all other series of Preferred
Stock ranking on a parity with the Series D Preferred Stock as
to dividends and upon liquidation and upon which like voting
rights have been conferred, voting together as a single class
without regard to series, shall be required for the Corporation
to issue any authorized shares of preferred stock of the
Corporation ranking prior to the Series D Preferred Stock
either as to dividends or upon liquidation.
5. Liquidation Rights. (a) Upon the dissolution, liquidation
or winding up of the Corporation, whether voluntary or
involuntary, the holders of the shares of the Series D
Preferred Stock shall be entitled to receive and to be paid out
of the assets of the Corporation available for distribution to
stockholders, before any payment or distribution shall be made
on the Common Stock or on any other class of stock ranking
junior to the Preferred Stock upon liquidation, the amount of
$50.00 per share, plus accrued and unpaid dividends thereon to
the date of final distribution.
(b) Neither the sale, lease or exchange (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets 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 dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this paragraph 5.
(c) After the payment to the holders of the shares of
the Series D Preferred Stock of the full preferential amounts
provided for in this paragraph 5, the holders of the Series D
Preferred Stock as such shall have no right or claim to any of
the remaining assets of the Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of the
Series D Preferred Stock upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts
to which such holders are entitled pursuant to paragraph 5(a)
of this Section M, no such distribution shall be made on
account of any shares of any other series of the Preferred
Stock or any other class of stock of the Corporation ranking on
a parity with the shares of the Series D Preferred Stock upon
such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of
the shares of the Series D Preferred Stock, ratably, in
proportion to the full distributable amounts to which holders
of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
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6. Ranking. For purposes of the foregoing paragraphs 1 through
5 of this Section M, any stock of any class or classes of the Corporation
shall be deemed to rank:
(a) prior to the shares of the Series D 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
dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, as the case may be, in
preference or priority to the holders of shares of the Series D
Preferred Stock;
(b) on a parity with shares of the Series D 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 D Preferred Stock,
if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary
or involuntary, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the
holders of such stock and the holders of shares of the Series D
Preferred Stock; and
(c) junior to shares of the Series D Preferred Stock,
either as to dividends or upon liquidation, if such class or
classes shall be Common Stock or if the holders of shares of
the Series D Preferred Stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary
or involuntary, as the case may be, in preference or priority
to the holders of shares of such class or classes.
Notwithstanding any other provision of this Section M or of
Section L, the Series D Preferred Stock shall rank on a parity (within the
meaning of paragraph 6(b) of this Section M) with the Corporation's 8.125%
Cumulative Preferred Stock, Series A, 5.50% Convertible Preferred Stock,
Series B, $45,000 Cumulative Redeemable Preferred Stock, Series Z and
Series C Preferred Stock as to dividends and distributions of assets.
N. $45,000 CUMULATIVE REDEEMABLE PREFERRED STOCK, SERIES Z
1. Designation and Number of Shares. The designation of such
series shall be $45,000 Cumulative Redeemable Preferred Stock, Series Z
(the "Series Z Preferred Stock"), and the number of shares constituting
such series shall be 4,444. Shares of the Series Z Preferred Stock shall
have a par value of $1.00 per share and the amount of $45,000 shall be the
"liquidation value" of each share of the Series Z Preferred Stock. The
number of authorized shares of Series Z Preferred Stock may be reduced (but
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not below the number of shares thereof then outstanding) by further
resolution duly adopted by the Board of Directors or the Executive
Committee and by the filing of a certificate pursuant to the provisions of
the General Corporation Law of the State of Delaware stating that such
reduction has been so authorized, but the number of authorized shares of
Series Z Preferred Stock shall not be increased.
2. Dividends. (a) Dividends on each share of Series Z
Preferred Stock shall be payable with respect to each quarter
ending on February 15, May 15, August 15 and November 15 of
each year ("Quarterly Dividend Period"), in arrears, payable
commencing on March 1, 1993 and on each June 1, September 1,
December 1 and March 1 thereafter ("Dividend Payment Dates")
with respect to the quarter then ended, at a rate per annum
equal to the Applicable Rate (as defined in paragraph (b) of
this Section 2) in effect during the Quarterly Dividend Period
to which such dividend relates, multiplied by the liquidation
value ($45,000) of each such share. Such dividends shall be
cumulative from December 16, 1992 and shall be payable, when
and as declared by the Board of Directors, out of assets
legally available for such purpose, on each Dividend Payment
Date as set forth above. Each such dividend shall be paid to
the holders of record of shares of the Series Z Preferred Stock
as they appear on the books of the Corporation on such record
date, not exceeding 30 days preceding the payment date thereof,
as shall be fixed in advance by the Board of Directors of the
Corporation. Dividends in arrears for any past Quarterly
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, not exceeding 45 days preceding the
payment date thereof, as may be fixed by the Board of Directors
of the Corporation.
(b) Except as provided below in this paragraph, the
"Applicable Rate" for any Quarterly Dividend Period shall be
85% of the daily average of the Dealer Offer Rates for 30-day
Commercial Paper placed by dealers whose firm's bond ratings
are AA or equivalent, as reported in the Federal Reserve Board
statistical release designated H-15 and converted to a 360-day
yield basis and rounded to two decimal places. The daily
average shall be calculated by the treasurer of the
Corporation, whose calculation shall be final and conclusive,
by dividing (i) the sum of (A) for each day in the Quarterly
Dividend Period for which such rate is so published, the Dealer
Offered Rate for such date, and (B) for each day in the
Quarterly Dividend Period for which such rate is not so
published, the Dealer Offered Rate for the most recent date for
which such rate was so published, by (ii) the number of days in
the Quarterly Dividend Period. Dividends payable on the
Series Z Preferred Stock for any period shall be computed on
the basis of the actual number of days elapsed in the period
for which such dividends are payable (whether a full or partial
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Quarterly Dividend Period) and based upon a year of 360 days.
If the Corporation determines in good faith that for any reason
the Applicable Rate cannot be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the
preceding Quarterly Dividend Period shall be continued for such
Quarterly Dividend Period.
3. Redemption. (a) The Corporation, at its sole option, out
of funds legally available therefor, may redeem shares of the
Series Z Preferred Stock, as a whole or in part, at any time or
from time to time, at a redemption price of $45,000 per share,
plus, in each case, an amount equal to accrued and unpaid
dividends thereon to the date fixed for redemption (the
"Redemption Price").
(b) In the event that fewer than all the outstanding
shares of the Series Z Preferred Stock are to be redeemed, the
shares to be redeemed from each holder of record 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.
(c) In the event the Corporation shall redeem shares of
the Series Z Preferred Stock, written notice of such redemption
shall be given by first class mail, postage prepaid, mailed not
less than 30 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 books of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the
number of shares of the Series Z Preferred Stock to be redeemed
and, in the case of a partial redemption pursuant to Section
3(b) hereof, the identification (by the number of the
certificate or otherwise) and the number of shares of Series Z
Preferred Stock evidenced thereby to be redeemed; (iii) the
Redemption Price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the
Redemption Price; and (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
(d) If notice of redemption shall have been duly given,
and if, on or before the redemption date specified therein, all
funds necessary for such redemption shall have been set aside
by the Corporation, separate and apart from its other funds, in
trust for the pro rata benefit of the holders of the shares
called for redemption, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares
so called for redemption shall not have been surrendered for
cancellation, all shares so called for redemption shall no
longer be deemed outstanding on and after such redemption date,
and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right
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of the holders thereof to receive the amount payable on
redemption thereof, without interest.
If such notice of redemption shall have been duly given
or if the Corporation shall have given to the bank or trust
company hereinafter referred to irrevocable authorization
promptly to give such notice, and if on or before the
redemption date specified therein the funds necessary for such
redemption shall have been deposited by the Corporation with
such bank or trust company in trust for the pro rata benefit of
the holders of the shares called for redemption, then,
notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation,
from and after the time of such deposit, all shares so called
for redemption shall no longer be deemed to be outstanding and
all rights with respect to such shares shall forthwith cease
and terminate, except only the right of the holders thereof to
receive from such bank or trust company at any time after the
time of such deposit the funds so deposited, without interest.
The aforesaid bank or trust company shall be a bank or trust
company organized and in good standing under the laws of the
United States of America or of the State of New York, doing
business in the Borough of Manhattan, The City of New York,
having capital surplus and undivided profits aggregating at
least $50,000,000 according to its latest published statement
of condition, and shall be identified in the notice of
redemption. Any interest accrued on such funds shall be for
the benefit of the Corporation. Any funds so set aside or
deposited, as the case may be, and unclaimed at the end of one
year from such redemption date shall, to the extent permitted
by law, be released or repaid to the Corporation, after which
repayment the holders of the shares so called for redemption
shall look only to the Corporation for payment thereof.
(e) Any shares of the Series Z Preferred Stock that
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 again designated as part of a particular series
by the Board of Directors.
