<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 June 30, 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)
<TABLE>
<S> <C>
Delaware 52-1568099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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 July 31, 1997: 641,114,987
<PAGE>
Travelers Group Inc.
TABLE OF CONTENTS
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Part I Financial Information
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Financial Statements: Page No.
-------------
Condensed Consolidated Statement of Income (Unaudited)--
Three and Six Months Ended June 30, 1997 and 1996...................... 3
Condensed Consolidated Statement of Financial Position--
June 30, 1997 (Unaudited) and December 31, 1996........................ 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)--Six Months Ended June 30, 1997............................ 5
Condensed Consolidated Statement of Cash Flows (Unaudited)--
Six Months Ended June 30, 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.................................... 14
Part II--Other Information
Item 1. Legal Proceedings........................................................ 35
Item 2. Changes in Securities.................................................... 36
Item 6. Exhibits and Reports on Form 8-K......................................... 36
Exhibit Index....................................................................... 37
Signatures.......................................................................... 38
</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 Six Months Ended
June 30, June 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues
Insurance premiums.......................................... $ 2,220 $ 2,060 $ 4,444 $ 3,316
Commissions and fees........................................ 841 878 1,718 1,766
Interest and dividends...................................... 1,638 1,417 3,206 2,543
Finance related interest and other charges.................. 321 287 627 571
Principal transactions...................................... 250 265 514 543
Asset management and administration fees.................... 386 331 762 648
Other income................................................ 317 188 630 554
--------- --------- --------- ---------
Total revenues............................................ 5,973 5,426 11,901 9,941
--------- --------- --------- ---------
Expenses
Policyholder benefits and claims............................ 1,906 2,319 3,811 3,590
Non-insurance compensation and benefits..................... 966 958 1,950 1,930
Insurance underwriting, acquisition and operating........... 799 861 1,604 1,367
Interest.................................................... 696 563 1,349 1,060
Provision for consumer finance credit losses................ 73 60 145 128
Other operating............................................. 435 449 876 850
--------- --------- --------- ---------
Total expenses............................................ 4,875 5,210 9,735 8,925
--------- --------- --------- ---------
Gain (loss) on sale of subsidiaries and affiliates.......... -- 397 -- 397
--------- --------- --------- ---------
Income before income taxes and minority interest............ 1,098 613 2,166 1,413
Provision for income taxes.................................. (386) (81) (763) (361)
Minority interest, net of income taxes...................... (49) 44 (98) 44
--------- --------- --------- ---------
Net income.................................................. $ 663 $ 576 $ 1,305 $ 1,096
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per share of common stock
and common stock equivalents.............................. $ 1.00 $ 0.88 $ 1.96 $ 1.65
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of common shares
outstanding and common stock equivalents (millions)....... 645.3 634.7 645.7 636.1
--------- --------- --------- ---------
--------- --------- --------- ---------
</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>
June 30, December 31,
1997 1996
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<S> <C> <C>
<CAPTION>
Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents
(including $1,306 and $1,256 segregated under federal and
other regulations)............................................ $ 1,739 $ 1,868
Investments and real estate held for sale:
Fixed maturities, primarily available for sale at market value
(amortized cost--$45,292 and $43,277)........................ 45,981 43,998
Equity securities, at market (cost--$1,324 and $1,113)........ 1,377 1,157
Mortgage loans................................................ 3,748 3,812
Real estate held for sale..................................... 502 459
Policy loans.................................................. 1,873 1,910
Short-term and other.......................................... 5,135 5,173
----------- -------------
Total investments and real estate held for sale............... 58,616 56,509
----------- -------------
Securities borrowed or purchased under agreements to resell..... 27,950 25,280
Brokerage receivables........................................... 8,507 7,305
Trading securities owned, at market value....................... 14,014 12,465
Net consumer finance receivables................................ 8,834 7,885
Reinsurance recoverables........................................ 9,876 10,234
Value of insurance in force and deferred policy acquisition
costs......................................................... 2,698 2,563
Cost of acquired businesses in excess of net assets............. 2,991 2,933
Separate and variable accounts.................................. 9,830 9,023
Other receivables............................................... 5,108 4,869
Other assets.................................................... 9,443 10,133
----------- -------------
Total assets.................................................... $ 159,606 $ 151,067
----------- -------------
----------- -------------
Liabilities
Investment banking and brokerage borrowings..................... $ 4,268 $ 3,217
Short-term borrowings........................................... 2,812 1,557
Long-term debt.................................................. 11,122 11,327
Securities loaned or sold under agreements to repurchase........ 26,889 24,449
Brokerage payables.............................................. 5,042 5,809
Trading securities sold not yet purchased, at market value...... 9,640 8,378
Contractholder funds............................................ 14,601 13,621
Insurance policy and claims reserves............................ 43,940 43,944
Separate and variable accounts.................................. 9,818 8,949
Accounts payable and other liabilities.......................... 15,196 14,702
----------- -------------
Total liabilities............................................. 143,328 135,953
----------- -------------
ESOP Preferred stock--Series C (net of note guarantee of $17
and $35)...................................................... 140 129
----------- -------------
TRV-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely junior subordinated debt
securities of TRV............................................. 1,000 1,000
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TAP-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely junior subordinated debt
securities of TAP............................................. 900 900
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Stockholders' equity
Preferred stock, at aggregate liquidation value................. 1,075 675
Common stock ($.01 par value; authorized shares: 1.5 billion;
issued shares: 1997--743,415,984 shares and 1996--743,082,134
shares)....................................................... 7 7
Additional paid-in capital...................................... 7,561 7,217
Retained earnings............................................... 8,524 7,452
Treasury stock, at cost (1997--103,807,529 shares and 1996--
105,503,401 shares)........................................... (2,958) (2,446)
Unrealized gain (loss) on investment securities................. 436 469
Other, principally unearned compensation........................ (407) (289)
----------- -------------
Total stockholders' equity.................................... 14,238 13,085
----------- -------------
Total liabilities and stockholders' equity...................... $ 159,606 $ 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>
Six months ended June 30, 1997 Amount Shares
- ------------------------------ ----------- -----------
<S> <C> <C>
(in thousands)
Preferred stock, at aggregate liquidation value
Balance, beginning of year......................................... $ 675 8,700
Issuance of preferred stock........................................ 400 1,600
----------- -------------
Balance, end of period............................................. $ 1,075 10,300
----------- -------------
----------- -------------
Common stock and additional paid-in capital
Balance, beginning of year......................................... $ 7,224 743,082
Issuance of shares pursuant to employee benefit plans.............. 347
Exercise of common stock warrants.................................. 6 334
Cost of issuance of preferred stock................................ (9)
----------- -------------
Balance, end of period............................................. 7,568 743,416
----------- -------------
Retained earnings
Balance, beginning of year......................................... 7,452
Net income......................................................... 1,305
Common dividends................................................... (193)
Preferred dividends................................................ (40)
-----------
Balance, end of period............................................. 8,524
-----------
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................................................ (12) 11,054
Treasury stock acquired............................................ (500) (9,359)
----------- -------------
Balance, end of period............................................. (2,958) (103,808)
----------- -------------
Unrealized gain (loss) on investment securities
Balance, beginning of year......................................... 469
Net change in unrealized gains and losses on investment securities,
net of tax....................................................... (33)
-----------
Balance, end of period............................................. 436
-----------
Other, principally unearned compensation
Balance, beginning of year......................................... (289)
Issuance of restricted stock, net of amortization.................. (118)
-----------
Balance, end of period............................................. (407)
-----------
Total common stockholders' equity and common shares outstanding.... $ 13,163 639,608
----------- -------------
----------- -------------
Total stockholders' equity......................................... $ 14,238
-----------
-----------
</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>
Six months ended June 30, 1997 1996
- ------------------------- --------- ---------
<S> <C> <C>
Cash flows from operating activities
Income before income taxes and minority interest........................ $ 2,166 $ 1,413
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.................................................. 709 499
Additions to deferred policy acquisition costs........................ (854) (587)
Depreciation and amortization......................................... 186 167
Provision for consumer finance credit losses.......................... 145 128
Changes in:
Trading securities, net............................................. (287) (148)
Securities borrowed, loaned and repurchase agreements, net.......... (230) 164
Brokerage receivables net of brokerage payables..................... (1,969) (1,568)
Insurance policy and claims reserves................................ 226 511
Other, net.......................................................... 1,068 1,174
--------- ---------
Net cash provided by (used in) operations............................... 1,160 1,753
Income taxes paid....................................................... (586) (475)
--------- ---------
Net cash provided by (used in) operating activities................... 574 1,278
--------- ---------
Cash flows from investing activities
Consumer loans originated or purchased.................................. (2,236) (1,468)
Consumer loans repaid or sold........................................... 1,391 1,266
Purchases of fixed maturities and equity securities..................... (12,819) (15,216)
Proceeds from sales of investments and real estate:
Fixed maturities available for sale and equity securities............. 9,895 12,584
Mortgage loans........................................................ 105 133
Real estate and real estate joint ventures............................ 25 86
Proceeds from maturities of investments:
Fixed maturities...................................................... 1,571 1,748
Mortgage loans........................................................ 316 417
Other investments, primarily short-term, net............................ (632) (537)
Business acquisition.................................................... -- (4,160)
Other, net.............................................................. (389) (15)
--------- ---------
Net cash provided by (used in) investing activities................... (2,773) (5,162)
--------- ---------
Cash flows from financing activities
Dividends paid.......................................................... (233) (191)
Issuance of preferred stock............................................. 391 --
Subsidiary issuance of preferred stock.................................. -- 900
Subsidiary's sale of Class A common stock............................... -- 1,453
Treasury stock acquired................................................. (500) (317)
Stock tendered for payment of withholding taxes......................... (156) (106)
Issuance of long-term debt.............................................. 541 1,350
Payments and redemptions of long-term debt.............................. (742) (360)
Net change in short-term borrowings (including investment banking and
brokerage borrowings)................................................. 2,306 1,428
Contractholder fund deposits............................................ 1,772 899
Contractholder fund withdrawals......................................... (1,310) (1,469)
Other, net.............................................................. 1 66
--------- ---------
Net cash provided by (used in) financing activities................... 2,070 3,653
--------- ---------
Change in cash and cash equivalents..................................... (129) (231)
Cash and cash equivalents at beginning of period........................ 1,868 1,866
--------- ---------
Cash and cash equivalents at end of period.............................. $ 1,739 $ 1,635
--------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................................ $ 1,335 $ 1,033
--------- ---------
--------- ---------
Supplemental schedule of noncash investing and financing activities
Assets and liabilities of business acquired:
Invested assets....................................................... -- $ 13,969
Reinsurance recoverables and other assets............................. -- 10,386
Insurance policy and claim reserves................................... -- (18,302)
Other liabilities..................................................... -- (1,893)
--------- ---------
Cash payment related to business acquisition........................ -- $ 4,160
--------- ---------
--------- ---------
</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 June 30,
1997 and for the three-month and six-month periods ended June 30, 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 Travelers Casualty and Surety Company
(formerly 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.
On June 23, 1997, TAP repurchased an aggregate of approximately 6.6 million
shares of Class A Common Stock held by four private investors for approximately
$240.8 million. This repurchase increased TRV's ownership of TAP to
approximately 83.4%.
