<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _______
-----------------------
COMMISSION FILE NUMBER 1-9924
-----------------------
TRAVELERS GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1568099
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
388 GREENWICH STREET, NEW YORK, NEW YORK 10013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 816-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK OUTSTANDING AS OF APRIL 30, 1998: 1,150,046,708
<PAGE>
TRAVELERS GROUP INC.
TABLE OF CONTENTS
-----------------
Part I - Financial Information
Item 1. Financial Statements: PAGE NO.
-------
Condensed Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 1998 and 1997 3
Condensed Consolidated Statement of Financial Position -
March 31, 1998 (Unaudited) and December 31, 1997 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Three Months Ended March 31, 1998 5
Condensed Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II - Other Information
Item 1. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 30
Exhibit Index 31
Signatures 33
2
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Insurance premiums $2,340 $2,224
Commissions and fees 1,434 1,206
Interest and dividends 4,421 3,498
Finance related interest and other charges 407 306
Principal transactions 780 762
Asset management and administration fees 498 389
Other income 488 315
- ------------------------------------------------------------------------------------------------
Total revenues 10,368 8,700
- ------------------------------------------------------------------------------------------------
EXPENSES
Policyholder benefits and claims 1,994 1,905
Non-insurance compensation and benefits 1,782 1,548
Insurance underwriting, acquisition and operating 812 805
Interest 3,177 2,378
Provision for consumer finance credit losses 87 72
Other operating 756 645
- ------------------------------------------------------------------------------------------------
Total expenses 8,608 7,353
- ------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 1,760 1,347
Provision for income taxes 609 483
Minority interest, net of income taxes 58 49
- ------------------------------------------------------------------------------------------------
Net income $1,093 $ 815
================================================================================================
BASIC EARNINGS PER SHARE:
Net income $0.95 $0.71
================================================================================================
Weighted average common shares outstanding 1,116.2 1,103.9
================================================================================================
DILUTED EARNINGS PER SHARE:
Net income $0.91 $0.67
================================================================================================
Adjusted weighted average common shares outstanding 1,173.1 1,182.0
================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions of dollars)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
- --------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents (including segregated cash and other deposits) $ 3,943 $ 4,033
Investments 64,156 61,834
Securities borrowed or purchased under agreements to resell 115,936 109,734
Brokerage receivables 41,303 15,627
Trading securities and commodities owned 124,567 139,732
Net consumer finance receivables 11,144 10,816
Reinsurance recoverables 9,622 9,579
Value of insurance in force and deferred policy acquisition costs 2,868 2,812
Cost of acquired businesses in excess of net assets 3,425 3,446
Separate and variable accounts 12,943 11,319
Other receivables 7,695 5,733
Other assets 10,873 11,890
- --------------------------------------------------------------------------- --------------- --------------
Total assets $408,475 $386,555
=========================================================================== =============== ==============
LIABILITIES
Investment banking and brokerage borrowings $ 18,195 $ 11,464
Short-term borrowings 3,804 3,979
Long-term debt 29,288 28,352
Securities loaned or sold under agreements to repurchase 118,312 120,921
Brokerage payables 56,624 12,763
Trading securities and commodities sold not yet purchased 65,177 96,166
Contractholder funds 15,188 14,848
Insurance policy and claims reserves 43,766 43,782
Separate and variable accounts 12,932 11,309
Accounts payable and other liabilities 20,451 19,553
- --------------------------------------------------------------------------- --------------- --------------
Total liabilities 383,737 363,137
- --------------------------------------------------------------------------- --------------- --------------
Redeemable preferred stock - Series I 280 280
- --------------------------------------------------------------------------- --------------- --------------
TRV or subsidiary obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely junior subordinated debt
securities of -- TRV 1,200 1,000
- --------------------------------------------------------------------------- --------------- --------------
TAP 900 900
- --------------------------------------------------------------------------- --------------- --------------
Salomon Smith Barney 745 345
- --------------------------------------------------------------------------- --------------- --------------
STOCKHOLDERS' EQUITY
Preferred stock ($1.00 par value; authorized shares: 30 million), at
aggregate liquidation value 1,450 1,450
Common stock ($.01 par value; authorized shares: 1.5 billion;
issued shares: 1998 - 1,243,283,392 and 1997 - 1,234,204,094) 12 12
Additional paid-in capital 5,872 5,368
Retained earnings 16,369 15,451
Treasury stock, at cost (1998 - 91,338,990 shares and 1997 -
89,136,729 shares) (2,630) (2,183)
Accumulated other changes in equity from nonowner sources 1,115 1,147
Unearned compensation (575) (352)
- --------------------------------------------------------------------------- --------------- --------------
Total stockholders' equity 21,613 20,893
- --------------------------------------------------------------------------- --------------- --------------
Total liabilities and stockholders' equity $408,475 $386,555
=========================================================================== =============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(In millions of dollars)
THREE MONTHS ENDED MARCH 31, 1998 Amount Shares
- ------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
PREFERRED STOCK, AT AGGREGATE LIQUIDATION VALUE (in thousands)
Balance, beginning of year $ 1,450 4,900
- ------------------------------------------------------------------------ ----------------- -----------------
Balance, end of period $ 1,450 4,900
======================================================================== ================= =================
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year $ 5,380 1,234,204
Issuance of shares pursuant to employee benefit plans 330
Conversion of Series C Preferred Stock 153 6,942
Exercise of warrants 27 2,137
Other (6)
- ------------------------------------------------------------------------ ----------------- -----------------
Balance, end of period 5,884 1,243,283
- ------------------------------------------------------------------------ ----------------- -----------------
RETAINED EARNINGS
Balance, beginning of year 15,451
Net income 1,093
Common dividends (144)
Preferred dividends (31)
- ------------------------------------------------------------------------ -----------------
Balance, end of period 16,369
- ------------------------------------------------------------------------ -----------------
TREASURY STOCK, AT COST
Balance, beginning of year (2,183) (89,137)
Issuance of shares pursuant to employee benefit plans, net of shares
tendered for payment of option exercise price and withholding taxes (25) 5,578
Treasury stock acquired (422) (7,780)
- ------------------------------------------------------------------------ ----------------- -----------------
Balance, end of period (2,630) (91,339)
- ------------------------------------------------------------------------ ----------------- -----------------
ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of year 1,147
Net change in unrealized gains and losses on investment securities,
net of tax (36)
Net translation adjustments, net of tax 4
- ------------------------------------------------------------------------ -----------------
Balance, end of period 1,115
- ------------------------------------------------------------------------ -----------------
UNEARNED COMPENSATION
Balance, beginning of year (352)
Issuance of restricted stock, net of amortization (223)
- ------------------------------------------------------------------------ -----------------
Balance, end of period (575)
- ------------------------------------------------------------------------ -----------------
TOTAL COMMON STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING 20,163 1,151,944
======================================================================== ================= =================
TOTAL STOCKHOLDERS' EQUITY $21,613
======================================================================== =================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In millions of dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 1997
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,093 $815
Amortization of deferred policy acquisition costs and value of insurance in force 363 354
Additions to deferred policy acquisition costs (418) (446)
Other non cash changes 148 188
Changes in:
Trading securities and commodities, net (15,824) (2,338)
Securities borrowed, loaned and repurchase agreements, net (8,811) 101
Brokerage receivables net of brokerage payables 18,185 (1,232)
Other, net (170) (75)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (5,434) (2,633)
- --------------------------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Consumer loans originated or purchased (1,387) (1,044)
Consumer loans repaid or sold 1,018 666
Purchases of fixed maturities and equity securities (6,821) (7,083)
Proceeds from sales of investments and real estate:
Fixed maturities available for sale and equity securities 4,776 6,278
Mortgage loans - 23
Real estate and real estate joint ventures 106 16
Proceeds from maturities of investments:
Fixed maturities 847 874
Mortgage loans 374 149
Other investments, primarily short-term, net (866) (579)
Assets securing collateralized mortgage obligations 31 17
Other, net (44) (132)
- --------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by (used in) investing activities (1,966) (815)
- --------------------------------------------------------------------------------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (175) (149)
Issuance of redeemable preferred stock of subsidiaries 600 -
Treasury stock acquired (422) (248)
Stock tendered for payment of withholding taxes (315) (97)
Issuance of long-term debt 2,182 2,511
Payments and redemptions of long-term debt (1,230) (1,522)
Net change in short-term borrowings (including investment banking and brokerage
borrowings) 6,556 2,860
Collateralized mortgage obligations (55) (17)
Contractholder fund deposits 1,213 798
Contractholder fund withdrawals (879) (727)
Other, net (165) (12)
- --------------------------------------------------------------------------------------- ----------- -----------
Net cash provided by (used in) financing activities 7,310 3,397
- --------------------------------------------------------------------------------------- ----------- -----------
Change in cash and cash equivalents (90) (51)
Cash and cash equivalents at beginning of period 4,033 3,260
- --------------------------------------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of period $3,943 $ 3,209
- --------------------------------------------------------------------------------------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 329 $ 273
======================================================================================= =========== ===========
</TABLE>
Interest expense recorded for financial statement purposes did not differ
materially from the amount of interest paid.
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
TRAVELERS GROUP INC. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
The accompanying condensed consolidated financial statements as of March 31,
1998 and for the three-month period ended March 31, 1998 and 1997 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 condensed consolidated financial
statements, including the notes thereto, 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,
1997.
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.
2. PENDING MERGER
--------------
On April 5, 1998, TRV and Citicorp agreed to combine in a merger of equals,
with the stockholders of each company owning approximately 50% of the
outstanding common stock of the combined company after the merger.
TRV's stockholders will retain their existing shares, which will
automatically represent shares of Citigroup Inc., the new name of
TRV following the merger. Each share of Citicorp Common Stock will be
exchanged for 2.5 shares of Citigroup Common Stock. The transaction will
be effected through a merger of Citicorp into a newly formed, wholly owned
subsidiary of TRV. The merger, which is anticipated to be completed
in the third quarter of 1998, is expected to be accounted for under the
pooling of interests method, and, accordingly, the Company's historical
consolidated financial statements presented in future reports will be
restated to include the accounts and results of Citicorp. The merger and/or
related transactions are subject to customary closing conditions, including
regulatory approvals and the affirmative vote of a majority of the
stockholders of each of TRV and Citicorp.
TRV has applied to the Federal Reserve Board to become a bank holding
company under the provisions of the Bank Holding Company Act of 1956 (the
BHCA). A bank holding company and its affiliates may not engage in
activities that are not permissible under the BHCA, including, generally,
insurance underwriting. However, under present rules the Company's existing
businesses can be retained and operated for at least a two-year period after
the Merger (the BHCA Compliance Period), which may be extended for three
additional one-year periods by the Federal Reserve Board if, in its
judgment, an extension would not be detrimental to the public interest.
Upon consummation of the Merger, and as a direct result of TRV becoming a
bank holding company, the BHCA will impose certain restrictions on the
Company's operations going forward, including the ability to make
acquisitions of certain insurance underwriters. It is not expected that such
restrictions will impede the Company's existing businesses in any material
respect or preclude the Company from expanding its existing insurance
underwriting activities (other than by acquisition of certain insurance
underwriters). At this time, the Company believes that its compliance with
applicable law following the Merger will not have a material adverse effect
on the Company's financial condition or results of operations.
There is pending federal legislation that would, if enacted, amend the BHCA
to authorize a bank holding company to own certain insurance underwriters.
There is no assurance that such legislation will be enacted. At the
expiration of the BHCA Compliance Period, the Company will evaluate its
alternatives in order to comply with whatever laws are then applicable.
7
<PAGE>
3. MERGER WITH SALOMON
-------------------
On November 28, 1997, a newly formed wholly owned subsidiary of TRV merged
with and into Salomon Inc (Salomon) (the Salomon Merger). Thereafter, Smith
Barney Holdings Inc. (Smith Barney), a wholly owned subsidiary of TRV, was
merged with and into Salomon to form Salomon Smith Barney Holdings Inc.
(Salomon Smith Barney), which is the primary vehicle through which the
Company engages in investment banking, proprietary trading, retail brokerage
and asset management. The Salomon Merger was accounted for as a pooling of
interests and constituted a tax-free exchange. As a result of the Salomon
Merger, Salomon Smith Barney recorded in the fourth quarter of 1997 a
restructuring charge of $838 million ($496 million after tax). This
restructuring charge reflects severance and other termination-related costs
to be incurred in connection with staff reductions ($161 million), costs in
connection with planned abandonment of certain facilities, premises and
other assets ($663 million), and other costs related directly to the Salomon
Merger ($14 million). At March 31, 1998, the reserve balance associated with
the above charge was $729 million, reflecting $109 million of charges
principally related to severance costs.
4. CHANGES IN ACCOUNTING PRINCIPLES AND ACCOUNTING STANDARDS NOT YET ADOPTED
-------------------------------------------------------------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 127, "Deferral of the Effective Date of
Certain Provisions of SFAS 125," which was effective for transfers and
pledges of certain financial assets and collateral made after December 31,
1997. The adoption of FAS No. 127 created additional assets and liabilities
on the Company's condensed consolidated statement of financial position
related to the recognition of securities provided and received as
collateral. At March 31, 1998, the impact of FAS No. 127 on the Company's
condensed consolidated statement of financial position was an increase to
total assets and liabilities of approximately $15 billion. In addition,
as a result of FAS No. 127, certain inventory positions, primarily, "Non-
U.S. government and government agency securities" have been reclassified
to receivables or payables.
Effective January 1, 1998 the Company adopted FAS 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 an annual 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 changes in stockholders' equity
from nonowner sources. The accumulated balance of changes in equity from
nonowner sources is required to be displayed separately from retained
earnings and additional paid-in capital in the statement of financial
position. The adoption of FAS No. 130 resulted primarily in the Company
reporting unrealized gains and losses on investments in debt and equity
securities held by the insurance subsidiaries in changes in equity from
nonowner sources. The Company's total changes in equity from nonowner
sources is as follows:
Three Months Ended
March 31,
--------------------------
(millions) 1998 1997
--------- --------
Net income $1,093 $815
Other changes in equity from nonowner sources (32) (609)
--------- --------
Total changes in equity from nonowner sources $1,061 $206
========= ========
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use and for
determining when specific costs should be capitalized and when they should
be expensed. SOP 98-1 is effective for financial statements for fiscal years
beginning after December 15, 1998. Restatement of previously issued
financial statements is not allowed. The Company has not yet determined the
impact that SOP 98-1 will have on its consolidated financial statements or
when it will be implemented.
8
<PAGE>
5. EARNINGS PER SHARE
------------------
Three months ended
March 31,
------------------------------
(in millions, except per share amounts) 1998 1997
----------- -----------
Net income $1,093 $ 815
Preferred dividends (31) (36)
----------- -----------
Net income available to common stockholders for
basic EPS 1,062 779
Effect of dilutive securities 6 10
----------- -----------
Net income available to common stockholders
for diluted EPS $1,068 $ 789
=========== ===========
Weighted average common shares
outstanding applicable to basic EPS 1,116.2 1,103.9
Effect of dilutive securities:
Convertible securities 13.2 26.7
Employee stock plans 37.6 44.4
Warrants 6.1 7.0
----------- -----------
Adjusted weighted average common shares
outstanding applicable to diluted EPS 1,173.1 1,182.0
=========== ===========
Basic earnings per share $ 0.95 $ 0.71
=========== ===========
Diluted earnings per share $ 0.91 $ 0.67
=========== ===========
6. DEBT
----
Investment banking and brokerage borrowings consisted of the following:
(MILLIONS) MARCH 31, 1998 December 31, 1997
---------- -------------------- --------------------
Commercial paper $13,182 $ 7,110
Bank borrowings 2,271 2,415
Other 2,742 1,939
--------- ---------
$18,195 $11,464
========= =========
Investment banking and brokerage borrowings are short-term in nature and
include commercial paper, bank borrowings and other borrowings, such as
deposit liabilities, used to finance Salomon Smith Barney's operations,
including the securities settlement process. Outstanding bank borrowings
include both U.S. dollar and non-U.S. dollar denominated loans. The
non-U.S. dollar loans are denominated in multiple currencies including
Japanese yen, German mark and U.K. sterling. All commercial paper
outstanding at March 31, 1998 and December 31, 1997 was U.S. dollar
denominated.
Salomon Smith Barney has a $1.250 billion revolving credit agreement with a
bank syndicate that extends through May 2000, and a $750 million 364-day
revolving credit agreement that extends through May 1998. Salomon Smith
Barney may borrow under its revolving credit facilities at various interest
rate options (LIBOR, CD or base rate) and compensates the banks for the
facilities through commitment fees. Under these facilities Salomon Smith
Barney is required to maintain a certain level of consolidated adjusted net
worth (as defined in the agreements). At March 31, 1998, this requirement
was exceeded by approximately $3.0 billion. At March 31, 1998, there were no
borrowings outstanding under either facility.
9
<PAGE>
Salomon Brothers Inc (SBI), an indirect wholly owned subsidiary of Salomon
Smith Barney, has a $2.1 billion committed secured standby bank credit
facility for financing securities positions. The facility contains certain
restrictive covenants that require, among other things, that SBI maintain
minimum levels of excess net capital and net worth (as defined in the
agreement). At March 31, 1998, SBI's excess net capital exceeded the minimum
required under the facility by $531 million and SBI's net worth exceeded the
minimum amount required by $976 million. Salomon Brothers International
Limited (SBIL), an indirect wholly owned subsidiary of Salomon Smith Barney,
has a $1.0 billion committed securities repurchase facility. The facility is
subject to restrictive covenants including a requirement that SBIL maintain
minimum levels of tangible net worth and excess financial resources (as
defined in the agreement). At March 31, 1998, SBIL exceeded these
requirements by $4.3 billion and $566 million, respectively. At March 31,
1998, there were no outstanding borrowings under either facility.
In the second quarter of 1998, Salomon Smith Barney expects to increase the
amount available under its committed uncollateralized revolving lines of
credit to $5.0 billion and terminate the facilities for SBI and SBIL.
Salomon Smith Barney also has substantial borrowing arrangements consisting
of facilities that it has been advised are available, but where no
contractual lending obligation exists.
Short-term borrowings consisted of commercial paper outstanding as follows:
(MILLIONS) MARCH 31, 1998 December 31, 1997
---------- -------------- -----------------
Commercial Credit Company $3,776 $3,871
Travelers Property Casualty Corp. 28 108
-------- -------
$3,804 $3,979
======== =======
Long-term debt, including its current portion, consisted of the following:
(MILLIONS) MARCH 31, 1998 December 31, 1997
---------- -------------- -----------------
Travelers Group Inc. $ 2,227 $ 1,695
Commercial Credit Company 6,400 6,300
Salomon Smith Barney Holdings Inc. 19,373 19,064
Travelers Property Casualty Corp. 1,250 1,249
The Travelers Insurance Group Inc. 38 44
--------- --------
$ 29,288 $ 28,352
========= ========
TRV, Commercial Credit Company (CCC), Travelers Property Casualty Corp.
(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 (LIBOR, CD, base rate or money
market) and compensates the banks for the facilities through commitment
fees.
TRV, CCC and TIC have a five-year revolving credit facility which expires in
June 2001 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 facility is limited to $250 million. At March 31, 1998, $500 million
was allocated to TRV, $450 million was allocated to CCC and $50 million was
allocated to TIC. Under this facility, the Company is required to maintain a
certain level of consolidated stockholders' equity (as defined in the
agreement). At March 31, 1998, this requirement was exceeded by
approximately $11 billion. At March 31, 1998, there were no borrowings
outstanding under this facility.
10
<PAGE>
At March 31, 1998, CCC also had a committed and available revolving credit
facility on a stand-alone basis of $4.4 billion, of which $3.4 billion
expires in 2002 and $1.0 billion in July 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 March 31, 1998, CCC would have been able to remit
$622 million 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 March 31, 1998, this requirement
was exceeded by approximately $3.6 billion. At March 31, 1998, 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 subsidiaries are limited to $805 million in 1998
without the prior approval of the Connecticut Insurance Department. TAP
received $110 million of dividends from its insurance subsidiaries during
the first three months of 1998.
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 $551 million of statutory
surplus is available in 1998 for such dividends without the prior approval
of the Connecticut Insurance Department, of which $110 million has been paid
during the first three months of 1998.
7. TRADING DERIVATIVES
-------------------
The following table discloses the notional amounts of derivative financial
instruments held by Salomon Smith Barney for trading purposes as of March
31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
MARCH 31, 1998 December 31, 1997
------------------------------ ---------------------------
CURRENT MARKET OR Current Market or
FAIR VALUE Fair Value
NOTIONAL -------------------- Notional --------------------
(billions) AMOUNTS ASSETS LIABILITIES Amounts Assets Liabilities
- ------------------------------------------------ -------- -------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Exchange-issued products:
Futures contracts (a) $987.2 $ - $ - $940.5 $ - $ -
Other exchange-issued products:
Equity contracts 9.7 0.2 0.5 10.6 0.2 0.4
Fixed income contracts 225.4 0.1 0.1 138.1 - -
Commodities contracts 3.0 - - 3.5 - -
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Total exchange-issued products 1,225.3 0.3 0.6 1,092.7 0.2 0.4
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Over-the-counter swaps, swap options,
caps and floors:
Swaps 1,507.8 1,328.3
Swaps options written 48.1 38.6
Swap options purchased 57.0 48.8
Caps and floors 167.8 161.4
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Total OTC swaps, swap options, caps and floors 1,780.7 6.1 7.0 1,577.1 5.8 6.7
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
OTC foreign exchange contracts and options:
Forward currency contracts 136.8 1.2 1.1 111.3 1.0 1.0
Options written 51.7 - 0.5 41.3 - 0.6
Options purchased 44.8 0.6 - 37.7 0.6 -
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Total OTC foreign exchange contracts and 233.3 1.8 1.6 190.3 1.6 1.6
options
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Other options and contractual commitments:
Options and warrants on equities and equity
indices 64.7 2.7 3.4 54.8 1.8 2.7
Options and forward contracts on
fixed-income securities 468.6 0.2 0.2 343.4 0.3 0.1
Commodities contracts 12.1 0.3 0.2 14.3 0.4 0.2
- ------------------------------------------------ -------- -------- ---------- --------- -------- ---------
Total contractual commitments $3,784.7 $11.4 $13.0 $3,272.6 $10.1 $11.7
================================================ ======== ======== ========== ========= ======== =========
</TABLE>
(a) Margin on futures contracts is included in brokerage receivables/payables on
the Condensed Consolidated Statement of Financial Condition.
11
<PAGE>
8. MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
----------------------------------------------------------------
In January 1998, Travelers Capital IV, a wholly owned subsidiary trust of
TRV, issued 8 million 6.850% Trust Preferred Securities (the TRV IV
Preferred Securities) with a liquidation preference of $25 per TRV IV
Preferred Security to the public and 247,440 common securities to TRV, the
proceeds of which were invested by Travelers Capital IV in $206 million of
6.850% Junior Subordinated Deferrable Interest Debentures issued by TRV (the
TRV Debentures). The $206 million of TRV Debentures is the sole asset of
Travelers Capital IV. The TRV Debentures mature on January 22, 2038 and are
redeemable by TRV in whole or in part at any time after January 22, 2003.
Travelers Capital IV will use the proceeds from any such redemption to
redeem a like amount of TRV IV Preferred Securities and common securities.
Distributions on the TRV IV Preferred Securities and common securities are
cumulative and payable quarterly in arrears. TRV's obligations under the
agreements that relate to the TRV IV Preferred Securities, the Trust and the
TRV Debentures constitute a full and unconditional guarantee by TRV of the
Trust's obligations under the TRV IV Preferred Securities.
In January 1998, SSBH Capital I, a wholly owned subsidiary trust of Salomon
Smith Barney, issued 16 million 7.2% Trust Preferred Securities (SSBH
Capital Preferred Securities) with a liquidation preference of $25 per SSBH
Capital Preferred Security to the public and 494,880 common securities to
Salomon Smith Barney, the proceeds of which were invested by SSBH Capital I
in $412 million of 7.2% Subordinated Deferrable Interest Debentures issued
by Salomon Smith Barney (the Salomon Smith Barney Debentures). The $412
million of Salomon Smith Barney Debentures is the sole asset of SSBH Capital
I. The Salomon Smith Barney Debentures mature on January 28, 2038 and are
redeemable by Salomon Smith Barney in whole or in part at any time after
January 28, 2003. SSBH Capital I will use the proceeds from any such
redemption to redeem a like amount of SSBH Capital Preferred Securities and
common securities. Distributions on the SSBH Capital Preferred Securities
and common securities are cumulative and payable quarterly in arrears.
Salomon Smith Barney's obligations under the agreements that relate to the
SSBH Capital Preferred Securities, the Trust and the Salomon Smith Barney
Debentures constitute a full and unconditional guarantee by Salomon Smith
Barney of the Trust's obligations under the SSBH Capital Preferred
Securities.
9. CONTINGENCIES
-------------
It is difficult to estimate the reserves for environmental and
asbestos-related claims due to the vagaries of court coverage decisions,
plaintiffs' expanded theories of liability, the risks inherent in major
litigation and other uncertainties. Conventional actuarial techniques are
not used to estimate such reserves.
The reserves carried for environmental and asbestos claims at March 31, 1998
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 Superfund and
other 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 is not likely that these claims
will have a material adverse effect on the Company's financial condition or
liquidity.
In the ordinary course of business TRV and/or its subsidiaries are also
defendants or co-defandants 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.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended March 31,
------------------------------
(in millions, except per share amounts) 1998 1997
- -------------------------------------------- --------- ---------
Revenues $ 10,368 $ 8,700
========= ==========
Net income $ 1,093 $ 815
========= ==========
Earnings per share:
Basic $ 0.95 $ 0.71
========= ==========
Diluted $ 0.91 $ 0.67
========= ==========
Weighted average common shares
outstanding (Basic) 1,116.2 1,103.9
========= ==========
Adjusted weighted average common shares
outstanding (Diluted) 1,173.1 1,182.0
========= ==========
RESULTS OF OPERATIONS
Consolidated results of operations include the accounts of TRV and its
subsidiaries (collectively, the Company). Consolidated net income for the
quarter ended March 31, 1998 was $1.093 billion, and includes reported
investment portfolio gains of $86 million after tax and minority interest. This
compares with net income of $815 million in the 1997 period, which included
reported investment portfolio gains of $9 million after tax. Excluding portfolio
gains and losses, income from operations for the first quarter of 1998 increased
$201 million or 25% over the comparable period in 1997, reflecting improved
performance at all business units.
The following discussion presents in more detail each segment's performance.
SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
------------------------------------------------------------------
INVESTMENT SERVICES
Three Months Ended March 31,
---------------------------------------------
1998 1997
- --------------------------------- ---------------------- ----------------------
(millions) REVENUES NET INCOME Revenues Net Income
- --------------------------------- ---------- ----------- ---------- -----------
Investment banking and brokerage $5,832 $443 $4,691 $368
Asset management 225 60 186 44
- --------------------------------- ---------- ----------- ---------- -----------
Salomon Smith Barney $6,057 $503 $4,877 $412
================================= ========== =========== ========== ===========
Salomon Smith Barney reported net income of $503 million for the quarter ended
March 31, 1998, an increase of 22% from the $412 million reported for the
quarter ended March 31, 1997. Revenues, net of interest expense, increased 16%
to $3.134 billion in the 1998 quarter compared to $2.708 billion in the 1997
quarter. Salomon Smith Barney's return on equity was 23.1% in the first quarter
of 1998, up from 21.7% in the first quarter of 1997 and significantly better
than the 12.5% in the fourth quarter of 1997. The pretax profit margin was 25.9%
in the first quarter of 1998, significantly improved from 16.6% in the fourth
quarter of 1997.