(f) Notwithstanding the foregoing provisions of this
Section 3, unless the full cumulative dividends on all
outstanding shares of the Series Z Preferred Stock shall have
been paid or contemporaneously are declared and paid for all
past Quarterly Dividend Periods, no shares of the Series Z
Preferred Stock shall be redeemed unless all outstanding shares
of the Series Z Preferred Stock are simultaneously redeemed,
and neither the Corporation nor a subsidiary of the Corporation
shall purchase or otherwise acquire for valuable consideration
any shares of the Series Z Preferred Stock, provided, however,
that the foregoing shall not prevent the purchase or
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acquisition of shares of the Series Z Preferred Stock pursuant
to a purchase or exchange offer made on the same terms to
holders of all the outstanding shares of the Series Z Preferred
Stock and mailed to the holders of record of all such
outstanding shares at such holders' addresses as the same
appear on the books of the Corporation and provided further
that if some, but less than all, of the shares of the Series Z
Preferred Stock are to be purchased or otherwise acquired
pursuant to such purchase or exchange offer and the number of
shares so tendered exceeds the number of shares so to be
purchased or otherwise acquired by the Corporation, the shares
of the Series Z Preferred Stock so tendered will be purchased
or otherwise acquired by the Corporation on a pro rata basis
according to the number of such shares duly tendered by each
holder so tendering shares of the Series Z Preferred Stock for
such purchase or exchange.
(g) If all the outstanding shares of the Series Z
Preferred Stock shall not have been redeemed on or prior to
September 15, 1998, each holder of the shares of the Series Z
Preferred Stock remaining outstanding shall have the right to
require that the Corporation repurchase such holder's shares,
in whole, at a purchase price (the "Purchase Price") in cash
equal to 100% of the liquidation value of such share, together
with all accrued and unpaid dividends on such shares to the
date of such repurchase (the "Repurchase Date"), in accordance
with the procedures set forth below.
Within 30 days prior to September 15, 1998, the Corporation
shall send by first-class mail, postage prepaid, to each holder
of the shares of the Series Z Preferred Stock, at its address
as the same appears on the books of the Corporation, a notice
stating the Repurchase Date, which shall be no earlier than 45
days nor later than 60 days from the date such notice is
mailed, and the instructions a holder must follow in order to
have his shares of the Series Z Preferred Stock repurchased in
accordance with this Section 3. Holders electing to have
shares of the Series Z Preferred Stock repurchased will be
required to surrender the certificate or certificates
representing such shares to the Corporation at the address
specified in the notice at least five business days prior to
the Repurchase Date.
4. Conversion or Exchange; Sinking Fund. The holders of
shares of the Series Z 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 capital
stock of the Corporation; nor shall the holders of shares of the Series Z
Preferred Stock be entitled to the benefits of a sinking fund in respect of
their shares of the Series Z Preferred Stock.
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5. Voting. (a) Except as otherwise provided in this
Section 5 or as otherwise required by law, the Series Z
Preferred Stock shall have no voting rights.
(b) If six quarterly dividends (whether or not
consecutive) payable on shares of Series Z Preferred Stock are
in arrears at the time of the record date to determine
stockholders for any annual meeting of stockholders of the
Corporation, the number of directors of the Corporation shall
be increased by two, and the holders of shares of Series Z
Preferred Stock (voting separately as a class with the holders
of shares of any one or more other series of Preferred Stock
upon which like voting rights have been conferred and are
exercisable) shall be entitled at such annual meeting of
stockholders to elect two directors of the Corporation, with
the remaining directors of the Corporation to be elected by the
holders of shares of any other class or classes or series of
stock entitled to vote therefor. In any such election, holders
of shares of Series Z Preferred Stock shall have one vote for
each share held.
At all meetings of stockholders at which holders of Preferred
Stock shall be entitled to vote for Directors as a single
class, the holders of a majority of the outstanding shares of
all classes and series of capital stock of the Corporation
having the right to vote as a single class shall be necessary
to constitute a quorum, whether present in person or by proxy,
for the election by such single class of its designated
Directors. In any election of Directors by stockholders voting
as a class, such Directors shall be elected by the vote of at
least a plurality of shares held by such stockholders present
or represented at the meeting. At any such meeting, the
election of Directors by stockholders voting as a class shall
be valid notwithstanding that a quorum of other stockholders
voting as one or more classes may not be present or represented
at such meeting.
(c) Any director who has been elected by the holders of
shares of Series Z Preferred Stock (voting separately as a
class with the holders of shares of any one or more other
series of Preferred Stock upon which like voting rights have
been conferred and are exercisable) may be removed at any time,
with or without cause, only by the affirmative vote of the
holders of the shares at the time entitled to cast a majority
of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that
purpose, and any vacancy thereby created may be filled by the
vote of such holders. If a vacancy occurs among the Directors
elected by such stockholders voting as a class, other than by
removal from office as set forth in the preceding sentence,
such vacancy may be filled by the remaining Director so
elected, or his or her successor then in office, and the
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Director so elected to fill such vacancy shall serve until the
next meeting of stockholders for the election of Directors.
(d) The voting rights of the holders of Series Z
Preferred Stock to elect Directors as set forth above shall
continue until all dividend arrearages on the Series Z
Preferred Stock have been paid or declared and set apart for
payment. Upon the termination of such voting rights, the terms
of office of all persons who may have been elected pursuant to
such voting rights shall immediately terminate, and the number
of directors of the Corporation shall be decreased by two.
(e) Without the consent of the holders of shares
entitled to cast at least two-thirds of the votes entitled to
be cast by the holders of the total number of shares of
Preferred Stock then outstanding, voting separately as a class
without regard to series, with the holders of shares of
Series Z Preferred Stock being entitled to cast one vote per
share, the Corporation may not:
(i) create any class of stock that shall have
preference as to dividends or distributions of assets
over the Series Z Preferred Stock; or
(ii) alter or change the provisions of the
Certificate of Incorporation (including any Certificate
of Amendment or Certificate of Designation relating to
the Series Z Preferred Stock) so as to adversely affect
the powers, preferences or rights of the holders of
shares of Series Z Preferred Stock; provided, however,
that if such creation or such alteration or change
would adversely affect the powers, preferences or
rights of one or more, but not all, series of Preferred
Stock at the time outstanding, such alteration or
change shall require consent of the holders of shares
entitled to cast at least two-thirds of the votes
entitled to be cast by the holders of all of the shares
of all such series so affected, voting as a class.
6. Liquidation Rights. (a) Upon the dissolution, liquidation
or winding up of the Corporation, the holders of the shares of
the Series Z Preferred Stock shall be entitled to receive out
of the assets of the Corporation available for distribution to
stockholders, before any payment or distribution shall be made
on the Common Stock or on any other class or series of stock
ranking junior to shares of the Series Z Preferred Stock as to
amounts distributable on dissolution, liquidation or winding
up, $45,000 per share, plus an amount equal to all dividends
(whether or not earned or declared) on such shares accrued and
unpaid thereon to the date of final distribution.
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(b) Neither the merger or consolidation of the
Corporation into or with any other corporation nor the merger
or consolidation of any other corporation into or with the
Corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, of the Corporation for
the purpose of this Section 6.
(c) After the payment to the holders of the shares of
the Series Z Preferred Stock of the full preferential amounts
provided for in this Section 6, the holders of the Series Z
Preferred Stock as such shall have no right or claim to any of
the remaining assets of the Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of the
Series Z Preferred Stock upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts
to which such holders are entitled pursuant to paragraph (a) of
this Section 6, the holders of shares of the Series Z Preferred
Stock and of any shares of Preferred Stock of any series or any
other stock of the Corporation ranking, as to the amounts
distributable upon dissolution, liquidation or winding up, on a
parity with the Series Z Preferred Stock, shall share ratably
in any distribution in proportion to the full respective
preferential amounts to which they are entitled.
7. Ranking of Stock of the Corporation. In respect of the
Series Z Preferred Stock, any stock of any class or classes of the
Corporation shall be deemed to rank:
(a) prior to the shares of the Series Z Preferred Stock
or prior to the Series Z Preferred Stock, either as to
dividends or upon liquidation, if the holders of such stock
shall be entitled to either the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of shares
of the Series Z Preferred Stock;
(b) on a parity with shares of the Series Z Preferred
Stock or on a parity with the Series Z Preferred Stock, either
as to dividends or upon liquidation, whether or not the
dividend rates, dividend payment dates, redemption amounts per
share or liquidation values per share or sinking fund
provisions, if any, are different from those of the Series Z
Preferred Stock, if the holders of such stock shall be entitled
to either the receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, as the case may be, in
proportion to their respective dividend rates or liquidation
values, without preference or priority, one over the other, as
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between the holders of such stock and the holders of shares of
the Series Z Preferred Stock, provided in any such case such
stock does not rank prior to the Series Z Preferred Stock; and
(c) junior to shares of the Series Z Preferred Stock or
junior to the Series Z Preferred Stock, as to dividends and
upon liquidation, if such stock shall be Common Stock or if the
holders of shares of the Series Z Preferred Stock shall be
entitled to receipt of dividends and of amounts distributable
upon dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, as the case may be, in
preference or priority to the holders of such stock.
The Series Z Preferred Stock is on a parity with the 8.125%
Cumulative Preferred Stock, Series A, of the Corporation, heretofore
authorized for issuance by the Corporation.
8. Definition. When used herein, the term "subsidiary" shall
mean any corporation a majority of whose voting stock ordinarily entitled
to elect directors is owned, directly or indirectly, by the Corporation.