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 six months ended June 30, 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 indicative of what would
have occurred had the acquisition and related transactions occurred on the date
indicated, or of future results of the Company.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996*
-----------------
<S> <C>
(in millions, except per share data)
Revenues................................................... $11,541
Net income................................................. $ 858
Net income per common share................................ $ 1.27
</TABLE>
- ------------------------
* 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>
In the second quarter of 1996 TAP recorded charges related to the
acquisition and integration of Aetna P&C. These charges resulted primarily from
anticipated costs of the acquisition and the application of Travelers
strategies, policies and practices to Aetna P&C reserves and include: $221
million after tax and minority interest ($414 million before tax and minority
interest) in reserve increases, net of reinsurance, related primarily to
cumulative injury claims other than asbestos (CIOTA); $81 million after tax and
minority interest ($152 million before tax and minority interest) in provisions
for reinsurance recoverables and other receivables; and a $19 million after tax
and minority interest ($35 million before tax and minority interest) provision
for lease and severance costs of The Travelers Indemnity Company related to the
restructuring plan for the acquisition. Excluding the charges discussed above
associated with the acquisition of Aetna P&C, which total $321 million after tax
and minority interest, pro forma net income would have been $1.18 billion or
$1.77 per share for the six months ended June 30, 1996. In addition, in the
second quarter of 1996 the Company recognized a gain of $363 million (before and
after tax) from the issuance of shares of Class A Common Stock by TAP and such
gain is not reflected in the pro forma financial information above.
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.
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
8
<PAGE>
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 June 30, 1997 and 1996,
basic EPS is $1.05 and $0.91, respectively, and diluted EPS is $0.99 and $0.87,
respectively.
On a pro forma basis, for the six months ended June 30, 1997 and 1996, basic
EPS is $2.06 and $1.72, respectively, and diluted EPS is $1.95 and $1.64,
respectively.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (FAS No. 130). FAS No. 130
establishes standards for the reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. All
items that are required to be recognized under accounting standards as
components of comprehensive income are to be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This Statement stipulates that comprehensive income reflect the
change in equity of an enterprise during a period from transactions and other
events and circumstances from nonowner sources. Comprehensive income will
thus represent the sum of net income and other comprehensive income, although
FAS No. 130 does not require the use of the terms comprehensive income or
other comprehensive income. The accumulated balance of other comprehensive
income is required to be displayed separately from retained earnings and
additional paid-in capital in the statement of financial position. This
Statement is effective for fiscal years beginning after December 15, 1997.
The Company anticipates that the adoption of FAS No. 130 will result
primarily in reporting unrealized gains and losses on investments in debt and
equity securities in comprehensive income.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (FAS No. 131). FAS No. 131 establishes standards for the way that
public enterprises report information about operating segments in annual
financial statements and requires that selected information about those
operating segments be reported in interim financial statements. This Statement
supersedes Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise". FAS No. 131 requires that all
public enterprises report financial and descriptive information about their
reportable operating segments. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. This Statement is effective for
fiscal years beginning after December 15, 1997. The Company's reportable
operating segments are not expected to change as a result of the adoption of FAS
No. 131.
9
<PAGE>
4. DEBT
Investment banking and brokerage borrowings consisted of the following:
<TABLE>
<CAPTION>
(millions) June 30, 1997 December 31, 1996
--------------- -------------------
<S> <C> <C>
Commercial paper.......................................... $ 4,116 $ 3,028
Bank loans and other borrowings........................... 152 189
--------- ---------
$ 4,268 $ 3,217
--------- ---------
--------- ---------
</TABLE>
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
and its subsidiary Smith Barney Inc. have commercial paper programs that consist
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:
<TABLE>
<CAPTION>
(millions) June 30, 1997 December 31, 1996
--------------- -------------------
<S> <C> <C>
Commercial Credit Company................................. $ 2,812 $ 1,482
Travelers Property Casualty Corp.......................... -- 25
The Travelers Insurance Company........................... -- 50
--------- ---------
$ 2,812 $ 1,557
--------- ---------
--------- ---------
</TABLE>
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 June 30, 1997, this
requirement was exceeded by approximately $5.2 billion. At June 30, 1997, there
were no borrowings outstanding under this facility.
CCC also has committed and available revolving credit facilities on a
stand-alone basis of $4.4 billion of which $3.4 billion expires in 2002 and $1.0
billion expires in 1998.
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 June 30, 1997, CCC would have been able to remit $313
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 level of consolidated stockholders' equity (as
defined in the agreement). At June 30, 1997, this
10
<PAGE>
requirement was exceeded by approximately $3.0 billion. At June 30, 1997, there
were no borrowings outstanding under this facility.
Long-term debt, including its current portion, consisted of the following:
<TABLE>
<CAPTION>
(millions) June 30, 1997 December 31, 1996
------------- -------------------
<S> <C> <C>
Travelers Group Inc....................................... $ 1,699 $ 1,903
Commercial Credit Company................................. 5,400 5,750
Smith Barney Holdings Inc................................. 2,725 2,369
Travelers Property Casualty Corp.......................... 1,249 1,249
The Travelers Insurance Group Inc......................... 49 56
----------- ---------
$ 11,122 $ 11,327
----------- ---------
----------- ---------
</TABLE>
During the first six months of 1997, Smith Barney issued $516 million of
notes with varying interest rates and maturities.
Smith Barney has a $1.250 billion revolving credit agreement with a bank
syndicate that extends through May 2000, and has a $750 million, 364-day
revolving credit agreement that extends through May 1998. At June 30, 1997,
there were no borrowings outstanding under either facility.
Smith Barney is limited 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 June 30, 1997, Smith Barney would have been
able to remit approximately $779 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
$200 million has been paid during the first six months 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 received $145
million of dividends from its insurance subsidiaries during the first six months
of 1997 and received an additional $100 million of dividends on July 1, 1997.
5. STOCKHOLDERS' EQUITY
In June 1997, the Company sold in a public offering 8.0 million depositary
shares, each representing one-fifth of a share of 6.365% Cumulative Preferred
Stock, Series F (Series F Preferred Stock) at an offering price of $50 per
depositary share for an aggregate principal amount of $400 million. The Series F
Preferred Stock has cumulative dividends payable quarterly commencing September
1, 1997 and a liquidation preference equivalent to $50 per depositary share plus
accrued and accumulated unpaid dividends. On or after June 16, 2007, the Company
may redeem the Series F Preferred Stock, in whole or in part, at any time at a
redemption price of $50 per depositary share plus dividends accrued and unpaid
to the redemption date.
In July 1997, the Company sold in a public offering 4.0 million depositary
shares, each representing one-fifth of a share of 6.213% Cumulative Preferred
Stock, Series G (Series G
11
<PAGE>
Preferred Stock) at an offering price of $50 per depositary share for an
aggregate principal amount of $200 million. The Series G Preferred Stock has
cumulative dividends payable quarterly commencing September 1, 1997 and a
liquidation preference equivalent to $50 per depositary share plus accrued and
accumulated unpaid dividends. On or after July 11, 2007, the Company may redeem
the Series G Preferred Stock, in whole or in part, at any time at a redemption
price of $50 per depositary share plus dividends accrued and unpaid to the
redemption date.
On July 1, 1997 the Company redeemed all of the 7.5 million outstanding
shares (15 million depositary shares) of its 9.25% Preferred Stock, Series D
(Series D Preferred Stock). The aggregate principal amount of Series D Preferred
Stock outstanding on June 30, 1997 was $375 million. All of the outstanding
shares of the Series D Preferred Stock were redeemed at $50 per share ($25 per
depositary share).
On July 28, 1997 the Company redeemed all of the 1.2 million outstanding
shares (12 million depositary shares) of its 8.125% Cumulative Preferred Stock,
Series A (Series A Preferred Stock). The aggregate principal amount of Series A
Preferred Stock outstanding as of June 30, 1997 was $300 million. All of the
outstanding shares of the Series A Preferred Stock were redeemed at $250 per
share ($25 per depositary share), plus accrued and unpaid dividends through July
28, 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.
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 June 30, 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.
12
<PAGE>
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.
7. SUBSEQUENT EVENT
On July 31, 1997, CCC acquired Security Pacific Financial Services from
BankAmerica Corporation for a purchase price of approximately $1.6 billion. The
purchase included approximately $1.2 billion of net consumer finance receivables
and approximately $70 million of other net assets. Financing for the transaction
was accomplished by CCC and included an equity contribution by TRV of $520
million to CCC.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
<S> <C> <C> <C> <C>
(In millions, except per share amounts) 1997 1996 1997 1996
--------- --------- --------- ---------
Revenues................................................... $ 5,973 $ 5,426 $ 11,901 $ 9,941
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income................................................. $ 663 $ 576 $ 1,305 $ 1,096
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share:
Net income............................................... $ 1.00 $ 0.88 $ 1.96 $ 1.65
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of common shares outstanding
and common stock equivalents............................. 645.3 634.7 645.7 636.1
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
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.
On June 23, 1997, TAP repurchased an aggregate of approximately 6.6 million
shares of Class A Common Stock held by four private investors for approximately
$240.8 million. This repurchase increased TRV's ownership of TAP to
approximately 83.4%.
RESULTS OF OPERATIONS
Consolidated net income for the quarter ended June 30, 1997 was $663
million, and includes reported investment portfolio gains of $6 million after
tax and minority interest. This compares with net income of $576 million in the
1996 period, which included portfolio losses of $59 million, as well as gains of
$389 million from sales of stock of subsidiaries and affiliates, and charges
related to the acquisition of Aetna P&C in April 1996, amounting to $321
million.
Excluding these items, net income for the second quarter of 1997 was 16%
above the comparable period in 1996, primarily reflecting increased earnings in
the insurance operations and improved performance at Smith Barney Holdings Inc.
(Smith Barney).
Net income for the six months ended June 30, 1997 was $1.305 billion,
compared to $1.096 billion in the 1996 period. Included in the 1997 six-month
period are portfolio gains of $15 million compared to $19 million in portfolio
losses in the 1996 six-month period and the other special items discussed above.
Excluding these items, net income for the first six months of 1997 was 23% above
the comparable period in 1996.
14
<PAGE>
The effective income tax rate for the three months and six months ended June
30, 1996 is below the statutory rate of 35% due primarily to the nontaxability
of the $363 million gain recognized from the sale of shares of Class A Common
Stock by TAP.
The following discussion presents in more detail each segment's performance.
Segment Results for the Three Months Ended June 30, 1997 and 1996
-----------------------------------------------------------------
INVESTMENT SERVICES
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
---------------------------- ----------------------------
<CAPTION>
(millions) Revenues Net income Revenues Net income
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Smith Barney................................. $ 2,099 $ 232 $ 1,970 $ 230
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
SMITH BARNEY
Despite a difficult trading and underwriting environment in April, Smith
Barney reported net income of $232 million for the three months ended June 30,
1997, slightly higher than the $230 million reported in the 1996 second quarter.
Smith Barney's return on equity of 31.5% for the second quarter of 1997
continues to be among the highest of its industry peer group. Pre-tax profit
margins increased to 24.2% in the second quarter of 1997, up from 23.4% in the
comparable prior year period.