13
<PAGE>
SALOMON SMITH BARNEY REVENUES
Three Months ended March 31,
---------------------------
(millions) 1998 1997
- -------------------------------------------- ------------- -------------
Commissions $ 795 $ 716
Investment banking 628 484
Principal transactions 780 762
Asset management and administration fees 498 389
Interest income, net* 395 322
Other income 38 35
- -------------------------------------------- ------------- -------------
Net revenues* $3,134 $2,708
============================================ ============= =============
* Net of interest expense of $2.923 billion and $2.169 billion for the
three-month period ended March 31, 1998 and 1997, respectively. Revenues
included in the condensed consolidated statement of income are before
deductions for interest expense.
Commission revenues increased 11% to $795 million in the first quarter of 1998
from $716 million in the first quarter of 1997. This increase is a result of
strong activity in sales of listed and over-the-counter securities and mutual
fund commissions.
Investment banking revenues increased 30% to $628 million in the first quarter
of 1998 up from $484 million in the first quarter of 1997. The increase in
investment banking revenues is primarily attributable to an increase in merger
and acquisition advisory fees as well as revenue growth from unit trust,
equities, high yield and investment grade debt underwriting.
Principal transaction revenues were $780 million in the first quarter of 1998,
up slightly from $762 million in the first quarter of 1997. The increase in
principal transaction revenues was a result of higher revenues from commodities
trading conducted by Phibro Inc. and was somewhat offset by a decline in
equities trading.
Asset management and administration fees increased 28% to $498 million in the
first quarter of 1998, up from $389 million in the first quarter of 1997. This
reflects broad growth in all recurring fee-based products. At March 31, 1998,
internally managed assets were $178.3 billion and total assets under fee-based
management were $245.4 billion compared to $139.2 billion and $185.9 billion,
respectively, at March 31, 1997.
Net interest and dividends increased 23% to $395 million in the first
quarter of 1998, up from $322 million in the first quarter of 1997.
Compensation and benefits expense, as a percentage of net revenues, for the
first quarter of 1998 was 54.9% compared to 54.6% in the first quarter of 1997
and non-compensation expense as a percentage of net revenues was 19.2% in the
1998 quarter compared to 20.3% in the 1997 quarter. Salomon Smith Barney
continues to maintain its focus on controlling fixed expenses.
14
<PAGE>
ASSETS UNDER FEE-BASED MANAGEMENT
At March 31,
----------------------------
(billions) 1998 1997
- --------------------------------------------- ----------------------------
Money market funds $ 51.6 $ 43.9
Mutual funds 56.0 40.5
Managed accounts 57.4 46.3
-------- --------
Salomon Smith Barney Asset Management 165.0 130.7
Financial Consultant managed accounts 13.3 8.5
-------- --------
Total internally managed accounts 178.3 139.2
Consulting Group externally managed assets 67.1 46.7
-------- --------
Total assets under fee-based management $245.4 $185.9
======== ========
Although included in Salomon Smith Barney's overall results, the following
highlights the revenues and operating earnings of the asset management division:
At March 31,
----------------------------
(millions) 1998 1997
- --------------------------------------------- ----------------------------
Revenues:
Investment advisory, administration and
distribution fees $202 $168
Unit Investment Trust revenues - net 13 9
Other revenues 10 9
------- ------
Total revenues $225 $186
======= ======
Operating earnings $ 60 $ 44
======= ======
The division's 36% increase in earnings reflects continued strength in mutual
funds, managed accounts, and its share of unit trust revenues, as well as the
acquisition of $5.9 billion of Common Sense(R) Trust assets at year-end 1997.
Assets under fee-based management for Salomon Smith Barney Asset Management
break down to 31% in money market funds, 34% in mutual funds and 35% in accounts
managed for high net worth individuals, pension funds, corporations and other
institutions. Investment advisory, administration and distribution fees rose 20%
to $202 million in the first quarter of 1998, reflecting a 26% increase in
assets under fee-based management from the comparable period last year.
In the mutual fund sector, there was a significant increase not only in dollar
inflows but also in performance, with the number of Morningstar 4- and 5- star
funds rising to 23, up from 15 in the prior year period.
New products successfully introduced include the Total Return Bond Fund as well
as a unit investment trust consisting of Real Estate Investment Trusts.
15
<PAGE>
CONSUMER FINANCE SERVICES
Three Months Ended March 31,
-----------------------------------------------
(millions) 1998 1997
- --------------------------- ---------- ------------ ---------- ------------
REVENUES NET INCOME Revenues Net income
- --------------------------- ---------- ------------ ---------- ------------
Consumer Finance Services $485 $60 $377 $47
=========================== ========== ============ ========== ============
Earnings in the first quarter of 1998 were $60 million compared to $47 million
in the first quarter of 1997. This segment's performance, in a traditionally
slow quarter, reflects the integration of Security Pacific Financial Services
(Security Pacific) into the Commercial Credit branch system since July 1997,
continued internal receivables growth and an improved charge-off rate.
Net receivables owned reached a record $11.4 billion, up 35% from the prior year
period and up $335 million or 3% since year-end 1997. This excludes $255.1
million in credit card receivables securitized on March 6, 1998. Most of the
receivables growth was in real estate-secured loans, which reflects the strength
of this product among Primerica Financial Services (PFS) representatives. On a
managed basis, including securitized assets, receivables totaled $11.6 billion,
an increase of $404 million from year-end 1997.
During the first quarter of 1998, the average yield on owned receivables was
14.18%, down from 14.65% in the first quarter of 1997, reflecting the shift in
the portfolio mix toward lower-risk real estate loans which have lower margins.
At March 31, 1998, the owned portfolio consisted of 47% real estate-secured
loans, 35% personal loans, 11% credit cards and 7% sales finance and other.
Delinquencies in excess of 60 days on owned receivables were 2.33% at March 31,
1998, down slightly from 2.35% at year-end 1997, but up from 2.25% at March 31,
1997. The charge-off rate on owned receivables of 2.75% in the first quarter of
1998 was improved from the 2.95% rate in the first quarter of 1997. As expected,
it was up from the 2.42% rate in the fourth quarter of 1997, which contained a
short-term benefit from the transition of Security Pacific's portfolio to the
Company's charge-off policies. The charge-off rate is expected to return to
lower levels during the second half of 1998.
As of, or for, the
Three Months Ended March 31,
-------------- ---------------
1998 1997
-------------- ---------------
Allowance for credit losses as a %
of net outstandings 2.91% 2.97%
Charge-off rate for the period 2.75% 2.95%
60 + days past due on a contractual
basis as a % of gross consumer
finance receivables at quarter end 2.33% 2.25%
16
<PAGE>
LIFE INSURANCE SERVICES
Three Months Ended March 31,
----------------------------------------------
(millions) 1998 1997
- -------------------------------- ---------- ------------ ---------- ------------
REVENUES NET INCOME Revenues Net income
- -------------------------------- ---------- ------------ ---------- ------------
Travelers Life and Annuity (1) $ 772 $168 $618 $ 105
Primerica Financial Services (2) 401 95 375 79
- -------------------------------- ---------- ------------ ---------- ------------
Total Life Insurance Services $ 1,173 $263 $993 $ 184
================================ ========== ============ ========= ============
(1) Net income includes $50 million and $4 million of reported investment
portfolio gains in 1998 and 1997, respectively.
(2) Net income includes $1 million of reported investment portfolio gains
in 1997.
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. It also provides group pension
products, including guaranteed investment contracts, and group annuities to
employer-sponsored retirement and savings plans. These products are primarily
marketed through The Copeland Companies (Copeland), an indirect wholly owned
subsidiary of TIC, Salomon Smith Barney Financial Consultants and a nationwide
network of independent agents. The majority of the annuity business and a
substantial portion of the life business written by Travelers Life and Annuity
is accounted for as investment contracts, with the result that the premium
deposits collected are not included in revenues.
Earnings before portfolio gains increased 17% to $118 million in the first
quarter of 1998, from $101 million in the comparable 1997 period. These record
earnings were largely driven by strong investment income and double-digit growth
in individual and group annuity account balances as well as long-term care
premiums. Positive earnings momentum attributable to strong sales growth of less
capital-intensive products - including variable life insurance and annuities -
continues to be partially offset by a gradual decline in the amount of higher
margin business written in prior years.
In deferred annuities, significant sales through Salomon Smith Barney Financial
Consultants and Copeland, combined with favorable market returns from variable
annuities, drove account balances to $17.5 billion at March 31, 1998, up 29% or
$4.0 billion from a year ago. Net written premium and deposits for the quarter
were up 43% to $819.8 million, of which more than 80% was generated by
cross-selling through Salomon Smith Barney Financial Consultants and Copeland.
Net written premium and deposits through Salomon Smith Barney rose 94% to $348
million, reflecting the momentum of a fourth quarter 1997 cross-selling
initiative, while Copeland's net written premium and deposits increased 31% to
$319 million, reflecting growth in its core business and continued success with
the Salomon Smith Barney joint venture in the small company segment of the
401(k) market.
Payout and group annuity account balances and benefit reserves reached $12.2
billion at March 31, 1998, up 10% from a year ago. The revitalization of this
business is reflected in the 33% increase in net written premiums and deposits
(excluding the Company's employee pension plan deposits) in the first quarter of
1998 to $859.9 million, up from $647.1 million in the comparable 1997 period.
For individual life insurance, net written premiums and deposits in the first
quarter of 1998 were $85.2 million, up 22% from $69.8 million in the first
quarter of 1997. Single deposits doubled to $23.8
17
<PAGE>
million, and new periodic premium sales increased 22%, reflecting a doubling
of sales at Salomon Smith Barney. For the first quarter of 1998, sales by
Salomon Smith Barney increased to over 40% of new periodic premium and single
deposits. Life insurance in force was $52.4 billion at March 31, 1998, up
$1.9 billion from a year ago.
Earned premiums for the growing long-term care insurance product line increased
31% to $45.6 million in the first quarter of 1998 from $34.9 million in the
first quarter of 1997. During the first quarter of 1998 sales through Salomon
Smith Barney increased to over 15% of total sales.
PRIMERICA FINANCIAL SERVICES
Earnings before portfolio gains for the first quarter of 1998 increased 21% to
$95 million from $78 million in the first quarter of 1997, reflecting continued
success at cross-selling a range of products, growth in life insurance in force,
favorable mortality experience and disciplined expense management.
Life insurance in force reached a record $372.5 billion at March 31, 1998, up 3%
from the prior year quarter, reflecting good policy persistency and stable sales
growth. New term life insurance sales during the first quarter of 1998 were
$13.0 billion in face value, up from $12.0 billion in the first quarter of 1997.
Although the number of policies issued declined quarter-over-quarter, the
average face amount per policy issued during the first quarter of 1998 rose 16%
to $222,600.
Cross-selling ventures demonstrated continued success. During the first quarter
of 1998, earnings related to the distribution of non-life insurance products
accounted for $19.6 million, or 21%, of PFS's operating earnings, an increase of
39% from the prior year quarter.
Sales of mutual funds (at net asset value) were $768.7 million for the first
quarter of 1998, a 6% increase over first quarter 1997 sales of $722.0 million
despite some softness in the Canadian mutual fund market. During the first
quarter 1998, Salomon Smith Barney funds accounted for almost 60% of PFS's U.S.
sales and approximately 44% of total sales.
Cash advanced on $.M.A.R.T. loan(R) and $.A.F.E.(R) loan products underwritten
by Commercial Credit was up 15% to $332.5 million in the first quarter of 1998.
The TRAVELERS SECURE(R) line of property and casualty insurance products showed
strong growth, with premiums up almost four-fold to $38 million and the number
of policies sold in the first quarter of 1998 up 123% to 37,192. The number of
agents licensed to sell auto and homeowners insurance jumped 51% to over 10,000
people. Variable annuity sales also climbed, reaching net written premiums and
deposits of $126.3 million in the first quarter of 1998.
One of the primary factors in PFS's cross-selling success, the FINANCIAL NEEDS
ANALYSIS, continues to help the company's Personal Financial Analysts define and
address their client's needs. More than 140,000 FNA'S were submitted in the
quarter of 1998, indicating the potential that more than one-half million people
will have an analysis done for them before year-end 1998.
18
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------- -------------------
(millions) 1998 1997
- ------------------------------------------------ ----------------------- -------------------
NET Net
INCOME income
REVENUES (LOSS) Revenues (loss)
- ------------------------------------------------ ---------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Commercial (1) (2) $1,697 $260 $ 1,624 $201
Personal (1) (3) 893 116 805 105
Financing costs and other (1) 4 (29) 2 (33)
Minority interest - (58) - (49)
- ------------------------------------------------ ---------- ------------ ---------- --------
Total Property & Casualty Insurance Services $2,594 $289 $2,431 $224
================================================ ========== ============ ========== ========
</TABLE>
(1) Before minority interest.
(2) Net income includes $35 million and $8 million of reported investment
portfolio gains in 1998 and 1997, respectively.
(3) Net income includes $8 million of reported investment portfolio gains
in 1998 and $3 million of reported investment portfolio losses in 1997.
Earnings before portfolio gains and minority interest increased 13% to $304
million in the first quarter of 1998 from $268 million in the first quarter of
1997. This increase in earnings was primarily the result of increased after-tax
net investment income and continued productivity improvements.
COMMERCIAL LINES
Earnings before portfolio gains increased 16% to $225 million in the first
quarter of 1998 from $193 million in the first quarter of 1997, primarily
reflecting continued expense savings, favorable loss experience and no
catastrophe losses in the first quarter of 1998 versus $4.9 million in
catastrophe losses, after taxes and reinsurance, in the prior year period.
Commercial Lines net written premiums for the first quarter of 1998 totaled
$1.212 billion, compared to $1.338 billion in the first quarter of 1997. The
first quarter of 1997 net written premiums included an adjustment of $142
million due to a change to conform the Aetna P&C method with The Travelers
Indemnity Company and its subsidiaries (Travelers P&C) method of recording
certain net written premiums. Excluding this adjustment, net written premiums
increased slightly. Net written premiums continue to be unfavorably impacted by
the difficult pricing environment and also reflect the Company's disciplined
approach to underwriting and risk management.
Fee income for the first quarter of 1998 was $82 million, a $15 million decrease
from the first quarter of 1997. This decrease was the result of the depopulation
of involuntary pools as the loss experience of workers' compensation improved
and insureds moved to voluntary markets and the Company's continued success in
lowering workers' compensation losses of service customers, partially offset by
National Accounts writing of more service fee-based product versus premium-based
product.
National Accounts 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 sells claims and policy management services to workers'
compensation and automobile assigned risk plans, self-insurance pools throughout
the United States and to niche voluntary markets. National Accounts net written
premiums of $186.6 million for the first quarter of 1998 decreased $35 million
from the first quarter of 1997. This decrease was primarily
19
<PAGE>
the result of pricing declines due to the highly competitive marketplace, a
decrease in the Company's level of involuntary pool participation as well as
National Accounts writing less premium-based product versus service fee-based
product and the Company's continued disciplined approach to underwriting and
risk management. National Accounts new business and the business retention
ratio were moderately higher in the first quarter of 1998 than in the first
quarter of 1997, reflecting an increase in claim service-only business as
well as continued product development efforts, especially in workers'
compensation managed care programs.
Commercial Accounts serves mid-sized businesses through a network of independent
agents and brokers. Commercial Accounts net written premiums were $462.6 million
in the first quarter of 1998 compared to $560.5 million in the first quarter of
1997. The first quarter of 1997 net written premiums included an adjustment of
$127.0 million due to the change to conform the Aetna P&C method with the
Travelers P&C method of recording certain net written premiums. Excluding this
adjustment, net written premiums increased reflecting the continued growth
through programs designed to leverage underwriting experience in specific
industries, partially offset by pricing declines due to the highly competitive
marketplace and the Company's continued disciplined approach to underwriting and
risk management. Commercial Accounts new business in the first quarter of 1998
was moderately lower than in the first quarter of 1997, reflecting the Company's
focus on obtaining new accounts where it can maintain its selective underwriting
policy. Commercial Accounts business retention ratio was moderately higher in
the first quarter of 1998 than in the first quarter of 1997. 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 $378.6 million in the first quarter of
1998 compared to $363.7 million in the first quarter of 1997. The first quarter
1997 net written premiums included an adjustment of $15.0 million due to the
change to conform the Aetna P&C method with the Travelers P&C method of
recording certain net written premiums. Excluding this adjustment, the increase
in Select Accounts net written premiums reflects the continued benefit from the
broader industry and product line expertise of the combined company, partially
offset by the highly competitive marketplace and the Company's continued
disciplined approach to underwriting and risk management. New premium business
in Select Accounts was significantly higher in the first quarter of 1998
compared to the first quarter of 1997. The Select Accounts business retention
ratio remained strong in the first quarter of 1998 and was virtually the same as
the first quarter of 1997.
Specialty Accounts markets products to national, midsize and small customers,
including individuals, and distributes them through both wholesale brokers and
retail agents and brokers throughout the United States. Specialty Accounts net
written premiums were $184.0 million in the first quarter of 1998 compared to
$192.6 million in the first quarter of 1997. This decrease primarily reflects a
highly competitive marketplace and the Company's continued disciplined approach
to underwriting and risk management.
The statutory combined ratio (before policyholder dividends) for Commercial
Lines in the first quarter of 1998 was 106.8% compared to 109.1% in the first
quarter of 1997. The GAAP combined ratio (before policyholder dividends) for
Commercial Lines in the first quarter of 1998 was 108.1% compared to 107.4% in
the first quarter of 1997.
GAAP combined ratios for Commercial Lines differ from statutory combined ratios
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The 1997 first quarter statutory and GAAP combined ratios for Commercial Lines
include an adjustment due to a change to conform the Aetna P&C method with the
Travelers P&C method of
20
<PAGE>
recording certain net written premiums. Excluding this adjustment, the
statutory and GAAP combined ratios before policyholder dividends for the
first quarter of 1997 would have been 110.5% and 110.6%, respectively. The
decrease in the first quarter of 1998 statutory and GAAP combined ratios
compared to the first quarter of 1997 statutory and GAAP combined ratios
excluding this adjustment was due to lower catastrophe losses, continued
productivity improvements and favorable loss experience, partially offset by
lower fee income.
PERSONAL LINES
Earnings before portfolio gains/losses were $108 million in the first quarter of
1998, about equal with the first quarter of 1997. The 1998 results were driven
by growth in premium income and strong net investment income and were offset by
catastrophe losses, after taxes and reinsurance, of $8.6 million, compared to no
such losses in the 1997 quarter, and an increase in investments in service
centers and market expansions.
Total net written premiums in the first quarter of 1998 grew 14% over the prior
year to $806.0 million, excluding a one-time adjustment in 1997 of $68.7 million
due to a change in the quota share arrangement. This increase reflects growth in
target markets served by independent agents and growth in the affinity group
marketing, joint marketing arrangements and the TRAVELERS SECURE(R) program.
Business retention continued to be strong.
The statutory combined ratio for Personal Lines in the first quarter of 1998 was
93.2% compared to 90.1% in the 1997 first quarter. The GAAP combined ratio for
Personal Lines in the first quarter of 1998 was 92.3% compared to 88.6% in the
1997 first quarter.
GAAP combined ratios differ from statutory combined ratios for Personal Lines
primarily due to the deferral and amortization of certain expenses for GAAP
reporting purposes only.
The 1997 first quarter statutory and GAAP combined ratios for Personal Lines
include an adjustment associated with a change in the quota share arrangement.
Excluding this adjustment, the statutory and GAAP combined ratios for the first
quarter of 1997 would have been 89.8% and 91.2%, respectively. The increase in
the first quarter of 1998 statutory and GAAP combined ratios compared to the
first quarter of 1997 excluding this adjustment was primarily due to the higher
level of catastrophe losses and a decrease in favorable prior year reserve
development in the automobile bodily injury line.
FINANCING COSTS AND OTHER
The primary component of net income (loss) in the first quarter of 1998 was
interest expense of $27 million after tax, compared to $26 million after tax in
the first quarter of 1997, reflecting financing costs associated with the
acquisition of Aetna P&C.
ENVIRONMENTAL CLAIMS
The Company's reserves for environmental claims are not established on a
claim-by-claim basis. An aggregate bulk reserve is carried for all of the
Company's environmental claims that are in the dispute process, until the
dispute is resolved. This bulk reserve is established and adjusted based upon
the aggregate volume of in-process environmental claims and the Company's
experience in resolving such claims. At March 31, 1998, approximately 18% of the
net aggregate reserve (i.e., approximately $193 million) consists of case
reserve for resolved claims. The balance, approximately 82% of the net aggregate
reserve (i.e., approximately $887 million), is carried in a bulk reserve and
includes incurred but not reported environmental claims for which the Company
has not received any specific claims.
21
<PAGE>
The following table displays activity for environmental losses and loss expenses
and reserves for the three months ended March 31, 1998 and 1997.
ENVIRONMENTAL LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1998 March 31, 1997
------------------ ------------------
Beginning reserves:
Direct $1,193 $1,369
Ceded (74) (127)
--------- ---------
Net 1,119 1,242
Incurred losses and loss expenses:
Direct 20 18
Ceded (6) (1)
Losses paid:
Direct 75 50
Ceded (22) (4)
Ending reserves:
Direct 1,138 1,337
Ceded (58) (124)
--------- ---------
Net $1,080 $1,213
========= =========
ASBESTOS CLAIMS
At March 31, 1998, approximately 24% of the net aggregate reserve (i.e.,
approximately $261 million) is for pending asbestos claims. The balance,
approximately 76% (i.e., approximately $848 million) of the net aggregate
reserve, represents incurred but not reported losses for which the Company has
not received any specific claims.
The following table displays activity for asbestos losses and loss expenses and
reserves for the three months ended March 31, 1998 and 1997. In general, the
Company posts case reserves for pending asbestos claims within approximately 30
business days of receipt of such claims.
ASBESTOS LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1998 March 31, 1997
------------------ ------------------
Beginning reserves:
Direct $1,363 $1,443
Ceded (249) (370)
--------- ---------
Net 1,114 1,073
Incurred losses and loss expenses:
Direct 29 20
Ceded (12) (7)
Losses paid:
Direct 52 52
Ceded (30) (23)
Ending reserves:
Direct 1,340 1,411
Ceded (231) (354)
--------- ---------
Net $1,109 $1,057
========= =========
22
<PAGE>
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at March 31, 1998 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 Superfund and other 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, lead paint, pesticides, pharmaceutical products, silicone-based
personal products, solvents and other deleterious substances.
At March 31, 1998, approximately 18% of the net aggregate reserve (i.e.,
approximately $188 million) is for pending CIOTA claims. The balance,
approximately 82% (i.e., approximately $888 million) of the net aggregate
reserve, represents incurred but not 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 three months ended March 31, 1998 and 1997. In general, the
Company posts case reserves for pending CIOTA claims within approximately 30
business days of receipt of such claims.
23
<PAGE>
CIOTA LOSSES THREE MONTHS ENDED Three Months Ended
(millions) MARCH 31, 1998 March 31, 1997
------------------ ------------------
Beginning reserves:
Direct $1,520 $1,560
Ceded (432) (446)
--------- ---------
Net 1,088 1,114
Incurred losses and loss expenses:
Direct (3) 6
Ceded 7 -
Losses paid:
Direct 17 8
Ceded (1) (5)
Ending reserves:
Direct 1,500 1,558
Ceded (424) (441)
--------- ---------
Net $1,076 $1,117
========= =========
CORPORATE AND OTHER
Three Months Ended March 31,
------------------------- ------------------------
(millions) 1998 1997
- ---------------------------- ------------------------- ------------------------
NET INCOME Net income
REVENUES (EXPENSE) Revenues (expense)
- ---------------------------- ------------ ------------ ----------- ------------
Total Corporate and Other $59 $(22) $22 $(52)
============================ ============ ============ =========== ============
Net treasury and corporate staff expenses for the first quarter of 1998 were up
slightly from the prior year period. The decline in total operating expense for
the segment reflects income from the disposition of a real estate development
property.
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. At March 31, 1998, $500 million was allocated to TRV, $450
million was allocated to CCC and $50 million was allocated to TIC. Under this
facility, TRV is required to maintain a
24
<PAGE>
certain level of consolidated stockholders' equity (as defined in the
agreement). At March 31, 1998, this requirement was exceeded by approximately
$11 billion. At March 31, 1998, there were no borrowings outstanding under
this facility.
As of March 31, 1998, TRV had unused credit availability of $500 million under
the five-year revolving credit facility. TRV may borrow under this revolving
credit facility at various interest rate options (LIBOR, CD and base rate) and
compensates the banks for the facility through commitment fees.
COMMERCIAL CREDIT COMPANY (CCC)
CCC also issues commercial paper directly to investors and maintains unused
credit availability under committed revolving credit agreements at least equal
to the amount of commercial paper outstanding. As of March 31, 1998, CCC had
unused credit availability of $3.850 billion under five-year revolving credit
facilities, including the $450 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 (LIBOR, CD, base rate or money market) and
compensates the banks for the facilities through commitment fees.
CCC is limited by covenants in its revolving credit agreements as to the amount
of dividends and advances that may be made to its parent or its affiliated
companies. At March 31, 1998, CCC would have been able to remit $622 million to
its parent under its most restrictive covenants.
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. TAP may borrow under this
revolving credit facility at various interest rate options (LIBOR or base rate)
and compensates the banks for the facility through commitment fees. Under this
facility, TAP is required to maintain a certain level of consolidated
stockholders' equity (as defined in the agreement). At March 31, 1998, this
requirement was exceeded by approximately $3.6 billion. At March 31, 1998, 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 $805 million in 1998 without
prior approval of the Connecticut Insurance Department. TAP has received $110
million of dividends from its insurance subsidiaries during the first three
months of 1998.
SALOMON SMITH BARNEY
Salomon Smith Barney's total assets were $294 billion at March 31, 1998, up from
$277 billion at December 31, 1997. Due to the nature of trading activities,
including matched book activities, it is not uncommon for asset levels to
fluctuate from period to period. Salomon Smith Barney's balance sheet is highly
liquid, with the vast majority of its assets consisting of marketable securities
and collateralized short-term financing agreements arising from securities
transactions. The highly liquid nature of these assets provides Salomon Smith
Barney with flexibility in financing and managing its business. Salomon Smith
Barney monitors and evaluates the adequacy of its capital and borrowing base on
a daily basis in order to allow for flexibility in its funding, to maintain
liquidity and to ensure that its capital base supports the regulatory capital
requirements of its subsidiaries.
Salomon Smith Barney has a committed uncollateralized revolving line of credit
totaling $2.0 billion and may borrow under this revolving credit facility at
various interest rate options (LIBOR, CD or base rate) and compensate the banks
for the facility through commitment fees. In addition, Salomon Brothers Inc, a
25
<PAGE>
wholly owned subsidiary of Salomon Smith Barney, has a $2.1 billion committed
secured standby bank credit facility for financing securities positions which
enables it to borrow on a secured basis using a variety of financial instruments
as collateral and Salomon Brothers International Limited, a wholly owned
subsidiary of Salomon Smith Barney, has a committed securities repurchase
facility in the amount of $1 billion. At March 31, 1998, there were no
outstanding borrowings under these facilities. Salomon Smith Barney also has
substantial borrowing arrangements consisting of facilities that it has been
advised are available, but where no contractual lending obligation exists. These
arrangements are reviewed on an ongoing basis to ensure flexibility in meeting
short-term requirements.