9. Limitation on Dividends on Junior Stock. So long as any
Series Z Preferred Stock shall be outstanding, without the consent of the
holders of two-thirds of the shares of the Series Z Preferred Stock then
outstanding the Corporation shall not declare any dividends on the Common
Stock or any other stock of the Corporation ranking as to dividends or
distributions of assets junior to the Series Z Preferred Stock (the Common
Stock and any such other stock being herein referred to as "Junior Stock"),
or make any payment on account of, or set apart money for, a sinking fund
or other similar fund or agreement for the purchase, redemption or other
retirement of any shares of Junior Stock, or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of
the Corporation, other than a distribution of Junior Stock (such dividends,
payments, setting apart and distributions being herein called "Junior Stock
Payments"), unless the following conditions shall be satisfied at the date
of such declaration in the case of any such dividend, or the date of such
setting apart in the case of any such fund, or the date of such payment or
distribution in the case of any other Junior Stock Payment:
(a) full cumulative dividends shall have been paid or
declared and set apart for payment on all outstanding shares of
Preferred Stock other than Junior Stock; and
(b) the Corporation shall not be in default or in
arrears with respect to any sinking fund or other similar fund
or agreement for the purchase, redemption or other retirement
of any shares of Preferred Stock other than Junior Stock;
provided, however, that any funds theretofore deposited in any sinking fund
or other similar fund with respect to any Preferred Stock in compliance
with the provisions of such sinking fund or other similar fund may
thereafter be applied to the purchase or redemption of such Preferred Stock
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in accordance with the terms of such sinking fund or other similar fund
regardless of whether at the time of such application full cumulative
dividends upon shares of Series Z Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set apart for
payment by the Corporation.
10. Waiver, Modification and Amendment. Notwithstanding
any other provisions relating to the Series Z Preferred Stock, any of the
rights or benefits of the holders of the Series Z Preferred Stock may be
waived, modified or amended with the consent of the holders of all of the
then outstanding shares of Series Z Preferred Stock. Any such waiver,
modification or amendment shall be deemed to have the same effect as
satisfaction in full of any such right or benefit as though actually
received by such holders.
FIFTH: The Directors need not be elected by written ballot
unless and to the extent the By-Laws so require.
SIXTH: The books and records of the Corporation may be kept
(subject to any mandatory requirement of law) outside the State of Delaware
at such place or places as may be determined from time to time by or
pursuant to authority granted by the Board of Directors or by the By-Laws.
SEVENTH: (A) The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors, the exact number
of directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors. The
directors shall be divided into three classes, designated Class I, Class II
and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. Class I directors shall be elected initially for a one-year
term, Class II directors initially for a two-year term and Class III
directors initially for a three-year term. At each succeeding annual
meeting of stockholders beginning in 1989, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in
the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which
his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors that results from an increase in the number of directors may be
filled by a majority of the Board of Directors then in office, provided
that a quorum is present, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the directors then in office, even
if less than a quorum, or a sole remaining director. Any director elected
to fill a vacancy not resulting from an increase in the number of directors
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shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article SEVENTH unless expressly provided by such terms.
B. Notwithstanding any other provision of this Certificate of
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of the shares entitled to vote at an
election of directors shall be required to amend, alter, change or repeal,
or to adopt any provision as part of this Certificate of Incorporation
inconsistent with the purpose and intent of, this Article SEVENTH.
EIGHTH: A. In addition to any affirmative vote required by law
or this Certificate of Incorporation or the By-Laws of the Corporation, and
except as otherwise expressly provided in Section B of this Article EIGHTH,
a Business Combination (as hereinafter defined) shall require the
affirmative vote of not less than sixty-six and two-thirds percent (66 2/3%)
of the votes entitled to be cast by the holders of all the then outstanding
shares of Voting Stock (as hereinafter defined), voting together as a
single class, excluding from such number of outstanding shares and from
such required vote, Voting Stock beneficially owned by any Interested
Stockholder (as hereinafter defined). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article EIGHTH shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is
required by law or by any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation or otherwise, if all of the
conditions specified in either of the following Paragraphs 1 or 2 are met;
provided, however, that in the case of a Business Combination that does not
involve the payment of consideration to the holders of the Corporation's
outstanding Capital Stock (as hereinafter defined), then the provisions of
Section A of this Article EIGHTH must be satisfied unless the conditions
specified in the following Paragraph 1 are met:
1. The Business Combination shall have been approved (and such
approval not subsequently rescinded) by a majority of the Continuing
Directors (as hereinafter defined), either specifically or as a transaction
which is within an approved category of transactions with an Interested
Stockholder. Such approval may be given prior to or subsequent to the
acquisition of, or announcement or public disclosure of the intention to
acquire, beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder; provided,
however, that approval shall be effective for the purposes of this
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Paragraph 1 only if obtained at a meeting at which a Continuing Director
Quorum (as hereinafter defined) was present; and provided further, that
such approval may be rescinded by a majority of the Continuing Directors at
any meeting at which a Continuing Director Quorum is present and which is
held prior to consummation of the proposed Business Combination.
2. All of the following conditions, if applicable, shall have
been met:
The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination (the "Consummation Date"), of consideration other than cash to
be received per share by holders of shares of any class or series of
outstanding Capital Stock in such Business Combination shall be at least
equal to the amount determined, as applicable, under Paragraph 2(a) or 2(b)
below:
(a) if the Fair Market Value per share of such class or
series of Capital Stock on the date of the first public
announcement of the proposed Business Combination (the
"Announcement Date") is less than the Fair Market Value per
share of such class or series of Capital Stock on the date on
which the Interested Stockholder became an Interested
Stockholder (the "Determination Date"), an amount (the "Premium
Capital Stock Price") equal to the sum of (i) the Fair Market
Value per share of such class or series of Capital Stock on the
Announcement Date plus (ii) the product of the Fair Market
Value per share of such class or series of Capital Stock on the
Announcement Date multiplied by the highest percentage premium
over the closing sale price per share of such class or series
of Capital Stock paid on any day by or on behalf of the
Interested Stockholder for any share of such class or series of
Capital Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of
such class or series of Capital Stock within the two-year
period immediately prior to the Announcement Date or in the
transaction in which it became an Interested Stockholder;
provided, however, that if the Premium Capital Stock Price as
determined above is greater than the highest per share price
paid by or on behalf of the Interested Stockholder for any
share of such class or series of Capital Stock in connection
with the acquisition by the Interested Stockholder of
beneficial ownership of shares of such class or series of
Capital Stock within the two-year period immediately prior to
the Announcement Date, the amount required under this Paragraph
2(a) shall be the higher of (A) such highest price paid by or
on behalf of the Interested Stockholder, and (B) the Fair
Market Value per share of such class or series of Capital Stock
on the Announcement Date (the Fair Market Value and other
prices per share of such class or series of Capital Stock
referred to in this Paragraph 2(a) shall be in each case
appropriately adjusted for any subsequent stock split, stock
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dividend, subdivision or reclassification with respect to such
class or series of Capital Stock); or
(b) if the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date is greater
than or equal to the Fair Market Value per share of such class
or series of Capital Stock on the Determination Date, in each
case as appropriately adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to
such class or series of Capital Stock, a price per share equal
to the Fair Market Value per share of such class or series of
Capital Stock on the Announcement Date.
The provisions of this Paragraph 2 shall be required to be met
with respect to every class or series of outstanding Capital Stock which is
the subject of the Business Combination whether or not the Interested
Stockholder has previously acquired beneficial ownership of any shares of a
particular class or series of Capital Stock.
(c) After the Determination Date and prior to the
Consummation Date of such Business Combination: (i) except as
approved by a majority of the Continuing Directors at a meeting
at which a Continuing Director Quorum is present, there shall
have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any
outstanding Capital Stock; (ii) there shall have been an
increase in the annual rate of dividends paid on the Common
Stock as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or
any similar transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless the
failure so to increase such annual rate is approved by a
majority of the Continuing Directors at a meeting at which a
Continuing Director Quorum is present; and (iii) such
Interested Stockholder shall not have become the beneficial
owner of any additional shares of Capital Stock except as part
of the transaction that results in such Interested Stockholders
becoming an Interested Stockholder and except in a transaction
that, after giving effect thereto, would not result in any
increase in the Interested Stockholder's percentage beneficial
ownership of any class or series of Capital Stock.
(d) After the Determination Date, such Interested
Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or
otherwise.
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(e) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (the "Act") (or any subsequent
provisions replacing such Act, rules or regulations), shall be
mailed to all stockholders of the Corporation at least 30 days
prior to the consummation of such Business Combination (whether
or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). The
proxy or information statement shall contain on the first page
thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Combination
that the Continuing Directors, or any of them, may choose to
make and, if deemed advisable by a majority of the Continuing
Directors, the opinion of an investment banking firm selected
by a majority of the Continuing Directors as to the fairness
(or not) of the terms of the Business Combination from a
financial point of view to the holders of the outstanding
shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates (as hereinafter defined), such
investment banking firm to be paid a reasonable fee for its
services by the Corporation.
(f) Such Interested Stockholder shall not have made any
major change in the Corporation's business or equity capital
structure without the approval of at least a majority of the
Continuing Directors.