SMITH BARNEY REVENUES
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------
<S> <C> <C>
(millions) 1997 1996
--------------- -------------
Commissions.................................................... $ 576 $ 577
Asset management and administration fees....................... 386 331
Investment banking............................................. 254 299
Principal transactions......................................... 250 265
Interest income, net*.......................................... 117 100
Other income................................................... 34 36
--------- ---------
Net revenues*.................................................. $ 1,617 $ 1,608
--------- ---------
--------- ---------
</TABLE>
- ------------------------
* Net of interest expense of $482 million and $362 million in 1997 and 1996,
respectively. Revenues included in the condensed consolidated statement of
income are before deductions for interest expense.
Revenues, net of interest expense of $1.617 billion for the 1997 second
quarter were slightly ahead of the $1.608 billion in the 1996 second quarter.
Commission revenues were $576 million in the 1997 second quarter, just about
even with the $577 million in the 1996 comparable period, as declines in mutual
funds and over-the-counter securities commissions were offset by an increase in
listed securities commissions. Annualized retail gross production per Financial
Consultant declined to $358,000 in the second quarter of 1997 from $369,000 in
the comparable 1996 period. Smith Barney currently has a sales force of
approximately 10,400 registered Financial Consultants working out of 438
domestic retail offices.
Asset management and administration fees rose 16% to a record $386 million,
reflecting broad growth in all recurring fee-based products--led by a 25%
increase in managed accounts revenues, a 19%
15
<PAGE>
increase in Consulting Group revenues, and a 10% increase in money market and
mutual fund revenues. At June 30, 1997 total fee-based assets under management
were a record $177.4 billion, which includes a record $124.3 billion in
internally managed assets, up 24% and 20%, respectively from the comparable 1996
period.
Investment banking revenues totaled $254 million, a 15% decline from the
comparable 1996 period, primarily reflecting a decrease in equity underwriting
revenues.
Principal transaction revenues were $250 million in the second quarter of
1997, a 5% decline from the comparable 1996 period, primarily because of a
decline in equity and municipal trading partially offset by an increase in
taxable fixed income trading.
Net interest income reached $117 million, up 17% over the comparable 1996
period. The increase is primarily due to increased margin lending to clients and
higher levels of interest earning net assets.
Total expenses, excluding interest, were $1.226 billion in the 1997 second
quarter compared to $1.231 billion in the comparable 1996 period. Smith Barney's
ratio of non-compensation expenses to net revenues was 20.4% for the second
quarter of 1997 compared to 20.7% in the comparable 1996 period. Smith Barney's
ratio of compensation and benefit expense to net revenues declined to 55.5% from
55.8% 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
businesses. 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.
16
<PAGE>
ASSETS UNDER MANAGEMENT
<TABLE>
<CAPTION>
At June 30,
--------------------
<S> <C> <C>
(billions) 1997 1996
--------- ---------
Smith Barney................................................................ $ 124.3 $ 103.8
Travelers Life and Annuity (1).............................................. 22.2 21.1
--------- ---------
Total Assets Under Management............................................... $ 146.5 $ 124.9
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Part of the Life Insurance Services segment.
CONSUMER FINANCE SERVICES
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------
<S> <C> <C> <C> <C>
(millions) 1997 1996
------------------------------ ------------------------------
<CAPTION>
Revenues Net income Revenues Net income
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Consumer Finance Services (1)................ $ 380 $ 54 $ 348 $ 61
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Net income in 1996 includes a portion of the gain ($1 million) from the
disposition of RCM Capital Management, a California Limited Partnership
(RCM).
Earnings in the second quarter of 1997 were lower than the comparable period
in 1996, as expected--reflecting a higher provision for loan losses in the 1997
period.
Consumer finance receivables, net of unearned finance charges, grew $595
million during the second quarter of 1997, which represents an annualized growth
rate of 28%. This growth was driven primarily by real estate loans generated
through the Company's 855 branch office network and through the sales efforts of
Primerica Financial Services (PFS).
Total net receivables were a record $9.041 billion at June 30, 1997, a 21%
increase from the prior year. The average yield, at 14.42%, was lower than the
1996 quarter's yield of 15.40%, mainly because of a shift in the portfolio mix
toward lower risk/lower margin real estate loans. Sales of real estate-secured
($.M.A.R.T.-SM-) loans sold exclusively through PFS continued at record levels
during the quarter. Travelers Bank credit card outstandings were $1.166 billion,
up from $972 million at March 31, 1997, as a result of strong credit card
originations.
Delinquencies in excess of 60 days were 2.14% as of June 30, 1997--lower
than the 2.25% at March 31, 1997 and the 2.18% at the end of the second
quarter of 1996. The charge-off rate was 2.82% during the second quarter of
1997, lower than the 1997 first quarter of 2.95% and the comparable 1996
period's rate of 2.92%. Reserves as a percentage of net receivables were
2.91% at June 30, 1997, down from 2.97% at the end of the 1997 first quarter
and 2.92% at the end of the 1996 second quarter.
17
<PAGE>
<TABLE>
<CAPTION>
As of, or for, the
Three Months Ended June 30,
----------------------------------
<S> <C> <C>
1997 1996
----------------- ---------------
Allowance for credit losses as a % of net outstandings......... 2.91% 2.92%
Charge-off rate for the period................................. 2.82% 2.92%
60 + days past due on a contractual basis as a % of
gross consumer finance receivables at quarter end............ 2.14% 2.18%
</TABLE>
On July 31, 1997, Commercial Credit Company (CCC) acquired Security Pacific
Financial Services from BankAmerica Corporation for a purchase price of
approximately $1.6 billion. The purchase included approximately $1.2 billion of
net consumer finance receivables and approximately $70 million of other net
assets.
LIFE INSURANCE SERVICES
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
---------------------------- ------------------------------
<CAPTION>
(millions) Revenues Net income Revenues Net income
----------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Travelers Life and Annuity (1)............... $ 666 $ 115 $ 549 $ 78
Primerica Financial Services (2)............. 375 81 354 70
----------- --------- --------- ---------
Total Life Insurance Services................ $ 1,041 $ 196 $ 903 $ 148
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Net income includes $10 million of reported investment portfolio gains in
1997 and $12 million of reported investment portfolio losses in 1996.
(2) Net income in 1997 includes $1 million of reported investment portfolio
losses. Net income in 1996 includes a portion of the gain ($4 million) from
the disposition of RCM.
TRAVELERS LIFE AND ANNUITY
Travelers Life and Annuity consists of annuity, life and long-term care
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. Travelers Life and Annuity
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.
18
<PAGE>
Earnings before portfolio gains increased 17% to $105 million in the second
quarter of 1997, from $90 million in the comparable 1996 period. Improved
earnings were largely driven by strong investment income, reflecting an
improvement in fixed income yields over the past year, as well as very
attractive yields on equity partnerships. 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 June
30, 1997 were $14.7 billion compared to $12.2 billion at June 30, 1996. Net
written premiums and deposits were $627.7 million in the second quarter of 1997,
up 23% from $509.5 million in the 1996 second 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
A.M. Best Company's recently announced upgrade of The Travelers Insurance
Company's rating to A+ (Superior), which rating may be revised or withdrawn at
anytime.
Payout and group annuity net premiums and deposits (excluding those of
affiliates) totaled $632.0 million in the second quarter of 1997, up more than
200% from $210.0 million in the second quarter of 1996, primarily as a result of
the $355 million growth in sales of one year variable rate guaranteed investment
contracts. Policyholder account balances and reserves totaled $11.5 billion at
June 30, 1997, marginally ahead of the June 30, 1996 balances but up $700
million from year-end 1996, reflecting the strong sales of new variable rate
guaranteed investment contracts.
Direct written premiums and deposits (excluding single premium policies) for
individual life insurance were $68.5 million in the second quarter of 1997, a
slight decrease from $69.8 million in the second quarter of 1996. Face amount of
individual life insurance issued during the second quarter of 1997 was $1.5
billion, compared with $1.7 billion in the second quarter of 1996, bringing
total life insurance in force to $50.7 billion at June 30, 1997.
Net written premiums for the growing long-term care insurance line were
$43.3 million in the second quarter of 1997, compared to $30.8 million in the
second quarter of 1996, largely as a result of strong sales during the quarter,
which improved 29% over the 1996 period.
PRIMERICA FINANCIAL SERVICES
Earnings (before portfolio gains and the 1996 disposition of RCM) for the
second quarter of 1997 increased 24% to $82 million from $66 million in the
second quarter of 1996, reflecting favorable mortality experience as well as
continued strength in life insurance in force and sales of mutual funds and
consumer loans.
Face amount of new term life insurance sales was $14.1 billion in the second
quarter of 1997, compared to $14.0 billion in the comparable 1996 quarter. Life
insurance in force reached $365.4 billion at June 30, 1997, up from $354.8
billion at June 30, 1996, and continued to reflect good policy persistency.
Sales of mutual funds (at net asset value) were $669.4 million for the
second quarter of 1997, a 5% increase over second quarter 1996 sales of $636.7
million, reflecting strong customer demand in the U.S. and Canada. More than 33%
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, reaching $1.901 billion at the end of the second quarter of 1997, up
12% from $1.696 billion at the end of the 1997 first quarter and up 43% from
$1.326 billion at the end of the 1996 second quarter. Earnings and assets
relating to
19
<PAGE>
these consumer loans are included in the Consumer Finance segment. The TRAVELERS
SECURE-R- home and auto insurance products issued through TAP continue to
experience growth in applications and policies, and as of June 30, 1997, had
been introduced in 37 states and were sold through nearly 8,000 agents licensed
to sell the product.
PROPERTY & CASUALTY INSURANCE SERVICES
<TABLE>
<CAPTION>
(millions)
<S> <C> <C> <C> <C>
Three Months Ended June 30,
--------------------------------------------------
<CAPTION>
1997 1996
------------------------ ------------------------
Net Net
income income
Revenues (loss) Revenues (loss)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial Lines(1) (2).............................. $ 1,612 $ 209 $ 1,445 $ (237)
Personal Lines(1) (3)................................ 815 97 750 51
Financing costs and other (1)........................ 4 (30) 7 (30)
Minority interest.................................... -- (49) -- 44
----------- --------- ----------- ---------
Total Property & Casualty Insurance Services......... $ 2,431 $ 227 $ 2,202 $ (172)
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
- ------------------------
(1) Before minority interest.
(2) Net income includes $32 million of reported investment portfolio losses in
1996 and $383 million of charges in 1996 related to the acquisition and
integration of Aetna P&C.
(3) Net income includes $4 million and $6 million of reported investment
portfolio losses in 1997 and 1996, respectively, and $8 million of charges
in 1996 related to the acquisition and integration of Aetna P&C.
As previously indicated, in the second quarter of 1996 TAP recorded charges
related to the acquisition and integration of Aetna P&C. These charges resulted
primarily from anticipated costs of the acquisition and the application of
Travelers strategies, policies and practices to Aetna P&C reserves and include:
$221 million after tax and minority interest ($414 million before tax and
minority interest) in reserve increases, net of reinsurance, related primarily
to cumulative injury claims other than asbestos (CIOTA); $81 million after tax
and minority interest ($152 million before tax and minority interest) in
provisions for reinsurance recoverables and other receivables; and a $19 million
after tax and minority interest ($35 million before tax and minority interest)
provision for lease and severance costs of Travelers Indemnity related to the
restructuring plan for the acquisition.