In the second quarter of 1998, Salomon Smith Barney expects to increase the
amount available under its committed uncollateralized revolving lines of credit
to $5.0 billion and terminate the facilities for SBI and SBIL.
Unsecured term debt is a significant component of the Salomon Smith Barney's
long-term capital. Term debt totaled $19.4 billion at March 31, 1998, compared
with $19.1 billion at December 31, 1997.
Salomon Smith Barney's borrowing relationships are with a broad range of banks,
financial institutions and other firms from which it draws funds. The volume of
borrowings generally fluctuates in response to changes in the level of
securities inventories, customer balances, the amount of reverse repurchase
transactions outstanding (i.e., purchases of securities under agreements to
resell the same security) and securities borrowed transactions. As these
activities increase, borrowings generally increase to fund the additional
activities. Availability of financing can vary depending upon market conditions,
credit ratings and the overall availability of credit to the securities
industry. Salomon Smith Barney seeks to expand and diversify its funding mix as
well as its creditor sources. Concentration levels for these sources,
particularly for short-term lenders, are closely monitored both in terms of
single investor limits and daily maturities.
Salomon Smith Barney monitors liquidity by tracking asset levels, collateral and
funding availability to maintain flexibility to meet its financial commitments.
As a policy, Salomon Smith Barney attempts to maintain sufficient capital and
funding sources in order to have the capacity to finance itself on a fully
collateralized basis in the event that its access to uncollateralized financing
is impaired. Its liquidity management process includes a contingency funding
plan designed to ensure adequate liquidity even if access to uncollateralized
funding sources is severely restricted or unavailable. This plan is reviewed
periodically to keep the funding options current and in line with market
conditions. The management of this plan includes an analysis which is utilized
to determine the ability to withstand varying levels of stress, which could
impact its liquidation horizons and required margins. In addition, Salomon Smith
Barney monitors its leverage and capital ratios on a daily basis.
Salomon Smith Barney's activities include trading securities that are less than
investment grade, characterized as "high yield." High yield securities include
corporate debt, convertible debt, preferred and convertible preferred equity
securities rated lower than "triple B-" by internationally recognized rating
agencies, unrated securities with market yields comparable to entities rated
below "triple B-," as well as sovereign debt issued by certain countries in
currencies other than their local currencies and which are not collateralized by
U.S. government securities. For example, high yield securities exclude the
collateralized portion of Salomon Smith Barney's holdings of "Brady Bonds," but
include such securities to the extent they are not collateralized. The trading
portfolio of high yield securities owned is carried at market or fair value and
totaled $6.6 billion at March 31, 1998, the largest high yield exposure to one
counterparty was $401 million.
THE TRAVELERS INSURANCE COMPANY (TIC)
At March 31, 1998, TIC had $24.5 billion of life and annuity product deposit
funds and reserves. Of that total, $13.0 billion is not subject to discretionary
withdrawal based on contract terms. The remaining
26
<PAGE>
$11.5 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 $2.1 billion of liabilities that
are surrenderable with market value adjustments. Also included are an
additional $5.2 billion of the life insurance and individual annuity
liabilities, which are subject to discretionary withdrawal and have an
average surrender charge of 4.7%. In the payout phase, these funds are
credited at significantly reduced interest rates. The remaining $4.2 billion
of liabilities is surrenderable without charge. More than 15.1% 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. TIC may borrow under this revolving credit facility at various rate
options (LIBOR, CD or base rate) and compensates the banks for the facility
through commitment fees. As of March 31, 1998, TIC had 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 $551 million of statutory surplus is
available in 1998 for such dividends without the prior approval of the
Connecticut Insurance Department, of which $110 million has been paid during the
first quarter of 1998.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
See Note 4 of Notes to Condensed Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
FORWARD LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by the words "believe," "expect," "anticipate," "intend,"
"estimate," and similar expressions. These forward-looking statements involve
risks and uncertainties including, but not limited to, the following: changes in
general economic conditions, including changes in the interest rate environment
and the level of personal bankruptcies; customer responsiveness to both new
products and distribution channels; and the possibility that the Company will be
unable to achieve anticipated levels of operational efficiencies related to
recently acquired companies, as well as achieving its other cost-savings
initiatives.
27
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For information concerning the City of Denver's imposition of a fee
relating to a Superfund site, see the description that appears in the tenth
and eleventh paragraphs under the caption "Legal Proceedings" beginning on
page 13 of the Annual Report on Form 10-K of Salomon Smith Barney Holdings
Inc. ("SSBH") for the year ended December 31, 1997 (File No. 1-4346), which
description is incorporated by reference herein. For a recent development
in this matter, see the description that appears in the paragraph under the
caption "Legal Proceedings" on page 16 of the Quarterly Report on Form 10-Q
of SSBH for the quarter ended March 31, 1998 (File No. 1-4346), which
description is incorporated by reference herein. Copies of the foregoing
descriptions are included as exhibits to this Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on April 22,
1998. At the meeting, (i) 19 persons were elected to serve as directors of the
Company, (ii) the selection of KPMG Peat Marwick LLP to serve as the independent
auditors of the Company for 1998 was ratified and (iii) an amendment to the
Company's Restated Certificate of Incorporation to increase to 3 billion the
shares of common stock authorized for issuance was approved. The number of votes
cast for, against or withheld, and the number of abstentions with respect to
each such matter is set forth below, as are the number of broker non-votes,
where applicable.
28
<PAGE>
<TABLE>
<CAPTION>
For Against/Withheld Abstained Broker Non-Votes
---------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C>
Election of Directors:
Nominee
C. Michael Armstrong 1,005,730,928 4,147,088
Judith Arron 1,004,983,404 4,894,612
Kenneth J. Bialkin 1,001,892,584 7,985,432
Joseph A. Califano, Jr 1,000,885,200 8,992,816
James Dimon 1,005,725,407 4,152,609
Leslie B. Disharoon 1,005,670,757 4,207,259
The Hon. Gerald R. Ford 1,004,513,980 5,364,036
Thomas W. Jones 1,005,499,966 4,378,050
Ann Dibble Jordan 1,005,070,120 4,807,896
Robert I. Lipp 1,005,726,643 4,151,373
Michael T. Masin 1,005,557,783 4,320,233
Deryck C. Maughan 1,005,473,489 4,404,527
Dudley C. Mecum 1,005,651,156 4,226,860
Andrall E. Pearson 1,005,517,188 4,360,827
Frank J. Tasco 1,005,534,970 4,343,046
Linda J. Wachner 1,005,351,825 4,526,191
Sanford I. Weill 1,005,386,597 4,491,419
Joseph R. Wright, Jr 1,005,920,120 3,957,896
Arthur Zankel 1,005,756,323 4,121,693
Ratification of Auditors: 1,006,792,197 1,418,971 1,666,848 0
Approval of Amendment
to Restated Certificate
of Incorporation: 949,302,219 57,027,091 3,548,706 0
</TABLE>
Item 5. Other Information.
On April 5, 1998, the Company and Citicorp agreed to combine in a
merger of equals. The consolidated financial statements of Citicorp
and its subsidiaries as of December 31, 1997 and 1996 and for each of
the years in the three-year period ended December 31, 1997, and certain pro
forma financial information with respect to the proposed transaction, have
previously been filed by the Company with Current Reports on Form 8-K. In
connection with the proposed transaction, certain historical financial
information from Citicorp's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, and certain additional pro forma financial information,
are being filed as Exhibits 99.03 and 99.04, respectively, to this Form 10-Q
and are incorporated herein by reference.
29
<PAGE>
Information about Citicorp is available through the periodic and other
reports that it files with the Securities and Exchange Commission (the
"SEC"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the SEC and those maintained
by the New York Stock Exchange, Inc., where Citicorp's common stock is
listed. In addition, the SEC maintains a site on the World Wide Web,
at http://www.sec.gov, that contains such reports and other information
about publicly traded companies, including Citicorp.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See Exhibit Index.
(b) Reports on Form 8-K:
On January 8, 1998, the Company filed a Current Report on Form 8-K,
dated January 6, 1998, filing certain exhibits under Item 7 thereof
relating to the offer and sale of the Company's 6 5/8% Notes due
January 15, 2028.
On January 28, 1998, the Company filed a Current Report on Form 8-K,
dated January 26, 1998, reporting under Item 5 thereof the results of
its operations for the quarter and year ended December 31, 1997, and
certain other selected financial data.
On February 19, 1998, the Company filed a Current Report on Form 8-K,
dated February 17, 1998, filing certain exhibits under Item 7 thereof
relating to the offer and sale of the Company's 6 7/8% Notes due
February 15, 2098.
No other reports on Form 8-K were filed during the first quarter of
1998; however, on April 7, 1998, the Company filed a Current Report on
Form 8-K, dated April 6, 1998, reporting under Item 5 thereof that it
had entered into a definitive merger agreement with Citicorp and filing
the merger agreement as an exhibit under Item 7 thereof; on April 9,
1998, the Company filed a Current Report on Form 8-K, dated April 8,
1998, filing under Items 5 and 7 thereof certain pro forma and
historical financial information; and on April 23, 1998, the Company
filed a Current Report on Form 8-K, dated April 20, 1998, reporting
under Item 5 thereof the results of its operations for the quarter
ended March 31, 1998, and certain other selected financial data.
30
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
- ------- -----------------------
3.01+ Restated Certificate of Incorporation of Travelers Group Inc. (the
"Company"), Certificate of Amendment to the Restated Certificate of
Incorporation, filed April 26, 1995, 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 Amendment to the
Restated Certificate of Incorporation, filed April 22, 1998,
Certificate of Designation of 6.365% Cumulative Preferred Stock,
Series F, Certificate of Designation of 6.213% Cumulative Preferred
Stock, Series G, Certificate of Designation of 6.231% Cumulative
Preferred Stock, Series H, Certificate of Designation of Series I
Cumulative Convertible Preferred Stock, Certificate of Designation
of 8.08% Cumulative Preferred Stock, Series J, Certificate of
Designation of 8.40% Cumulative Preferred Stock, Series K,
Certificate of Designation of 9.50% Cumulative Preferred Stock,
Series L, Certificate of Designation of 5.864% Cumulative Preferred
Stock, Series M, and Certificate of Designation of Cumulative
Adjustable Rate Preferred Stock, Series Y.
3.02 By-Laws of the Company, as amended 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).
10.01+ Amendment to the Salomon Inc Equity Partnership Plan for Key
Employees (effective March 25, 1998).
12.01+ Computation of Ratio of Earnings to Fixed Charges.
27.01+ Financial Data Schedule.
99.01+ The tenth and eleventh paragraphs under the caption "Legal
Proceedings" beginning on page 13 of the Annual Report on Form
10-K of Salomon Smith Barney Holdings Inc. ("SSBH") for the
fiscal year ended December 31, 1997 (File No. 1-4346).
99.02+ The paragraph under the caption "Legal Proceedings" on
page 16 of the Quarterly Report on Form 10-Q of SSBH for the
fiscal quarter ended March 31, 1998 (File No. 1-4346).
99.03+ Certain historical financial information from Citicorp's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
31
<PAGE>
99.04+ Unaudited Pro Forma Condensed Combined Statement of Financial
Position as of March 31, 1998, Unaudited Pro Forma Condensed
Combined Statements of Income for the three months ended March 31,
1998 and 1997, and the notes thereto.
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 SEC upon request.
- --------------------------
+ Filed herewith.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVELERS GROUP INC.
Date: May 13, 1998 By Heidi Miller
----------------------------
Heidi Miller
Senior Vice President and
Chief Financial Officer
(Principal Financial
Officer)
Date: May 13, 1998 By Irwin Ettinger
------------------------------
Irwin Ettinger
Executive Vice President and
Chief Accounting Officer
(Principal Accounting
Officer)
33
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
- ------- -----------------------
3.01+ Restated Certificate of Incorporation of Travelers Group Inc. (the
"Company"), Certificate of Amendment to the Restated Certificate of
Incorporation, filed April 26, 1995, 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 Amendment to the
Restated Certificate of Incorporation, filed April 22, 1998,
Certificate of Designation of 6.365% Cumulative Preferred Stock,
Series F, Certificate of Designation of 6.213% Cumulative Preferred
Stock, Series G, Certificate of Designation of 6.231% Cumulative
Preferred Stock, Series H, Certificate of Designation of Series I
Cumulative Convertible Preferred Stock, Certificate of Designation
of 8.08% Cumulative Preferred Stock, Series J, Certificate of
Designation of 8.40% Cumulative Preferred Stock, Series K,
Certificate of Designation of 9.50% Cumulative Preferred Stock,
Series L, Certificate of Designation of 5.864% Cumulative Preferred
Stock, Series M, and Certificate of Designation of Cumulative
Adjustable Rate Preferred Stock, Series Y.
3.02 By-Laws of the Company, as amended 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).
10.01+ Amendment to the Salomon Inc Equity Partnership Plan for Key
Employees (effective March 25, 1998).
12.01+ Computation of Ratio of Earnings to Fixed Charges.
27.01+ Financial Data Schedule.
99.01+ The tenth and eleventh paragraphs under the caption "Legal
Proceedings" beginning on page 13 of the Annual Report on Form
10-K of Salomon Smith Barney Holdings Inc. ("SSBH") for the
fiscal year ended December 31, 1997 (File No. 1-4346).
99.02+ The paragraph under the caption "Legal Proceedings" on
page 16 of the Quarterly Report on Form 10-Q of SSBH for the
fiscal quarter ended March 31, 1998 (File No. 1-4346).
99.03+ Certain historical financial information from Citicorp's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
<PAGE>
99.04+ Unaudited Pro Forma Condensed Combined Statement of Financial
Position as of March 31, 1998, Unaudited Pro Forma Condensed
Combined Statements of Income for the three months ended March 31,
1998 and 1997, and the notes thereto.
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 SEC upon request.
- --------------------------
+ Filed herewith.
<PAGE>
EXHIBIT 3.01
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE TRAVELERS INC.
The Travelers Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
The name of the corporation is The Travelers Inc.
(hereinafter the "Corporation") and the date of filing of its original
Certificate of Incorporation with the Delaware Secretary of State is March
8, 1988. The name under which the Corporation filed its Certificate of
Incorporation is Commercial Credit Group, Inc.
The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated and integrated, but not amended,
to read as herein set forth in full:
FIRST: The name of the Corporation is:
THE TRAVELERS INC.
SECOND: The registered office of the Corporation is to be located at
the Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, in the county of New Castle, in the State of Delaware. The
name of its registered agent at that address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: A. The total number of shares of Common Stock which the
Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares of Common Stock having a par value of one cent ($.01)
per share. The total number of shares of Preferred Stock which the
Corporation shall have the authority to issue is Thirty Million
(30,000,000) shares having a par value of one dollar ($1.00) per share.
B. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The authority of the
Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
<PAGE>
(i) The number of shares constituting that series and the
distinctive designation of that series.
(ii) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(iv) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such
conversion or exchange, including provision for adjustment of
the conversion or exchange rate in such events as the Board of
Directors shall determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the manner of selecting shares for
redemption if less than all shares are to be redeemed, the date
or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption
dates;
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amount of such sinking fund;
(vii) The right of the shares of that series to the benefit
of conditions and restrictions upon the creation of indebtedness
of the Corporation or any subsidiary, upon the issue of any
additional stock (including additional shares of such series or
any other series) and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption
or other acquisition by the Corporation or any subsidiary of any
outstanding stock of the Corporation;
(viii) The rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and
(ix) Any other relative, participating, optional or other
special rights, qualifications, limitations or restrictions of
that series.
C. Dividends on outstanding shares of Preferred Stock shall be
paid, or declared and set apart for payment, before any dividends shall be
paid or declared and set apart for payment on outstanding shares of Common
2
<PAGE>
Stock. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to
pay such holders the full preferential amount to which they are entitled,
then such assets shall be distributed ratably among the shares of all
series of Preferred Stock in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with
respect thereto.
D. Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or otherwise) or
which, if convertible or exchangeable, have been converted into or
exchanged for shares of stock of any other class or classes shall have the
status of authorized and unissued shares of Preferred Stock of the same
series and may be reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions and the restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of Preferred Stock.
E. Subject to the provisions of any applicable law or except as
otherwise provided by the resolution or resolutions providing for the issue
of any series of Preferred Stock, the holders of outstanding shares of
Common Stock shall exclusively possess voting power for the election of
directors and for all other purposes, each holder of record of shares of
Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
F. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, after payment
shall have been made to the holders of Preferred Stock of the full amount
of dividends to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of Preferred Stock, the
holders of Common Stock shall be entitled, to the exclusion of the holders
of Preferred Stock of any and all series, to receive such dividends as from
time to time may be declared by the Board of Directors.
G. Except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, in the event of
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment shall have been made to the holders
of Preferred Stock of the full amount to which they shall be entitled
pursuant to the resolution or resolutions providing for the issue of any
series of Preferred Stock, the holders of Common Stock shall be entitled,
to the exclusion of the holders of Preferred Stock of any and all series,
to share ratably according to the number of shares of Common Stock held by
them, in all remaining assets of the Corporation available for
distribution.
3
<PAGE>
H. The issuance of any shares of Common Stock or Preferred Stock
authorized hereunder and any other actions permitted to be taken by the
Board of Directors pursuant to this Article FOURTH must be authorized by
the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of
the entire Board of Directors or by a committee of the Board of Directors
constituted by the affirmative vote of at least sixty-six and two-thirds
percent (66 2/3%) of the entire Board of Directors.
I. Notwithstanding any other provision of this Certificate of
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of the shares entitled to vote at an
election of directors shall be required to amend, alter, change or repeal,
or adopt any provision as part of this Certificate of Incorporation
inconsistent with the purpose and intent of, section B through I of this
Article FOURTH.
J. 8.125% CUMULATIVE PREFERRED STOCK, SERIES A
1. Designation and Number of Shares. The designation of such
series shall be 8.125% Cumulative Preferred Stock, Series A (the "Series A
Preferred Stock"), and the number of shares constituting such series shall
be 1,200,000. The number of authorized shares of Series A Preferred Stock
may be reduced (but not below the number of shares thereof then
outstanding) by further resolution duly adopted by the Board of Directors
or the Executive Committee and by the filing of a certificate pursuant to
the provisions of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized, but the number of
authorized shares of Series A Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series A Preferred
Stock shall be cumulative from the date of original issue of such share and
shall be payable, when and as declared by the Board of Directors out of
funds legally available therefor, in cash on March 1, June 1, September 1
and December 1 of each year, commencing September 1, 1992.
Each quarterly period beginning on February 15, May 15, August
15 and November 15 in each year and ending on and including the day next
preceding the first day of the next such quarterly period shall be a
"Dividend Period." If a share of Series A Preferred Stock is outstanding
during an entire Dividend Period, the dividend payable on such share on the
first day of the calendar month immediately following the last day of such
Dividend Period shall be $5.078125 (or one-fourth of 8.125% of the
Liquidation Preference (as defined in Section 7) for such share). If a
share of Series A Preferred Stock is outstanding for less than an entire
Dividend Period, the dividend payable on such share on the first day of the
calendar month immediately following the last day of such Dividend Period
on which such share shall be outstanding shall be the product of $5.078125
multiplied by the ratio (which shall not exceed one) that the number of
days that such share was outstanding during such Dividend Period bears to
the number of days in such Dividend Period.
4
<PAGE>
Each dividend on the shares of Series A Preferred Stock shall be
paid to the holders of record of shares of Series A Preferred Stock as they
appear on the stock register of the Corporation on such record date, not
more than 60 days nor less than 10 days preceding the payment date of such
dividend, as shall be fixed in advance by the Board of Directors. Dividends
on account of arrears for any past Dividend Periods may be declared and
paid at any time, without reference to any regular dividend payment date,
to holders of record on such date, not exceeding 45 days preceding the
payment date thereof, as may be fixed in advance by the Board of Directors.
If there shall be outstanding shares of any other class or
series of preferred stock of the Corporation ranking on a parity as to
dividends with the Series A Preferred Stock, the Corporation, in making any
dividend payment on account of arrears on the Series A Preferred Stock or
such other class or series of preferred stock, shall make payments ratably
upon all outstanding shares of Series A Preferred Stock and such other
class or series of preferred stock in proportion to the respective amounts
of dividends in arrears upon all such outstanding shares of Series A
Preferred Stock and such other class or series of preferred stock to the
date of such dividend payment.
Holders of shares of Series A Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in
excess of full cumulative dividends on such shares. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend
payment that is in arrears.
3. Redemption. The Series A Preferred Stock is not subject to
any mandatory redemption pursuant to a sinking fund or otherwise. The
Corporation, at its option, may redeem shares of Series A Preferred Stock,
as a whole or in part, at any time or from time to time on or after July
28, 1997, at a price of $250 per share, plus accrued and accumulated but
unpaid dividends thereon to but excluding the date fixed for redemption
(the "Redemption Price").
If the Corporation shall redeem shares of Series A Preferred
Stock pursuant to this Section 3, notice of such redemption shall be given
by first class mail, postage prepaid, not less than 30 or more than 90 days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as shown on the stock register of the
Corporation. Each such notice shall state: (a) the redemption date; (b) the
number of shares of Series A Preferred Stock to be redeemed and, if less
than all such shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (c) the Redemption Price;
(d) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; and (e) that dividends on
the shares to be redeemed will cease to accrue on such redemption date.
Notice having been mailed as aforesaid, from and after the redemption date
(unless default shall be made by the Corporation in providing money for the
payment of the Redemption Price) dividends on the shares of Series A
Preferred Stock so called for redemption shall cease to accrue, and such
shares shall no longer be deemed to be outstanding, and all rights of the
5
<PAGE>
holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the Redemption Price) shall cease. Upon
surrender in accordance with such notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors shall so require and the notice shall so state), the Corporation
shall redeem such shares at the Redemption Price. If less than all the
outstanding shares of Series A Preferred Stock are to be redeemed, the
Corporation shall select those shares to be redeemed from outstanding
shares of Series A Preferred Stock not previously called for redemption by
lot or pro rata (as nearly as may be) or by any other method determined by
the Board of Directors to be equitable.
The Corporation shall not redeem less than all the outstanding
shares of Series A Preferred Stock pursuant to this Section 3, or purchase
or acquire any shares of Series A Preferred Stock otherwise than pursuant
to a purchase or exchange offer made on the same terms to all holders of
shares of Series A Preferred Stock, unless full cumulative dividends shall
have been paid or declared and set apart for payment upon all outstanding
shares of Series A Preferred Stock for all past Dividend Periods, and
unless all matured obligations of the Corporation with respect to all
sinking funds, retirement funds or purchase funds for all series of
Preferred Stock then outstanding have been met.
4. Shares to be Retired. All shares of Series A Preferred Stock
redeemed by the Corporation shall be retired and canceled and shall be
restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be reissued.
5. Conversion or Exchange. The holders of shares of Series A
Preferred Stock shall not have any rights to convert any such shares into
or exchange any such shares for shares of any other class or series of
capital stock of the Corporation.
6. Voting. Except as otherwise provided in this Section 6 or as
otherwise required by law, the Series A Preferred Stock shall have no
voting rights.
If six quarterly dividends (whether or not consecutive) payable
on shares of Series A Preferred Stock are in arrears at the time of the
record date to determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors of the Corporation
shall be increased by two, and the holders of shares of Series A Preferred
Stock (voting separately as a class with the holders of shares of any one
or more other series of Preferred Stock upon which like voting rights have
been conferred and are exercisable) shall be entitled at such annual
meeting of stockholders to elect two directors of the Corporation, with the
remaining directors of the Corporation to be elected by the holders of
shares of any other class or classes or series of stock entitled to vote
therefor. In any such election, holders of shares of Series A Preferred
Stock shall have one vote for each share held.
6
<PAGE>
At all meetings of stockholders at which holders of Preferred
Stock shall be entitled to vote for Directors as a single class, the
holders of a majority of the outstanding shares of all classes and series
of capital stock of the Corporation having the right to vote as a single
class shall be necessary to constitute a quorum, whether present in person
or by proxy, for the election by such single class of its designated
Directors. In any election of Directors by stockholders voting as a class,
such Directors shall be elected by the vote of at least a plurality of
shares held by such stockholders present or represented at the meeting. At
any such meeting, the election of Directors by stockholders voting as a
class shall be valid notwithstanding that a quorum of other stockholders
voting as one or more classes may not be present or represented at such
meeting.
Any director who has been elected by the holders of shares of
Series A Preferred Stock (voting separately as a class with the holders of
shares of any one or more other series of Preferred Stock upon which like
voting rights have been conferred and are exercisable) may be removed at
any time, with or without cause, only by the affirmative vote of the
holders of the shares at the time entitled to cast a majority of the votes
entitled to be cast for the election of any such director at a special
meeting of such holders called for that purpose, and any vacancy thereby
created may be filled by the vote of such holders. If a vacancy occurs
among the Directors elected by such stockholders voting as a class, other
than by removal from office as set forth in the preceding sentence, such
vacancy may be filled by the remaining Director so elected, or his
successor then in office, and the Director so elected to fill such vacancy
shall serve until the next meeting of stockholders for the election of
Directors.
The voting rights of the holders of the Series A Preferred Stock
to elect Directors as set forth above shall continue until all dividend
arrearages on the Series A Preferred Stock have been paid or declared and
set apart for payment. Upon the termination of such voting rights, the
terms of office of all persons who may have been elected pursuant to such
voting rights shall immediately terminate, and the number of directors of
the Corporation shall be decreased by two.
Without the consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of the
total number of shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the holders of shares
of Series A Preferred Stock being entitled to cast one vote per share, the
Corporation may not:
(i) create any class of stock that shall have preference
as to dividends or distributions of assets over the Series A
Preferred Stock; or
(ii) alter or change the provisions of the Certificate of
Incorporation (including any Certificate of Amendment or
Certificate of Designation relating to the Series A Preferred
7
<PAGE>
Stock) so as to adversely affect the powers, preferences or
rights of the holders of shares of Series A Preferred Stock;
provided, however, that if such creation or such alteration or change would
adversely affect the powers, preferences or rights of one or more, but not
all, series of Preferred Stock at the time outstanding, such alteration or
change shall require consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as a class.
7. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of Series A Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders,
before any distribution of assets shall be made to the holders of the
Common Stock or of any other shares of stock of the Corporation ranking as
to such distribution junior to the Series A Preferred Stock, a liquidating
distribution in an amount equal to $250 per share (the "Liquidation
Preference") plus an amount equal to any accrued and accumulated but unpaid
dividends thereon to the date of final distribution. The holders of the
Series A Preferred Stock shall not be entitled to receive the Liquidation
Preference and such accrued dividends, however, until the liquidation
preference of any other class of stock of the Corporation ranking senior to
the Series A Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution are
insufficient to pay in full the amounts payable with respect to the Series
A Preferred Stock and any other shares of stock of the Corporation ranking
as to any such distribution on a parity with the Series A Preferred Stock,
the holders of the Series A Preferred Stock and of such other shares shall
share ratably in any distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled.
After payment to the holders of the Series A Preferred Stock of
the full preferential amounts provided for in this Section 7, the holders
of the Series A Preferred Stock shall be entitled to no further
participation in any distribution of assets by the Corporation.