C. The following definitions shall apply with respect to this
Article EIGHTH:
1. The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or
any Major Subsidiary (as hereinafter defined) with, or any
sale, lease, exchange, transfer or other disposition of
substantially all the assets or outstanding shares of capital
stock of the Corporation or any Major Subsidiary with or for
the benefit of, (i) any Interested Stockholder or (ii) any
other company (whether or not itself an Interested Stockholder)
which is or after such merger, consolidation or sale, lease,
exchange, transfer or other disposition would be an Affiliate
or Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or security arrangement,
investment, loan, advance, guarantee, agreement to purchase,
agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a
series of transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder involving any assets, securities or
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commitments of the Corporation, any Major Subsidiary or any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder having an aggregate Fair Market Value
and/or involving aggregate commitments of Twenty-Five Million
dollars ($25,000,000) or more; or
(c) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries (as hereinafter defined) or any other
transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class
or series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(d) any agreement, contract or other arrangement
providing for any one or more of the actions specified in the
foregoing clauses (a) to (d);
provided, however, that no such aforementioned transaction shall be deemed
to be a Business Combination subject to this Article EIGHTH if the
Announcement Date of such transaction occurs more than eighteen months
after the Determination Date with respect to such Interested Stockholder.
2. The term "Capital Stock" shall mean all capital stock of
the Corporation authorized to be issued from time to time under Article
FOURTH of this Certificate of Incorporation, including, without limitation,
the Common Stock, and the term "Voting Stock" shall mean all Capital Stock
which by its terms may be voted on all matters submitted to stockholders of
the Corporation generally.
3. The term "person" shall mean any individual, firm, company
or other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
4. The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any profit-
sharing, employee stock ownership or other employee benefit plan of the
Corporation or any trustee of or fiduciary with respect to any such plan
when acting in such capacity) who (a) is, or has announced or publicly
disclosed a plan or intention to become, the beneficial owner of Voting
Stock representing twenty-five percent (25%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of Voting Stock;
or (b) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was
the beneficial owner of Voting Stock representing twenty-five percent (25%)
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or more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates or Associates beneficially
owns directly or indirectly; (b) which such person or any of its Affiliates
or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding; or (c) which is beneficially owned, directly
or indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section C, the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph 5 of Section C, but shall not include any other shares of Capital
Stock that may be reserved for issuance or issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
6. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Act as
in effect on the date that this Article EIGHTH is approved and adopted by
the Sole Incorporator (the term "registrant" in said Rule 12b-2 meaning in
this case the Corporation); provided, however, that the terms "Affiliate"
and "Associate" shall not include any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any trustee
of or fiduciary with respect to any such plan when acting in such capacity.
7. The term "Subsidiary" means any company of which a majority
of any class of equity security is beneficially owned by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 4 of this Section C, the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
8. The term "Major Subsidiary" means a Subsidiary having
assets of twenty-five million dollars ($25,000,000) or more as reflected in
the most recent fiscal year-end audited, or if unavailable, unaudited,
consolidated balance sheet, prepared in accordance with applicable state
insurance law with respect to Subsidiaries engaged in an insurance
business, and in accordance with generally accepted accounting principles
with respect to Subsidiaries engaged in a business other than an insurance
business.
9. The term "Continuing Director" means any member of the
Board of Directors of the Corporation, while such person is a member of the
Board of Directors, who is not an Affiliate or Associate or representative
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of the Interested Stockholder and who was a member of the Board of
Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Continuing Director while
such successor is a member of the Board of Directors, who is not an
Affiliate or Associate or representative of the Interested Stockholder and
who is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors; provided, however, that the term
"Continuing Director" shall not include any officer of the Corporation or
of any Affiliate or Associate of the Corporation.
10. The term "Fair Market Value" means (a) in the case of
cash, the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Act on which such stock is listed, or, if such stock
is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any similar system then in use, or if no
such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Continuing Directors in good faith; and (c) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the Continuing
Directors.
11. The term "Continuing Director Quorum" means at least
two (2) Continuing Directors capable of exercising the power conferred upon
them under the provisions of the Certificate of Incorporation and By-Laws
of the Corporation.
12. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Paragraph 2 of Section B of this Article EIGHTH shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors at a meeting at
which a Continuing Director Quorum is present shall have the power and duty
to determine the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry, and to determine all
questions arising under this Article EIGHTH, including, without limitation,
(a) whether a person is an Interested Stockholder, (b) the number of shares
of Capital Stock or other securities beneficially owned by any person, (c)
whether a person is an Affiliate or Associate of another, (d) whether the
assets that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of twenty-five million dollars ($25,000,000) or
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more as provided in Paragraph 1(b) of Section C of this Article EIGHTH and
(e) whether a Subsidiary is a Major Subsidiary. Any such determination
made in good faith shall be binding and conclusive on all parties. In the
event a Continuing Director Quorum cannot be attained at such meeting, all
such determinations shall be made by the Delaware Court of Chancery.
E. Nothing contained in this Article EIGHTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation imposed
by law.
F. The fact that any Business Combination complies with the
provisions of Section B of this Article EIGHTH shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination or
recommend its adoption or approval to the stockholders of the Corporation,
nor shall such compliance limit, prohibit or otherwise restrict in any
manner the Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to such Business
Combination.
G. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that a lesser percentage or separate class vote may be specified by
law, this Certificate of Incorporation or the By-Laws of the Corporation),
the affirmative vote of the holders of not less than sixty-six and two-
thirds percent (66 2/3%) of the votes entitled to be cast by the holders of
all the then outstanding shares of Voting Stock, voting together as a
single class, excluding Voting Stock beneficially owned by any Interested
Stockholder, shall be required to amend, alter, change or repeal, or adopt
any provision as part of this Certificate of Incorporation inconsistent
with the purpose and intent of, this Article EIGHTH; provided, however,
that this Section G shall not apply to, and such sixty-six and two-thirds
percent (66 2/3%) vote shall not be required for, any amendment, repeal or
adoption recommended by the affirmative vote of at least seventy-five
percent (75%) of the entire Board of Directors if all of such directors
voting for such recommendation are persons who would be eligible to serve
as Continuing Directors within the meaning of Section C, Paragraph 9 of
this Article EIGHTH.
NINTH: In furtherance and not in limitation of the powers
conferred upon it by the laws of the State of Delaware, the Board of
Directors shall have the power to adopt, amend, alter or repeal the
Corporation's By-Laws. The affirmative vote of at least sixty-six and two-
thirds percent (66 2/3%) of the entire Board of Directors shall be required to
adopt, amend, alter or repeal the Corporation's By-Laws. Notwithstanding
any other provisions of this Certificate of Incorporation or the By-Laws of
the Corporation (and notwithstanding the fact that a lesser percentage or
separate class vote may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), the affirmative vote of
the holders of at least seventy-five percent (75%) of the voting power of
the shares entitled to vote at an election of directors shall be required
to adopt, amend, alter or repeal, or adopt any provision as part of this
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Certificate of Incorporation inconsistent with the purpose and intent of,
this Article NINTH.
TENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
ELEVENTH: Except as provided in Articles FOURTH, SEVENTH, EIGHTH
and NINTH of this Certificate of Incorporation, the Corporation reserves
the right to amend and repeal any provision contained in this Certificate
of Incorporation in the manner prescribed by the laws of the State of
Delaware, and all rights of stockholders shall be subject to this
reservation.
THE UNDERSIGNED, being a Senior Vice President of the
Corporation, does hereby certify that the Corporation has restated its
Certificate of Incorporation as set forth above, does hereby certify that
such restatement has been duly adopted by the Board of Directors of the
Corporation in accordance with the applicable provisions of Section 245 of
the General Corporation Law of the State of Delaware, and does hereby make
and file this Restated Certificate of Incorporation.
Dated: March 29, 1994
/s/ Charles O. Prince, III
-------------------------------
Charles O. Prince, III
Senior Vice President
ATTEST:
/s/ Mark J. Amrhein
- ----------------------------
Mark J. Amrhein
Assistant Secretary
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EXHIBIT 3.02
BY-LAWS
OF
TRAVELERS GROUP INC.
EFFECTIVE APRIL 23, 1997
<PAGE>
BY-LAWS
OF
TRAVELERS GROUP INC.
ARTICLE I
LOCATION
SECTION 1. The location of the registered office of the Company in
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. The Company shall, in addition to the registered office in the
State of Delaware, establish and maintain an office within or without the State
of Delaware or offices in such other places as the Board of Directors may from
time to time find necessary or desirable.
ARTICLE II
CORPORATE SEAL
SECTION 1. The corporate seal of the Company shall have inscribed thereon
the name of the Company and the year of its creation (1988) and the words
"Incorporated Delaware."
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders, or any special meeting
thereof, shall be held either in the City of Baltimore, State of Maryland, or at
such other place as may be designated by the Board of Directors or by the
Executive Committee, or by the officer or group of Directors calling any special
meeting.
SECTION 2. Stockholders entitled to vote may vote at all meetings either
in person or by proxy in writing. All proxies shall be filed with the Secretary
of the meeting before being voted upon.
<PAGE>
SECTION 3. A majority in amount of the stock issued, outstanding and
entitled to vote represented by the holders in person or by proxy shall be
requisite at all meetings to constitute a quorum for the election of Directors
or for the transaction of other business except as otherwise provided by law, by
the Certificate of Incorporation or by these By-laws. If at any annual or
special meeting of the stockholders, a quorum shall fail to attend, a majority
in interest attending in person or by proxy may adjourn the meeting from time to
time, not exceeding sixty days in all, without notice other than by announcement
at the meeting (except as otherwise provided herein) until a quorum shall attend
and thereupon any business may be transacted which might have been transacted at
the meeting originally called had the same been held at the time so called. If
the adjournment is for more than 30 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 vote at the
meeting.