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.
COMMERCIAL LINES
Earnings before portfolio gains/losses and acquisition-related charges
increased 17% to $209 million in the second quarter of 1997 from $178 million in
the second quarter of 1996, primarily reflecting strong net investment income
and expense savings. Catastrophe losses were insignificant in both periods.
Commercial Lines net written premiums for the second quarter of 1997 totaled
$1.141 billion, up 4% from $1.100 billion in the second quarter of 1996
(excluding an adjustment associated with a reinsurance transaction in 1996).
This increase reflects continued growth in programs designed to
20
<PAGE>
leverage underwriting experience in specific industries, and was offset in part
by the highly competitive conditions in the marketplace and the Company's
continuing focus on writing profitable business.
Fee income for the second quarter of 1997 was $91.4 million compared to
$100.6 million in the second quarter of 1996. This decrease was due to 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 service
customers, slightly offset by National Accounts writing more service fee-based
product versus premium-based product.
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 $149.7 million for
the second quarter of 1997 decreased $29.9 million from the second quarter of
1996 (excluding an adjustment associated with a reinsurance transaction). This
decrease was due to National Accounts writing less premium-based product versus
service fee-based product and the competitive marketplace. For the second
quarter of 1997, National Accounts new business was significantly lower than the
second quarter of 1996. This decrease primarily reflects the addition of one
large account in the second quarter of 1996 and the competitive marketplace.
National Accounts business retention ratio was virtually the same in the second
quarter of 1997 and 1996.
Commercial Accounts serves mid-sized businesses through a network of
independent agents and brokers. Commercial Accounts net written premiums were
$453.0 million in the second quarter of 1997 compared to $380.5 million in the
second quarter of 1996. For the second quarter of 1997, new premium business in
Commercial Accounts was significantly higher compared to the second quarter of
1996, reflecting continued growth through programs designed to leverage
underwriting experience in specific industries. The Commercial Accounts business
retention ratio was significantly higher in the second quarter of 1997 compared
to the 1996 second 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 $369.6 million in the second
quarter of 1997 compared to $368.6 million in the second quarter of 1996. New
premium business in Select Accounts was moderately higher in the second quarter
of 1997 compared to the second quarter of 1996. The Select Accounts business
retention ratio was moderately higher in the second quarter of 1997 compared to
the second quarter of 1996. These increases reflect 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 $168.4 million in the second quarter of 1997 compared to $171.7 million in
the second quarter of 1996.
The statutory combined ratio (before policyholder dividends) for Commercial
Lines in the second quarter of 1997 was 109.7% compared to 171.1% in the second
quarter of 1996. The GAAP combined ratio (before policyholder dividends) for
Commercial Lines in the second quarter of 1997 was 110.0% compared to 171.1% in
the second quarter of 1996.
21
<PAGE>
The decreases in the second quarter of 1997 statutory and GAAP combined
ratios for Commercial Lines were primarily attributable to the 1996 charges
related to the acquisition and integration of Aetna P&C. Excluding these amounts
the statutory and GAAP combined ratios for the second quarter of 1996 would have
been 111.5% and 114.3%, respectively. The decrease in the second quarter of 1996
statutory and GAAP combined ratios compared to the second quarter of 1996
statutory and GAAP combined ratios excluding acquisition-related charges was due
to slightly lower losses and loss adjustment expenses in the second quarter of
1997 compared to the second quarter of 1996 as well as expense reductions in
1997.
The GAAP combined ratio for Commercial Lines differs from the statutory
combined ratio primarily due to the deferral and amortization of certain
expenses for GAAP reporting purposes only. In addition, the purchase accounting
adjustments recorded for GAAP in connection with the Aetna P&C acquisition
resulted in a statutory charge in 1996.
PERSONAL LINES
Earnings before portfolio gains/losses increased 57% to $101 million in the
second quarter of 1997 from $65 million in the second quarter of 1996. Results
for the second quarter of 1997 reflect the impact of catastrophe losses, after
taxes and reinsurance, of $4.5 million compared to $14.0 million in the 1996
period. The strong operating earnings reflect a low level of catastrophe losses
during the quarter, lower expenses and the continued favorable prior year
reserve development in personal automobile lines.
Net written premiums in the second quarter of 1997 were $744.9 million,
compared to $675.8 million in the second quarter of 1996. This increase reflects
lower ceded premiums due to a change in a reinsurance arrangement in January
1997, growth in target markets served by independent agents and growth in the
affinity marketing and TRAVELERS SECURE-R- programs. Business retention
continued to be strong.
The statutory combined ratio for Personal Lines in the second quarter of
1997 was 92.8% compared to 100.1% in the second quarter of 1996. The GAAP
combined ratio for Personal Lines in the second quarter of 1997 was 92.1%
compared to 102.1% in the second quarter of 1996. The decrease in the combined
ratios in 1997 was due to the favorable prior year reserve development in
personal automobile lines, lower catastrophe losses and expense reductions.
FINANCING COSTS AND OTHER
The primary component of net income (loss) in the second quarter of 1997 was
interest expense of $26 million after tax, compared to $25 million after tax in
the second quarter of 1996, reflecting financing costs associated with the
acquisition of Aetna P&C.
CORPORATE AND OTHER
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C>
(millions) 1997 1996
------------------------------ --------------------------------
<CAPTION>
Net income Net income
Revenues (expense) Revenues (expense)
------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net expenses (1)............................. -- $ (46) -- $ (75)
Net gain (loss) on sale of subsidiaries and
affiliates................................. -- -- -- 384
--------- --------- --------- ---------
Total Corporate and Other.................... $ 22 $ (46) $ 3 $ 309
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Net income (expense) includes $15 million of reported investment portfolio
losses in 1996.
22
<PAGE>
Net corporate expenses (before reported portfolio losses) were down in the
second quarter of 1997 compared to the second quarter of 1996, reflecting higher
income from corporate investments and lower borrowing costs.
Segment Results for the Six Months Ended June 30, 1997 and 1996
---------------------------------------------------------------
The overall operating trends for the six months ended June 30, 1997 and 1996
were substantially the same as those of the second quarter periods except as
noted below.
INVESTMENT SERVICES
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
---------------------------- ----------------------------
<CAPTION>
(millions) Revenues Net income Revenues Net income
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Smith Barney................................. $ 4,204 $ 471 $ 3,927 $ 454
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
SMITH BARNEY REVENUES
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
<S> <C> <C>
(millions) 1997 1996
--------- ---------
Commissions................................................................. $ 1,183 $ 1,182
Asset management and administration fees.................................... 762 648
Investment banking.......................................................... 518 576
Principal transactions...................................................... 514 543
Interest income, net*....................................................... 234 195
Other income................................................................ 67 71
--------- ---------
Net revenues*............................................................... $ 3,278 $ 3,215
--------- ---------
--------- ---------
</TABLE>
- ------------------------
* Net of interest expense of $926 million and $712 million in 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 2% to $3.278 billion for the
first six months of 1997 from $3.215 billion in the first six months of 1996.
Commission revenues were $1.183 billion in the first six months of 1997,
slightly ahead of the $1.182 billion in the 1996 comparable period. Asset
management and administration fees rose 18% to a record $762 million in the
first six months of 1997. Investment banking revenues in the first six months of
1997 totaled $518 million, a 10% decline from the comparable 1996 period.
Contributing to the decline in investment banking revenues during the first six
months of 1997 was a decrease in merger and acquisition advisory activity.
Principal transaction revenues were $514 million in the first six months of
1997, a 5% decline from the comparable 1996 period. Net interest income reached
$234 million in the first six months of 1997, up 20% over the comparable 1996
period.
Total expenses, excluding interest, increased to $2.486 billion in the first
six months of 1997 from $2.471 billion in the comparable 1996 period. Smith
Barney's ratio of non-compensation expenses to net revenues was 20.5% for the
first six months of 1997 and 1996. Smith Barney's ratio of compensation and
benefit expense to net revenues declined to 55.3% for the first six months of
1997 from 56.3% in the comparable prior year period.
23
<PAGE>
CONSUMER FINANCE SERVICES
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
<S> <C> <C> <C> <C>
(millions) 1997 1996
------------------------------ ------------------------------
<CAPTION>
Revenues Net income Revenues Net income
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Consumer Finance Services(1)................. $ 757 $ 101 $ 696 $ 117
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Net income in 1996 includes a portion of the gain ($1 million) from the
disposition of RCM.
During the first six months of 1997 the average yield, at 14.53%, was
lower than the 15.41% in the first six months of 1996, mainly because of a
shift in the portfolio mix toward lower risk/lower margin real estate loans.
The charge-off rate remained relatively flat at 2.88% for the first six
months of 1997, compared to the comparable 1996 period's rate of 2.89%.
LIFE INSURANCE SERVICES
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
---------------------------- ----------------------------
<CAPTION>
(millions) Revenues Net income Revenues Net income
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Travelers Life and Annuity(1)................ $ 1,284 $ 220 $ 1,126 $ 163
Primerica Financial Services(2).............. 750 160 709 141
---------- --------- ---------- ---------
Total Life Insurance Services................ $ 2,034 $ 380 $ 1,835 $ 304
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
- ------------------------
(1) Net income includes $14 million of reported investment portfolio gains in
1997 and $9 million of reported investment portfolio losses in 1996.
(2) Net income in 1996 includes $6 million of reported investment portfolio
gains and a portion of the gain ($4 million) from the disposition of RCM.
TRAVELERS LIFE AND ANNUITY
Deferred annuity net written premiums and deposits were $1.201 billion in
the first six months of 1997, up 20% from $997.2 million in the first six months
of 1996.
Payout and group annuity net premiums and deposits (excluding those of
affiliates) totaled $1.279 billion in the first six months of 1997, up 86% from
$688.9 million in the first six months of 1996.
Face amount of individual life insurance issued during the first six months
of 1997 was $3.0 billion, compared to $3.2 billion in the first six months of
1996. Direct written premiums and deposits (excluding single premium policies)
for individual life insurance were $139.7 million in the first six months of
1997, even with the first six months of 1996.
Net written premiums for the growing long-term care insurance line were
$85.8 million in the first six months of 1997, compared to $58.5 million in the
first six months of 1996.
24
<PAGE>
PRIMERICA FINANCIAL SERVICES
Face amount of new term life insurance sales was $26.1 billion in the first
six months of 1997, compared to $26.3 billion in the comparable 1996 period.
Sales of mutual funds (at net asset value)
were $1.391 billion for the first six months of 1997, a 16% increase over the
comparable 1996 period sales of $1.204 billion.
PROPERTY & CASUALTY INSURANCE SERVICES
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
<S> <C> <C> <C> <C>
(millions) 1997 1996
------------------------ ------------------------
<CAPTION>
Net Net
income income
Revenues (loss) Revenues (loss)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial Lines(1) (2).............................. $ 3,236 $ 410 $ 2,250 $ (143)
Personal Lines(1) (3)................................ 1,620 202 1,123 73
Financing costs and other (1)........................ 6 (63) 7 (30)
Minority interest.................................... -- (98) -- 44
----------- ---------- ----------- ----------
Total Property & Casualty Insurance Services......... $ 4,862 $ 451 $ 3,380 $ (56)
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
- ------------------------
(1) Before minority interest.