Consolidation or merger of the Corporation with or into one or
more other corporations, or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation, shall not be deemed or construed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 7 if the preferences or special voting rights of the holders of
shares of Series A Preferred Stock are not impaired thereby.
8. Limitation on Dividends on Junior Stock. So long as any
Series A Preferred Stock shall be outstanding the Corporation shall not
8
<PAGE>
declare any dividends on the Common Stock or any other stock of the
Corporation ranking as to dividends or distributions of assets junior to
the Series A Preferred Stock (the Common Stock and any such other stock
being herein referred to as "Junior Stock"), or make any payment on account
of, or set apart money for, a sinking fund or other similar fund or
agreement for the purchase, redemption or other retirement of any shares of
Junior Stock, or make any distribution in respect thereof, whether in cash
or property or in obligations or stock of the Corporation, other than a
distribution of Junior Stock (such dividends, payments, setting apart and
distributions being herein called "Junior Stock Payments"), unless the
following conditions shall be satisfied at the date of such declaration in
the case of any such dividend, or the date of such setting apart in the
case of any such fund, or the date of such payment or distribution in the
case of any other Junior Stock Payment:
(i) full cumulative dividends shall have been paid or
declared and set apart for payment on all outstanding shares of
Preferred Stock other than Junior Stock; and
(ii) the Corporation shall not be in default or in arrears
with respect to any sinking fund or other similar fund or
agreement for the purchase, redemption or other retirement of
any shares of Preferred Stock other than Junior Stock;
provided, however, that any funds theretofore deposited in any sinking fund
or other similar fund with respect to any Preferred Stock in compliance
with the provisions of such sinking fund or other similar fund may
thereafter be applied to the purchase or redemption of such Preferred Stock
in accordance with the terms of such sinking fund or other similar fund
regardless of whether at the time of such application full cumulative
dividends upon shares of Series A Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set apart for
payment by the Corporation.
K. 5.50% CONVERTIBLE PREFERRED STOCK, SERIES B
1. Designation and Number of Shares. The designation of such
series shall be 5.50% Convertible Preferred Stock, Series B (the "Series B
Convertible Preferred Stock"), and the number of shares constituting such
series shall be 2,500,000. The number of authorized shares of Series B
Convertible Preferred Stock may be reduced (but not below the number of
shares thereof then outstanding) by further resolution duly adopted by the
Board of Directors or the Executive Committee and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of Series B Convertible Preferred Stock
shall not be increased.
2. Dividends. Dividends on each share of Series B Convertible
Preferred Stock shall be cumulative from the date of original issue of such
share and shall be payable, when and as declared by the Board of Directors
9
<PAGE>
out of funds legally available therefor, in cash on March 1, June 1,
September 1 and December 1 of each year, commencing September 1, 1993.
Each quarterly period beginning on February 15, May 15, August
15 and November 15 in each year and ending on and including the day next
preceding the first day of the next such quarterly period shall be a
"Dividend Period." If a share of Series B Convertible Preferred Stock is
outstanding during an entire Dividend Period, the dividend payable on such
share on the first day of the calendar month immediately following the last
day of such Dividend Period shall be $.6875 (or one-fourth of 5.50% of the
Liquidation Preference (as defined in Section 6) for such share). If a
share of Series B Convertible Preferred Stock is outstanding for less than
an entire Dividend Period, the dividend payable on such share on the first
day of the calendar month immediately following the last day of such Divi-
dend Period on which such share shall be outstanding shall be the product
of $.6875 multiplied by the ratio (which shall not exceed one) that the
number of days that such share was outstanding during such Dividend Period
bears to the number of days in such Dividend Period.
Each dividend on the shares of Series B Convertible Preferred
Stock shall be paid to the holders of record of shares of Series B Con-
vertible Preferred Stock as they appear on the stock register of the
Corporation on such record date, not more than 60 days nor less than 10
days preceding the payment date of such dividend, as shall be fixed in
advance by the Board of Directors. Dividends on account of arrears for any
past Dividend Periods may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record on
such date, not exceeding 45 days preceding the payment date thereof, as may
be fixed in advance by the Board of Directors.
If there shall be outstanding shares of any other class or
series of preferred stock of the Corporation ranking on a parity as to
dividends with the Series B Convertible Preferred Stock, the Corporation,
in making any dividend payment on account of arrears on the Series B
Convertible Preferred Stock or such other class or series of preferred
stock, shall make payments ratably upon all outstanding shares of Series B
Convertible Preferred Stock and such other class or series of preferred
stock in proportion to the respective amounts of dividends in arrears upon
all such outstanding shares of Series B Convertible Preferred Stock and
such other class or series of preferred stock to the date of such dividend
payment.
Holders of shares of Series B Convertible Preferred Stock shall
not be entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends on such shares. No interest,
or sum of money in lieu of interest, shall be payable in respect of any
dividend payment that is in arrears.
3. Redemption. The Series B Convertible Preferred Stock is not
subject to any mandatory redemption pursuant to a sinking fund or
otherwise. The Corporation, at its option, may redeem shares of Series B
Convertible Preferred Stock, as a whole or in part, at any time or from
10
<PAGE>
time to time on or after July 30, 1996 at the following redemption prices
per share (expressed as a percentage of the Liquidation Preference (as
defined in Section 6 hereof)), if redeemed during the 12-month period
beginning July 30 of the year indicated:
Year Redemption Price
---- ----------------
1996 103.85%
1997 103.30%
1998 102.75%
1999 102.20%
2000 101.65%
2001 101.10%
2002 100.55%
and thereafter at a price of $50.00 per share, plus, in each case, accrued
and accumulated but unpaid dividends thereon to but excluding the date
fixed for redemption (the "Redemption Price").
If the Corporation shall redeem shares of Series B Convertible
Preferred Stock pursuant to this Section 3, notice of such redemption shall
be given by first class mail, postage prepaid, not less than 30 or more
than 90 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as shown on the stock
register of the Corporation. Each such notice shall state: (a) the
redemption date; (b) the number of shares of Series B Convertible Preferred
Stock to be redeemed and, if less than all such shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (c) the Redemption Price; (d) the place or places where certifi-
cates for such shares are to be surrendered for payment of the Redemption
Price; and (e) that dividends on the shares to be redeemed will cease to
accrue on such redemption date. Notice having been mailed as aforesaid,
from and after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the Redemption Price)
dividends on the shares of Series B Convertible Preferred Stock so called
for redemption shall cease to accrue, and such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the Redemption Price) shall cease. Upon surrender in accor-
dance with such notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the notice shall so state), the Corporation shall
redeem such shares at the Redemption Price. If less than all the outstand-
ing shares of Series B Convertible Preferred Stock are to be redeemed, the
Corporation shall select those shares to be redeemed from outstanding
shares of Series B Convertible Preferred Stock not previously called for
redemption by lot or pro rata (as nearly as may be) or by any other method
reasonably determined by the Board of Directors in good faith to be
equitable.
The Corporation shall not redeem less than all the outstanding
shares of Series B Convertible Preferred Stock pursuant to this Section 3,
or purchase or acquire any shares of Series B Convertible Preferred Stock
11
<PAGE>
otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of shares of Series B Convertible Preferred Stock,
unless full cumulative dividends shall have been paid or declared and set
apart for payment upon all outstanding shares of Series B Convertible
Preferred Stock for all past Dividend Periods, and unless all matured
obligations of the Corporation with respect to all sinking funds,
retirement funds or purchase funds for all series of Preferred Stock then
outstanding have been met.
4. Shares to be Retired. All shares of Series B Convertible
Preferred Stock redeemed by the Corporation shall be retired and canceled
and shall be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be
reissued.
5. Voting. Except as otherwise provided in this Section 5 or as
otherwise required by law, the Series B Convertible Preferred Stock shall
have no voting rights.
If six quarterly dividends (whether or not consecutive) payable
on shares of Series B Convertible Preferred Stock are in arrears at the
time of the record date to determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors of the Corporation
shall be increased by two, and the holders of shares of Series B
Convertible Preferred Stock (voting separately as a class with the holders
of shares of any one or more other series of Preferred Stock upon which
like voting rights have been conferred and are exercisable) shall be enti-
tled at such annual meeting of stockholders to elect two directors of the
Corporation, with the remaining directors of the Corporation to be elected
by the holders of shares of any other class or classes or series of stock
entitled to vote therefor. In any such election, holders of shares of
Series B Convertible Preferred Stock shall have one vote for each share
held.
At all meetings of stockholders at which holders of Preferred
Stock shall be entitled to vote for Directors as a single class, the
holders of a majority of the outstanding shares of all classes and series
of capital stock of the Corporation having the right to vote as a single
class shall be necessary to constitute a quorum, whether present in person
or by proxy, for the election by such single class of its designated
Directors. In any election of Directors by stockholders voting as a class,
such Directors shall be elected by the vote of at least a plurality of
shares held by such stockholders present or represented at the meeting. At
any such meeting, the election of Directors by stockholders voting as a
class shall be valid notwithstanding that a quorum of other stockholders
voting as one or more classes may not be present or represented at such
meeting.
Any director who has been elected by the holders of shares of
Series B Convertible Preferred Stock (voting separately as a class with the
holders of shares of any one or more other series of Preferred Stock upon
which like voting rights have been conferred and are exercisable) may be
12
<PAGE>
removed at any time, with or without cause, only by the affirmative vote of
the holders of the shares at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such director at a
special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If a vacancy
occurs among the Directors elected by such stockholders voting as a class,
other than by removal from office as set forth in the preceding sentence,
such vacancy may be filled by the remaining Director so elected, or his
successor then in office, and the Director so elected to fill such vacancy
shall serve until the next meeting of stockholders for the election of
Directors.
The voting rights of the holders of the Series B Convertible
Preferred Stock to elect Directors as set forth above shall continue until
all dividend arrearages on the Series B Convertible Preferred Stock have
been paid or declared and set apart for payment. Upon the termination of
such voting rights, the terms of office of all persons who may have been
elected pursuant to such voting rights shall immediately terminate, and the
number of directors of the Corporation shall be decreased by two.
Without the consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of the
total number of shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the holders of shares
of Series B Convertible Preferred Stock being entitled to cast one vote per
share, the Corporation may not:
(i) create any class of stock that shall have preference
as to dividends or distributions of assets over the Series B
Convertible Preferred Stock; or
(ii) alter or change the provisions of the Certificate of
Incorporation (including any Certificate of Amendment or Certif-
icate of Designation relating to the Series B Convertible Pre-
ferred Stock) so as to adversely affect the powers, preferences
or rights of the holders of shares of Series B Convertible Pre-
ferred Stock;
provided, however, that if such creation or such alteration or change would
adversely affect the powers, preferences or rights of one or more, but not
all, series of Preferred Stock at the time outstanding, such alteration or
change shall require consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as a class.
6. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of Series B Convertible Preferred Stock shall be entitled to re-
ceive out of the assets of the Corporation available for distribution to
stockholders, before any distribution of assets shall be made to the
holders of the Common Stock or of any other shares of stock of the
Corporation ranking as to such distribution junior to the Series B Convert-
ible Preferred Stock, a liquidating distribution in an amount equal to
13
<PAGE>
$50.00 per share (the "Liquidation Preference") plus an amount equal to any
accrued and accumulated but unpaid dividends thereon to the date of final
distribution. The holders of the Series B Convertible Preferred Stock
shall not be entitled to receive the Liquidation Preference and such
accrued dividends, however, until the liquidation preference of any other
class of stock of the Corporation ranking senior to the Series B Con-
vertible Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full.
If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets available for distribution are
insufficient to pay in full the amounts payable with respect to the Series
B Convertible Preferred Stock and any other shares of stock of the
Corporation ranking as to any such distribution on a parity with the Series
B Convertible Preferred Stock, the holders of the Series B Convertible Pre-
ferred Stock and of such other shares shall share ratably in any
distribution of assets of the Corporation in proportion to the full respec-
tive preferential amounts to which they are entitled.
After payment to the holders of the Series B Convertible Pre-
ferred Stock of the full preferential amounts provided for in this Section
6, the holders of the Series B Convertible Preferred Stock shall be
entitled to no further participation in any distribution of assets by the
Corporation.
Consolidation or merger of the Corporation with or into one or
more other corporations, or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation, shall not be deemed or construed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 6 if the preferences or special voting rights of the holders of
shares of Series B Convertible Preferred Stock are not impaired thereby.
7. Limitation on Dividends on Junior Stock. So long as any
Series B Convertible Preferred Stock shall be outstanding, the Corporation
shall not declare any dividends on the Common Stock or any other stock of
the Corporation ranking as to dividends or distributions of assets junior
to the Series B Convertible Preferred Stock (the Common Stock and any such
other stock being herein referred to as "Junior Stock"), or make any
payment on account of, or set apart money for, a sinking fund or other
similar fund or agreement for the purchase, redemption or other retirement
of any shares of Junior Stock, or make any distribution in respect thereof,
whether in cash or property or in obligations or stock of the Corporation,
other than a distribution of Junior Stock (such dividends, payments,
setting apart and distributions being herein called "Junior Stock
Payments"), unless the following conditions shall be satisfied at the date
of such declaration in the case of any such dividend, or the date of such
setting apart in the case of any such fund, or the date of such payment or
distribution in the case of any other Junior Stock Payment:
14
<PAGE>
(i) full cumulative dividends shall have been paid or de-
clared and set apart for payment on all outstanding shares of
Preferred Stock other than Junior Stock; and
(ii) the Corporation shall not be in default or in arrears
with respect to any sinking fund or other similar fund or agree-
ment for the purchase, redemption or other retirement of any
shares of Preferred Stock other than Junior Stock;
provided, however, that any funds theretofore deposited in any sinking fund
or other similar fund with respect to any Preferred Stock in compliance
with the provisions of such sinking fund or other similar fund may
thereafter be applied to the purchase or redemption of such Preferred Stock
in accordance with the terms of such sinking fund or other similar fund re-
gardless of whether at the time of such application full cumulative
dividends upon shares of Series B Convertible Preferred Stock outstanding
to the last dividend payment date shall have been paid or declared and set
apart for payment by the Corporation.
8. Conversion Rights. The shares of Series B Convertible Pre-
ferred Stock shall be convertible, in whole or in part, at the option of
the holder(s) thereof, into shares of Common Stock subject to the following
terms and conditions:
(a) The shares of Series B Convertible Preferred Stock
shall be convertible at the office of any transfer agent of the
Corporation, and at such other office or offices, if any, as the
Board of Directors may designate, into fully paid and nonassess-
able shares (calculated as to each conversion to the nearest
1/100 of a share) of common stock, $.01 par value per share, of
the Corporation ("Common Stock") at the rate of that number of
shares of Common Stock for each share of Series B Convertible
Preferred Stock that is equal to $50.00 divided by the Conver-
sion Price applicable per share of Common Stock at the time of
conversion (the "Conversion Price"). The Conversion Price shall
initially be $49.00. The Conversion Price shall be adjusted in
certain instances as provided below.
(b) In order to convert shares of Series B Convertible
Preferred Stock into Common Stock, the holder thereof shall
surrender the certificate or certificates evidencing such shares
of Series B Convertible Preferred Stock at the office of the
transfer agent for the Series B Convertible Preferred Stock,
which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank,
or accompanied by proper instruments of transfer to the Corpora-
tion or in blank, accompanied by (i) an irrevocable written
notice to the Corporation that the holder elects so to convert
such shares of Series B Convertible Preferred Stock and specify-
ing the name or names (with address or addresses) in which a
certificate or certificates evidencing shares of Common Stock
are to be issued and (ii) if required pursuant to paragraph (p)
15
<PAGE>
of this Section 8, an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Corpora-
tion demonstrating that such taxes have been paid).
A payment or adjustment shall not be made by the Corpora-
tion upon any conversion on account of any dividends accrued on
the shares of Series B Convertible Preferred Stock surrendered
for conversion or on account of any dividends on the Common
Stock issued upon conversion.
Shares of Series B Convertible Preferred Stock shall be
deemed to have been converted immediately prior to the close of
business on the day of the surrender of such shares for
conversion in accordance with the foregoing provisions, and the
person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock at such time. As
promptly as practicable on or after the conversion date, the
Corporation shall issue and shall deliver at such office a
certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with
payment in lieu of any fraction of a share, as hereinafter
provided, to the person or persons entitled to receive the same.
In case shares of Series B Convertible Preferred Stock are
called for redemption, the right to convert such shares shall
cease and terminate at the close of business on the date fixed
for redemption, unless default shall be made in payment of the
Redemption Price.
(c) In case the Corporation shall pay or make a dividend
or other distribution on any class of capital stock of the
Corporation in Common Stock, the Conversion Price in effect at
the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other distri-
bution shall be reduced to a price determined by multiplying
such Conversion Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such reduction to become effective at the opening
of business on the day following the date fixed for such deter-
mination. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjust-
ed to be the Conversion Price which would then be in effect if
such date fixed for the determination of stockholders entitled
to receive such dividend or other distribution had not been
fixed, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any conversion of
the Series B Convertible Preferred Stock prior to the date such
subsequent adjustment is made. For the purposes of this para-
graph (c), the number of shares of Common Stock at any time
16
<PAGE>
outstanding shall not include shares held in the treasury of the
Corporation, but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of
Common Stock.
(d) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less
than the Average Market Price (as defined below) of Common Stock
on the date fixed for the determination of stockholders entitled
to receive such rights or warrants, the Conversion Price in ef-
fect at the close of business on the date fixed for such
determination shall be reduced to a price determined by multi-
plying such Conversion Price by a fraction of which the numera-
tor shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of
the offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at such
Average Market Price and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase, such
reduction to become effective at the opening of business on the
day following the date fixed for such determination. To the
extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be
in effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the Con-
version Price shall again be adjusted to be the Conversion Price
which would then be in effect if the date fixed for the determi-
nation of stockholders entitled to receive such rights or war-
rants had not been fixed, but such subsequent adjustment shall
not affect the number of shares of Common Stock issued upon any
conversion of the Series B Convertible Preferred Stock prior to
the date such subsequent adjustment is made. For the purposes
of this paragraph (d), the number of shares of Common Stock at
any time outstanding shall not include shares held in the
treasury of the Corporation, but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. As used herein the term "Average Market
Price" of the Common Stock shall mean the average of the daily
reported closing sales prices, regular way, per share of the
Common Stock on the New York Stock Exchange (the "NYSE") or, if
the Common Stock is not principally traded on the NYSE, such
other market on which the Common Stock is listed or principally
traded, for the 10 consecutive trading days prior to the date of
determination.
17
<PAGE>
(e) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the close of business on the date
upon which such subdivision becomes effective shall be propor-
tionately reduced, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the
close of business on the date upon which such combination be-
comes effective shall be proportionately increased, such reduc-
tion or increase, as the case may be, to become effective at the
opening of business on the day following the date upon which
such subdivision or combination becomes effective.
(f) In case the Corporation shall, by dividend or other-
wise, distribute to all holders of its Common Stock evidences of
its indebtedness or assets (including securities, but excluding
(i) any rights or warrants referred to in paragraph (d) of this
Section 8, (ii) any dividend or distribution paid in cash or
other property out of the retained earnings of the Corporation
and (iii) any dividend or distribution referred to in paragraph
(c) of this Section 8), then either (at the option of the Corpo-
ration) (A) the Corporation shall elect to include in such
distribution the holders of Series B Convertible Preferred Stock
(as of the record date for such distribution) as if such holders
had converted all shares of Series B Convertible Preferred Stock
into Common Stock immediately prior to such record date (such
conversion assumed to be made at the Conversion Price in effect
without regard to the adjustment provided in the following
clause (B)), or (B) the Conversion Price shall be reduced to a
price determined by multiplying the Conversion Price in effect
at the close of business on the date fixed for the determination
of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Average Market
Price per share of the Common Stock on the date fixed for such
determination less the then fair market value (as reasonably
determined in good faith by the Board of Directors) on such date
of the portion of the assets or evidences of indebtedness so to
be distributed applicable to one share of Common Stock and the
denominator shall be such Average Market Price per share of the
Common Stock, such adjustment to become effective at the opening
of business on the day following the date fixed for the
determination of stockholders entitled to receive such
distribution. In the event that such dividend or distribution
is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in
effect if such date fixed for the determination of stockholders
entitled to receive such dividend or other distribution had not
been fixed, but such subsequent adjustment shall not affect the
number of shares of Common Stock issued upon any conversion of
the Series B Convertible Preferred Stock prior to the date such
subsequent adjustment is made. If the Corporation makes an
election under clause (A) of this paragraph (f) with respect to
18
<PAGE>
any such distribution payable on the Series B Convertible
Preferred Stock (an "Elected Corporation Dividend"), the
Corporation may in lieu of such distribution elect to pay to the
holder of any share of Series B Convertible Preferred Stock the
fair market value (determined as provided above) of such Elected
Corporation Dividend in cash (the "Cash Equivalent").
(g) The reclassification (including any reclassification
upon a consolidation or merger in which the Corporation is the
continuing corporation, but not including any transactions for
which an adjustment is provided in paragraph (i) below) of
Common Stock into securities including other than Common Stock
shall be deemed to involve (i) a distribution of such securities
other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled
to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (f) of this
Section 8) and (ii) a subdivision or combination, as the case
may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and
the effective date of such reclassification shall be deemed to
be "the date upon which such subdivision becomes effective" or
"the day upon which such combination becomes effective," as the
case may be, and "the date upon which such subdivision or combi-
nation becomes effective" within the meaning of paragraph (e) of
this Section 8).
(h) The Corporation may make such reductions in the Con-
version Price, in addition to those required by paragraphs (c),
(d), (e), (f) and (g) above, as it considers to be advisable in
order that any event treated for Federal income tax purposes as
a dividend of stock or stock rights shall not be taxable to the
recipients.
(i) In case of any consolidation of the Corporation with,
or merger of the Corporation into, any other corporation, part-
nership, joint venture, association or other entity (a "Per-
son"), any merger of another Person into the Corporation (other
than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of
Common Stock) or any sale or transfer of all or substantially
all of the assets of the Corporation, then each share of Series
B Convertible Preferred Stock shall be convertible only into the
kind and amount (if any) of securities, cash or other property
receivable upon such consolidation, merger, sale or transfer by
a holder of the number of shares of Common Stock into which such
share of Series B Convertible Preferred Stock was convertible
immediately prior to such consolidation, merger, sale or trans-
fer. The above provisions of this paragraph (i) shall similarly
apply to successive consolidations, mergers, sales or transfers.
19
<PAGE>
(j) No adjustment in the Conversion Price shall be re-
quired unless such adjustment would require an increase or
decrease of at least 1% in the Conversion Price; provided,
however, that any adjustments which by reason of this subpara-
graph (j) are not required to be made shall be carried forward
and taken into account in determining whether any subsequent
adjustment shall be required.
(k) Notwithstanding any other provision of this Section 8,
no adjustment to the Conversion Price shall reduce the Conver-
sion Price below the then par value per share of the Common
Stock, and any such purported adjustment shall instead reduce
the Conversion Price to such par value.
(l) Whenever the Conversion Price is adjusted as herein
provided the Corporation shall compute the adjusted Conversion
Price in accordance with this Section 8 and shall prepare a
certificate signed by the Treasurer of the Corporation setting
forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the transfer agent or
agents for the Series B Convertible Preferred Stock and a copy
mailed as soon as practicable to the holders of record of the
shares of Series B Convertible Preferred Stock.
(m) In case:
(i) the Corporation shall declare a dividend (or any
other distribution) on its Common Stock payable otherwise
than in cash out of its retained earnings; or
(ii) the Corporation shall authorize the granting to
the holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights; or
(iii) of any reclassification of the capital stock of
the Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation
is required, or of the sale or transfer of all or
substantially all of the assets of the Corporation; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall cause to be filed
with the transfer agent or agents, if any, for the Series B
Convertible Preferred Stock, and shall cause to be mailed to the
holders of record of the outstanding shares of Series B Convert-
ible Preferred Stock, at least 30 days (or 15 days in any case
20
<PAGE>
specified in clause (i) or (ii) above) prior to the applicable
record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, trans-
fer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up
(but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice).
(n) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized
but unissued Common Stock, for the purpose of effecting the
conversion of shares of Series B Convertible Preferred Stock,
the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series B Convertible Preferred
Stock then outstanding.
(o) No fractional shares of Common Stock shall be issued
upon conversion, but, instead of any fraction of a share which
would otherwise be issuable, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the
same fraction of the market price per share of Common Stock (as
determined in good faith by the Board of Directors or in any
manner prescribed by the Board of Directors) at the close of
business on the day of conversion.
(p) The Corporation will pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common
Stock on conversion of shares of Series B Convertible Preferred
Stock pursuant hereto. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the shares of Series B
Convertible Preferred Stock so converted were registered, and no
such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of
any such tax, or has established to the satisfaction of the
Corporation that such tax has been paid.
(q) For the purpose of this Section 8, the term "Common
Stock" shall include any stock of any class of the Corporation
which has no preference in respect of dividends or of amounts
21
<PAGE>
payable in the event of any voluntary or involuntary liquida-
tion, dissolution or winding up of the Corporation and which is
not subject to redemption by the Corporation. However, shares
issuable on conversion of shares of Series B Convertible Pre-
ferred Stock shall include only shares of the class designated
as Common Stock of the Corporation as of July 31, 1993, or
shares of any class or classes resulting from any reclassifica-
tion or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation and which are not subject to redemption by
the Corporation; provided that if at any time there shall be
more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from
all such reclassifications bears to the total number of shares
of all such classes resulting from all such reclassifications.
(r) In any case in which this Section 8 shall require that
an adjustment shall become effective on the day following a
record date for an event, the Corporation may defer until the
occurrence of such event (i) issuing to the holder of any share
of Series B Convertible Preferred Stock, if such share is con-
verted after such record date and before the occurrence of such
event, the additional Common Stock (and associated Elected
Corporation Dividend or Cash Equivalent, if any) issuable upon
such conversion by reason of the adjustment required by such
event over and above Common Stock (and associated Elected Corpo-
ration Dividend or Cash Equivalent, if any) issuable upon such
conversion before giving effect to such adjustment and (ii) pay-
ing to such holders any amount in cash in lieu of a fractional
share of Common Stock pursuant to paragraph (p) of this Section
8; provided that upon request of any such holder, the Corpo-
ration shall deliver to such holder a due bill or other ap-
propriate instrument evidencing such holder's right to receive
such additional Common Stock and such cash, upon the occurrence
of the event requiring such adjustment.
9. Sinking Fund. The Series B Convertible Preferred Stock shall
not be subject to any right of mandatory payment or prepayment (except for
liquidation, dissolution or winding up of the Corporation) or to any
sinking fund.
10. Ranking. The Series B Convertible Preferred Stock shall
rank on a parity with the Corporation's 8.125% Cumulative Preferred Stock,
Series A and $45,000 Cumulative Redeemable Preferred Stock, Series Z with
respect to dividends and distributions of assets upon liquidation,
dissolution or winding up of the Corporation.
11. Exchanges. Certificates representing shares of Series B
Convertible Preferred Stock shall be exchangeable, at the option of the
holder, for a new certificate or certificates of the same or different
22
<PAGE>
denominations representing in the aggregate the same number of shares of
Series B Convertible Preferred Stock.