SECTION 4. The annual meeting of the stockholders shall be held on such
date and at such time as the Board of Directors or the Executive Committee may
determine by resolution. Except as otherwise set forth in the Certificate of
Incorporation of the Company, each holder of voting stock shall be entitled to
one vote for each share of such stock standing registered in his or her name.
All annual meetings shall be general meetings.
SECTION 5. The business to be transacted at the annual meeting shall
include the election of Directors, consideration and action upon the reports of
officers and Directors, the acts, contracts, transactions and proceedings of the
officers, Directors, Executive Committee, and all other Committees of the Board
and any other matters within the power of the Company which may be brought
before the meeting.
SECTION 6. Notice of the annual meeting shall be mailed by the Secretary
to each stockholder entitled to vote, at his or her last known post office
address, at least ten days but not more than sixty days prior to the meeting.
SECTION 7. Special meetings of the stockholders may be called by the
Chairman of the Board. A special meeting shall be called at the request, in
writing, of a majority of the Board of Directors or of the Executive Committee,
or by the vote of the Board of Directors or of the Executive Committee.
SECTION 8. Notice of each special meeting, indicating briefly the object
or objects thereof, shall be mailed by the Secretary to each stockholder
entitled to vote at his or her last known post office address, at least ten days
but not more than sixty days prior to the meeting.
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SECTION 9. If the entire Board of Directors becomes vacant, any
stockholder may call a special meeting in the same manner that the Chairman of
the Board may call such meeting, and Directors for the unexpired term may be
elected at said special meeting in the manner provided for their election at
annual meetings.
ARTICLE IV
DIRECTORS
SECTION 1. The affairs, property and business of the Company shall be
managed and controlled by a Board of Directors, with the exact number of
directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors. The election
and term of directors shall be as provided in the Certificate of Incorporation,
as amended, from time to time.
SECTION 2. Vacancies in the Board of Directors shall be filled as provided
in the Certificate of Incorporation of the Company, as amended from time to
time.
ARTICLE V
POWERS OF THE DIRECTORS
SECTION 1. The Board of Directors shall have the management of the
business of the Company, and, in addition to the powers and authorities by these
By-laws expressly conferred upon them, may exercise all such powers and do all
such acts and things, as may be exercised or done by the Company, but subject,
nevertheless, to the provisions of the laws of the State of Delaware, of the
Certificate of Incorporation and of these By-laws.
SECTION 2. The Directors and members of the Executive Committee and other
committees appointed by the Board of Directors or by the Executive Committee as
such shall not receive any stated salary for their services except where
authorized by the Board of Directors, but, by resolution of the Board, a fixed
sum and reasonable expenses may be allowed for attendance at each regular or
special meeting, provided nothing herein contained shall be construed to
preclude a Director or member of a committee from serving in any other capacity
and receiving compensation therefor, but if he or she shall serve as an officer
or employee of the Company or of any subsidiary company, receiving a salary, he
or she shall be paid the actual expenses for attending meetings, but no other
sums, except by the express order of the Board of Directors.
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<PAGE>
SECTION 3. The Company shall indemnify, to the fullest extent permissible
under the General Corporation Law of the State of Delaware, or the
indemnification provisions of any successor statute, any person, and the heirs
and personal representatives of such person, against any and all judgments,
fines, amounts paid in settlement and costs and expenses, including attorneys'
fees, actually and reasonably incurred by or imposed upon such person in
connection with, or resulting from any claim, action, suit or proceeding (civil,
criminal, administrative or investigative) in which such person is a party or is
threatened to be made a party by reason of such person being or having been a
director, officer or employee of the Company, or of another corporation, joint
venture, trust or other organization in which such person serves as a director,
officer, employee or agent at the request of the Company, or by reason of such
person being or having been an administrator or a member of any board or
committee of this Company or of any such other organization, including, but not
limited to, any administrator, board or committee related to any employee
benefit plan.
The Company may advance expenses incurred in defending a civil or criminal
action, suit or proceeding to any such director, officer, employee or agent upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount, if it shall ultimately be determined that such
person is not entitled to indemnification by the Company.
The foregoing right of indemnification and advancement of expenses shall in
no way be exclusive of any other rights of indemnification to which any such
person may be entitled, under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, and shall inure to the benefit of the
heirs and personal representatives of such person.
SECTION 4. Each Director and officer and each member of any committee
designated by the Board of Directors shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the books of account or
other records of the Company or of any of its subsidiaries, or upon reports made
to the Company or any of its subsidiaries by any officer of the Company or of a
subsidiary or by an independent certified public accountant or by an appraiser
selected with reasonable care by the Board of Directors or by any such
committee.
ARTICLE VI
MEETINGS OF THE DIRECTORS
SECTION 1. The Board of Directors shall meet as soon as convenient after
the annual meeting of stockholders in the City of Baltimore, State of
Maryland, or at such other place as may be designated by the Board of
Directors or the Executive Committee, for the
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purpose of organization and the transaction of any other business which may
properly come before the meeting.
SECTION 2. Regular meetings of the Directors may be held without notice at
such time and place as may be determined from time to time by resolution of the
Board.
SECTION 3. One-third of the total number of Directors shall constitute a
quorum except when the Board of Directors consists of one Director, then one
Director shall constitute a quorum for the transaction of business, but the
Directors present, though fewer than a quorum, may adjourn the meeting to
another day. 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.
SECTION 4. Special meetings of the Board may be called by the Board, the
Executive Committee or the Chairman of the Board, on one day's notice, or other
reasonable notice, to each Director, either personally, by mail or by wire, and
may be held at such time as the Board of Directors, the Executive Committee or
the officer calling said meeting may determine. Special meetings may be called
in like manner on the request in writing of three Directors. If the Board of
Directors or the Executive Committee so determine, such special meetings may be
held at some place other than at the office of the Company in the City of
Baltimore.
SECTION 5. In the absence of both the Secretary and an Assistant
Secretary, the Board of Directors shall appoint a secretary to record all votes
and the minutes of its proceedings.
SECTION 6. 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 a written consent to such action be signed by all of the members of
the Board of Directors or committee as the case may be, and such written consent
be filed with the minutes of the proceedings of the Board of Directors or such
committee.
ARTICLE VII
STANDING COMMITTEES
SECTION 1. The Board of Directors may designate from their number standing
committees and may invest them with all their own powers, except as otherwise
provided in the General Corporation Law of the State of Delaware, subject to
such conditions as they may prescribe, and all committees so appointed shall
keep regular minutes of their transactions and shall cause them to be recorded
in books kept for that purpose in the office of the Company, and shall report
the same to the Board of Directors at their regular meeting.
- 5 -
<PAGE>
ARTICLE VIII
EXECUTIVE COMMITTEE
SECTION 1. The Board of Directors may designate an Executive Committee of
not more than ten nor fewer than two persons from among their own number. One-
third of the members of the Executive Committee shall constitute a quorum except
when the Executive Committee consists of two, then one member shall constitute a
quorum. Any vacancy on the Executive Committee shall be filled by the Board of
Directors.
SECTION 2. The Executive Committee shall exercise all powers of the Board
of Directors between the meetings of said Board except as otherwise provided in
the General Corporation Law of the State of Delaware. No action of the
Executive Committee shall become operative unless it has the affirmative vote of
at least a majority of the members of the Executive Committee present and
voting.
SECTION 3. Regular meetings of the Executive Committee shall be held
without notice at such time and place as may be determined from time to time by
resolution of the Executive Committee. Special meetings of the Executive
Committee may be called at any time upon one day's notice, or other reasonable
notice, either personally, by mail or by wire, by the Chairman of the Board, the
Chairman of the Executive Committee, or by any two members of the Executive
Committee.
SECTION 4. In the absence of both the Secretary and an Assistant
Secretary, the Executive Committee shall appoint a secretary who shall keep
regular minutes of the actions of the said Committee and report the same to the
Board of Directors, which thereupon shall take action thereon.
SECTION 5. The Board of Directors may designate from the members of the
Executive Committee a Chairman of the Executive Committee. If the Board of
Directors should not make such designation, the Executive Committee may
designate a Chairman of the Executive Committee.
ARTICLE IX
OFFICERS OF THE COMPANY
SECTION 1. The officers of the Company shall consist of a Chairman of the
Board of Directors, a President, one or more Vice Presidents, a Controller, a
Secretary and a Treasurer. There also may be such other officers and assistant
officers as, from time to time, may be elected or appointed by the Board of
Directors or by the Executive Committee.
- 6 -
<PAGE>
ARTICLE X
OFFICERS - HOW CHOSEN
SECTION 1. At the first meeting after the annual meeting of stockholders,
the Directors shall elect annually from among their own number a Chairman of the
Board and a President. They shall also elect the several Vice Presidents, a
Controller, a Secretary and a Treasurer, to hold office for one year or until
others are elected and qualify in their stead or until their earlier resignation
or removal.
SECTION 2. The Directors or the Executive Committee shall also elect or
appoint such other officers and assistant officers as from time to time they may
determine, and who shall hold office during the pleasure of the Board or of the
Executive Committee.
ARTICLE XI
CHAIRMAN OF THE BOARD
SECTION 1. The Chairman of the Board shall be the Chief Executive Officer
of the Company, and shall have general supervision and direction over the
business and policies of the Company, and over all the other officers of the
Company and shall see that their duties are properly performed. He or she shall
have all the powers conferred upon the President by these By-laws, except such
as by the laws of the State of Delaware can be exercised only by the President
or a Vice President.