(2) Net income in 1997 includes $8 million of reported investment portfolio
gains. Net income in 1996 includes $11 million of reported investment
portfolio losses and $383 million of charges related to the acquisition and
integration of Aetna P&C.
(3) Net income includes $7 million and $6 million of reported investment
portfolio losses in 1997 and 1996, respectively, and $8 million of charges
in 1996 related to the acquisition and integration of Aetna P&C.
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.
COMMERCIAL LINES
Commercial Lines net written premiums for the first six months of 1997
totaled $2.479 billion, up $739 million from $1.740 billion for the first six
months of 1996 (excluding an adjustment associated with a reinsurance
transaction in 1996). This premium increase reflects the inclusion in 1997 of
Aetna P&C for the entire six months compared to only the second quarter of 1996
and a $142 million increase due to a change to conform the Aetna P&C method with
Travelers Indemnity and its subsidiaries' (Travelers P&C) method of recording
certain net written premiums within Commercial Lines. Offsetting these increases
in part were the highly competitive conditions in the marketplace and the
Company's continuing focus on writing profitable business.
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 six months of 1997 totaled $2.479 billion, compared to $2.345 billion
for the first six months of 1996. This increase was primarily attributable to
the change to conform the Aetna P&C method with the Travelers P&C method of
recording net written premiums.
Fee income for the first six months of 1997 was $188.4 million compared to
$193.7 million in the first six months of 1996.
25
<PAGE>
National Accounts net written premiums of $371.3 million for the first six
months of 1997 decreased $4.2 million from the first six months of 1996
(excluding an adjustment associated with a reinsurance transaction in 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
$371.3 million for the first six months of 1997 compared to $446.3 million for
the first six months of 1996. National Accounts new business in the first six
months of 1997 was virtually the same as in the first six months of 1996.
National Accounts business retention ratio was significantly higher in the first
six months of 1997 compared to the first six months of 1996, reflecting an
unusually low retention ratio in the first quarter of 1996.
Commercial Accounts net written premiums were $1.014 billion in the first
six months of 1997 compared to $582.1 million in the first six months of 1996.
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 $1.014 billion in the first six months of 1997 compared to $821.4 million
in the first six months of 1996. This increase reflected $127 million due to the
change to conform the Aetna P&C method with the Travelers P&C method of
recording certain net written premiums and the continued growth through programs
designed to leverage underwriting experience in specific industries, partially
offset by the competitive marketplace. For the first six months of 1997, new
premium business in Commercial Accounts has significantly improved compared to
the first six months of 1996, reflecting continued growth in programs designed
to leverage underwriting experience in specific industries. The Commercial
Accounts business retention ratio in the first six months of 1997 has
significantly improved compared to the first six months of 1996.
Select Accounts net written premiums were $733.3 million in the first six
months of 1997 compared to $509.5 million in the first six months of 1996. On a
combined total basis including Aetna P&C (for periods prior to April 2, 1996 for
comparative purposes only), Select Accounts net written premiums of $733.3
million for the first six months of 1997 were $2.7 million above the first six
months of 1996 premium levels. This increase reflected $15 million due to the
change to conform the Aetna P&C method with Travelers P&C method of recording
certain net written premiums, mostly offset by a decrease due to the competitive
marketplace. New premium business in Select Accounts was moderately higher in
the first six months of 1997 compared to the first six months of 1996,
reflecting an increase due to the acquisition of Aetna P&C, partially offset by
a decrease due to the competitive marketplace. The Select Accounts business
retention ratio was moderately higher in the first six months of 1997 compared
to the first six months of 1996, reflecting the broader industry and product
line expertise of the combined company.
Specialty Accounts net written premiums were $361.0 million in the first six
months of 1997 compared to $273.3 million in the first six months of 1996. 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 $361.0
million in the first six months of 1997 compared to $347.2 million in the first
six months of 1996. The growth is primarily attributable to increased writings
of its excess and surplus lines business.
Catastrophe losses, net of taxes and reinsurance, were $5.1 million and $6.4
million in the first six months of 1997 and 1996, respectively. The 1997
catastrophe losses were primarily due to tornadoes in the Midwest in the first
quarter. The 1996 catastrophe losses were primarily due to winter storms in the
first quarter.
The statutory combined ratio (before policyholder dividends) for Commercial
Lines in the first six months of 1997 was 109.3% compared to 149.2% in the first
six months of 1996. The GAAP
26
<PAGE>
combined ratio (before policyholder dividends) for Commercial Lines in the first
six months of 1997 was 108.5% compared to 148.6% in the first six months of
1996.
The decreases in the first six months of 1997 statutory and GAAP combined
ratios for Commercial Lines compared to the first six months of 1996 were
primarily attributable to the 1996 charges related to the acquisition and
integration of Aetna P&C. Excluding these amounts, the statutory and GAAP
combined ratios for the six months ended June 30, 1996 would have been 110.5%
and 111.8%, respectively. The decrease in the first six months of 1997 statutory
and GAAP combined ratios compared to the first six months of 1996 statutory and
GAAP combined ratios excluding acquisition-related charges was generally due to
the inclusion in 1997 of Aetna P&C's results for the entire six months compared
to only the second quarter in 1996. Aetna P&C has historically had a higher
underwriting expense ratio, partially offset by a lower loss ratio, which
reflects the mix of business including the favorable effect of the lower loss
ratio of the Bond business.
PERSONAL LINES
Net written premiums in the first six months of 1997 were $1.520 billion,
compared to $1.017 billion in the first six months 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 six months of 1997
totaled $1.520 billion compared to $1.333 billion for the first six months of
1996.
The statutory combined ratio for Personal Lines in the first six months of
1997 was 91.5% compared to 101.9% in the first six months of 1996. The GAAP
combined ratio for Personal Lines in the first six months of 1997 was 90.4%
compared to 102.6% in the first six months of 1996. The decrease in the combined
ratios in 1997 was due to the favorable prior year reserve development in
personal automobile lines, lower catastrophe losses and expense reductions.
FINANCING COSTS AND OTHER
The primary component of net income (loss) for the first six months of 1997
was interest expense of $52 million after tax, compared to $25 million after tax
in the first six months of 1996, reflecting financing costs associated with the
acquisition of Aetna P&C in the second quarter of 1996.
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 June 30, 1997, approximately 15% of the net
environmental reserves (i.e., approximately $182 million) are case reserves for
resolved claims. The balance, approximately 85% of the net environmental
reserves (i.e., approximately $1.041 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.
27
<PAGE>
The following table displays activity for environmental losses and loss
expenses and reserves for the six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Environmental Losses Six Months Ended Six Months Ended
(millions) June 30, 1997 June 30, 1996
------------------- -------------------
<S> <C> <C>
Beginning reserves:
Direct............................................... $ 1,369 $ 454
Ceded................................................ (127) (50)
--------- ---------
Net.................................................. 1,242 404
Acquisition of Aetna P&C:
Direct............................................... -- 938
Ceded................................................ -- (24)
Incurred losses and loss expenses:
Direct............................................... 38 38
Ceded................................................ (2) (2)
Losses paid:
Direct............................................... 100 63
Ceded................................................ (45) (20)
Ending reserves:
Direct............................................... 1,307 1,367
Ceded................................................ (84) (56)
--------- ---------
Net.................................................. $ 1,223 $ 1,311
--------- ---------
--------- ---------
</TABLE>
ASBESTOS CLAIMS
At June 30, 1997, approximately 24% of the net asbestos reserves (i.e.,
approximately $257 million) are for pending asbestos claims. The balance,
approximately 76% (i.e., approximately $808 million) of the net asbestos
reserves, represents incurred but not yet reported losses.
28
<PAGE>
The following table displays activity for asbestos losses and loss expenses
and reserves for the six months ended June 30, 1997 and 1996. In general, the
Company posts case reserves for pending asbestos claims within approximately 30
business days of receipt of such claims.
<TABLE>
<CAPTION>
Asbestos Losses Six Months Ended Six Months Ended
(millions) June 30, 1997 June 30, 1996
------------------- -------------------
<S> <C> <C>
Beginning reserves:
Direct............................................... $ 1,443 $ 695
Ceded................................................ (370) (293)
--------- ---------
Net.................................................. 1,073 402
Acquisition of Aetna P&C:
Direct............................................... -- 776
Ceded................................................ -- (116)
Incurred losses and loss expenses:
Direct............................................... 37 49
Ceded................................................ (14) 16
Losses paid:
Direct............................................... 89 65
Ceded................................................ (58) (36)
Ending reserves:
Direct............................................... 1,391 1,455
Ceded................................................ (326) (357)
--------- ---------
Net.................................................. $ 1,065 $ 1,098
--------- ---------
--------- ---------
</TABLE>
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 June 30, 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 continue 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) CLAIMS
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,
29
<PAGE>
lead paint, pesticides, pharmaceutical products, silicone-based personal
products, solvents and other deleterious substances.
At June 30, 1997, approximately 18% of the net CIOTA reserves (i.e.,
approximately $204 million) are for pending CIOTA claims. The balance,
approximately 82% (i.e., approximately $901 million) of the net CIOTA reserves,
represents incurred but not yet reported losses for which the Company has not
received any specific claims.
The following table displays activity for CIOTA losses and loss expenses and
reserves for the six months ended June 30, 1997 and 1996. In general, the
Company posts case reserves for pending CIOTA claims within approximately 30
business days of receipt of such claims.
<TABLE>
<CAPTION>
CIOTA Losses Six Months Ended Six Months Ended
(millions) June 30, 1997 June 30, 1996
------------------- -------------------
<S> <C> <C>
Beginning reserves:
Direct............................................... $ 1,560 $ 374
Ceded................................................ (446) --
------ ------
Net.................................................. 1,114 374
Acquisition of Aetna P&C:
Direct............................................... -- 709
Ceded................................................ -- (293)
Incurred losses and loss expenses:
Direct............................................... 12 544
Ceded................................................ -- (160)
Losses paid:
Direct............................................... 36 36
Ceded................................................ (15) (4)
Ending reserves:
Direct............................................... 1,536 1,591
Ceded................................................ (431) (449)
--------- ---------
Net.................................................. $ 1,105 $ 1,142
--------- ---------
--------- ---------
</TABLE>
CORPORATE AND OTHER
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------
<S> <C> <C> <C> <C>
(millions) 1997 1996
------------------------------ ----------------------------
<CAPTION>
Net income Net income
Revenues (expense) Revenues (expense)
------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Net expenses (1)............................. -- $ (98) -- $ (107)
Net gain (loss) on sale of subsidiaries and
affiliates................................. -- -- -- 384
--------- --------- --------- ---------
Total Corporate and Other.................. $ 44 $ (98) $ 103 $ 277
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Net income (expense) includes $5 million of reported investment portfolio
losses in 1996.