L. $ 4.53 ESOP CONVERTIBLE PREFERRED STOCK, SERIES C
1. Designation, Issuance and Transfer. (a) There shall be a
series of Preferred Stock, the designation of which shall be
"$4.53 ESOP Convertible Preferred Stock, Series C" (hereinafter
called the "Series C Preferred Stock") and the number of
authorized shares constituting the Series C Preferred Stock
shall be eight million (8,000,000). Shares of the Series C
Preferred Stock shall have a stated value of $53.25 per share.
The number of authorized shares of the Series C Preferred Stock
may be reduced by resolution duly adopted by the Board of
Directors, or by a duly authorized committee thereof, and by the
filing, pursuant to the provisions of the General Corporation
Law of the State of Delaware, of a certificate of amendment to
the Certificate of Incorporation of the Corporation, as
theretofore amended, stating that such reduction has been so
authorized, but the number of authorized shares of the Series C
Preferred Stock shall not be increased.
(b) Shares of Series C Preferred Stock shall be issued
only to Shawmut Bank Connecticut, National Association, as
trustee (the "Trustee") acting on behalf of the employee stock
ownership feature of The Travelers Savings, Investment and Stock
Ownership Plan, as amended from time to time or any successor to
such plan (the "Plan"), or any successor trustee under the Plan.
In the event of any transfer of shares of Series C Preferred
Stock to any person other than the Trustee, other than a pledge
of the shares of Series C Preferred Stock by the Trust in
connection with the financing or refinancing of the purchase by
the Trustee of shares of $4.53 Series A ESOP Convertible
Preference Stock (without par value) of The Travelers
Corporation (the "Series A Preference Stock"; such shares of
Series A Preference Stock having been assumed by the Corporation
and become shares of Series C Preferred Stock pursuant to the
terms of such Series A Preference Stock) or of shares of Series
C Preferred Stock, the shares of the Series C Preferred Stock so
transferred, upon such transfer and without any further action
by the Corporation or the holder, shall be automatically
converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series C Preferred
Stock into shares of Common Stock pursuant to paragraph 4 of
this Section L and no such transferee shall have any of the
voting powers, preferences or rights of shares of Series C
Preferred Stock hereunder, but rather, only the powers and
rights pertaining to the Common Stock into which such shares of
Series C Preferred Stock shall be so converted. Notwithstanding
the foregoing provisions of this paragraph 1(b), shares of
Series C Preferred Stock may be converted into shares of Common
Stock as provided by paragraph 4 of this Section L and the
23
<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.
24
<PAGE>
(c) So long as any shares of the Series C Preferred Stock
are outstanding, no dividend (other than a dividend in Common
Stock or in any other stock of the Corporation ranking junior to
the Series C Preferred Stock as to dividends and upon
liquidation and other than as provided in paragraph 2(b) of this
Section L) shall be declared or paid or set aside for payment,
and no other distribution shall be declared or made upon the
Common Stock or upon any other stock of the Corporation ranking
junior to or on a parity with the Series C Preferred Stock as to
dividends or upon liquidation, nor shall any Common Stock nor
any other stock of the Corporation ranking junior to or on a
parity with the Series C Preferred Stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock)
by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to the Series C
Preferred Stock as to dividends and upon liquidation), unless,
in each case, the full cumulative dividends on all outstanding
shares of the Series C Preferred Stock shall have been paid or
contemporaneously are declared and paid through the latest
Dividend Payment Date.
(d) Dividends payable on the Series C Preferred Stock for
any full quarterly period shall be computed by dividing the Rate
by four (for purposes of this paragraph 2(d), the Series C
Preferred Stock shall be deemed to have been outstanding for the
full quarterly period ending April 1, 1994). Subject to the
preceding sentence, dividends payable on the Series C Preferred
Stock for any period less than a full quarterly period shall be
computed on the basis of a 360-day year of 30-day months.
3. Redemption. (a) The shares of Series C Preferred Stock
shall not be redeemable before January 1, 1998 except as set
forth in paragraphs 3(b), 3(c), 3(d) and 3(e) of this Section L.
On or after January 1, 1998, the Corporation, at its sole
option, may redeem the Series C Preferred Stock as a whole or in
part at a price of $53.25 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption.
(b) The shares of Series C Preferred Stock shall be
redeemable by the Corporation, at its sole option, at any time
and from time to time if there is a change in the Federal tax
law of the United States of America which has the effect of
precluding the Corporation from claiming any of the tax
deductions for dividends paid on the Series C Preferred Stock
when such dividends are used as provided under Section 404(k)(2)
of the Internal Revenue Code of 1986, as amended, and as in
effect on the date shares of Series C Preferred Stock are
initially issued (for this purpose, such date of initial
issuance being the date of the original issuance of the Series A
Preference Stock), at the higher of (i) $53.25 per share plus
25
<PAGE>
accrued and unpaid dividends thereon to the date fixed for
redemption or (ii) the fair market value per share of the Series
C Preferred Stock as determined by an independent appraiser,
appointed by the Trustee in accordance with the provisions of
the Plan, as of the most recent Valuation Date, as defined in
the Plan.
(c) The shares of Series C Preferred Stock shall be
redeemable in whole at any time upon the commencement of any
action by a governmental authority having jurisdiction which may
result in the divestiture or other material change in the
business of the Corporation or any subsidiary by reason of the
issuance of the Series C Preferred Stock. At such time as the
shares of Series C Preferred Stock shall be redeemable pursuant
to this paragraph 3(c), the Corporation, at its sole option, may
redeem the Series C Preferred Stock at the following redemption
prices per share plus, in each case, accrued and unpaid
dividends thereon to the date fixed for redemption.
If redeemed during the twelve-month period beginning January 1,
Year Price
---- -----
1994 $55.52
1995 $54.95
1996 $54.38
1997 $53.82
and $53.25 if redeemed on or after January 1, 1998.
(d) The shares of Series C Preferred Stock shall be
redeemed by the Corporation at a redemption price which shall
be the higher of (i) $53.25 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption or (ii) the
fair market value per share of the Series C Preferred Stock as
determined by an independent appraiser appointed by the Trustee
in accordance with the provisions of the Plan, as of the most
recent Valuation Date, as defined in the Plan, at the option of
the holder, at any time and from time to time upon notice to
the Corporation given not less than five business days prior to
the date fixed by the holder in such notice for such
redemption, upon certification by such holder to the
Corporation, when and to the extent necessary for such holder
to provide for distributions required to be made to
participants under, or to satisfy an investment election
provided to participants in accordance with, the Plan.
(e) At the option of the holder, the shares of Series C
Preferred Stock shall be redeemed in whole by the Corporation
at a redemption price of $53.25 per share plus accrued and
unpaid dividends thereon to the date fixed for redemption, at
any time (i) upon a Change in Control of the Corporation or
26
<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
27
<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
28
<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
29
<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
30
<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
31
<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
32
<PAGE>
(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.
33
<PAGE>
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,
34
<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,
35
<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
36
<PAGE>
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
37
<PAGE>
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
38
<PAGE>
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
39
<PAGE>
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
40
<PAGE>
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
41
<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
42
<PAGE>
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
43
<PAGE>
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
44
<PAGE>
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
45
<PAGE>
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
46
<PAGE>
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
47
<PAGE>
date; (ii) the number of shares of the Series D Preferred Stock
to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date.
(d) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the
redemption price of the shares called for redemption) dividends
on the shares of the Series D Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no
longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the
right to receive from the Corporation the redemption price)
shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state), such shares shall be
redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder
thereof.
(e) Any shares of the Series D Preferred Stock which
shall at any time have been redeemed, repurchased or otherwise
acquired by the Corporation shall, upon such redemption,
repurchase or other acquisition, be retired and thereafter have
the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such shares are
once more designated as part of a particular series by the
Board of Directors or a duly authorized committee thereof.
(f) Notwithstanding the foregoing provisions of this
paragraph 3, unless the full cumulative dividends on all
outstanding shares of the Series D Preferred Stock shall have
been paid or contemporaneously are declared and paid through
the last Dividend Payment Date, no shares of the Series D
Preferred Stock shall be redeemed unless all outstanding shares
of the Series D Preferred Stock are simultaneously redeemed,
and the Corporation shall not purchase or otherwise acquire any
shares of the Series D Preferred Stock; provided, however, that
the foregoing shall not prevent the purchase or acquisition of
shares of the Series D Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all
outstanding shares of the Series D Preferred Stock.
48
<PAGE>
(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
49
<PAGE>
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
50
<PAGE>
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.
51
<PAGE>
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
52
<PAGE>
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
53
<PAGE>
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
54
<PAGE>
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
55
<PAGE>
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.
56
<PAGE>
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
57
<PAGE>
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.
58
<PAGE>
(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
59
<PAGE>
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
60
<PAGE>
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
61
<PAGE>
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
62
<PAGE>
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
63
<PAGE>
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.
64
<PAGE>
(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
65
<PAGE>
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%)
66
<PAGE>
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
67
<PAGE>
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
68
<PAGE>
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
69
<PAGE>
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
70
<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.
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
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
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
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 of the Corporation is hereby amended to
read in its entirety as follows:
The total number of shares of Common Stock which the Corporation
shall have the authority to issue is 3 billion 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 22nd day of April, 1998.
TRAVELERS GROUP INC.
By: /s/ Charles O. Prince, III
-----------------------------
Charles O. Prince, III
Executive Vice President
and Secretary
<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 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
6.231% Cumulative Preferred Stock, Series H
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 September
3, 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 6.231% Cumulative Preferred Stock, Series H (the
"Series H Preferred Stock"), and the number of shares constituting
such series shall be 800,000. The number of authorized shares of
Series H 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 H Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series H
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 February
1, May 1, August 1 and November 1 of each year, commencing November 1,
1997.
Each quarterly period beginning on February 1, May 1, August
1 and November 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 H 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 $3.894375 (or
one-fourth of 6.231% of the Liquidation Preference (as defined in
Section 7) for such share). If a share of Series H 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 $3.894375
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.
2
<PAGE>
If, prior to 18 months after the date of the original
issuance of the Series H Preferred Stock, one or more 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 H 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 H 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
3
<PAGE>
the Dividends-Received Percentage applicable to the dividend in question
and .50) over (y) the dividend paid by the Company on such dividend payable
date, will be payable (if declared) to holders of Series H Preferred Stock
on the record date applicable to the next succeeding dividend payment date
or, if the Series H Preferred Stock is called for redemption prior to such
record date, to holders of Series H 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 H Preferred Stock (each, an "Affected Dividend
Payment Date"), the Company will pay (if declared) additional
dividends (the "Retroactive Dividends") to holders of Series H
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 H Preferred Stock on the record date following the
date of enactment) or, if the Series H Preferred Stock is called for
redemption prior to such record date, to holders of Series H 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 H Preferred Stock
shall be paid to the holders of record of shares of Series H 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
4
<PAGE>
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 Company ranking on a parity as to
dividends with the Series H Preferred Stock, the Company, in making
any dividend payment on account of arrears on the Series H Preferred
Stock or such other class or series of preferred stock, shall make
payments ratably upon all outstanding shares of Series H 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 H Preferred Stock and such other class or
series of preferred stock to the date of such dividend payment.
Holders of shares of Series H 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 H 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 H Preferred
Stock, as a whole or in part, at any time or from time to time on or
after September 8, 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 H 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 H 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
5
<PAGE>
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 Company in
providing money for the payment of the Redemption Price) dividends on the
shares of Series H 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 H Preferred Stock are to be redeemed, the
Company shall select those shares to be redeemed from outstanding shares of
Series H 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 H Preferred Stock pursuant to this Section 3, or
purchase or acquire any shares of Series H Preferred Stock otherwise
than pursuant to a purchase or exchange offer made on the same terms
to all holders of shares of Series H Preferred Stock, unless full
cumulative dividends shall have been paid or declared and set apart
for payment upon all outstanding shares of Series H 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 H 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
H 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 H Preferred Stock shall
have no voting rights.
If six quarterly dividends (whether or not consecutive)
payable on shares of Series H 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
H 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 H 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 H 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 H Preferred
Stock to elect Directors as set forth above shall continue until all
dividend arrearages on the Series H 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 H 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 H 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 H Preferred Stock) so as to
adversely affect the powers, preferences or rights of the holders of
shares of Series H 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 H 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 H
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 H 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 H 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 H Preferred Stock and any other shares of stock
of the Company ranking as to any such distribution on a parity with
the Series H Preferred Stock, the holders of the Series H 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 H Preferred Stock
of the full preferential amounts provided for in this Section 7, the
holders of the Series H 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 H Preferred Stock are not impaired thereby.
9
<PAGE>
8. Limitation on Dividends on Junior Stock. So long as any
Series H 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 H 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 H
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 5th day of September, 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
SERIES I CUMULATIVE CONVERTIBLE PREFERRED STOCK
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.
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 September 24, 1997, adopted resolutions that provide for a series of
Preferred Stock as follows:
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $1.00 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of
<PAGE>
such series shall be designated as the "Series I Cumulative Convertible
Preferred Stock" (the "Series I Preferred Stock") and the number of shares
constituting such series shall be 280,000, which number may be decreased (but
not increased) by a resolution adopted by the Board of Directors without a vote
of stockholders; PROVIDED, HOWEVER, that such number may not be decreased below
the number of then currently outstanding shares of Series I Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of shares of Series I Preferred Stock, in preference
to the holders of shares of the Common Stock, par value $.01 per share (the
"Common Stock"), of the Corporation and of any other capital stock of the
Corporation ranking junior to the Series I Preferred Stock as to payment of
dividends, shall be entitled to receive, when and as declared by the Board
of Directors out of net profits or net assets of the Corporation legally
available for the payment of dividends, cumulative cash dividends at the
annual rate of $90 per share, and no more, in equal quarterly payments on
March 31, June 30, September 30 and December 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date which is on or
after the date of original issue of the Series I Preferred Stock; PROVIDED,
HOWEVER, that with respect to such first Quarterly Dividend Payment Date,
the holders of shares of Series I Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of net profits
or net assets of the Corporation legally available for the payment of
dividends, a cumulative cash dividend in the amount of $22.50.
(b) Dividends payable pursuant to paragraph (a) of this Section 2
shall begin to accrue and be cumulative from the date of original issue of
the Series I Preferred Stock, except that the amount of the cumulative cash
dividend payable with respect to the first Quarterly Dividend Payment Date
shall be as specified in paragraph (a) of this Section 2. The amount of
dividends so payable shall be determined on the basis of twelve 30-day
months and a 360-day year. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series I Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix
2
<PAGE>
a record date for the determination of holders of shares of Series I
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be no more than 60 days prior to the date fixed for
the payment thereof.
Section 3. VOTING RIGHTS. In addition to any voting rights provided
elsewhere herein and in the Corporation's Restated Certificate of Incorporation,
as it may be amended or restated from time to time (the "Certificate of
Incorporation"), and any voting rights provided by law, the holders of shares of
Series I Preferred Stock shall have the following voting rights:
(a) Each share of Series I Preferred Stock shall be entitled to
26.31579 votes multiplied by the Exchange Ratio after giving effect to any
Adjustment Event (as such terms are defined in the Agreement and Plan of
Merger, dated as of September 24, 1997, among the Corporation, Salomon Inc
and Diamonds Acquisition Corp. (the "Merger Agreement")), subject to
adjustment in the manner set forth in paragraph (b) of Section 8. Except
as otherwise provided herein, or by the Certificate of Incorporation, or by
law, the shares of Series I Preferred Stock and the shares of Common Stock
(and any other shares of capital stock of the Corporation at the time
entitled thereto) shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(b) So long as any shares of Series I Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of
shares shall then be required by law, without first obtaining the consent
or approval of the holders of at least two-thirds of the number of
then-outstanding shares of Series I Preferred Stock, and all other series
of the Corporation's Preferred Stock, par value $1.00 per share
(collectively with the Series I Preferred Stock, the "Preferred Stock"),
voting as a single class, given in person or by proxy at a meeting at which
the holders of such shares shall be entitled to vote separately as a class,
the Corporation shall not: (i) authorize shares of any class or series of
stock having any preference or priority as to dividends or upon liquidation
("Senior Stock") over the Preferred Stock; (ii) reclassify any shares of
stock of the Corporation into shares of Senior Stock; (iii) authorize any
security exchangeable for, convertible into, or evidencing the right to
purchase any
3
<PAGE>
shares of Senior Stock; (iv) amend, alter or repeal the Certificate of
Incorporation to alter or change the preferences, rights or powers of the
Preferred Stock so as to affect the Preferred Stock adversely; PROVIDED,
HOWEVER, that if any such amendment, alteration or repeal would alter or
change the preferences, rights or powers of one or more, but not all, of
the series of the Preferred Stock at the time outstanding, the consent or
approval of the holders of at least two-thirds of the number of the
outstanding shares of each such series so affected, similarly given, shall
be required in lieu of (or if such consent is required by law, in addition
to) the consent or approval of the holders of at least two-thirds of the
number of outstanding shares of Preferred Stock as a class; or (v) effect
the voluntary liquidation, dissolution or winding up of the Corporation, or
the sale, lease, exchange of all or substantially all of the assets,
property or business of the Corporation, or the merger or consolidation of
the Corporation with or into any other corporation (except a wholly-owned
subsidiary of the Corporation), PROVIDED, HOWEVER, that no separate vote of
the holders of the Preferred Stock as a class shall be required in the case
of a merger or consolidation or a sale, exchange or conveyance of all or
substantially all of the assets, property or business of the Corporation
(such transactions being hereinafter in this proviso referred to as a
"reorganization") if (A) the resulting, surviving or acquiring corporation
will have after such reorganization no stock either authorized or
outstanding (except such stock of the Corporation as may have been
authorized or outstanding immediately preceding such reorganization, or
such stock of the resulting, surviving or acquiring corporation as may be
issued in exchange therefor) ranking prior to, or on a parity with, the
Preferred Stock or the stock of the resulting, surviving or acquiring
corporation issued in exchange therefor and (B) each holder of shares of
Preferred Stock immediately preceding such reorganization will receive in
exchange therefor the same number of shares of stock, with substantially
the same preferences, rights and powers, of the resulting, surviving, or
acquiring corporation.
So long as any shares of Preferred Stock shall be outstanding and
unless the consent or approval of a greater number of shares shall then be
required by law, without first obtaining the consent or approval of the
holders of a majority of the number of such shares at the time outstanding,
given in person or by proxy at a
4
<PAGE>
meeting at which the holders of such shares shall be entitled to vote
separately as a class, the Corporation shall not amend the provisions of
its Certificate of Incorporation so as to increase the amount of the
authorized Preferred Stock or so as to authorize any other stock ranking on
a parity with the Preferred Stock either as to payment of dividends or upon
liquidation.
(c) If on any date a total of six quarterly dividends on the Series I
Preferred Stock have fully accrued but have not been paid in full, the
holders of shares of Series I Preferred Stock, together with the holders of
all other then-outstanding shares of any series of the Preferred Stock (or
any other series or class of the Company's preferred stock) as to which
series or class a total of six quarterly dividends have fully accrued but
have not been paid in full and which such series or class shall be entitled
to the rights described in this paragraph (c) (collectively, "Defaulted
Preferred Stock"), shall have the right, voting together as a single class,
to elect two directors. Such right of the holders of Defaulted Preferred
Stock to vote for the election of such two directors may be exercised at
any annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournment thereof, or by the written
consent, delivered to the Secretary of the Corporation, of the holders of a
majority of all outstanding shares of Defaulted Preferred Stock, until
dividends in default on the outstanding shares of Defaulted Preferred Stock
shall have been paid in full (or such dividends shall have been declared
and funds sufficient therefor set apart for payment), at which time the
term of office of the two directors so elected shall terminate
automatically. So long as such right to vote continues (and unless such
right has been exercised by written consent of the holders of a majority of
the outstanding shares of Defaulted Preferred Stock as hereinabove
authorized), the Secretary of the Corporation may call, and upon the
written request of the holders of record of a majority of the outstanding
shares of Defaulted Preferred Stock addressed to him at the principal
office of the Corporation shall call, a special meeting of the holders of
such shares for the election of such two directors as provided herein.
Such meeting shall be held within 30 days after delivery of such request to
the Secretary, at the place and upon the notice provided by law and in the
By-laws for the holding of meetings of stockholders. No such special meet-
5
<PAGE>
ing or adjournment thereof shall be held on a date less then 30 days before
an annual meeting of stockholders or any special meeting in lieu thereof.
If at any such annual or special meeting or any adjournment thereof the
holders of a majority of the then outstanding shares of Defaulted Preferred
Stock entitled to vote in such election shall be present or represented by
proxy, or if the holders of a majority of the outstanding shares of
Defaulted Preferred Stock shall have acted by written consent in lieu of a
meeting with respect thereto, then the authorized number of directors shall
be increased by two, and the holders of the Defaulted Preferred Stock shall
be entitled to elect the two additional directors. Directors so elected
shall serve until the next annual meeting or until their successors shall
be elected and shall qualify, unless the term of office of the persons so
elected as directors shall have terminated under the circumstances set
forth in the second sentence of this paragraph (c). In case of any vacancy
occurring among the directors elected by the holders of the Defaulted
Preferred Stock as a class, the remaining directors who shall have been so
elected may appoint a successor to hold office for the unexpired term of
the directors whose places shall be vacant. If both directors so elected
by the holders of Defaulted Preferred Stock as a class shall cease to serve
as directors before their terms shall expire, the holders of the Defaulted
Preferred Stock then outstanding and entitled to vote for such directors
may, by written consent as hereinabove provided, or at a special meeting of
such holders called as provided above, elect successors to hold office for
the unexpired terms of the directors whose places shall be vacant.
(d) Except as provided herein (including without limitation the right
to vote with the Common Stock on all matters submitted to a vote of
stockholders of the Corporation as set forth in paragraph (a) of this
Section 3) or in the Certificate of Incorporation, or as required by law,
the holders of shares of Series I Preferred Stock shall have no voting
rights and their consent shall not be required for the taking of any
corporate action.
6
<PAGE>
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends payable on shares of Series I
Preferred Stock as provided in Section 2 hereof are in arrears, thereafter
and until all accrued and unpaid dividends, whether or not declared, on the
outstanding shares of Series I Preferred Stock shall have been paid in full
or declared and set apart for payment, or whenever the Corporation shall
not have redeemed shares of Series I Preferred Stock at a time required by
paragraph (a) of Section 5 hereof, thereafter and until all mandatory
redemption obligations which have come due shall have been satisfied or all
necessary funds have been set apart for payment, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of Common Stock or other capital stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series I
Preferred Stock ("Junior Stock"), other than dividends or distributions
payable in Junior Stock; or (ii) declare or pay dividends, or make any
other distributions, on any shares of capital stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series I Preferred Stock ("Parity Stock"), other than dividends or
distributions payable in Junior Stock, except dividends paid ratably on the
Series I Preferred Stock and all Parity Stock on which dividends are
payable or in arrears, in proportion to the total amounts to which the
holders of all such shares are then entitled.
(b) Whenever quarterly dividends payable on shares of Series I
Preferred Stock as provided in Section 2 hereof are in arrears, thereafter
and until all accrued and unpaid dividends, whether or not declared, on the
outstanding shares of Series I Preferred Stock shall have been paid in full
or declared and set apart for payment, or whenever the Corporation shall
not have redeemed shares of Series I Preferred Stock at a time required by
paragraph (a) of Section 5 hereof, thereafter and until all mandatory
redemption obligations which have come due shall have been satisfied or all
necessary funds have been set apart for payment, the Corporation shall not:
(i) redeem or purchase or otherwise acquire for consideration any shares of
Junior Stock or Parity Stock; or (ii) purchase or otherwise acquire for
consideration any shares of Series I Preferred Stock; PROVIDED, that the
Corporation may redeem shares of Series I
7
<PAGE>
Preferred Stock pursuant to paragraph (a) of Section 5 hereof.
(c) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of capital stock of the Corporation unless the Corporation could, pursuant
to paragraph (b) of this Section 4, purchase such shares at such time and
in such manner.
Section 5. REDEMPTION.
(a) On each October 31 commencing on October 31, 1998 (so long as any
shares of Series I Preferred Stock remain outstanding), the Corporation
shall redeem 140,000 shares of Series I Preferred Stock (or, if fewer than
140,000 shares of Series I Preferred Stock are then outstanding, the number
of shares then outstanding), by paying therefor in cash $1,000 per share
plus an amount per share equal to all accrued but unpaid dividends thereon,
whether or not declared, to the date of redemption. The Corporation may
apply to its mandatory redemption obligations, on a pro rata basis with
respect to mandatory redemption payments to be made, any shares of Series I
Preferred Stock purchased, redeemed or otherwise acquired (other than upon
conversion) by it which have not been previously credited against its
mandatory redemption obligations.
(b) If less than all shares of Series I Preferred Stock at the time
outstanding are to be redeemed, the shares to be redeemed shall be selected
pro rata or by lot, in such manner as may be prescribed by the Board of
Directors.
(c) Notice of any redemption of shares of Series I Preferred Stock
shall be given by publication in a newspaper of general circulation in the
Borough of Manhattan not less than thirty nor more than sixty days prior to
the date fixed for redemption, if the Series I Preferred Stock is listed on
any national securities exchange or traded in the over-the-counter market;
and, in any case, a similar notice shall be mailed not less than thirty,
but not more than sixty, days prior to such date to each holder of shares
of Series I Preferred Stock to be redeemed, at such holder's address as it
appears on the transfer books of the Corporation. In order to facilitate
the redemption of shares of Series I Preferred Stock, the Board of
Directors may fix a record date for
8
<PAGE>
the determination of shares of Series I Preferred Stock to be redeemed, not
more than sixty days or less than thirty days prior to the date fixed for
such redemption.
(d) Notice having been given pursuant to paragraph (c) of this
Section 5, from and after the date specified therein as the date of
redemption, unless default shall be made by the Corporation in providing
moneys for the payment of the redemption price pursuant to such notice, all
dividends on the Preferred Stock thereby called for redemption shall cease
to accrue, and from and after the date of redemption so specified, unless
default shall be made by the Corporation as aforesaid, or from and after
the date (prior to the date of redemption so specified) on which the
Corporation shall provide the moneys for the payment of the redemption
price by depositing the amount thereof with a bank or trust company doing
business in the Borough of Manhattan, The City of New York, and having a
capital and surplus of at least $10,000,000, PROVIDED that the notice of
redemption shall state the intention of the Corporation to deposit such
amount on a date in such notice specified, all rights of the holders
thereof as stockholders of the Corporation, except the right to receive the
redemption price (but without interest) and except the right to exercise
any privileges of conversion, shall cease and determine. Any interest
allowed on moneys so deposited shall be paid to the Corporation. Any
moneys so deposited which shall remain unclaimed by the holders of such
Preferred Stock at the end of six years after the redemption date shall
become the property of, and be paid by such bank or trust company to, the
Corporation.
Section 6. REACQUIRED SHARES. Any shares of Series I Preferred Stock
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatso-ever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, par value $1.00 per share, of the
Corporation and may be reissued subject to the conditions or restrictions on
issuance set forth herein.
Section 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of
Junior Stock, unless, prior thereto, the holders of shares of Series I
Preferred
9
<PAGE>
Stock shall have received $1,000 per share, plus an amount per share equal
to all accrued but unpaid dividends thereon, whether or not declared, to
the date of such payment or (ii) to the holders of shares of Parity Stock,
except distributions made ratably on the Series I Preferred Stock and all
such Parity Stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up.
(b) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation shall be determined to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section
7.