SECTION 2. He or she shall be ex-officio a member of all standing
committees, shall have the general powers and duties of the direction,
supervision and management usually vested in the Chief Executive Officer of a
corporation, and shall preside at all meetings of the Board of Directors. He or
she shall see that all orders and resolutions of the Board of Directors and
Executive Committee are carried into effect.
SECTION 3. He or she shall submit reports of the current operations of the
Company to the Board of Directors and Executive Committee at their regular
meetings, and annual reports to the stockholders.
- 7 -
<PAGE>
ARTICLE XII
PRESIDENT
SECTION 1. The President shall be the Chief Operating Officer of the
Company, and, if the President shall not also be the Chairman of the Board,
shall be subordinate to the Chairman of the Board, shall have general
supervision and direction over the business and policies of the Company, and
over all the other officers of the Company, and shall see that their duties are
properly performed.
SECTION 2. The President shall preside at all meetings of the Board of
Directors in the absence of the Chairman of the Board.
SECTION 3. The President shall be ex-officio a member of all standing
committees, and, in the absence of the Chairman of the Board, shall have the
general powers and duties of the Chairman of the Board and of the supervision,
direction and management usually vested in the office of a president or chief
executive officer of a corporation.
ARTICLE XIII
VICE PRESIDENTS
SECTION 1. Each Vice President shall have such powers and perform such
duties as may be assigned to him by the Board of Directors or Executive
Committee, or, subject to Section 2 of Article XVII, by the Chairman of the
Board or the President. The Board of Directors may add to the title of any Vice
President such distinguishing designation as may be deemed desirable, which
designation may reflect seniority, duties, or responsibilities of such Vice
President. In the absence of the President, any Vice President designated by
the Chairman of the Board may perform the duties and exercise the powers of the
President.
ARTICLE XIV
CONTROLLER
SECTION 1. The Controller shall have charge of and supervise all
accounting matters, the preparation of all accounting reports and statistics of
the Company and its
- 8 -
<PAGE>
subsidiaries, and shall perform the duties usually incident to the office of the
Controller. He or she shall submit such reports and records to the Board of
Directors or the Executive Committee as may be requested by them, or by the
Chairman of the Board or by the President.
ARTICLE XV
SECRETARY
SECTION 1. The Secretary shall attend all sessions of the Board of
Directors and of the Executive Committee, and act as clerk thereof and record
all votes and the minutes of all proceedings in a book to be kept for that
purpose, and shall perform like duties for the Standing Committees when
required.
SECTION 2. He or she shall see that proper notice is given of all meetings
of the stockholders of the Company, of the Board of Directors and of the
Executive Committee. In his or her absence, or in case of his or her failure or
inability to act, an Assistant Secretary or a secretary pro-tempore shall
perform his or her duties and such other duties as may be prescribed by the
Board of Directors.
SECTION 3. He or she shall keep account of certificates of stock or other
receipts and securities representing an interest in or to the capital of the
Company, transferred and registered in such form and manner and under such
regulations as the Board of Directors may prescribe.
SECTION 4. He or she shall keep in safe custody the contracts, books and
such corporate records as are not otherwise provided for, and the seal of the
Company. He or she shall affix the seal to any instrument requiring the same
and the seal, when so affixed, shall be attested by the signature of the
Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer.
ARTICLE XVI
TREASURER
SECTION 1. The Treasurer shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Company and shall deposit all money
in the name of, for the account of or to the credit of the Company in such
depositories as may be designated by the Board of Directors or by the Executive
Committee, and shall keep all securities and other valuable effects in a safe
place designated by the Board of Directors or the Executive Committee.
- 9 -
<PAGE>
SECTION 2. He or she shall perform such other duties as the Board of
Directors or the Executive Committee may from time to time prescribe or require.
ARTICLE XVII
DUTIES OF OFFICERS
SECTION 1. In addition to the duties specifically enumerated in the
By-laws, all officers and assistant officers of the Company shall perform such
other duties as may be assigned to them from time to time by the Board of
Directors, the Executive Committee, or by their superior officers.
SECTION 2. The Board of Directors or Executive Committee may change the
powers or duties of any officer or assistant officer, or delegate the same to
any other officer, assistant officer or person.
SECTION 3. Every officer and assistant officer of the Company shall from
time to time report to the Board of Directors, the Executive Committee or to his
or her superior officers all matters within his or her knowledge which the
interests of the Company may require to be brought to their notice.
ARTICLE XVIII
CERTIFICATES OF STOCK, SECURITIES, NOTES, ETC.
SECTION 1. Certificates of stock, or other receipts and securities
representing an interest in or to the capital of the Company, shall bear the
signature of the Chairman of the Board, the President or any Vice President and
bear the countersignature of the Secretary or any Assistant Secretary or the
Treasurer or any Assistant Treasurer.
SECTION 2. Nothing in this Article XVIII shall be construed to limit the
right of the Company, by resolution of its Board of Directors or Executive
Committee, to authorize, under such conditions as such Board or Committee may
determine, the facsimile signature by any properly authorized officer of any
instrument or document that said Board of Directors or Executive Committee may
determine.
SECTION 3. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature shall have been used on any certificates of
stock, notes or securities shall cease to be such officer, transfer agent or
registrar of this Company, whether because of death, resignation or otherwise,
before the same shall have been issued by this
- 10 -
<PAGE>
Company, such certificates of stock, notes and securities may nevertheless be
adopted by this Company and be issued and delivered as though the person or
persons who signed the same or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer, transfer agent or
registrar of this Company, and such adoption of said certificates of stock,
notes and securities shall be evidenced by a resolution of the Board of
Directors or Executive Committee to that effect.
SECTION 4. All transfers of the stock of the Company shall be made upon
the books of the Company by the owners of the shares in person or by their legal
representatives.
SECTION 5. Certificates of stock shall be surrendered and canceled at the
time of transfer.
SECTION 6. The Company shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
SECTION 7. In the case of a loss or the destruction of a certificate of
stock, another may be issued in its place upon satisfactory proof of such loss
or destruction and the giving of a bond of indemnity, unless waived, approved by
the Board of Directors or by the Executive Committee.
ARTICLE XIX
CHECKS, LOANS, COMMERCIAL PAPER, CONTRACTS, ETC.
SECTION 1. Any two of the following officers who are authorized by the
Board of Directors or Executive Committee, to wit, the Chairman of the Board,
the President, the Vice Presidents, the Secretary or the Treasurer, not being
the same person, or any of them together with an Assistant Vice President, an
Assistant Secretary or an Assistant Treasurer, shall have the authority to sign
and execute on behalf of the Company as maker, drawer, acceptor, guarantor,
endorser, assignor or otherwise, all notes, collateral trust notes, debentures,
drafts, bills of exchange, acceptances, securities and commercial paper of all
kinds.
SECTION 2. The Chairman of the Board, the President, any Vice President,
the Secretary, the Treasurer or any other person, when such officer or other
person is authorized by the Board of Directors or Executive Committee, shall
have authority, on behalf of and for the account of the Company, (a) to borrow
money against duly executed obligations of the Company; (b) to sell, discount or
otherwise dispose of notes, collateral trust notes,
- 11 -
<PAGE>
debentures, drafts, bills of exchange, acceptances, securities, obligations of
the Company and commercial paper of all kinds; (c) to sign orders for the
transfer of money to affiliated or subsidiary companies, and (d) to execute
contracts.
SECTION 3. The Board of Directors or the Executive Committee may either in
the absence of any of said officers or persons, or for any other reason, appoint
some other officer or some other person to exercise the powers and discharge the
duties of such officer or person under this Article, and the officer or person
so appointed shall have all the power and authority hereby conferred upon the
officer for whom he or she may be appointed so to act.
SECTION 4. Commercial paper, in the form of short term promissory notes,
of the Company issued by arrangement with a bank duly authorized by the Board of
Directors or Executive Committee of this Company shall be issued under the
manual signature of one of the officers of the Company and manually co-signed on
behalf of the Company by an employee of the bank approved by the Company;
provided however, that the Board of Directors or Executive Committee may, by
resolution, provide, with such protective measures as they may prescribe, that,
in lieu of the manual signature of an officer of this Company on any such
commercial paper of the Company issued by an authorized bank as aforesaid, the
facsimile signature of an officer of this Company may be used thereon, and said
facsimile signature, when placed thereon, shall have the same effect as though
said commercial paper had been manually signed by an officer of this Company.
ARTICLE XX
FISCAL YEAR
SECTION 1. The fiscal year of the Company shall begin the first day of
January and terminate on the thirty-first day of December in each year.
ARTICLE XXI
NOTICE
SECTION 1. Whenever under the provisions of the laws of the State of
Delaware or these By-laws notice is required to be given to any Director, member
of the Executive Committee, officer or stockholder, it shall not be construed to
mean personal notice, but such notice may be given by wire or in writing by
depositing the same in the post office or letter box in a post paid, sealed
wrapper, addressed to such Director, member of the Executive Committee, officer
or stockholder at his or her address as the same appears in the books of the
Company; and the time when the same shall be mailed shall be deemed to be the
time of the giving of such notice.
- 12 -
<PAGE>
ARTICLE XXII
WAIVER OF NOTICE
SECTION 1. Any stockholder, Director or member of the Executive Committee
may waive in writing any notice required to be given under these By-laws.
ARTICLE XXIII
AMENDMENT OF BY-LAWS
SECTION 1. The Board of Directors, at any meeting, may alter or amend
these By-laws, and any alteration or amendments so made may be repealed by the
Board of Directors or by the stockholders at any meeting duly called.