Net corporate expenses (before reported portfolio losses) were down in the
first six months of 1997 compared to the first six months of 1996 reflecting
higher income from corporate investments and lower borrowing costs.
30
<PAGE>
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.
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 June 30, 1997 this requirement was exceeded by approximately $5.2
billion. At June 30, 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.
In June 1997, the Company sold in a public offering 8.0 million depositary
shares, each representing one-fifth of a share of 6.365% Cumulative Preferred
Stock, Series F (Series F Preferred Stock) at an offering price of $50 per
depositary share for an aggregate principal amount of $400 million. The Series F
Preferred Stock has cumulative dividends payable quarterly commencing September
1, 1997 and a liquidation preference equivalent to $50 per depositary share plus
accrued and accumulated unpaid dividends. On or after June 16, 2007, the Company
may redeem the Series F Preferred Stock, in whole or in part, at any time at a
redemption price of $50 per depositary share plus dividends accrued and unpaid
to the redemption date.
In July 1997, the Company sold in a public offering 4.0 million depositary
shares, each representing one-fifth of a share of 6.213% Cumulative Preferred
Stock, Series G (Series G Preferred Stock) at an offering price of $50 per
depositary share for an aggregate principal amount of $200 million. The Series G
Preferred Stock has cumulative dividends payable quarterly commencing September
1, 1997 and a liquidation preference equivalent to $50 per depositary share plus
accrued and accumulated unpaid dividends. On or after July 11, 2007, the Company
may redeem the Series G Preferred Stock, in whole or in part, at any time at a
redemption price of $50 per depositary share plus dividends accrued and unpaid
to the redemption date.
On July 1, 1997 the Company redeemed all of the 7.5 million outstanding
shares (15 million depositary shares) of its 9.25% Preferred Stock, Series D
(Series D Preferred Stock). The aggregate principal amount of Series D Preferred
Stock outstanding on June 30, 1997 was $375 million. All of the outstanding
shares of the Series D Preferred Stock were redeemed at $50 per share ($25 per
depositary share).
31
<PAGE>
On July 28, 1997 the Company redeemed all of the 1.2 million outstanding
shares (12 million depositary shares) of its 8.125% Cumulative Preferred Stock,
Series A (Series A Preferred Stock). The aggregate principal amount of Series A
Preferred Stock outstanding as of June 30, 1997 was $300 million. All of the
outstanding shares of the Series A Preferred Stock were redeemed at $250 per
share ($25 per depositary share), plus accrued and unpaid dividends through July
28, 1997.
TRV as of August 7, 1997, had $1.0 billion available for debt offerings and
$400 million available for preferred security 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 June 30, 1997, this requirement was exceeded by
approximately $3.0 billion. At June 30, 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 received $145
million of dividends from its insurance subsidiaries during the first six months
of 1997 and received an additional $100 million of dividends on July 1, 1997.
TAP as of August 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. CCC has unused credit
availability of $4.250 billion under five-year revolving credit facilities,
(including the $850 million referred to above) and $1.0 billion under a 364-day
facility. 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 June 30, 1997, CCC would have been able to remit $313
million to its parent under its most restrictive covenants.
CCC completed the following long-term debt offerings in 1997 and, as of
August 7, 1997 had $650 million available for debt offerings and $400 million
available for trust preferred security offerings under its shelf registration
statements:
<TABLE>
<S> <C>
- - 6.45% Notes due July 1, 2002................................. $300 million
- - 6.75% Notes due July 1, 2007................................. $300 million
- - 6 1/2% Notes due August 1, 2004.............................. $250 million
</TABLE>
32
<PAGE>
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 $1.250 billion
revolving credit agreement with a bank syndicate that extends through May 2000,
and has a $750 million 364-day revolving credit agreement with a bank syndicate
that extends through May 1998. At June 30, 1997, there were no borrowings
outstanding under either facility. 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 and its subsidiary Smith Barney Inc. issue 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 as to the amount of dividends that may be paid to
TRV. At June 30, 1997, Smith Barney would have been able to remit
approximately $779 million to TRV under its most restrictive covenants.
Smith Barney completed the following long-term debt offerings in 1997 and,
as of August 7, 1997, had $750 million available for debt offerings under its
shelf registration statement:
<TABLE>
<S> <C>
- - S&P 500 Equity Linked Notes due March 11, 2002............... $66 million
- - 7% Notes due March 15, 2004.................................. $250 million
- - 7 3/8% Notes due May 15, 2007................................ $200 million
- - 6 5/8% Notes due July 1, 2002................................ $250 million
</TABLE>
In addition to the long-term debt offerings above, in May 1997 Smith Barney,
through a private placement, issued $25 million of 6.98% Notes due December 30,
1999.
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
the impact on net income would be relatively smaller.
THE TRAVELERS INSURANCE COMPANY (TIC)
At June 30, 1997, TIC had $23.3 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
33
<PAGE>
remaining $10.9 billion is for life and annuity products that are subject to
discretionary withdrawal by the contractholder. Included in the amount that is
subject to discretionary withdrawal is $1.7 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
4.8%. In the payout phase, these funds are credited at significantly reduced
interest rates. The remaining $3.9 billion of liabilities is surrenderable
without charge. More than 17% 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
$200 million has been paid during the first six months of 1997.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
See Note 3 of Notes to Condensed Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
34
<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, the
third full paragraph on page 83 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 and the first paragraph on page 28 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
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 June
1997, the U.S. Supreme Court denied plaintiffs' petition for certiorari.
For information concerning a complaint seeking equitable relief that was
filed by the U.S. Department of Justice, naming 24 major brokerage firms,
including SBI, see the description that appears in the first paragraph on page
35 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, 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.
In April 1997, the U.S. District Court for the Southern District of New York
approved the settlement previously agreed to by the parties. In May 1997,
plaintiffs in the related civil class action challenged certain provisions of
the settlement.
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 84 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and the third paragraph on page 28 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, 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 July
1997, the Texas Department of Insurance issued a rule addressing the same
premium calculation issues raised by the proposed intervenor class in Travelers
Indemnity Company of Connecticut v. Texas Workers Compensation Insurance
Facility. The Company believes that this rule, which requires that rebates be
paid to certain 1991 to 1994 Texas workers compensation policyholders, exceeds
the Department's authority. Accordingly, the Company has joined with several
other insurers in an appeal proceeding, entitled Highlands Insurance Company v.
Texas Department of Insurance, which was filed in July 1997 in the District
Court of Travis County, Texas. In July 1997, a purported class action, entitled
El Chico Restaurants, Inc. v. The Aetna Casualty and Surety Company, et al., was
filed in the U.S. District Court for the Southern District of Florida, with
allegations similar to those in the two El Chico purported class actions filed
earlier this year in Tennessee and Georgia.
35
<PAGE>
ITEM 2. CHANGES IN SECURITIES.
On June 2, 1997, Smith Barney Inc. ("SBI") acquired the business of Perkins
Shareholder Services, Inc. ("PSS"), a California corporation that provides stock
option plan administration services, for approximately $85,000 in cash and
certain other non-cash consideration. In connection with the transaction, on
June 4, 1997, the Company issued 25,877 shares (the "Shares") of common stock,
$.01 par value per share, of the Company, to Marilyn J. Perkins Claassen, PSS's
president and sole stockholder, which Shares vest periodically over three and
one-half years and which may be forfeited under certain circumstances. The
Company received approximately $1,420,000 from SBI (based on the June 2, 1997
closing price of $54.875) to pay for the Shares. The issuance of the Shares was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
On June 13, 1997, the Company filed a Current Report on Form 8-K, dated June
11, 1997, filing certain exhibits under Item 7 thereof relating to the offer and
sale of the Company's 6.365% Cumulative Preferred Stock, Series F, $1.00 par
value per share.
No other reports on Form 8-K were filed during the quarter ended June 30,
1997; however, on July 10, 1997, the Company filed a Current Report on Form 8-K,
dated July 8, 1997, filing certain exhibits under Item 7 thereof relating to the
offer and sale of the Company's 6.213% Cumulative Preferred Stock, Series G,
$1.00 par value per share.
36
<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 "Company"), Certificate Electronic
of Designation of Cumulative Adjustable Rate Preferred Stock, Series Y, Certificate of
Amendment to the Restated Certificate of Incorporation, filed April 24, 1996, Certificate
of Amendment to the Restated Certificate of Incorporation, filed April 23, 1997,
Certificate of Designation of 6.365% Cumulative Preferred Stock, Series F, and Certificate
of Designation of 6.213% Cumulative Preferred Stock, Series G.
3.02 By-Laws of the Company as amended and restated through April 23, 1997, incorporated by
reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997 (File No. 1-9924) (the "Company's 3/31/97 10-Q").
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 10-Q for the Electronic
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 first paragraph on page 34 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996, 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") and the first paragraph on page 28 of the Company's 3/31/97
10-Q.
99.02 The first paragraph on page 35 of the Company's Quarterly Report on Form 10-Q for the Electronic
fiscal quarter ended June 30, 1996.
99.03 The paragraph that begins on page 90 and ends on page 91 of the Prospectus dated April 22, Electronic
1996 of Travelers Property Casualty Corp., the second paragraph on page 84 of the Company's
1996 10-K and the third paragraph on page 28 of the Company's 3/31/97 10-Q.
</TABLE>
<TABLE>
<S> <C>
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 Securities and Exchange
Commission upon request.
</TABLE>
37
<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: August 12, 1997 By /s/ Heidi Miller
------------------------------
Heidi Miller
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 12, 1997 By /s/ Irwin Ettinger
------------------------------
Irwin Ettinger
Executive Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
38
<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 "Company"), Certificate Electronic
of Designation of Cumulative Adjustable Rate Preferred Stock, Series Y, Certificate of
Amendment to the Restated Certificate of Incorporation, filed April 24, 1996, Certificate
of Amendment to the Restated Certificate of Incorporation, filed April 23, 1997,
Certificate of Designation of 6.365% Cumulative Preferred Stock, Series F, and Certificate
of Designation of 6.213% Cumulative Preferred Stock, Series G.
3.02 By-Laws of the Company as amended and restated through April 23, 1997, incorporated by
reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997 (File No. 1-9924) (the "Company's 3/31/97 10-Q").
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 10-Q for the Electronic
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 first paragraph on page 34 of the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996, 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") and the first paragraph on page 28 of the Company's 3/31/97
10-Q.
99.02 The first paragraph on page 35 of the Company's Quarterly Report on Form 10-Q for the Electronic
fiscal quarter ended June 30, 1996.
99.03 The paragraph that begins on page 90 and ends on page 91 of the Prospectus dated April 22, Electronic
1996 of Travelers Property Casualty Corp., the second paragraph on page 84 of the Company's
1996 10-K and the third paragraph on page 28 of the Company's 3/31/97 10-Q.
</TABLE>
<TABLE>
<S> <C>
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 Securities and Exchange Commission upon
request.
</TABLE>
<PAGE>
Exhibit 3.01
Certificate of Designation
of
6.213% Cumulative Preferred Stock, Series G
of
Travelers Group Inc.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Travelers Group Inc., a Delaware corporation (the "Corporation"),
hereby certifies that:
1. The Restated Certificate of Incorporation, as amended, 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 one billion five hundred million (1,500,000,000) 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. Pursuant to resolutions duly adopted by the Board of
Directors in accordance with Section 141 of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors has granted such
authority to its Executive Committee (the "Executive Committee").
3. Pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation, and upon the Executive Committee by
resolution of the Board of Directors, the Executive Committee, by action duly
taken on July 8, 1997, and the Notes Committee by action duly taken on July
8, 1997 adopted resolutions that provide for a series of 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
<PAGE>
qualifications, limitations or restrictions thereof, of such series are
fixed, hereby as follows:
1. Designation and Number of Shares. The designation of such
series shall be 6.213% Cumulative Preferred Stock, Series G (the "Series G
Preferred Stock"), and the number of shares constituting such series shall be
800,000. The number of authorized shares of Series G 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 DGCL stating that such reduction has been so authorized, but the number
of authorized shares of Series G Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series G 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, 1997.
Each quarterly period beginning on March 1, June 1, September 1 and
December 1 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 G 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 $3.883125 (or one-fourth of 6.213% of the Liquidation Preference (as
defined in Section 7) for such share). If a share of Series G 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 $3.883125 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.
If, prior to 18 months after the date of the original issuance of
the Series G Preferred Stock, one or more
2
<PAGE>
amendments to the Internal Revenue Code of 1986, as amended (the "Code") are
enacted that reduce the percentage of the dividends-received deduction
(currently 70%) as specified in section 243(a)(1) of the Code or any
successor provision (the "Dividends-Received Percentage"), the amount of each
dividend payable (if declared) per share of Series G Preferred Stock for
dividend payments made on or after the effective date of such change in the
Code will be adjusted by multiplying the amount of the dividend payable
described above (before adjustment) by the following fraction (the "DRD
Formula"), and rounding the result to the nearest cent (with one-half cent
rounded up):
1-.35(1-.70)
--------------
1-.35(1-DRP)
For the purposes of the DRD Formula, "DRP" means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend
in question; provided, however, that if the Dividends-Received
Percentage applicable to the dividend in question shall be less than 50%,
then the DRP shall equal .50. Notwithstanding the foregoing provisions, if,
with respect to any such amendment, the Company receives either an
unqualified opinion of nationally recognized independent tax counsel selected
by the Company or a private letter ruling or similar form of authorization
from the Internal Revenue Service ("IRS") to the effect that such amendment
does not apply to a dividend payable on the Series G Preferred Stock, then
such amendment will not result in the adjustment provided for pursuant to the
DRD Formula with respect to such dividend. Such opinion shall be based upon
the legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation.
If any such amendment to the Code is enacted after the dividend
payable on a dividend payment date has been declared, the amount of the
dividend payable on such dividend payment date will not be increased;
instead, additional dividends (the "Post Declaration Date Dividends") equal
to the excess, if any, of (x) the product of the dividend paid by the Company
on such dividend payment date and the DRD Formula (where the DRP used in the
DRD Formula would be equal to the greater of the Dividends-Received
Percentage applicable to the dividend in question and .50) over (y) the
dividend paid by the Company on
3
<PAGE>
such dividend payable date, will be payable (if declared) to holders of
Series G Preferred Stock on the record date applicable to the next
succeeding dividend payment date or, if the Series G Preferred Stock
is called for redemption prior to such record date, to holders of Series G
Preferred Stock on the applicable redemption date, as the case may be,
in addition to any other amounts payable on such date.
If any such amendment to the Code is enacted and the reduction in
the Dividends-Received Percentage retroactively applies to a dividend payment
date as to which the Company previously paid dividends on the Series G
Preferred Stock (each, an "Affected Dividend Payment Date"), the Company will
pay (if declared) additional dividends (the "Retroactive Dividends") to
holders of Series G Preferred Stock on the record date applicable to the next
succeeding dividend payment date (or, if such amendment is enacted after the
dividend payable on such dividend payment date has been declared, to holders
of Series G Preferred Stock on the record date following the date of
enactment) or, if the Series G Preferred Stock is called for redemption prior
to such record date, to holders of Series G Preferred Stock on the applicable
redemption date, as the case may be, in an amount equal to the excess of (x)
the product of the dividend paid by the Company on each Affected Dividend
Payment Date and the DRD Formula (where the DRP used in the DRD Formula would
be equal to the greater of the Dividends-Received Percentage and .50 applied
to each Affected Dividend Payment Date) over (y) the sum of the dividend paid
by the Company on each Affected Dividend Payment Date; provided, however that
if the Company has received the opinion, letter ruling or authorization
referred to above, with respect to a dividend payable on the Affected Payment
Date, then no such Retroactive Dividends will be payable.
Each dividend on the shares of Series G Preferred Stock shall be
paid to the holders of record of shares of Series G Preferred Stock as
they appear on the stock register of the Company 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
4
<PAGE>
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 Company ranking on a parity as to dividends with the
Series G Preferred Stock, the Company, in making any dividend payment on
account of arrears on the Series G Preferred Stock or such other class or
series of preferred stock, shall make payments ratably upon all outstanding
shares of Series G 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 G Preferred Stock and such
other class or series of preferred stock to the date of such dividend payment.
Holders of shares of Series G 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 G Preferred Stock is not subject to any
mandatory redemption pursuant to a sinking fund or otherwise. The Company, at
its option, may redeem shares of Series G Preferred Stock, as a whole or in
part, at any time or from time to time on or after July 11, 2007, 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 Company shall redeem shares of Series G 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 Company. Each
such notice shall state: (a) the redemption date; (b) the number of shares of
Series G 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
5
<PAGE>
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 Company in providing money for the payment of the Redemption
Price) dividends on the shares of Series G 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
Company (except the right to receive from the Company 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 Company shall redeem such shares at the Redemption Price. If less
than all the outstanding shares of Series G Preferred Stock are to be
redeemed, the Company shall select those shares to be redeemed from
outstanding shares of Series G 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 Company shall not redeem less than all the outstanding shares of
Series G Preferred Stock pursuant to this Section 3, or purchase or acquire
any shares of Series G Preferred Stock otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders of shares of Series G
Preferred Stock, unless full cumulative dividends shall have been paid or
declared and set apart for payment upon all outstanding shares of Series G
Preferred Stock for all past Dividend Periods, and unless all matured
obligations of the Company 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 G Preferred Stock
redeemed by the Company 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 G
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 Company.
6
<PAGE>
6. Voting. Except as otherwise provided in this Section 6 or
as otherwise required by law, the Series G Preferred Stock shall have no
voting rights.
If six quarterly dividends (whether or not consecutive) payable on
shares of Series G Preferred Stock are in arrears at the time of the record
date to determine stockholders for any annual meeting of stockholders of the
Company, the number of directors of the Company shall be increased by two,
and the holders of shares of Series G 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 Company, with the remaining directors of the Company 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 G 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 Company 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
G 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
7
<PAGE>
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 G Preferred Stock to
elect Directors as set forth above shall continue until all dividend
arrearages on the Series G 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
Company 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 G
Preferred Stock being entitled to cast one vote per share, the Company may
not:
(i) create any class of stock that shall have preference as to
dividends or distributions of assets over the Series G 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 G Preferred Stock) so as to adversely
affect the powers, preferences or rights of the holders of shares of Series G
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.
8
<PAGE>
7. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, voluntary or involuntary, the
holders of Series G Preferred Stock shall be entitled to receive out of the
assets of the Company 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 Company ranking as to such distribution
junior to the Series G 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 G 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
Company ranking senior to the Series G 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 Company, the assets available for distribution are
insufficient to pay in full the amounts payable with respect to the Series G
Preferred Stock and any other shares of stock of the Company ranking as to
any such distribution on a parity with the Series G Preferred Stock, the
holders of the Series G Preferred Stock and of such other shares shall share
ratably in any distribution of assets of the Company in proportion to the
full respective preferential amounts to which they are entitled.
After payment to the holders of the Series G Preferred Stock of the
full preferential amounts provided for in this Section 7, the holders of the
Series G Preferred Stock shall be entitled to no further participation in any
distribution of assets by the Company.
Consolidation or merger of the Company 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 Company,
shall not be deemed or construed to be a liquidation, dissolution or winding
up of the Company within the meaning of this Section 7 if the preferences or
special voting rights of the holders of shares of Series G Preferred Stock
are not impaired thereby.
9
<PAGE>
8. Limitation on Dividends on Junior Stock. So long as any
Series G Preferred Stock shall be outstanding the Company shall not declare
any dividends on the Common Stock or any other stock of the Company ranking
as to dividends or distributions of assets junior to the Series G 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 Company, 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 Company 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 G Preferred Stock outstanding to the last dividend payment date
shall have been paid or declared and set apart for payment by the Company.
10
<PAGE>
Travelers Group Inc. has caused this Certificate to be duly
executed by its Executive Vice President, and attested by its Assistant
Secretary this 10th day of July, 1997.
TRAVELERS GROUP INC.
By /s/ Charles O. Prince, III
-----------------------------
Charles O. Prince, III
Executive Vice President
Attest:
/s/ Shelley J. Dropkin
- ----------------------
Shelley J. Dropkin
Assistant Secretary
11
<PAGE>
Certificate of Designation
of
6.365% Cumulative Preferred Stock, Series F
of
Travelers Group Inc.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Travelers Group Inc., a Delaware corporation (the "Corporation"),
hereby certifies that:
1. The Restated Certificate of Incorporation, as amended, 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 one billion five hundred million (1,500,000,000) 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. Pursuant to resolutions duly adopted by the Board of
Directors in accordance with Section 141 of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors has granted such
authority to its Executive Committee (the "Executive Committee").
3. Pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation, and upon the Executive Committee by
resolution of the Board of Directors, the Executive Committee, by action duly
taken on May 30, 1997, and the Notes Committee by action duly taken on June
11, 1997 adopted resolutions that provide for a series of 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
<PAGE>
established, and the designation, powers, preference and rights, and
qualifications, limitations or restrictions thereof, of such series are
fixed, hereby as follows:
1. Designation and Number of Shares. The designation of such
series shall be 6.365% Cumulative Preferred Stock, Series F (the "Series F
Preferred Stock"), and the number of shares constituting such series shall be
1,600,000. The number of authorized shares of Series F 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 DGCL stating that such reduction has been so authorized, but the number
of authorized shares of Series F Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series F 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, 1997.
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 F 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 $3.978125 (or one-fourth of 6.365% of the
Liquidation Preference (as defined in Section 7) for such share). If a share
of Series F 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 $3.978125 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.