Section 8. CONVERSION. Each share of Series I Preferred Stock may,
at the option of the holder thereof, be converted at any time on or after the
date of original issuance of the Series I Preferred Stock into shares of Common
Stock, on the terms and conditions set forth in this Section 8.
(a) Subject to the provisions for adjustment hereinafter set forth,
each share of Series I Preferred Stock shall be convertible in the manner
hereinafter set forth into 26.31579 fully paid and nonassessable shares of
Common Stock multiplied by the Exchange Ratio after giving effect to any
Adjustment Event (as such terms are defined in the Merger Agreement).
(b) The number of shares of Common Stock into which each share of
Series I Preferred Stock is convertible, and the number of votes to which
the holder of a share of Series I Preferred Stock is entitled pursuant to
paragraph (a) of Section 3, shall be subject to adjustment from time to
time as follows:
(i) In case the Corporation shall at any time or from time to
time declare a dividend, or make a distribution, on the outstanding
shares of Common Stock in shares of Common Stock or subdivide or
reclassify the outstanding shares of Common Stock into a greater
number of shares or combine or reclassify the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then,
and in each such case,
10
<PAGE>
(A) the number of shares of Common Stock into which each
share of Series I Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number of
shares of Common Stock which the holder of a share of Series I
Preferred Stock would have been entitled to receive after the
happening of any of the events described above had such share
been converted immediately prior to the happening of such event
or the record date therefor, whichever is earlier;
(B) the number of votes to which a holder of a share of
Series I Preferred Stock is entitled pursuant to paragraph (a) of
Section 3 shall be adjusted so that, after the happening of any
of the events described above, such holder shall be entitled to a
number of votes equal to (I) the number of votes to which such
holder was entitled pursuant to paragraph (a) of Section 3
immediately prior to such happening multiplied by (II) a
fraction, the numerator of which is the number of shares of
Common Stock into which one share of Series I Preferred Stock was
convertible immediately after such happening and the denominator
of which is the number of shares of Common Stock into which one
share of Series I Preferred Stock was convertible immediately
prior to such happening; and
(C) an adjustment made pursuant to this clause (i) shall
become effective (x) in the case of any such dividend or
distribution, (1) immediately after the close of business on the
record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, for
purposes of subclause (A), and (2) immediately after the close of
business on the date of payment of such dividend or distribution,
or the date of effectiveness of such subdivision or
reclassification, for purposes of subclause (B), or (y) in the
case of any such subdivision, reclassification or combination, at
the close of business on the day upon which such corporate action
becomes effective, for purposes of both subclause (A) and
subclause (B).
11
<PAGE>
(ii) In case the Corporation shall issue rights or warrants to
all holders of the Common Stock entitling such holders to subscribe
for or purchase Common Stock at a price per share less than the
Current Market Price per share of the Common Stock and the record date
for the determination of stockholders entitled to receive such rights
or warrants, then, and in each such case,
(A) the number of shares of Common Stock into which each
share of Series I Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying the number of
shares of Common Stock into which such share was convertible on
the day immediately prior to such record date by a fraction, (I)
the numerator of which is the sum of (1) the number of shares of
Common Stock outstanding on such record date and (2) the number
of additional shares of Common Stock which such rights or warrant
entitle holders of Common Stock to subscribe for or purchase
("Offered Shares"), and (II) the denominator of which is the sum
of (1) the number of shares of Common Stock outstanding on the
record date and (2) a fraction, (x) the numerator of which is the
product of the number of Offered Shares multiplied by the
subscription or purchase price of the Offered Shares and (y) the
denominator of which is the Current Market Price per share of
Common Stock on such record date;
(B) the number of votes to which a holder of a share of
Series I Preferred Stock is entitled pursuant to paragraph (a) of
Section 3 shall be adjusted so that, after the happening of any
of the events described above, such holder shall be entitled to a
number of votes equal to (I) the number of votes to which such
holder was entitled pursuant to paragraph (a) of Section 3
immediately prior to such happening multiplied by (II) a
fraction, the numerator of which is the number of shares of
Common Stock into which one share of Series I Preferred Stock was
convertible immediately after such happening and the denominator
of which is
12
<PAGE>
the number of shares of Common Stock into which one share of
Series I Preferred Stock was convertible immediately prior to
such happening; and
(C) such adjustment shall become effective immediately
after such record date, for purposes of subclause (A), and
immediately after the date of such issuance, for purposes of
subclause (B).
(iii) In case the Corporation shall at any time or from time to
time declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other
securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its Subsidiaries by way of
dividend) on its Common Stock, other than (x) regular quarterly
dividends payable in cash or extraordinary cash dividends in an
aggregate amount not to exceed $.25 per share of Common Stock, (y)
shares of Common Stock which are referred to in clause (i) of this
paragraph (b), or (z) rights or warrants which are referred to in
clause (ii) of this paragraph (b), then,
(A) in each such case, the number of shares of Common Stock
into which each share of Series I Preferred Stock is convertible
shall be adjusted so that the holder of each share thereof shall
be entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (1) the
number of shares of Common Stock into which such share was
convertible on the day immediately prior to the record date fixed
for the determination of stockholders entitled to receive such
dividend or distribution by (2) a fraction, the numerator of
which shall be the Current Market Price per share of Common Stock
as of such record date, and the denominator of which shall be
such Current Market Price per share of Common Stock less the Fair
Market Value per share of Common Stock (as determined in good
faith by the Board of Directors of the Corporation, a certified
resolution with respect to which shall be mailed to each holder
of shares of
13
<PAGE>
Series I Preferred Stock) of such dividend or distribution;
PROVIDED, HOWEVER, that in the event of a distribution of shares
of capital stock of a Subsidiary of the Corporation (a
"Spin-Off") made to holders of shares of Common Stock, the
numerator of such fraction shall be the sum of the Current Market
Price per share of Common Stock as of the 35th Trading Day after
the effective date of such Spin-Off and the Current Market Price
of the number of shares (or the fraction of a share) of capital
stock of the Subsidiary which is distributed in such Spin-Off in
respect of one share of Common Stock as of such 35th Trading Day
and the denominator of which shall be the Current Market Price
per share of Common Stock as of such 35th Trading Day;
(B) in the case of a dividend or distribution of securities
of the Corporation having general voting rights in the election
of directors ("Voting Securities") (but not in the case of any
other dividend or distribution described in this clause (iii)),
the number of votes to which a holder of a share of Series I
Preferred Stock is entitled pursuant to paragraph (a) of Section
3 shall be adjusted so that, after the payment of such dividend
or making of such distribution, such holder shall be entitled to
(I) the number of votes to which such holder was entitled
pursuant to paragraph (a) of Section 3 immediately prior to such
payment or making multiplied by (II) the number of votes entitled
to be cast generally in the election of directors by the holder
of a share of Common Stock in respect of both such share of
Common Stock and the Voting Securities received by such holder as
a result of such dividend or distribution in respect of such
share of Common Stock; and
(C) an adjustment made pursuant to this clause (iii) shall
be made upon the opening of business on the next Business Day
following the date on which any such dividend or distribution is
paid and shall be effective retroactively immediately after the
close of business on the record date fixed for the determination
of stockholders entitled to receive
14
<PAGE>
such dividend or distribution; PROVIDED, HOWEVER, if the proviso
to subclause (A) of this clause (iii) applies, then such
adjustment shall be made and be effective as of such 35th Trading
Day after the effective date of such Spin-Off.
(iv) In case at any time the Corporation shall be a party to any
transaction (including, without limitation, a merger, consolidation,
sale of all or substantially all of the Corporation's assets,
liquidation or recapitalization of the Common Stock and excluding any
transaction to which clause (i), (ii) or (iii) of this paragraph (b)
applies) in which the previously outstanding Common Stock shall be
changed into or exchanged for different securities of the Corporation
or common stock or other securities of another corporation or
interests in a noncorporate entity or other property (including cash)
or any combination of any of the foregoing, then, as a condition of
the consummation of such transaction, lawful and adequate provision
shall be made so that each holder of shares of Series I Preferred
Stock shall be entitled, upon conversion, to an amount per share equal
to (A) the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged times (B)
the number of shares of Common Stock into which a share of Preferred
Stock is convertible immediately prior to the consummation of such
transaction.
(c) In case the Corporation shall at any time or from time to time
declare, order, pay or make a dividend or other distribution (including,
without limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of the
Corporation or any of its Subsidiaries by way of dividend) on its Common
Stock, other than (A) regular quarterly dividends payable in cash, (B)
shares of Common Stock which are referred to in clause (i) of paragraph (b)
of this Section 8, or (C) rights or warrants which are referred to in
clause (ii) of paragraph (b) of this Section 8, then, from and after the
date of declaration of such dividend or other distribution until the date
of payment thereof, each share of Series I Preferred Stock may be
converted, at the option of the holder thereof, into the number of shares
of Common Stock set forth in paragraph (a) of this Section 8, as
15
<PAGE>
adjusted by paragraph (b) of this Section 8, on the terms and conditions
set forth in this Section 8, and if so converted during such period, such
holder shall be entitled to receive such dividend or distribution as if
such holder had been the holder of such shares of Common Stock as of the
record date for such dividend or distribution. Promptly after the
declaration of any dividend or distribution (other than any dividend or
distribution described in clauses (A), (B) and (C) of this paragraph (c)),
the Corporation shall mail to the holders of record of the outstanding
shares of Series I Preferred Stock at their respective addresses as the
same shall appear in the Corporation's stock records a notice describing
such dividend or distribution in reasonable detail and setting forth the
expected date of payment thereof.
(d) If any adjustment in the number of shares of Common Stock into
which each share of Series I Preferred Stock may be converted required
pursuant to this Section 8 would result in an increase or decrease of less
than one half of 1% in the number of shares of Common Stock into which each
share of Series I Preferred Stock is then convertible, the amount of any
such adjustment shall be carried forward and adjustment with respect
thereto shall be made at the time of and together with any subsequent
adjustment, which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one half of 1% of the
number of shares of Common Stock into which each share of Series I
Preferred Stock is then convertible.
(e) The Board of Directors may increase the number of shares of
Common Stock into which each share of Series I Preferred Stock may be
converted, in addition to the adjustments required by this Section 8, as
shall be determined by it (as evidenced by a resolution of the Board of
Directors) to be advisable in order to avoid or diminish any income deemed
to be received by any holder for federal income tax purposes of shares of
Common Stock or Series I Preferred Stock resulting from any events or
occurrences giving rise to adjustments pursuant to this Section 8 or from
any other similar event.
(f) The holder of any shares of Series I Preferred Stock may exercise
his right to convert such shares into shares of Common Stock by
surrendering for such purpose to the Corporation, at its principal office
or at such other office or agency maintained by the Corporation for
16
<PAGE>
that purpose, a certificate or certificates representing the shares of
Series I Preferred Stock to be converted accompanied by a written notice
stating that such holder elects to convert all or a specified whole number
of such shares in accordance with the provisions of this Section 8 and
specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case such notice
shall specify a name or names other than that of such holder, such notice
shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such
taxes, the Corporation will pay any and all issue and other taxes (other
than taxes based on income) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of Series I Preferred
Stock pursuant hereto. As promptly as practicable, and in any event within
five business days after the surrender of such certificate or certificates
and the receipt of such notice relating thereto and, if applicable, payment
of all transfer taxes (or the demonstration to the satisfaction of the
Corporation that such taxes have been paid), the Corporation shall deliver
or cause to be delivered (i) certificates representing the number of
validly issued, fully paid and nonassessable full shares of Common Stock to
which the holder of shares of Series I Preferred Stock so converted shall
be entitled and (ii) if less than the full number of shares of Series I
Preferred Stock evidenced by the surrendered certificate or certificates
are being converted, a new certificate or certificates, of like tenor, for
the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversion shall be
deemed to have been made at the close of business on the date of giving of
such notice and of such surrender of the certificate or certificates
representing the shares of Series I Preferred Stock to be converted so that
the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive shares of Common Stock in accordance
herewith, and the person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time. The Corporation shall not be
required to convert, and no surrender of shares of Series I Preferred Stock
shall be effective for that purpose, while the transfer books of the
Corporation for the Common Stock are closed for any purpose (but not for
any period in excess of 15 days); but the surrender of shares of Series I
Preferred Stock for conversion during
17
<PAGE>
any period while such books are so closed shall become effective for
conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares of Series I Preferred
Stock were surrendered, and at the conversion rate in effect at the date of
such surrender.
(g) Subject to the limitations on conversion set forth in the first
sentence of Section 8 hereof, shares of Series I Preferred Stock may be
converted at any time up to the close of business on the second Business
Day preceding the date fixed for redemption of such shares pursuant to
Section 5 hereof.
(h) Upon conversion of any shares of Series I Preferred Stock, the
holder thereof shall not be entitled to receive any accumulated, accrued or
unpaid dividends in respect of the shares so converted; PROVIDED, that such
holder shall be entitled to receive any dividends on such shares of Series
I Preferred Stock declared prior to such conversion if such holder
held such shares on the record date fixed for the determination of holders
of shares of Series I Preferred Stock entitled to receive payment of such
dividend.
(i) In connection with the conversion of any shares of Series I
Preferred Stock, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the day
on which such shares of Series I Preferred Stock are deemed to have been
converted.
(j) The Corporation shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series I Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all then outstanding shares of Series I Preferred Stock.
The Corporation shall from time to time, subject to and in accordance with
the laws of Delaware, increase the authorized amount of Common Stock if at
any time the number of authorized shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion at such time of all then
outstanding shares of Series I Preferred Stock.
18
<PAGE>
Section 9. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares
of Common Stock into which each share of Series I Preferred Stock is convertible
(or the number of votes to which each share of Series I Preferred Stock is
entitled) is adjusted as provided in Section 8 hereof, the Corporation shall
promptly mail to the holders of record of the outstanding shares of Series I
Preferred Stock at their respective addresses as the same shall appear in the
Corporation's stock records a notice stating that the number of shares of Common
Stock into which the shares of Series I Preferred Stock are convertible has
been adjusted and set-ting forth the new number of shares of Common Stock (or
describing the new stock, securities, cash or other property) into which each
share of Series I Preferred Stock is convertible (and the now number of votes to
which each share of Series I Preferred Stock is entitled), as a result of such
adjustment, a brief statement of the facts requiring such adjustment and the
computation thereof, and when such adjustment became effective.
Section 10. DEFINITIONS. For the purposes of the Certificate of
Designation of Series I Cumulative Convertible Preferred Stock which embodies
this resolution:
"Business Day" means any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Closing Price" per share of Common Stock on any date shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and
19
<PAGE>
asked prices as furnished by a professional marketmaker making a market in the
Common Stock selected by the Board of Directors. If the Common Stock is not
publicly held or so listed or publicly traded, "Closing Price" shall mean the
Fair Market Value per share as determined in good faith by the Board of
Directors of the Corporation.
"Current Market Price" per share of Common Stock on any date shall be
deemed to be the Closing Price per share of Common Stock on the Trading Day
immediately prior to such date.
"Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Voting Stock" means the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
Section 11. RANK. The Series I Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, equally with
all shares of Preferred Stock presently outstanding.
20
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series I Cumulative Convertible Preferred Stock to be duly
executed by its Executive Vice President and attested to by its Assistant
Secretary and has caused its corporate seal to be affixed hereto, this 26th day
of November, 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
21
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF
8.08% CUMULATIVE PREFERRED STOCK, SERIES J
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.
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 September 24, 1997, adopted resolutions that provide for a series of
Preferred Stock as follows:
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $1.00 per share, of the Corporation be hereby created, and that the
designation and
<PAGE>
amount thereof and the preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as the "8.08% Cumulative Preferred Stock, Series J" (the "Series J
Preferred Stock") and the number of shares constituting such series shall be
400,000, which number may be increased or decreased by a resolution adopted by
the Board of Directors or a committee so authorized by the Board of Directors
without a vote of stockholders; PROVIDED, HOWEVER, that such number may not be
decreased below the number of then currently outstanding shares of Series J
Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of shares of Series J Preferred Stock, in preference
to the holders of shares of the Common Stock, par value $.01 per share (the
"Common Stock"), of the Corporation and of any other capital stock of the
Corporation ranking junior to the Series J Preferred Stock as to payment of
dividends, shall be entitled to receive, when and as declared by the Board
of Directors out of net profits or net assets of the Corporation legally
available for the payment of dividends, cumulative cash dividends in the
amount of $40.40 per share, and no more, in equal quarterly payments on
March 31, June 30, September 30 and December 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date which is at least
10 days after the date of original issue of the Series J Preferred Stock;
PROVIDED, HOWEVER, that with respect to such first Quarterly Dividend
Payment Date, the holders of shares of Series J Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of
net profits or net assets of the Corporation legally available for the
payment of dividends, a cumulative cash dividend in the amount of $10.10
per share (as to each holder of shares, such dividend payment with respect
to the aggregate number of shares of Series J Preferred Stock held by such
holder to be rounded down to the nearest full cent), and no more.
2
<PAGE>
(b) Dividends payable pursuant to paragraph (a) of this Section 2
shall begin to accrue and be cumulative from the date of original issue of
the Series J Preferred Stock, except that the amount of the cumulative cash
dividend payable with respect to the first Quarterly Dividend Payment Date
shall be as specified in paragraph (a) of this Section 2. The amount of
dividends so payable shall be determined on the basis of twelve 30-day
months and a 360-day year. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series J Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The record date for
the determination of holders of shares of Series J Preferred Stock entitled
to receive payment of a dividend declared thereon shall be the close of
business on the fifteenth day (whether or not a business day) next
preceding the Quarterly Dividend Payment Date or such other date, no more
than 60 days prior to the date fixed for the payment thereof, as may be
determined by the Board of Directors or a duly authorized committee
thereof.
Section 3. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends payable on shares of Series J
Preferred Stock as provided in Section 2 hereof are in arrears, thereafter
and until all accrued and unpaid dividends, whether or not declared, on the
outstanding shares of Series J Preferred Stock shall have been paid in full
or declared and set apart for payment, the Corporation shall not: (i)
declare or pay dividends, or make any other distributions, on any shares of
Common Stock or other capital stock ranking junior (either as to payment of
dividends or distribution of assets upon liquidation, dissolution or
winding up) to the Series J Preferred Stock ("Junior Stock"), other than
dividends or distributions payable in Junior Stock; (ii) declare or pay
dividends, or make any other distributions, on any shares of capital stock
ranking on a parity (either as to payment of dividends or distribution of
assets upon liquidation, dissolution or winding up) with the Series J
Preferred Stock ("Parity
3
<PAGE>
Stock"), other than dividends or distributions payable in Junior Stock,
except dividends paid ratably on the Series J Preferred Stock and all
Parity Stock on which dividends are payable or in arrears, in proportion to
the total amounts to which the holders of all such shares are then
entitled; (iii) redeem or purchase or otherwise acquire for consideration
any shares of Junior Stock; PROVIDED, that the Corporation may at any time
redeem, purchase or otherwise acquire any shares of Junior Stock in
exchange for shares of Junior Stock; or (iv) redeem or purchase or
otherwise acquire for consideration any shares of Series J Preferred Stock
or Parity Stock, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of capital stock of the Corporation unless the Corporation could, pursuant
to paragraph (a) of this Section 3, purchase or otherwise acquire such
shares at such time and in such manner.
Section 4. REDEMPTION.
(a) The shares of Series J Preferred Stock shall not be redeemed by
the Corporation prior to March 31, 1998. The Corporation, at its option,
may redeem shares of Series J Preferred Stock, as a whole or in part, at
any time or from time to time on or after March 31, 1998, at a price of
$500 per share, plus an amount per share equal to all accrued but unpaid
dividends thereon, whether or not declared, to the date fixed for
redemption (hereinafter called the "redemption price"). The Corporation's
election to redeem shares of Series J Preferred Stock shall be expressed by
resolution of the Board of Directors. Any such redemption shall be made
upon not less than 30, nor more than 60, days' previous notice to holders
of
4
<PAGE>
record of the shares of Series J Preferred Stock to be redeemed, given as
hereinafter provided.
(b) If less than all shares of Series J Preferred Stock at the time
outstanding are to be redeemed, the shares to be redeemed shall be selected
pro rata or by lot, in such manner as may be prescribed by resolution of
the Board of Directors.
(c) Notice of any redemption of shares of Series J Preferred Stock
shall be given by publication in a newspaper of general circulation in the
Borough of Manhattan, The City of New York, such publication to be made not
less than 30 nor more than 60 days prior to the redemption date fixed by
the Board of Directors and specified therein. A similar notice shall be
mailed by the Corporation, postage prepaid, not less than 30 nor more than
60 days prior to such redemption date, addressed to the respective holders
of record of shares of Series J Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the stock transfer records
of the Corporation, but the mailing of such notice shall not be a condition
of such redemption. In order to facilitate the redemption of shares of
Series J Preferred Stock, the Board of Directors may fix a record date for
the determination of shares of Series J Preferred Stock to be redeemed, not
more than 60 days nor less than 30 days prior to the date fixed for such
redemption.
(d) Notice having been given pursuant to paragraph (c) of this
Section 4, from and after the date specified therein as the date of
redemption, unless default shall be made by the Corporation in providing
moneys for the payment of the redemption price pursuant to such notice, all
dividends on the Series J Preferred Stock thereby called for redemption
shall cease to accrue, and from and after the date of redemption so
specified, unless default shall be made by the Corporation as aforesaid, or
from and after the date (if prior to the date of redemption so specified)
on which the Corporation shall provide the moneys for the payment of the
redemption price by depositing the amount thereof with a bank or trust
company doing business in the Borough of Manhattan, The City of New York,
and having a capital and surplus of at least $10,000,000, PROVID-
5
<PAGE>
ED, that the notice of redemption shall state the intention of the
Corporation to deposit such amount on a date prior to the date of
redemption so specified in such notice, all rights of the holders thereof
as stockholders of the Corporation, except the right to receive the
redemption price (but without interest), shall cease. Any interest allowed
on moneys so deposited shall be paid to the Corporation. Any moneys so
deposited which shall remain unclaimed by the holders of such Series J
Preferred Stock at the end of six years after the redemption date shall
become the property of, and be paid by such bank or trust company to, the
Corporation.
Section 5. REACQUIRED SHARES. Any shares of Series J Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of the Corporation's Preferred Stock, par value $1.00 per share
(collectively with the Series J Preferred Stock, the "Preferred Stock"), of the
Corporation and may be reissued subject to the conditions or restrictions on
issuance set forth herein, in the Corporation's Restated Certificate of
Incorporation, as it may be amended or restated from time to time (the
"Certificate of Incorporation"), in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of
Junior Stock, unless, prior thereto, the holders of shares of Series J
Preferred Stock shall have received $500 per share, plus an amount per
share equal to all accrued but unpaid dividends thereon, whether or not
declared, to the date of such payment or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series J Preferred
Stock and all such Parity Stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
6
<PAGE>
(b) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons, nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section
6.
Section 7. VOTING RIGHTS. In addition to any voting rights provided
in the Certificate of Incorporation for all series of Preferred Stock, and any
voting rights provided by law, the holders of shares of Series J Preferred Stock
shall have the following voting rights:
(a) Except as otherwise provided herein, or by the Certificate of
Incorporation, or by law, the shares of Series J Preferred Stock and the
shares of Common Stock (and any other shares of capital stock of the
Corporation at the time entitled thereto) shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation,
provided that, when voting together with the shares of Common Stock, each
share of Series J Preferred Stock shall be entitled to three votes.
(b) So long as any shares of Series J Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of
shares shall then be required by law, without first obtaining the consent
or approval of the holders of at least two-thirds of the number of
then-outstanding shares of Series J Preferred Stock, and all other series
of Preferred Stock, voting as a single class, given in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class, the Corporation shall not: (i) authorize shares of
any class or series of stock having any preference or priority as to
dividends or upon liquidation ("Senior Stock") over the Preferred Stock;
(ii) reclassify any shares of stock of the Corporation into shares of
Senior Stock; (iii) authorize any security exchangeable for, convertible
into, or evidencing the right to purchase any shares of Senior Stock; (iv)
amend, alter or repeal the Certificate of Incorporation to alter or change
the preferences, rights or powers of the Preferred Stock so as to
7
<PAGE>
affect the preferred Stock adversely; PROVIDED, HOWEVER, that if any such
amendment, alteration or repeal would alter or change the preferences,
rights or powers of one or more, but not all, of the series of the
Preferred Stock at the time outstanding, the consent or approval of the
holders of at least two-thirds of the number of the outstanding shares of
each such series so affected, similarly given, shall be required in lieu of
(or if such consent is required by law, in addition to) the consent or
approval of the holders of at least two-thirds of the number of outstanding
shares of Preferred Stock as a class; or (v) effect the voluntary
liquidation, dissolution or winding up of the Corporation, or the sale,
lease or exchange of all or substantially all of the assets, property or
business of the Corporation, or the merger or consolidation of the
Corporation with or into any other corporation (except a wholly-owned
subsidiary of the Corporation); PROVIDED, HOWEVER, that no separate vote of
the holders of the Preferred Stock as a class shall be required in the case
of a merger or consolidation or a sale, exchange or conveyance of all or
substantially all of the assets, property or business of the Corporation
(such transactions being hereinafter in this proviso referred to as a
"reorganization") if (A) the resulting, surviving or acquiring corporation
will have after such reorganization no stock either authorized or
outstanding (except such stock of the Corporation as may have been
authorized or outstanding immediately preceding such reorganization, or
such stock of the resulting, surviving or acquiring corporation as may be
issued in exchange therefor) ranking prior to, or on a parity with, the
Preferred Stock or the stock of the resulting, surviving or acquiring
corporation issued in exchange therefor and (B) each holder of shares of
Preferred Stock immediately preceding such reorganization will receive in
exchange therefor the same number of shares of stock, with substantially
the same preferences, rights and powers, of the resulting, surviving, or
acquiring corporation.
So long as any shares of Preferred Stock shall be outstanding and
unless the consent or approval of a greater number of shares shall then be
required by law, without first obtaining the consent or approval of the
holders of a majority of the number of such shares at
8
<PAGE>
the time outstanding, given in person or by proxy at a meeting at which the
holders of such shares shall be entitled to vote separately as a class, the
Corporation shall not amend the provisions of its Certificate of
Incorporation so as to increase the amount of the authorized Preferred
Stock or so as to authorize any other stock ranking on a parity with the
Preferred Stock either as to payment of dividends or upon liquidation.