- 13 -
<PAGE>
Exhibit 11.01
TRAVELERS GROUP INC. and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(In millions, except for per share amounts)
Three Months Ended
March 31,
------------------------
1997 1996
---------- ----------
Earnings:
Net income $642 $520
---------- ----------
Preferred dividends:
8.125% Cumulative Preferred Stock - Series A (6) (6)
5.5% Convertible Preferred Stock - Series B - (1)
$4.53 Convertible Preferred Stock - Series C (6) (10)
9 1/4% Preferred Stock - Series D (9) (9)
---------- ----------
(21) (26)
---------- ----------
Income applicable to common stock $621 $494
========== ==========
Average shares:
Common 612.5 611.0
Warrants 4.7 2.9
Assumed exercise of dilutive stock options 14.0 11.7
Incremental shares - Stock based incentive plans 15.3 11.9
---------- ----------
646.5 637.5
========== ==========
Earnings per share:
Net Income $ 0.96 $ 0.77
========== ==========
Earnings per common share is computed after recognition of preferred stock
dividend requirements and is based on the weighted average number of common
shares outstanding during the period after consideration of the dilutive effect
of common stock warrants and stock options and the incremental shares assumed
issued under the Capital Accumulation Plan and other restricted stock plans.
Fully diluted earnings per common share, assuming conversion of all outstanding
dilutive convertible preferred stock and the maximum dilutive effect of common
stock equivalents, have not been presented because the effects are not material.
The fully diluted earnings per common share calculation for the three months
ended March 31, 1997 and 1996 would entail adding the number of shares issuable
on conversion of the dilutive convertible preferred stock (4.8 and 13.2 million,
respectively) and the incremental dilutive effect of common stock equivalents
(1.6 million in 1996) to the number of shares included in the earnings per
common share calculation (resulting in 651.3 and 652.3 million shares,
respectively) and eliminating the dividend requirements of the dilutive
convertible preferred stock ($2 and $5 million, respectively).
<PAGE>
Exhibit 12.01
TRAVELERS GROUP INC. and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except for ratio)
Three months ended
March 31,
------------------------------
1997 1996
------------- -------------
Income from continuing operations
before income taxes and minority interest $1,068 $ 800
Interest 653 497
Portion of rentals deemed to be interest 27 26
------------- -------------
Earnings available for fixed charges $1,748 $1,323
============= =============
FIXED CHARGES
- -------------
Interest $ 653 $ 497
Portion of rentals deemed to be interest 27 26
------------- -------------
Fixed charges $ 680 $ 523
============= =============
Ratio of earnings to fixed charges 2.57x 2.53x
============= =============
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TRAVELERS GROUP INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> $1,776
<SECURITIES> 95,573<F1>
<RECEIVABLES> 21,601<F2>
<ALLOWANCES> 0<F3>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F3>
<PP&E> 0<F3>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 153,944
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 16,746<F4>
2,042
675
<COMMON> 7
<OTHER-SE> 12,176<F5>
<TOTAL-LIABILITY-AND-EQUITY> 153,944
<SALES> 0<F3>
<TOTAL-REVENUES> 5,928
<CGS> 0<F3>
<TOTAL-COSTS> 4,860
<OTHER-EXPENSES> 0<F3>
<LOSS-PROVISION> 72<F6>
<INTEREST-EXPENSE> 653<F6>
<INCOME-PRETAX> 1,068
<INCOME-TAX> 377
<INCOME-CONTINUING> 642
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 642
<EPS-PRIMARY> $0.96
<EPS-DILUTED> 0<F3>
<FN>
<F1>INCLUDES THE FOLLOWING ITEMS FROM THE FINANCIAL STATEMENTS: TOTAL INVESTMENTS
$56,781; SECURITIES BORROWED OR PURCHASED UNDER AGREEMENTS TO RESELL $26,545;
AND TRADING SECURITIES OWNED, AT MARKET VALUE $12,247.
<F2>INCLUDES THE FOLLOWING ITEMS FROM THE FINANCIAL STATEMENTS: BROKERAGE
RECEIVABLES $7,914; NET CONSUMER FINANCE RECEIVABLES $8,247 AND OTHER
RECEIVABLES $5,440.
<F3>ITEMS WHICH ARE INAPPLICABLE RELATIVE TO THE UNDERLYING FINANCIAL STATEMENTS
ARE INDICATED WITH A ZERO AS REQUIRED.
<F4>INCLUDES THE FOLLOWING ITEMS FROM THE FINANCIAL STATEMENTS: INVESTMENT BANKING
AND BROKERAGE BORROWINGS $3,752; SHORT-TERM BORROWINGS $2,112 AND LONG-TERM
DEBT $10,882.
<F5>INCLUDES THE FOLLOWING ITEMS FROM THE FINANCIAL STATEMENTS: ADDITIONAL PAID-IN
CAPITAL $7,433; RETAINED EARNINGS $7,977; TREASURY STOCK $(2,614); UNREALIZED
GAIN (LOSS) ON INVESTMENT SECURITIES $(131); AND OTHER $(489).
<F6>INCLUDED IN TOTAL COSTS AND EXPENSES APPLICABLE TO SALES AND REVENUES.
</FN>
</TABLE>
<PAGE>
Exhibit 99.01
COMPANY'S FORM 10-Q
September 30, 1993
Page 26
In October 1993, several purported class action lawsuits were filed in the
Federal District Court for the Southern District of New York naming Smith
Barney, Harris Upham & Co. Incorporated ("SBS") as defendant. The cases arise
from SBS's participation as lead and co-underwriter in the initial public
offerings of three separate funds managed by Hyperion Capital Management Inc.
The plaintiffs have also named as defendants the funds' directors and the
co-underwriters and their representatives. Plaintiffs allege that the
registration statements and prospectuses by which the offerings were made
between June 1992 and October 1992 were materially false and misleading, and are
seeking unspecified damages in claims brought under the Federal securities laws.
The Company believes it has meritorious defenses to these actions and intends to
defend against them vigorously.
<PAGE>
COMPANY'S FORM 10-K
December 31, 1995
Page 65
For information concerning several purported class action lawsuits filed
against SBI in connection with three funds managed by Hyperion Capital
Management Inc., see the description that appears in the fourth paragraph of
page 26 of the Company's filing on Form 10-Q for the quarter ended September 30,
1993, which description is incorporated by reference herein. A copy of the
pertinent paragraph of such filing is included as an exhibit to this Form 10-K.
The actions were consolidated under the title In re: Hyperion Securities
Litigation. SBI's motion to dismiss the claims was granted in July 1995. In
August 1995, an appeal was filed in the U.S. Court of Appeals for the Second
Circuit. The Company is awaiting a decision on the appeal.
<PAGE>
COMPANY'S FORM 10-Q
September 30, 1996
Page 34
Item 1. Legal Proceedings.
For information concerning the several class action lawsuits filed against
Smith Barney Inc. in connection with three funds managed by Hyperion Capital
Management Inc., see the descriptions that appear in the fourth paragraph on
page 26 of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, and the first paragraph under the heading "Smith Barney" on
page 65 of the Company's Annual Report on Form 10-K for the year ended December
31, 1995, which descriptions are incorporated by reference herein. A copy of the
pertinent paragraphs of such filings is included as an exhibit to this Form
10-Q. In October 1996, the U.S. Court of Appeals for the Second Circuit affirmed
the district court's dismissal of the claims. Plaintiffs have applied for a
rehearing en banc.
<PAGE>
COMPANY'S FORM 10-K
December 31, 1996
Page 83
For information concerning several purported class action lawsuits filed
against SBI in connection with three funds managed by Hyperion Capital
Management Inc., see the descriptions that appear in the fourth paragraph on
page 26 of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, the first paragraph under the heading "Smith Barney" on
page 65 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and the first paragraph on page 34 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, which
descriptions are incorporated by reference herein. A copy of the
pertinent paragraphs of such filings is included as an exhibit to this Form
10-K. Plaintiffs' petition for a rehearing en banc was denied in January 1997.
<PAGE>
Exhibit 99.02
SMITH BARNEY HOLDINGS INC. Form 10-Q
September 30, 1994
Page 16
In June, 1994, several actions relating to trading practices on the
National Association of Securities Dealers Automated Quotation system were filed
against a number of broker/dealers, including SBI, in various federal courts. In
October 1994, the actions were consolidated in the Federal District Court for
the Southern District of New York. The plaintiffs purport to represent a class
of purchasers of stock trading in that system over the last four years. The
claims generally allege price-fixing violations under the federal antitrust laws
and violations of the federal securities laws relating to the use of even-eighth
price quotes instead of odd-eighth bid and asked quotes. A consolidated amended
complaint is expected to be filed in mid-December 1994. The Company is reviewing
these allegations, believes that it has meritorious defenses and intends to
vigorously defend against these claims.
<PAGE>
COMPANY'S FORM 10-K
December 31, 1995
Page 65
For information concerning actions filed against a number of
broker-dealers, including SBI, relating to trading practices on the National
Association of Securities Dealers Automated Quotation system, see the
description that appears in the third paragraph of page 16 of the Quarterly
Report on Form 10-Q of Smith Barney Holdings Inc. for the quarter ended
September 30, 1994, which description is incorporated by reference herein. A
copy of the pertinent paragraph is included as an exhibit to this Form 10-K. A
consolidated amended complaint was filed in December 1994. In August 1995, the
defendants' motion to dismiss was granted with leave to replead, and a
consolidated amended complaint was filed.