If, prior to 18 months after the date of the original issuance of
the Series F Preferred Stock, one or more
2
<PAGE>
amendments to the Internal Revenue Code of 1986, as amended (the "Code")
are enacted that reduce the percentage of the dividends-received deduction
(currently 70%) as specified in section 243(a)(1) of the Code or any
successor provision (the "Dividends-Received Percentage"), the amount of
each dividend payable (if declared) per share of Series F Preferred Stock
for dividend payments made on or after the effective date of such change in
the Code will be adjusted by multiplying the amount of the dividend payable
described above (before adjustment) by the following fraction (the
"DRD Formula"), and rounding the result to the nearest cent (with one-half
cent rounded up):
1-.35(1-.70)
--------------
1-.35(1-DRP)
For the purposes of the DRD Formula, "DRP" means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend in
question; provided, however, that if the Dividends-Received Percentage
applicable to the dividend in question shall be less than 50%, then
the DRP shall equal .50. Notwithstanding the foregoing provisions, if,
with respect to any such amendment, the Corporation receives either an
unqualified opinion of nationally recognized independent tax counsel selected
by the Corporation or a private letter ruling or similar form of
authorization from the Internal Revenue Service ("IRS") to the effect that
such amendment does not apply to a dividend payable on the Series F Preferred
Stock, then such amendment will not result in the adjustment provided for
pursuant to the DRD Formula with respect to such dividend. Such opinion
shall be based upon the legislation amending or establishing the DRP or upon
a published pronouncement of the IRS addressing such legislation.
If any such amendment to the Code is enacted after the dividend
payable on a dividend payment date has been declared, the amount of the
dividend payable on such dividend payment date will not be increased;
instead, additional dividends (the "Post Declaration Date Dividends") equal
to the excess, if any, of (x) the product of the dividend paid by the
Corporation on such dividend payment date and the DRD Formula (where the DRP
used in the DRD Formula would be equal to the greater of the
Dividends-Received Percentage applicable to the dividend in question and .50)
over (y) the dividend paid by the Corporation
3
<PAGE>
on such dividend payable date, will be payable (if declared) to holders
of Series F Preferred Stock on the record date applicable to the next
succeeding dividend payment date or, if the Series F Preferred Stock is
called for redemption prior to such record date, to holders of Series F
Preferred Stock on the applicable redemption date, as the case may be,
in addition to any other amounts payable on such date.
If any such amendment to the Code is enacted and the reduction in
the Dividends-Received Percentage retroactively applies to a dividend payment
date as to which the Corporation previously paid dividends on the Series F
Preferred Stock (each, an "Affected Dividend Payment Date"), the Corporation
will pay (if declared) additional dividends (the "Retroactive Dividends") to
holders of Series F Preferred Stock on the record date applicable to the next
succeeding dividend payment date (or, if such amendment is enacted after the
dividend payable on such dividend payment date has been declared, to holders
of Series F Preferred Stock on the record date following the date of
enactment) or, if the Series F Preferred Stock is called for redemption prior
to such record date, to holders of Series F Preferred Stock on the applicable
redemption date, as the case may be, in an amount equal to the excess of (x)
the product of the dividend paid by the Corporation on each Affected Dividend
Payment Date and the DRD Formula (where the DRP used in the DRD Formula would
be equal to the greater of the Dividends-Received Percentage and .50 applied
to each Affected Dividend Payment Date) over (y) the sum of the dividend paid
by the Corporation on each Affected Dividend Payment Date; provided, however
that if the Corporation has received the opinion, letter ruling or
authorization referred to above, with respect to a dividend payable on the
Affected Payment Date, then no such Retroactive Dividends will be payable.
Each dividend on the shares of Series F Preferred Stock shall be
paid to the holders of record of shares of Series F 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
4
<PAGE>
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 F Preferred Stock, the Corporation, in making any dividend payment
on account of arrears on the Series F Preferred Stock or such other class or
series of preferred stock, shall make payments ratably upon all outstanding
shares of Series F 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 F Preferred Stock and such
other class or series of preferred stock to the date of such dividend payment.
Holders of shares of Series F 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 F 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 F Preferred Stock, as
a whole or in part, at any time or from time to time on or after June 16,
2007, 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 F 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 F 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
5
<PAGE>
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 F 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 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 F
Preferred Stock are to be redeemed, the Corporation shall select those shares
to be redeemed from outstanding shares of Series F 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 F Preferred Stock pursuant to this Section 3, or purchase or
acquire any shares of Series F Preferred Stock otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of shares of
Series F Preferred Stock, unless full cumulative dividends shall have been
paid or declared and set apart for payment upon all outstanding shares of
Series F 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 F 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 F
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
<PAGE>
6. Voting. Except as otherwise provided in this Section 6 or
as otherwise required by law, the Series F Preferred Stock shall have no
voting rights.
If six quarterly dividends (whether or not consecutive) payable on
shares of Series F 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 F 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 F 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
F 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
7
<PAGE>
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 F Preferred Stock to
elect Directors as set forth above shall continue until all dividend
arrearages on the Series F 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 F
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 F 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 F Preferred Stock) so as to adversely
affect the powers, preferences or rights of the holders of shares of Series F
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.
8
<PAGE>
7. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of Series F 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 F 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 F 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 F 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 F
Preferred Stock and any other shares of stock of the Corporation ranking as
to any such distribution on a parity with the Series F Preferred Stock, the
holders of the Series F 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 F Preferred Stock of the
full preferential amounts provided for in this Section 7, the holders of the
Series F 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 liquidatin, 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 F Preferred Stock
are not impaired thereby.
9
<PAGE>
8. Limitation on Dividends on Junior Stock. So long as any
Series F 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 F 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 F Preferred Stock outstanding to the last dividend payment date
shall have been paid or declared and set apart for payment by the Corporation.
10
<PAGE>
Travelers Group Inc. has caused this Certificate to be duly
executed by its Executive Vice President, and attested by its Assistant
Secretary this 13th day of June, 1997.
TRAVELERS GROUP INC.
By /s/ Charles O. Prince, III
-----------------------------------
Charles O. Prince, III
Executive Vice President
Attest:
/s/ Shelley J. Dropkin
- ----------------------------------
Shelley J. Dropkin
Assistant Secretary
11
<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: 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
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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.
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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
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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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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
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<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
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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
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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
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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
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(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
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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
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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:
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(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
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<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
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$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:
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<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)
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<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
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<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.
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<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.
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<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
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<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
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<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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(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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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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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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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<TABLE>
<CAPTION>
Exhibit 11.01
Travelers Group Inc. and Subsidiaries
Computation of Earnings Per Share
(In millions, except for per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------- ----------- ----------- -----------
Earnings:
Net income.............................................. $ 663 $ 576 $ 1,305 $ 1,096
Preferred dividends:
8.125% Cumulative Preferred Stock--Series A............. (6) (6) (12) (12)
5.5% Convertible Preferred Stock--Series B.............. -- (2) -- (4)
$4.53 Convertible Preferred Stock--Series C............. (5) (4) (11) (14)
9 1/4% Preferred Stock--Series D........................ (9) (8) (18) (17)
6.365% Cumulative Preferred Stock--Series F............. (1) -- (1) --
--------- --------- ----------- -----------
(21) (20) (42) (47)
----- ----- ----------- -----------
Income applicable to common stock....................... $ 642 $ 556 $ 1,263 $ 1,049
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Average shares:
Common.................................................. 612.1 609.6 612.3 610.2
Warrants................................................ 4.6 2.8 4.6 2.9
Assumed exercise of dilutive stock options.............. 12.0 9.6 13.0 10.7
Incremental shares--Stock based incentive plans......... 16.6 12.7 15.8 12.3
--------- --------- ----------- -----------
645.3 634.7 645.7 636.1
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Earnings per share:
Net Income.............................................. $ 1.00 $ 0.88 $ 1.96 $ 1.65
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
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 and six
months ended June 30, 1997 would entail adding the number of shares issuable on
conversion of the dilutive convertible preferred stock (4.8 and 4.8 million,
respectively) and the incremental dilutive effect of common stock equivalents
(2.8 million and 3.5 million, respectively) to the number of shares included in
the earnings per common share calculation (resulting in 652.9 and 654.0 million
shares, respectively) and eliminating the dividend requirements of the dilutive
convertible preferred stock ($2.3 and $4.7 million, respectively). The fully
diluted earnings per common share calculation for the three and six months ended
June 30, 1996 would entail adding the number of shares issuable on conversion of
the dilutive convertible preferred stock (11.3 and 11.3 million, respectively)
and the incremental dilutive effect of common stock equivalents (2.6 million and
3.2 million, respectively) to the number of shares included in the earnings per
common share calculation (resulting in 648.6 and 650.6 million shares,
respectively) and eliminating the dividend requirements of the dilutive
convertible preferred stock ($4.7 and $9.5 million, respectively).
<PAGE>
Exhibit 12.01
Travelers Group Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions of dollars, except for ratio)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Income from continuing operations
before income taxes and minority interest............................. $ 2,166 $ 1,413
Interest................................................................ 1,349 1,060
Portion of rentals deemed to be interest................................ 55 53
--------- ---------
Earnings available for fixed charges.................................. $ 3,570 $ 2,526
--------- ---------
--------- ---------
Fixed charges
Interest................................................................ $ 1,349 $ 1,060
Portion of rentals deemed to be interest................................ 55 53
--------- ---------
Fixed charges......................................................... $ 1,404 $ 1,113
--------- ---------
--------- ---------
Ratio of earnings to fixed charges...................................... 2.54x 2.27x
--------- ---------
--------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
June 30, 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,739
<SECURITIES> 100,580<F1>
<RECEIVABLES> 22,449<F2>
<ALLOWANCES> 0<F3>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F3>
<PP&E> 0<F3>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 159,606
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 18,202<F4>
2,040
1,075
<COMMON> 7
<OTHER-SE> 13,156<F5>
<TOTAL-LIABILITY-AND-EQUITY> 159,606
<SALES> 0<F3>
<TOTAL-REVENUES> 11,901
<CGS> 0<F3>
<TOTAL-COSTS> 9,735
<OTHER-EXPENSES> 0<F3>
<LOSS-PROVISION> 145<F6>
<INTEREST-EXPENSE> 1,349<F6>
<INCOME-PRETAX> 2,166
<INCOME-TAX> 763
<INCOME-CONTINUING> 1,305
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 1,305
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 0<F3>
<FN>
<F1>Includes the following items from the financial statements: total investments
$58,616; securities borrowed or purchased under agreements to resell $27,950;
and trading securities owned, at market value $14,014.
<F2>Includes the following items from the financial statemetns: brokerage
receivables $8,507; net consumer finance receivables $8,834 and other
receivables $5,108.
<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 $4,268; short-term borrowings $2,812
and long-term debt $11,122.
<F5>Includes the following items from the financial statements: additional
paid-in capital $7,561; retained earnings $8,524; treasury stock $(2,958);
unrealized gain (loss) on investment securities $436; and other $(407).
<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>
COMPANY'S FORM 10-Q
March 31, 1997
Page 28
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.
<PAGE>
Exhibit 99.02
COMPANY'S FORM 10-Q
June 30, 1996
Page 35
Item 1. Legal Proceedings.
In July 1996, a complaint seeking equitable relief was filed in the U.S.
District Court for the Southern District of New York by the U.S. Department
of Justice, naming twenty-four major brokerage firms, including the Company's
subsidiary, Smith Barney, Inc., as defendants. A proposed settlement has been
agreed to by the parties, subject to approval of the court. Pursuant to this
settlement, the defendants, without admitting any liability, would agree not
to engage in certain practices relating to the quoting of Nasdaq securities
and would further agree to implement a program to ensure compliance with
federal antitrust laws and with the terms of the settlement. No monetary
fines or penalties are imposed as part of the settlement.
<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
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>
COMPANY'S FORM 10-Q
March 31, 1997
Page 28
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.