(c) If on any date a total of six quarterly dividends on Series J
Preferred Stock have fully accrued but have not been paid in full, the
holders of shares of Series J Preferred Stock, together with the holders of
all other then-outstanding shares of any series of the Preferred Stock (or
any other series or class of the Corporation's preferred stock) as to which
series or class a total of six quarterly dividends have fully accrued but
have not been paid in full and which such series or class shall be entitled
to the rights described in this paragraph (c) (collectively, "Defaulted
Preferred Stock"), shall have the right, voting together as a single class,
to elect two directors. Such right of the holders of Defaulted Preferred
Stock to vote for the election of such two directors may be exercised at
any annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournment thereof, or by the written
consent, delivered to the Secretary of the Corporation, of the holders of a
majority of all outstanding shares of Defaulted Preferred Stock, until
dividends in default on the outstanding shares of Defaulted Preferred Stock
shall have been paid in full (or such dividends shall have been declared
and funds sufficient therefor set apart for payment), at which time the
term of office of the two directors so elected shall terminate
automatically. So long as such right to vote continues (and unless such
right has been exercised by written consent of the holders of a majority of
the outstanding shares of Defaulted Preferred Stock as hereinabove
authorized), the Secretary of the Corporation may call, and upon the
written request of the holders of record of a majority of the outstanding
shares of Defaulted Preferred Stock addressed to his at the principal
office of the Corporation shall call, a special meeting of the holders of
such shares for the election of such two
9
<PAGE>
directors as provided herein. Such meeting shall be held within 30 days
after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the By-laws for the holding of meetings of
stockholders. No such special meeting or adjournment thereof shall be held
on a date less than 30 days before an annual meeting of stockholders or any
special meeting in lieu thereof. If at any such annual or special meeting
or any adjournment thereof the holders of a majority of the then
outstanding shares of Defaulted Preferred Stock entitled to vote in such
election shall be present or represented by proxy, or if the holders of a
majority of the outstanding shares of Defaulted Preferred Stock shall have
acted by written consent in lieu of a meeting with respect thereto, then
the authorized number of directors shall be increased by two, and the
holders of the Defaulted Preferred Stock shall be entitled to elect the two
additional directors. Directors so elected shall serve until the next
annual meeting or until their successors shall be elected and shall
qualify, unless the term of office of the persons so elected as directors
shall have terminated under the circumstances set forth in the second
sentence of this paragraph (c). In case of any vacancy occurring among the
directors elected by the holders of the Defaulted Preferred Stock as a
class, the remaining director who shall have been so elected may appoint a
successor to hold office for the unexpired term of the directors whose
places shall be vacant. If both directors so elected by the holders of
Defaulted Preferred Stock as a class shall cease to serve as directors
before their terms shall expire, the holders of the Defaulted Preferred
Stock then outstanding and entitled to vote for such directors may, by
written consent as hereinabove provided, or at a special meeting of such
holders called as provided above, elect successors to hold office for the
unexpired terms of the directors whose places shall be vacant.
Section 8. DEFINITIONS. For the purposes of the Certificate of
Designations of the Series J Preferred Stock which embodies this resolution:
"Persons" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
10
<PAGE>
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
Section 9. RANK. The Series J Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, equally with
all shares of $4.53 ESOP Convertible Preferred Stock, Series C; 6.365%
Cumulative Preferred Stock, Series F; 6.213% Cumulative Preferred Stock, Series
G; 6.231% Cumulative Preferred Stock, Series H; Series I Cumulative Convertible
Preferred Stock; 8.40% Cumulative Preferred Stock, Series K; 9.50% Cumulative
Preferred Stock, Series L; 5.864% Cumulative Preferred Stock, Series M; and
Cumulative Adjustable Rate Preferred Stock, Series Y of the Corporation.
11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of 8.08% Cumulative Preferred Stock, Series J to be duly executed
by its Executive Vice President and attested to by its Assistant Secretary and
has caused its corporate seal to be affixed hereto, this 26th day of November,
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
12
<PAGE>
CERTIFICATE OF DESIGNATION
OF
8.40% CUMULATIVE PREFERRED STOCK, SERIES K
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.
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 September 24, 1997, adopted resolutions that provide for a series of
Preferred Stock as follows:
RESOLVED, that a series of the class of authorized
<PAGE>
Preferred Stock, par value $1.00 per share, of the Corporation be hereby
created, and that the designation and amount thereof and the preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as the "8.40% Cumulative Preferred Stock, Series K" (the "Series K
Preferred Stock") and the number of shares constituting such series shall be
500,000, which number may be increased or decreased by a resolution adopted by
the Board of Directors or a committee so authorized by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of Series K
Preferred Stock.
SECTION 2. DIVIDEND AND DISTRIBUTIONS. (a) The holders of shares of
Series K Preferred Stock, in preference to the holders of shares of the Common
Stock, par value $ .01 per share (the "Common Stock"), of the Corporation and of
any other capital stock of the Corporation ranking junior to the Series K
Preferred Stock as to payment of dividends, shall be entitled to receive, when
and as declared by the Board of Directors out of net profits or net assets of
the Corporation legally available for the payment of dividends, cumulative cash
dividends in the amount of $42.00 per share, and no more, in equal quarterly
payments on March 31, June 30, September 30 and December 31 in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date which is at least 10
days after the date of original issue of the Series K Preferred Stock; provided,
however, that with respect to such first Quarterly Dividend Payment Date, the
holders of shares of Series K Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of net profits or net assets of
the Corporation legally available for the payment of dividends, a cumulative
cash dividend in the amount of $10.50 per share (as to each holder of shares,
such dividend payment with respect to the aggregate number of shares of Series K
Preferred Stock held by such holder to be rounded down to the nearest full
cent), and no more.
(b) Dividends payable pursuant to paragraph (a) of this Section 2
shall begin to accrue and be cumulative from the date of original issue of the
Series K Preferred Stock, except that the amount of the cumulative cash dividend
payable with respect to the first Quarterly Dividend Payment Date shall be as
2
<PAGE>
specified in paragraph (a) of this Section 2. The amount of dividends so
payable shall be determined on the basis of twelve 30-day months and a 360-day
year. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series K Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The record date for the determination of holders of shares of
Series K Preferred Stock entitled to receive payment of a dividend declared
thereon shall be the close of business on the fifteenth day (whether or not a
business day) next preceding the Quarterly Dividend Payment Date or such other
date, no more than 60 days prior to the date fixed for the payment thereof, as
may be determined by the Board of Directors or a duly authorized committee
thereof.
SECTION 3. CERTAIN RESTRICTIONS. (a) Whenever quarterly dividends
payable on shares of Series K Preferred Stock as provided in Section 2 hereof
are in arrears, thereafter and until all accrued and unpaid dividends, whether
or not declared, on the outstanding shares of Series K Preferred Stock shall
have been paid in full or declared and set apart for payment, the Corporation
shall not: (i) declare or pay dividends, or make any other distributions, on any
shares of Common Stock or other capital stock ranking junior (either as to
payment of dividends or distribution of assets upon liquidation, dissolution or
winding up) to the Series K Preferred Stock ("Junior Stock"), other than
dividends or distributions payable in Junior Stock; (ii) declare or pay
dividends, or make any other distributions, on any shares of capital stock
ranking on a parity (either as to payment of dividends or distribution of assets
upon liquidation, dissolution or winding up) with the Series K Preferred Stock
("Parity Stock"), other than dividends or distributions payable in Junior Stock,
except dividends paid ratably on the Series K Preferred Stock and all Parity
Stock on which dividends are payable or in arrears, in proportion to the total
amounts to which the holders of all such shares are then entitled; (iii) redeem
or purchase or otherwise acquire for consideration any shares of Junior Stock;
provided, that the Corporation may at any time redeem, purchase or otherwise
acquire any shares of Junior Stock in exchange for shares of Junior Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of
Series K Preferred Stock or Parity Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
3
<PAGE>
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
capital stock of the Corporation unless the Corporation could, pursuant to
paragraph (a) of this Section 3, purchase or otherwise acquire such shares at
such time and in such manner.
SECTION 4. REDEMPTION. (a) The shares of Series K Preferred Stock
shall not be redeemed by the Corporation prior to March 31, 2001. The
Corporation at its option, may redeem shares of Series K Preferred Stock, as a
whole or in part, at any time or from time to time on or after March 31, 2001,
at a price of $500 per share, plus an amount per share equal to all accrued but
unpaid dividends thereon, whether or not declared, to the date fixed for
redemption (hereinafter called the "redemption price"). The Corporation's
election to redeem shares of Series K Preferred Stock shall be expressed by
resolution of the Board of Directors. Any such redemption shall be made upon
not less than 30, nor more than 60, days' previous notice to holders of record
of the shares of Series K Preferred Stock to be redeemed, given as hereinafter
provided.
(b) If less than all shares of Series K Preferred Stock at the time
outstanding are to be redeemed, the shares to be redeemed shall be selected pro
rata or by lot, in such manner as may be prescribed by resolution of the Board
of Directors.
(c) Notice of any redemption of shares of Series K Preferred Stock
shall be given by publication in a newspaper of general circulation in the
Borough of Manhattan, The City of New York, such publication to be made not less
than 30 nor more than 60 days prior to the redemption date fixed by the Board of
Directors and specified therein. A similar notice shall be mailed by the
Corporation, postage prepaid, not less than 30 nor more than 60 days prior to
such redemption date, addressed to the respective holders of record of shares of
Series K Preferred Stock to be redeemed at their respective addresses as the
same shall appear on the stock transfer records of the Corporation, but the
mailing of such notice shall not be a condition of such redemption. In order to
facilitate the redemption of shares of Series K Preferred Stock, the Board of
Directors may fix a record
4
<PAGE>
date for the determination of shares of Series K Preferred Stock to be redeemed,
not more than 60 days nor less than 30 days prior to the date fixed for such
redemption.
(d) Notice having been given pursuant to paragraph (c) of this
Section 4, from and after the date specified therein as the date of redemption,
unless default shall be made by the Corporation in providing moneys for the
payment of the redemption price pursuant to such notice, all dividends on the
Series K Preferred Stock thereby called for redemption shall cease to accrue,
and from and after the date of redemption so specified, unless default shall be
made by the Corporation as aforesaid, or from and after the date (if prior to
the date of redemption so specified) on which the Corporation shall provide the
moneys for the payment of the redemption price by depositing the amount thereof
with a bank or trust company doing business in the Borough of Manhattan, The
City of New York, and having a capital and surplus of at least $10,000,000,
provided that the notice of redemption shall state the intention of the
Corporation to deposit such amount on a date prior to the date of redemption so
specified in such notice, all rights of the holders thereof as stockholders of
the Corporation, except the right to receive the redemption price (but without
interest), shall cease. Any interest allowed on moneys so deposited shall be
paid to the Corporation. Any moneys so deposited which shall remain unclaimed
by the holders of such Series K Preferred Stock at the end of six years after
the redemption date shall become the property of, and be paid by such bank or
trust company to, the Corporation.
SECTION 5. REACQUIRED SHARES. Any shares of Series K Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of the Corporation's Preferred Stock, par value $1.00 per share
(collectively with the Series K Preferred Stock, the "Preferred Stock"), and may
be reissued subject to the conditions or restrictions on issuance set forth
herein, in the Corporation's Restated Certificate of Incorporation, as it may be
amended or restated from time to time (the "Certificate of Incorporation"), in
any other Certificate of Designation creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) Upon any
liquidation, dissolution or winding up of the
5
<PAGE>
Corporation, no distribution shall be made (i) to the holders of shares of
Junior Stock, unless, prior thereto, the holders of shares of Series K Preferred
Stock shall have received $500 per share, plus an amount per share equal to all
accrued but unpaid dividends thereon, whether or not declared, to the date of
such payment or (ii) to the holders of shares of Parity Stock, except
distributions made ratably on the Series K Preferred Stock and all such Parity
Stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation, merger or other business combination
of the Corporation with or into any other Person or Persons, nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 6.
SECTION 7. VOTING RIGHTS. In addition to any voting rights provided
in the Certificate of Incorporation for all series of Preferred Stock, and any
voting rights provided by law, the holders of shares of Series K Preferred Stock
shall have the following voting rights:
(a) Except as otherwise provided herein, or by the Certificate
of Incorporation, or by law, the shares of Series K Preferred Stock and the
shares of Common Stock (and any other shares of capital stock of the Corporation
at the time entitled thereto) shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation, provided that, when
voting together with the shares of Common Stock, each share of Series K
Preferred Stock shall be entitled to three votes.
(b) So long as any shares of Series K Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of shares
shall then be required by law, without first obtaining the consent or approval
of the holders of at least two-thirds of the number of then-outstanding shares
of Series K Preferred Stock, and all other series of Preferred Stock, voting as
a single class, given in person or by proxy at a meeting at which the holders of
such shares shall be entitled to vote separately as a class, the Corporation
shall not: (i) authorize shares of any class or series of stock having any
preference or priority as to dividends or upon liquidation ("Senior Stock") over
the
6
<PAGE>
Preferred Stock; (ii) reclassify any shares of stock of the Corporation into
shares of Senior Stock; (iii) authorize any security exchangeable for,
convertible into, or evidencing the right to purchase any shares of Senior
Stock; (iv) amend, alter or repeal the Certificate of Incorporation to alter or
change the preferences, rights or powers of the Preferred Stock so as to affect
the Preferred Stock adversely; provided, however, that if any such amendment,
alteration or repeal would alter or change the preferences, rights or powers of
one or more, but not all, of the series of the Preferred Stock at the time
outstanding, the consent or approval of the holders of at least two-thirds of
the number of the outstanding shares of each such series so affected, similarly
given, shall be required in lieu of (or if such consent is recognized by law, in
addition to) the consent or approval of the holders of at least two-thirds of
the number of outstanding shares of Preferred Stock as a class; or (v) effect
the voluntary liquidation, dissolution or winding up of the Corporation, or the
sale, lease or exchange of all or substantially all of the assets, property or
business of the Corporation, or the merger or consolidation of the Corporation
with or into any other corporation (except a wholly owned subsidiary of the
Corporation); provided, however, that no separate vote of the holders of the
Preferred Stock as a class shall be required in the case of a merger or
consolidation or a sale, exchange or conveyance of all or substantially all of
the assets, property or business of the Corporation (such transactions being
hereinafter in this proviso referred to as a "reorganization") if (A) the
resulting, surviving or acquiring corporation will have after such
reorganization no stock either authorized or outstanding (except such stock of
the Corporation as may have been authorized or outstanding immediately preceding
such reorganization, or such stock of the resulting, surviving or acquiring
corporation as may be issued in exchange therefor) ranking prior to, or on a
parity with, the Preferred Stock or the stock of the resulting, surviving or
acquiring corporation issued in exchange therefor and (B) each holder of shares
of Preferred Stock immediately preceding such reorganization will receive in
exchange therefor the same number of shares of stock, with substantially the
same preferences, rights and powers, of the resulting, surviving, or acquiring
corporation.
So long as any shares of Preferred Stock shall be outstanding and
unless the consent or approval of a greater
7
<PAGE>
number of shares shall then be required by law, without first obtaining the
consent or approval of the holders of a majority of the number of such shares at
the time outstanding, given in person or by proxy at a meeting at which the
holders of such shares shall be entitled to vote separately as a class, the
Corporation shall not amend the provisions of its Certificate of Incorporation
so as to increase the amount of the authorized Preferred Stock or so as to
authorize any other stock ranking on a parity with the Preferred Stock either as
to payment of dividends or upon liquidation.
(c) If on any date a total of six quarterly dividends on the
Series K Preferred Stock have fully accrued but have not been paid in full, the
holders of shares of the Series K Preferred Stock, together with the holders of
all other then-outstanding shares of any series of the Preferred Stock (or any
other series or class of the Corporation's preferred stock) as to which series
or class a total of six quarterly dividends have fully accrued but have not been
paid in full and which such series or class shall be entitled to the rights
described in this paragraph (c) (collectively, "Defaulted Preferred Stock"),
shall have the right, voting together as a single class, to elect two directors.
Such right of the holders of Defaulted Preferred Stock to vote for the election
of such two directors may be exercised at any annual meeting or at any special
meeting called for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of a majority of all outstanding shares of Defaulted
Preferred Stock, until dividends in default on the outstanding shares of
Defaulted Preferred Stock shall have been paid in full (or such dividends shall
have been declared and funds sufficient therefor set apart for payment), at
which time the term of office of the two directors so elected shall terminate
automatically. So long as such right to vote continues (and unless such right
has been exercised by written consent of the holders of a majority of the
outstanding shares of Defaulted Preferred Stock as hereinabove authorized), the
Secretary of the Corporation may call, and upon the written request of the
holders of record of a majority of the outstanding shares of Defaulted Preferred
Stock addressed to him at the principal office of the Corporation shall call, a
special meeting of the holders of such shares for the election of such two
directors as provided herein. Such meeting shall be held within 30 days after
delivery of such request to the
8
<PAGE>
Secretary, at the place and upon the notice provided by law and in the
By-laws for the holding of meetings of stockholders. No such special
meeting or adjournment thereof shall be held on a date less than 30 days
before an annual meeting of stockholders or any special meeting in lieu
thereof. If at any such annual or special meeting or any adjournment
thereof the holders of a majority of the then outstanding shares of
Defaulted Preferred Stock entitled to vote in such election shall be
present or represented by proxy, or if the holders of a majority of the
outstanding shares of Defaulted Preferred Stock shall have acted by written
consent in lieu of a meeting with respect thereto, then the authorized
number of directors shall be increased by two, and the holders of the
Defaulted Preferred Stock shall be entitled to elect the two additional
directors. Directors so elected shall serve until the next annual meeting
or until their successors shall be elected and shall qualify, unless the
term of office of the persons so elected as directors shall have terminated
under the circumstances set forth in the second sentence of this paragraph
(c). In case of any vacancy occurring among the directors elected by the
holders of the Defaulted Preferred Stock as a class, the remaining director
who shall have been so elected may appoint a successor to hold office for
the unexpired term of the directors whose places shall be vacant. If both
directors so elected by the holders of Defaulted Preferred Stock as a class
shall cease to serve as directors before their terms shall expire, the
holders of the Defaulted Preferred Stock then outstanding and entitled to
vote for such directors may, by written consent as hereinabove provided, or
at a special meeting of such holders called as provided above, elect
successors to hold office for the unexpired terms of the directors whose
places shall be vacant.
SECTION 8. DEFINITIONS. For the purposes of the Certificate of
Designation of the Series K Preferred Stock which embodies this resolution:
"Persons" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
9
<PAGE>
SECTION 9. RANK. The Series K Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, equally with
all shares of $4.53 ESOP Convertible Preferred Stock, Series C; 6.365%
Cumulative Preferred Stock, Series F; 6.213% Cumulative Preferred Stock, Series
G; 6.231% Cumulative Preferred Stock, Series H; Series I Cumulative Convertible
Preferred Stock; 8.08% Cumulative Preferred Stock, Series J; 9.50% Cumulative
Preferred Stock, Series L; 5.864% Cumulative Preferred Stock, Series M; and
Cumulative Adjustable Rate Preferred Stock, Series Y of the Corporation.
10
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of 8.40% Cumulative Preferred Stock, Series K to be duly executed by
its Executive Vice President and attested to by its Assistant Secretary and has
caused its corporate seal to be affixed hereto, this 26th day of November, 1997.
TRAVELERS GROUP INC.
by /s/ Charles O. Prince, III
------------------------------
Charles O. Prince, III
Executive Vice President
{Seal}
Attest:
/s/ Shelley J. Dropkin
- ----------------------------
Shelley J. Dropkin
Assistant Secretary
11
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF
9.50% CUMULATIVE PREFERRED STOCK, SERIES L
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.
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 September 24, 1997, adopted resolutions that provide for a series of
Preferred Stock as follows:
RESOLVED, that a series of the class of autho-
<PAGE>
rized Preferred Stock, par value $1.00 per share, of the Corporation be hereby
created, and that the designation and amount thereof and the preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as the "9.50% Cumulative Preferred Stock, Series L" (the "Series L
Preferred Stock") and the number of shares constituting such series shall be
690,000, which number may be increased or decreased by a resolution adopted by
the Board of Directors or a committee so authorized by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of Series L
Preferred Stock plus the number of shares reserved for issuance pursuant to any
outstanding Purchase Contracts entered into by the Corporation.
SECTION 2. DIVIDEND AND DISTRIBUTIONS.(a) The holders of shares of
Series L Preferred Stock, in preference to the holders of shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of the Corporation and of
any other capital stock of the Corporation ranking junior to the Series L
Preferred Stock as to payment of dividends, shall be entitled to receive, when
and as declared by the Board of Directors out of net profits or net assets of
the Corporation legally available for the payment of dividends, cumulative cash
dividends at the annual rate of 9.50% of the liquidation preference per share of
the Series L Preferred Stock (equivalent to $47.50 per annum per share), and no
more, in equal quarterly payments (rounded down to the nearest cent) on March
31, June 30, September 30 and December 31 in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date which is at least 10 days after the date
of original issue of the Series L Preferred Stock.
(b) Dividends payable pursuant to paragraph (a) of this Section 2
shall begin to accrue and be cumulative from the date of original issue of the
Series L Preferred Stock, except that the amount of the cumulative
2
<PAGE>
cash dividend payable with respect to the first Quarterly Dividend Payment Date
shall be as specified in paragraph (a) of this Section 2. The amount of
dividends so payable shall be determined on the basis of twelve 30-day months
and a 360-day year. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series L Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The record date for the determination of
holders of shares of Series L Preferred Stock entitled to receive payment of a
dividend declared thereon shall be the close of business on the fifteenth day
(whether or not a business day) immediately preceding the Quarterly Dividend
Payment Date or such other date, no more than 60 days prior to the date fixed
for the payment thereof, as may be determined by the Board of Directors or a
duly authorized committee thereof.
SECTION 3. CERTAIN RESTRICTIONS.(a) Whenever quarterly dividends
payable on shares of Series L Preferred Stock as provided in Section 2 hereof
are in arrears, thereafter and until all accrued and unpaid dividends, whether
or not declared, on the outstanding shares of Series L Preferred Stock shall
have been paid in full or declared and set apart for payment, the Corporation
shall not:(i) declare or pay dividends, or make any other distributions, on any
shares of Common Stock or other capital stock ranking junior (either as to
payment of dividends or distribution of assets upon liquidation, dissolution or
winding up) to the Series L Preferred Stock ("Junior Stock"), other than
dividends or distributions payable in Junior Stock;(ii) declare or pay
dividends, or make any other distributions, on any shares of capital stock
ranking on a parity (either as to payment of dividends or distribution of assets
upon liquidation, dissolution or winding up) with the Series L Preferred Stock
("Parity Stock"), other than dividends or distributions payable in Junior Stock,
except dividends paid ratably on the Series L Preferred Stock and all Parity
Stock on which dividends are payable or in arrears, in proportion to the total
amounts to which the holders of all such shares are then entitled; (iii)redeem
or purchase or otherwise acquire for consideration any shares of Junior Stock;
provided, that the Corporation may at
3
<PAGE>
any time redeem, purchase or otherwise acquire any shares of Junior Stock in
exchange for shares of Junior Stock; or (iv) redeem or purchase or otherwise
acquire for consideration any shares of Series L Preferred Stock or Parity
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any Subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation unless the Corporation could, pursuant to paragraph (a) of
this Section 3, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 4. REDEMPTION.(a) The shares of Series L Preferred Stock
shall not be redeemed by the Corporation prior to the later of June 30, 2001,
and the date of issue of the Series L Preferred Stock. The Corporation at its
option, may redeem shares of Series L Preferred Stock, as a whole or in part, at
any time or from time to time on or after the later of June 30, 2001, and the
date of issue of the Series L Preferred Stock, at a price of $500 per share,
plus an amount per share equal to all accrued but unpaid dividends thereon,
whether or not declared, to the date fixed for redemption (hereinafter called
the "redemption price"). The Corporation's election to redeem shares of Series
L Preferred Stock shall be expressed by resolution of the Board of Directors.
Any such redemption shall be made upon not less than 30, nor more than 60, days
notice prior to the redemption date fixed by the Board of Directors and
specified therein to holders of record of the shares of Series L Preferred Stock
to be redeemed, given as hereinafter provided.
(b) If less than all shares of Series L Preferred Stock at the time
outstanding are to be redeemed, the shares to be redeemed shall be selected pro
rata or by lot, in such manner as may be prescribed by resolution
4
<PAGE>
of the Board of Directors.
(c) Notice of any redemption of shares of Series L Preferred Stock
shall be given by publication in a newspaper of general circulation in the
Borough of Manhattan, The City of New York, such publication to be made not less
than 30 nor more than 60 days prior to the redemption date fixed by the Board of
Directors and specified therein. A similar notice shall be mailed by the
Corporation, or its agent, postage prepaid, not less than 30 nor more than 60
days prior to such redemption date, addressed to the respective holders of
record of shares of Series L Preferred Stock to be redeemed at their respective
addresses as the same shall appear on the stock transfer records of the
Corporation, but the mailing of such notice shall not be a condition of such
redemption. In order to facilitate the redemption of shares of Series L
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of Series L Preferred Stock to be redeemed, not more
than 60 days nor less than 30 days prior to the date fixed for such redemption.
(d) Notice having been given pursuant to paragraph (c) of this Section
4, from and after the date specified therein as the date of redemption, unless
default shall be made by the Corporation in providing moneys for the payment of
the redemption price pursuant to such notice, all dividends on the Series L
Preferred Stock thereby called for redemption shall cease to accrue, and from
and after the date of redemption so specified, unless default shall be made by
the Corporation as aforesaid, or from and after the date (if prior to the date
of redemption so specified) on which the Corporation shall provide the moneys
for the payment of the redemption price by depositing the amount thereof with a
bank or trust company doing business in the Borough of Manhattan, The City of
New York, and having a capital and surplus of at least $10,000,000, provided
that the notice of redemption shall state the intention of the Corporation to
deposit such amount on a date prior to the date of redemption so specified in
such notice, all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price (but without
interest), shall cease. Any interest allowed on moneys so deposited shall be
paid to the Corporation. Any moneys so deposited which shall remain unclaimed
by the holders of such Series L Preferred Stock at the end of six years after
the redemption date shall become the property of, and be paid by such bank or
trust company to, the Corporation.
5
<PAGE>
SECTION 5. REAQUIRED SHARES. Any shares of Series L Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of the Corporation's Preferred Stock, par value $1.00 per share
(collectively with the Series L Preferred Stock, the "Preferred Stock"), of the
Corporation and may be reissued subject to the conditions or restrictions on
issuance set forth herein, in the Corporation's Restated Certificate of
Incorporation, as it may be amended or restated from time to time (the
"Certificates of Incorporation"), in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.(a) Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (i) to the holders of shares of Junior Stock, unless, prior thereto, the
holders of shares of Series L Preferred Stock shall have received $500 per
share, plus an amount per share equal to all accrued but unpaid dividends
thereon, whether or not declared, to the date of such payment or (ii) to the
holders of shares of Parity Stock, except distributions made ratably on the
Series L Preferred Stock and all such Parity Stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. After payment of the full amount of the
liquidating distribution to which holders of the Series L Preferred Stock are
entitled, such holders shall have no right or claim to any of the remaining
assets of the Company.
(b) Neither the consolidation, merger or other business combination of
the Corporation with or into any other Person or Persons, nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or
6
<PAGE>
business of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 6.
SECTION 7. VOTING RIGHTS. In addition to any voting rights provided
in the Certificate of Incorporation for all series of Preferred Stock, and any
voting rights provided by law, the holders of shares of Series L Preferred Stock
shall have the following voting rights:
(a) Except as otherwise provided herein, or by the Certificate of
Incorporation, or by law, the shares of Series L Preferred Stock and the
shares of Common Stock (and any other shares of capital stock of the
Corporation at the time entitled thereto) shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation,
provided that, when voting together with the shares of Common Stock, each
share of Series L Preferred Stock shall be entitled to three votes.