<PAGE>
COMPANY'S FORM 10-K
December 31, 1996
Page 83
For information concerning actions filed against a number of
broker-dealers, including SBI, relating to trading practices on the National
Association of Securities Dealers Automated Quotation system, see the
descriptions that appear in the third paragraph on page 16 of the Quarterly
Report on Form 10-Q of SB Holdings for the quarter ended September 30, 1994
and the last full paragraph on page 65 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995, which descriptions are
incorporated by reference herein. A copy of the pertinent paragraphs of such
filing is included as an exhibit to this Form 10-K. In March 1996, plaintiffs
filed a motion for class certification.
<PAGE>
Exhibit 99.03
PROSPECTUS OF TRAVELERS
PROPERTY CASUALTY CORP.
April 22, 1996
Pages 90 and 91
A number of cases have been filed against several insurance companies and
industry organizations relating to service fee charges and premium calculations
on certain workers' compensation insurance. Certain subsidiaries of the Company
are defendants in South Carolina ex rel. Medlock v. National Council on
Compensation Insurance ("NCCI"), an action filed by the Attorney General of
South Carolina in August 1994 in the Court of Common Pleas, County of
Greenville, South Carolina; Four Way Plant Farm v. NCCI, a purported class
action filed in September 1994 in the Circuit Court for Bullock County, Alabama,
and NC Steel, Inc. v. NCCI, a purported class action filed in November 1993 in
the Superior Court Division of the General Court of Justice, Wake County, North
Carolina. In these cases, the plaintiffs generally allege that the
administration of each state's workers' compensation assigned risk pool
conspired with servicing carriers for the pool to collect excessive fees in
violation of state antitrust and/or unfair trade practice laws. The plaintiffs
seek unspecified compensatory, treble and/or punitive damages and injunctive
relief. The Company believes it has meritorious defenses and intends to contest
the allegations. In NC Steel, Inc. v. NCCI, the defendants' motion to dismiss
was granted in February 1995, and the plaintiffs have appealed to the North
Carolina Court of Appeals. In April 1994, certain subsidiaries of [the Company]
were named as additional defendants in a purported class action pending in the
116th District of Dallas County, Texas, entitled Weatherford Roofing Company v.
Employers National Insurance Company. The plaintiffs in this case allege that
the workers' compensation carriers in Texas have conspired to collect excessive
or improper premiums in violation of state insurance laws, antitrust laws and/or
state unfair trade practices laws. The plaintiffs seek compensatory, treble
and/or punitive damages as well as declaratory and injunctive relief. In a
statutory demand letter, plaintiffs' counsel allege classwide compensatory
damages, including interest through October 1994, of approximately $572 million.
Since that time, court-approved settlements with certain other insurers have
been based on single damage, or alleged overcharge, calculations which, if
applied to Company-issued policies of class members, would yield single damages
of $50 million or less. The Company believes it has meritorious defenses and
intends to contest the allegations unless an attractive settlement opportunity
arises.
<PAGE>
COMPANY'S FORM 10-Q
June 30, 1996
Page 35
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and premium
calculations on certain workers' compensation insurance, see the description
that appears in the paragraph beginning on page 90 and continuing on page 91 of
the Prospectus dated April 22, 1996 of Travelers/Aetna Property Casualty Corp.,
a majority-owned subsidiary of the Company, which description is incorporated by
reference herein. A copy of the pertinent paragraph of such filing is included
as an exhibit to this Form 10-Q. Two of such actions, Four Way Plant Farm v.
NCCI and Weatherford Roofing Company v. Employees National Insurance Company,
have been settled, subject to approval of the court. In NC Steel, Inc. v. NCCI,
the North Carolina Court of Appeals affirmed the trial court's dismissal in
part, reversed in part and remanded for further proceedings.
<PAGE>
COMPANY'S FORM 10-Q
September 30, 1996
Page 34
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and premium
calculations on certain workers' compensation insurance, see the descriptions
that appear in the paragraph that begins on page 90 and ends on page 91 of the
Prospectus dated April 22, 1996 of Travelers/Aetna Property Casualty Corp., a
majority-owned subsidiary of the Company, and in the second paragraph on page 35
of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, which descriptions are incorporated by reference herein. A copy of the
pertinent paragraphs of such filings is included as an exhibit to this Form
10-Q. In October 1996, certain subsidiaries of the Company were named as
defendants in a purported class action filed in the District Court of Wyandotte
County, Kansas, Civil Court Department under the name Amundson & Associates Art
Studio Ltd. v. NCCI, et al. The plaintiffs make allegations and seek damages
that are similar to those in the cases referred to above.
<PAGE>
COMPANY'S FORM 10-Q
December 31, 1996
Page 84
For information concerning actions filed against several insurance
companies and industry organizations relating to service fee charges and premium
calculations on certain workers' compensation insurance, see the descriptions
that appear in the paragraph that begins on page 90 and ends on page 91 of the
Prospectus dated April 22, 1996 of TAP, the second paragraph on page 35 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and
the second paragraph on page 34 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, which descriptions are incorporated by
reference herein. A copy of the pertinent paragraphs of such filings is included
as an exhibit to this Form 10-K. In NC Steel, Inc. v. NCCI, plaintiffs and
defendants have appealed to the North Carolina State Supreme Court. In November
1996, Amundson & Associates Art Studio v. NCCI, et al. was removed to the U.S.
District Court for the District of Kansas. In December 1996, a purported class
action entitled Forman, Inc. v. NCCI, et al. was filed in Chancery Court, Marion
County, Tennessee, with allegations similar to those in NC Steel and seeking
unspecified monetary damages. In January 1997, two additional purported class
actions, each entitled El Chico Restaurants, Inc. v. The Aetna Casualty and
Surety Company, et al., were filed in Chancery Court, Davidson County,
Tennessee, and Superior Court, Richmond County, Georgia, respectively, with
allegations similar to those in Weatherford Roofing Company v. Employers
National Insurance Company, which was settled in mid-1996. Plaintiffs seek
unspecified monetary damages. In February 1997, one action was removed to the
U.S. District Court for the Middle District of Tennessee and the other action
was removed to the U.S. District Court for the Southern District of Georgia.
Also in January 1997, a purported class of Texas workers' compensation insureds
filed a petition to intervene in a lawsuit pending since 1995 in District Court,
Travis County, Texas, entitled Travelers Indemnity Company of Connecticut v.
Texas Workers Compensation Insurance Facility. The pending lawsuit arose out of
a fee dispute between certain subsidiaries of the Company and the administration
of the Texas assigned risk pool. The proposed class challenges both the fees
paid to servicing carriers for the pool from 1991 to 1993 and certain premium
calculations on certain workers' compensation policies from 1991 forward. The
Company believes it has meritorious defenses to these actions and intends to
contest the allegations.
<PAGE>
Exhibit 99.04
COMPANY'S FORM 10-Q
September 30, 1995
Page 30
In July 1995, a purported class action was filed under the name Elvidio
Vennettilli et. al. v. Primerica Inc. et. al. in the United States District
Court for the Eastern District of Michigan on behalf of individuals who
purchased interests in oil and gas rights owned by Basic Energy and Affiliated
Resources Inc. ("BEAR"). Notwithstanding that the alleged violations were in
contravention of agreements between the agents and Primerica Financial Services
("PFS") and did not involve securities of the Company or any subsidiary thereof,
the complaint, which seeks unspecified monetary damages, alleges that
defendants, including PFS, committed violations of the federal securities laws
and common law fraud. The Company believes it has meritorious defenses and
intends to contest the allegations.
<PAGE>
COMPANY'S FORM 10-Q
March 31, 1996
Page 25
For information concerning a purported class action against Primerica Inc.
and others in connection with the purchase of oil and gas rights owned by Basic
Energy and Affiliated Resources Inc. ("BEAR"), see the description that appears
in the second paragraph of page 30 of the Company's filing on Form 10-Q for the
quarter ended September 30, 1995, which description is incorporated by reference
herein. A copy of the pertinent paragraph of such filing is included as an
exhibit to this Form 10-Q. Two additional alleged class actions making similar
allegations and seeking similar relief, Fournier v. PFS Inc. and McNeely v.
BEAR, have purported to name certain subsidiaries of the Company as defendants.
These cases are pending in the U.S. District Court for the Eastern District of
Michigan. The Company has filed a motion to dismiss each of these actions.
<PAGE>
COMPANY'S FORM 10-Q
September 30, 1996
Page 34
For information concerning a purported class action filed against Primerica
Financial Services Inc. ("PFSI"), a subsidiary of the Company, in connection
with the purchase by individuals of interests in oil and gas rights owned by
Basic Energy and Affiliated Resources Inc. ("BEAR"), see the description that
appears in the second paragraph on page 30 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995 and the fourth paragraph on
page 25 of the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, which descriptions are incorporated by reference herein. A copy
of the pertinent paragraphs of such filings is included as an exhibit to this
Form 10-Q. In October 1996, the court dismissed several claims against PFSI.
Also in October 1996, the National Association of Securities Dealers, Inc.
("NASD") filed a complaint against PFSI alleging a failure to supervise certain
registered representatives and associated persons and to establish and maintain
proper written procedures for compliance with NASD rules regarding private
securities transactions relating to BEAR.