(b) So long as any shares of Series L Preferred Stock shall be
outstanding and unless the consent or approval of a greater number of
shares shall then be required by law, without first obtaining the consent
or approval of the holders of at least two-thirds of the number of
then-outstanding shares of Series L Preferred Stock, and all other series
of Preferred Stock, voting as a single class, given in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class, the Corporation shall not:(i) authorize shares of
any class or series of stock having any preference or priority as to
dividends or upon liquidation ("Senior Stock") over the Preferred Stock;
(ii)reclassify any shares of stock of the Corporation into shares of Senior
Stock;(iii) authorize any security exchangeable for, convertible into, or
evidencing the right to purchase any shares of Senior Stock; (iv) amend,
alter or repeal the Certificate of Incorporation to alter or change the
preferences, rights or powers of the Preferred Stock so as to affect the
Preferred Stock adversely; provided, however, that if any such amendment,
alteration or repeal would alter or change the preferences, rights or
powers of one or more, but
7
<PAGE>
not all, of the series of the Preferred Stock at the time outstanding, the
consent or approval of the holders of at least two-thirds of the number of
the outstanding shares of each such series so affected, similarly given,
shall be required in lieu of (or if such consent is required by law, in
addition to) the consent or approval of the holders of at least two-thirds
of the number of outstanding shares of Preferred Stock as a class; or (v)
effect the voluntary liquidation, dissolution or winding up of the
Corporation, or the sale, lease or exchange of all or substantially all of
the assets, property or business of the Corporation, or the merger or
consolidation of the Corporation with or into any other corporation (except
a wholly owned subsidiary of the Corporation); provided, however, that no
separate vote of the holders of the Preferred Stock as a class shall be
required in the case of a merger or consolidation or a sale, exchange or
conveyance of all or substantially all of the assets, property or business
of the Corporation (such transactions being hereinafter in this proviso
referred to as a "reorganization") if (A) the resulting, surviving or
acquiring corporation will have after such reorganization no stock either
authorized or outstanding (except such stock of the Corporation as may have
been authorized or outstanding immediately preceding such reorganization,
or such stock of the resulting, surviving or acquiring corporation as may
be issued in exchange therefore) ranking prior to, or on a parity with, the
Preferred Stock or the stock of the resulting, surviving or acquiring
corporation issued in exchange therefor and (B) each holder of shares of
Preferred Stock immediately preceding such reorganization will receive in
exchange therefor the same number of shares of stock, with substantially
the same preferences, rights and powers, of the resulting, surviving, or
acquiring corporation.
So long as any shares of Preferred Stock shall be outstanding and
unless the consent or approval of a greater number of shares shall then be
required by law, without first obtaining the consent or approval of the
holders of a majority of the number of such shares at the time outstanding,
given in person or by proxy at a meeting at which the holders of such
8
<PAGE>
shares shall be entitled to vote separately as a class, the Corporation
shall not amend the provisions of its Certificate of Incorporation so as to
increase the amount of the authorized Preferred Stock or so as to authorize
any other stock ranking on a parity with the Preferred Stock either as to
payment of dividends or upon liquidation.
(c) If on any date a total of six quarterly dividends on Series L
Preferred Stock have fully accrued but have not been paid in full, the
holders of shares of Series L Preferred Stock, together with the holders of
all other then-outstanding shares of any series of the Preferred Stock (or
any other series or class of the Corporation's preferred stock) as to which
series or class a total of six quarterly dividends have fully accrued but
have not been paid in full and which such series or class shall be entitled
to the rights described in this paragraph (c) (collectively, "Defaulted
Preferred Stock"), shall have the right, voting together as a single class,
to elect two directors. Such right of the holders of Defaulted Preferred
Stock to vote for the election of such two directors may be exercised at
any annual meeting or at any special meeting called for such purpose as
hereinafter provided or at any adjournment thereof, or by the written
consent, delivered to the Secretary of the Corporation, of the holders of a
majority of all outstanding shares of Defaulted Preferred Stock, until
dividends in default on the outstanding shares of Defaulted Preferred Stock
shall have been paid in full (or such dividends shall have been declared
and funds sufficient therefor set apart for payment), at which time the
term of office of the two directors so elected shall terminate
automatically. So long as such right to vote continues (and unless such
right has been exercised by written consent of the holders of a majority of
the outstanding shares of Defaulted Preferred Stock as hereinabove
authorized), the Secretary of the Corporation may call, and upon the
written request of the holders of record of a majority of the outstanding
shares of Defaulted Preferred Stock addressed to him at the principal
office of the Corporation shall call, a special meeting of the holders of
such shares for the election of such two
9
<PAGE>
directors as provided herein. Such meeting shall be held within 30 days
after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the By-laws for the holding of meetings of
stockholders. No such special meeting or adjournment thereof shall be held
on a date less than 30 days before an annual meeting of stockholders or any
special meeting in lieu thereof. If at any such annual or special meeting
or any adjournment thereof the holders of a majority of the then
outstanding shares of Defaulted Preferred Stock entitled to vote in such
election shall be present or represented by proxy, or if the holders of a
majority of the outstanding shares of Defaulted Preferred Stock shall have
acted by written consent in lieu of a meeting with respect thereto, then
the authorized number of directors shall be increased by two, and the
holders of the Defaulted Preferred Stock shall be entitled to elect the two
additional directors. Directors so elected shall serve until the next
annual meeting or until their successors shall be elected and shall
qualify, unless the term of office of the persons so elected as directors
shall have terminated under the circumstances set forth in the second
sentence of this paragraph (c). In case of any vacancy occurring among the
directors elected by the holders of the Defaulted Preferred Stock as a
class, the remaining director who shall have been so elected may appoint a
successor to hold office for the unexpired term of the directors whose
places shall be vacant. If both directors so elected by the holders of
Defaulted Preferred stock as a class shall cease to serve as directors
before their terms shall expire, the holders of the Defaulted Preferred
Stock then outstanding and entitled to vote for such directors may, by
written consent as hereinabove provided, or at a special meeting of such
holders called as provided above, elect successors to hold office for the
unexpired terms of the directors whose places shall be vacant.
SECTION 8. DEFINITIONS. For the purposes of the Certificate of
Designations of the Series L Preferred Stock which embodies this resolution:
10
<PAGE>
"Persons" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
SECTION 9. RANK. The Series L Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, equally with
all shares of $4.53 ESOP Convertible Preferred Stock, Series C; 6.365%
Cumulative Preferred Stock, Series F; 6.213% Cumulative Preferred Stock, Series
G; 6.231% Cumulative Preferred Stock, Series H; Series I Cumulative Convertible
Preferred Stock; 8.08% Cumulative Preferred Stock, Series J; 8.40% Cumulative
Preferred Stock, Series K; 5.864% Cumulative Preferred Stock, Series M; and
Cumulative Adjustable Rate Preferred Stock, Series Y of the Corporation.
11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of 9.50% Cumulative Preferred Stock, Series L to be duly executed
by its Executive Vice President and attested to by its Assistant Secretary and
has caused its corporate seal to be affixed hereto, this 26th day of November,
1997.
TRAVELERS GROUP INC.
by /s/ Charles O. Prince, III
------------------------------
Charles O. Prince, III
Executive Vice President
{Seal}
Attest:
/s/ Shelley J. Dropkin
- ----------------------------
Shelley J. Dropkin
Assistant Secretary
12
<PAGE>
Certificate of Designation
of
5.864% Cumulative Preferred Stock, Series M
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 October
3, 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 5.864% Cumulative Preferred Stock, Series M (the
"Series M Preferred Stock"), and the number of shares constituting
such series shall be 800,000. The number of authorized shares of
Series M 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 M Preferred Stock shall not be increased.
2. Dividends. Dividends on each share of Series M
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 February
1, May 1, August 1 and November 1 of each year, commencing November 1,
1997.
Each quarterly period beginning on February 1, May 1, August
1 and November 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 M 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 $3.665 (or
one-fourth of 5.864% of the Liquidation Preference (as defined in
Section 7) for such share). If a share of Series M 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 $3.665
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.
2
<PAGE>
If, prior to 18 months after the date of the original
issuance of the Series M Preferred Stock, one or more 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 M 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 M 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
3
<PAGE>
the Dividends-Received Percentage applicable to the dividend in question
and .50) over (y) the dividend paid by the Company on such dividend payable
date, will be payable (if declared) to holders of Series M Preferred Stock
on the record date applicable to the next succeeding dividend payment date
or, if the Series M Preferred Stock is called for redemption prior to such
record date, to holders of Series M 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 M Preferred Stock (each, an "Affected Dividend
Payment Date"), the Company will pay (if declared) additional
dividends (the "Retroactive Dividends") to holders of Series M
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 M Preferred Stock on the record date following the
date of enactment) or, if the Series M Preferred Stock is called for
redemption prior to such record date, to holders of Series M 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 M Preferred Stock
shall be paid to the holders of record of shares of Series M 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
4
<PAGE>
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 Company ranking on a parity as to
dividends with the Series M Preferred Stock, the Company, in making
any dividend payment on account of arrears on the Series M Preferred
Stock or such other class or series of preferred stock, shall make
payments ratably upon all outstanding shares of Series M 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 M Preferred Stock and such other class or
series of preferred stock to the date of such dividend payment.
Holders of shares of Series M 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 M 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 M Preferred
Stock, as a whole or in part, at any time or from time to time on or
after October 8, 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 M 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 M 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
5
<PAGE>
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 Company in
providing money for the payment of the Redemption Price) dividends on the
shares of Series M 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 M Preferred Stock are to be redeemed, the
Company shall select those shares to be redeemed from outstanding shares of
Series M 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 M Preferred Stock pursuant to this Section 3, or
purchase or acquire any shares of Series M Preferred Stock otherwise
than pursuant to a purchase or exchange offer made on the same terms
to all holders of shares of Series M Preferred Stock, unless full
cumulative dividends shall have been paid or declared and set apart
for payment upon all outstanding shares of Series M 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 M 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
M 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 M Preferred Stock shall
have no voting rights.
If six quarterly dividends (whether or not consecutive)
payable on shares of Series M 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
M 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 M 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 M 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 M Preferred
Stock to elect Directors as set forth above shall continue until all
dividend arrearages on the Series M 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 M 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 M 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 M Preferred Stock) so as to
adversely affect the powers, preferences or rights of the holders of
shares of Series M 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 M 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 M
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 M 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 M 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 M Preferred Stock and any other shares of stock
of the Company ranking as to any such distribution on a parity with
the Series M Preferred Stock, the holders of the Series M 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 M Preferred Stock
of the full preferential amounts provided for in this Section 7, the
holders of the Series M 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 M Preferred Stock are not impaired thereby.
9
<PAGE>
8. Limitation on Dividends on Junior Stock. So long as any
Series M 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 M 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 M
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 7th day of October, 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
Cumulative Adjustable Rate Preferred Stock, Series Y
of
The Travelers Inc.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
The Travelers Inc., a Delaware corporation (the
"Corporation"), hereby certifies that:
1. The Restated Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation") fixes the
total number of shares of all classes of capital stock that
the Corporation shall have the authority to issue at five
hundred million (500,000,000) shares of common stock, par
value $.01 per share ("Common Stock"), and thirty million
(30,000,000) shares of preferred stock, par value $1.00 per
share ("Preferred Stock").
2. The Certificate of Incorporation expressly
grants to the Board of Directors of the Corporation (the
"Board of Directors") authority to provide for the issuance of
the shares of Preferred Stock in series, and to establish from
time to time the number of shares to be included in each such
series and to fix the designation, powers, preferences and
rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon the
Board of Directors by the Certificate of Incorporation, the
Board of Directors, by action duly taken on March 23, 1994,
adopted resolutions providing for the Cumulative Adjustable
Rate Preferred Stock, Series Y (the "Series Y Preferred
Stock") as follows:
RESOLVED, that an issue of a series of
Preferred Stock is hereby provided for, and the number of
shares to be included in such series is established, and
the designation, powers, preference and rights, and
qualifications, limitations or restrictions of such
series are fixed hereby as follows:
CUMULATIVE ADJUSTABLE RATE PREFERRED STOCK, SERIES Y
1. Designation and Number of Shares. The
designation of such series shall be Cumulative
Adjustable Rate Preferred Stock, Series Y (the "Series Y
Preferred Stock"), and the number of shares constituting
such series shall be 5,000. Shares of the Series Y
Preferred Stock shall have a par value of $1.00 per
share, and the amount of $100,000 shall be the
"liquidation value" of each share of the Series Y
Preferred Stock.
<PAGE>
The number of authorized shares of Series Y Preferred Stock
may be reduced (but not below the number of shares thereof
then outstanding) by further resolution duly adopted by the
Board of Directors or the Executive Committee and by the
filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that
such reduction has been so authorized, but the number of
authorized shares of Series Y Preferred Stock shall not be
increased.
2. Dividends. (a) Dividends on each share
of Series Y Preferred Stock shall be payable with respect
to each quarter beginning on the last day of March, June,
September and December of each year and ending on the day
immediately prior to the first day of the next succeeding
period ("Quarterly Dividend Period"), in arrears, payable
commencing on June 30, 1994, and on each September 30,
December 31, March 31 and June 30 thereafter with respect
to the quarter then ended, provided that if such day is
not a Business Day (as hereinafter defined), such
dividend shall be paid on the next succeeding Business
Day (each a "Dividend Payment Date"), at a rate per annum
equal to the Applicable Rate (as determined in accordance
with paragraph (b) or (c) of this Section 2, as
applicable) in effect for the Quarterly Dividend Period
to which such dividend relates, multiplied by the
liquidation value of each such share. Such dividends
shall be cumulative from March 31, 1994, and shall be
payable, when and as declared by the Board of Directors,
out of assets legally available for such purpose, on each
Dividend Payment Date as set forth above. Each such
dividend shall be paid to the holders of record of shares
of the Series Y Preferred Stock as they appear on the
books of the Corporation on such record date, not
exceeding 30 days preceding the payment date thereof, as
shall be fixed in advance by the Board of Directors of
the Corporation. Dividends in arrears for any past
Quarterly Dividend Periods may be declared and paid at
any time, without reference to any regular Dividend
Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as
may be fixed by the Board of Directors of the
Corporation.
(b) The Applicable Rate for each Quarterly
Dividend Period commencing prior to December 31, 1995
shall be 4.85%.
(c) The Applicable Rate for each Quarterly
Dividend Period commencing on or after December 31, 1995,
shall be equal to the greater of (i) the Short Term Rate
(as hereinafter defined) on the Business Day immediately
preceding the Dividend Payment Date for the immediately
preceding Quarterly Dividend Period (the "Dividend Reset
Date"), and (ii) 4.85%.
(d) "Short Term Rate" shall mean a rate equal
to (i) 85% of the Commercial Paper Rate (as hereinafter
defined) if on the Dividend Reset Date either (x) the
rating for the Preferred Stock of the Corporation
published by Moody's Investors Service Inc. ("Moody's")
is "A2" or lower or the rating for the Preferred Stock of
the Corporation published by Standard & Poor's
Corporation ("S&P") is "A" or lower, or (y) the Preferred
Stock of the Corporation is not rated by both Moody's and
S&P, and (ii) 78% of the Commercial Paper Rate if the
rating for the Preferred Stock of the
2
<PAGE>
Corporation published by Moody's is "Aa2" or higher and the
rating for the Preferred Stock of the Corporation published by
S&P is "AA" or higher.
(e) "Commercial Paper Rate" shall mean, on any
Dividend Reset Date, a rate equal to the Money Market
Yield (calculated as described below) of the 90-day rate
for commercial paper, as made available and subsequently
published in H.15(519) under the heading "Commercial
Paper" for such date. In the event that such rate is not
made available by 3:00 P.M., New York City time, on such
Dividend Reset Date, then the Commercial Paper Rate shall
be the Money Market Yield of the 90-day rate on such
Dividend Reset Date for commercial paper as made
available and subsequently published in Composite Quota-
tions under the heading "Commercial Paper." If by 3:00
P.M., New York City time, on such Dividend Reset Date
such rate has not yet been made available in either
H.15(519) or Composite Quotations, the Commercial Paper
Rate for such Dividend Reset Date shall be the Money
Market Yield of the arithmetic mean of the offered rates
as of 11:00 A.M., New York City time, on such Dividend
Reset Date of three leading dealers of commercial paper
in the city of New York selected by the Corporation for
90-day commercial paper placed for an industrial issuer
whose senior unsecured bond rating is "AA" or the equiva-
lent from a nationally recognized securities rating
agency; provided, however, that if the dealers selected
as aforesaid are not quoting as mentioned in this
sentence, the Commercial Paper Rate with respect to such
Dividend Reset Date will be the Commercial Paper Rate in
effect on the immediately preceding Dividend Reset Date.
(f) "Money Market Yield" shall be a yield
(expressed as a percentage) calculated in accordance with
the following formula:
x
Money Market Yield = ----------------- x 100
360 - (D x M)
where "D" refers to the per annum rate for the commercial
paper quoted on a bank discount basis and expressed as a
decimal; and "M" refers to the actual number of days in
the interest period for which interest is being calcu-
lated.
(g) "Business Day" means any day that is not a
Saturday, Sunday or a legal holiday in the State of New
York.
(h) Dividends payable on the Series Y
Preferred Stock for any Quarterly Dividend Period ending
prior to December 31, 1995 shall be computed on the basis
of one-fourth of the Applicable Rate. Dividends payable
on the Series Y Preferred Stock for any Quarterly
Dividend Period beginning on or after December 31, 1995
shall be computed on the basis of the actual number of
days elapsed in the period for which such dividends are
payable (whether a full or partial Quarterly Dividend
Period) and based upon a year of 360 days. If the
Corporation determines in good faith that for any reason
the Applicable Rate cannot be determined for any
Quarterly Dividend Period, then the
3
<PAGE>
Applicable Rate in effect for the preceding Quarterly Dividend
Period shall be continued for such Quarterly Dividend Period.
3. Optional Redemption. (a) The
Corporation, at its sole option, out of funds legally
available therefor, may redeem shares of the Series Y
Preferred Stock, in whole or in part, on any Dividend
Payment Date on or after December 31, 1995, at a
redemption price of $100,000 per share, plus, in each
case, an amount equal to accrued and unpaid dividends
thereon to the date fixed for redemption (the "Redemption
Price").
(b) In the event that fewer than all the
outstanding shares of the Series Y Preferred Stock are to
be redeemed, the shares to be redeemed from each holder
of record shall be determined by lot or pro rata as may
be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in
its sole discretion to be equitable.
(c) In the event the Corporation shall redeem
shares of the Series Y Preferred Stock, written notice of
such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 days prior to
the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the
same appears on the books of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the
number of shares of the Series Y Preferred Stock to be
redeemed and, in the case of a partial redemption
pursuant to Section 3(b) hereof, the identification (by
the number of the certificate or otherwise) of the shares
of Series Y Preferred Stock to be redeemed; (iii) the
Redemption Price; (iv) the place or places where
certificates for such shares are to be surrendered for
payment of the Redemption Price; and (v) that dividends
on the shares to be redeemed will cease to accrue on such
redemption date.
(d) If notice of redemption shall have been
duly given, and if, on or before the redemption date
specified therein, all funds necessary for such
redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the
pro rata benefit of the holders of the shares called for
redemption, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for
shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for
redemption shall no longer be deemed outstanding on and
after such redemption date, and all rights with respect
to such shares shall forthwith on such redemption date
cease and terminate, except only the right of the holders
thereof to receive the amount payable on redemption
thereof, without interest.
If such notice of redemption shall have been
duly given or if the Corporation shall have given to the
bank or trust company hereinafter referred to irrevocable
authorization promptly to give such notice, and if on or
before the redemption date specified therein the funds
necessary for such redemption shall have been deposited
by the Corporation with such bank or trust company in
trust for the pro rata benefit of the holders of the
shares called for redemption, then, notwithstanding that
any certificate for shares so called for redemption shall
not have been surrendered for cancellation, from and
after the time of such deposit, all shares so called for
redemption shall no longer be
4
<PAGE>
deemed to be outstanding and all rights with respect to such
shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or
trust company at any time after the time of such deposit the
funds so deposited, without interest. The aforesaid bank or
trust company shall be a bank or trust company organized and
in good standing under the laws of the United States of
America or of the State of New York, doing business in the
Borough of Manhattan, The city of New York, having capital
surplus and undivided profits aggregating at least $50,000,000
according to its latest published statement of condition, and
shall be identified in the notice of redemption. Any interest
accrued on such funds shall be for the benefit of the
Corporation. Any funds so set aside or deposited, as the case
may be, and unclaimed at the end of one year from such
redemption date shall, to the extent permitted by law, be
released or repaid to the Corporation, after which repayment
the holders of the shares so called for redemption shall look
only to the Corporation for payment thereof.
(e) Notwithstanding the foregoing provisions
of this Section 3, unless the full cumulative dividends
on all outstanding shares of the Series Y Preferred Stock
shall have been paid or contemporaneously are declared
and paid for all past Quarterly Dividend Periods, no
shares of the Series Y Preferred Stock shall be redeemed
unless all outstanding shares of the Series Y Preferred
Stock are simultaneously redeemed, and neither the
Corporation nor a subsidiary of the Corporation shall
purchase or otherwise acquire for valuable consideration
any shares of the Series Y Preferred Stock, provided,
however, that the foregoing shall not prevent the
purchase or acquisition of shares of the Series Y
Preferred Stock pursuant to a purchase or exchange offer
made on the same terms to holders of all the outstanding
shares of the Series Y Preferred Stock and mailed to the
holders of record of all such outstanding shares at such
holders' addresses as the same appear on the books of the
Corporation and provided further that if some, but less
than all, of the shares of the Series Y Preferred Stock
are to be purchased or otherwise acquired pursuant to
such purchase or exchange offer and the number of shares
so tendered exceeds the number of shares so to be
purchased or otherwise acquired by the Corporation, the
shares of the Series Y Preferred Stock so tendered will
be purchased or otherwise acquired by the Corporation on
a pro rata basis according to the number of such shares
duly tendered by each holder so tendering shares of the
Series Y Preferred Stock for such purchase or exchange.
(f) If all the outstanding shares of the
Series Y Preferred Stock shall not have been redeemed on
or prior to March 30, 1999, each holder of the shares of
the Series Y Preferred Stock remaining outstanding shall
have the right to require that the Corporation
repurchase, on the Business Day next following such date
or on the Business Day next following each fifth
anniversary of such date thereafter (the "Repurchase
Date"), all but not less than all of such holder's then
outstanding shares at a purchase price (the "Purchase
Price") in cash equal to 100% of the aggregate
liquidation value of such shares, together with all
accrued and unpaid dividends on such shares to but not
including the Repurchase Date, in accordance with the
procedures set forth below.
(g) Not less than 30 or more than 60 days
prior to the Repurchase Date any holder who desires to
cause the Corporation to repurchase such holder's shares
of
5
<PAGE>
Series Y Preferred Stock shall send by first-class mail,
postage prepaid, to the Corporation at its principal executive
offices, a notice stating (i) that such holder desires to
cause the Corporation to repurchase such holder's shares of
Series Y Preferred Stock, (ii) the number of shares to be
repurchased, and (iii) the Repurchase Date. Holders electing
to have shares of the Series Y Preferred Stock repurchased
will be required to surrender the certificate or certificates
representing such shares to the Corporation at least five
business days prior to the Repurchase Date, and on the
Repurchase Date the Corporation shall pay to such holder the
Purchase Price.
(h) Any shares of the Series Y Preferred Stock
that shall at any time have been redeemed or repurchased
shall, after such redemption or repurchase, have the
status of authorized but unissued shares of Preferred
Stock, without designation as to series until such shares
are once again designated as part of a particular series
by the Board of Directors.
4. Conversion or Exchange; Sinking Fund. The
holders of shares of the Series Y Preferred Stock shall
not have any rights herein to convert such shares into,
or exchange such shares for, shares of any other class or
classes or of any other series of any class or classes of
capital stock of the Corporation; nor shall the holders
of shares of the Series Y Preferred Stock be entitled to
the benefits of a sinking fund in respect of their shares
of the Series Y Preferred Stock.
5. Voting. (a) Except as otherwise provided
in this Section 5 or as otherwise required by law, the
Series Y Preferred Stock shall have no voting rights.
(b) If six quarterly dividends (whether or not
consecutive) payable on shares of Series Y Preferred
Stock are in arrears at the time of the record date to
determine stockholders for any annual meeting of
stockholders of the Corporation, the number of directors
of the Corporation shall be increased by two, and the
holders of shares of Series Y Preferred Stock (voting
separately as a class with the holders of shares of any
one or more other series of Preferred Stock upon which
like voting rights have been conferred and are
exercisable) shall be entitled at such annual meeting of
stockholders to elect two directors of the Corporation,
with the remaining directors of the Corporation to be
elected by the holders of shares of any other class or
classes or series of stock entitled to vote therefor. In
any such election, holders of shares of Series Y
Preferred Stock shall have one vote for each share held.
At all meetings of stockholders at which
holders of Preferred Stock shall be entitled to vote for
Directors as a single class, the holders of a majority of
the outstanding shares of all classes and series of
capital stock of the Corporation having the right to vote
as a single class shall be necessary to constitute a
quorum, whether present in person or by proxy, for the
election by such single class of its designated
Directors. In any election of Directors by stockholders
voting as a class, such Directors shall be elected by the
vote of at least a plurality of shares held by such
stockholders present or represented at the meeting. At
any such meeting, the election of Directors by
stockholders voting as a class shall be valid
notwithstanding that a quorum of other
6
<PAGE>
stockholders voting as one or more classes may not be present
or represented at such meeting.
(c) Any director who has been elected by the
holders of shares of Series Y Preferred Stock (voting
separately as a class with the holders of shares of any
one or more other series of Preferred Stock upon which
like voting rights have been conferred and are
exercisable) may be removed at any time, with or without
cause, only by the affirmative vote of the holders of the
shares at the time entitled to cast a majority of the
votes entitled to be cast for the election of any such
director at a special meeting of such holders called for
that purpose, and any vacancy thereby created may be
filled by the vote of such holders. If a vacancy occurs
among the Directors elected by such stockholders voting
as a class, other than by removal from office as set
forth in the preceding sentence, such vacancy may be
filled by the remaining Director so elected, or his or
her successor then in office, and the Director so elected
to fill such vacancy shall serve until the next meeting
of stockholders for the election of Directors.
(d) The voting rights of the holders of Series
Y Preferred Stock to elect Directors as set forth above
shall continue until all dividend arrearages on the
Series Y Preferred Stock have been paid or declared and
set apart for payment. Upon the termination of such
voting rights, the terms of office of all persons who may
have been elected pursuant to such voting rights shall
immediately terminate, and the number of directors of the
Corporation shall be decreased by two.
(e) Without the consent of the holders of
shares entitled to cast at least two-thirds of the votes
entitled to be cast by the holders of the total number of
shares of Preferred Stock then outstanding, voting
separately as a class without regard to series, with the
holders of shares of Series Y Preferred Stock being
entitled to cast one vote per share, the Corporation may
not:
(i) create any class of stock that shall
have preference as to dividends or distributions of
assets over the Series Y Preferred Stock; or
(ii) alter or change the provisions of the
Certificate of Incorporation (including any
Certificate of Amendment or Certificate of
Designation relating to the Series Y Preferred
Stock) so as to adversely affect the powers,
preferences or rights of the holders of shares of
Series Y Preferred Stock; provided, however, that if
such creation or such alteration or change would
adversely affect the powers, preferences or rights
of one or more, but not all, series of Preferred
Stock at the time outstanding, such alteration or
change shall require consent of the holders of
shares entitled to cast at least two-thirds of the
votes entitled to be cast by the holders of all of
the shares of all such series so affected, voting as
a class.
6. Liquidation Rights. (a) Upon the
dissolution, liquidation or winding up of the
Corporation, the holders of the shares of the Series Y
Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution
7
<PAGE>
to stockholders, before any payment or distribution shall be
made on the Common Stock or on any other class or series of
stock ranking junior to shares of the Series Y Preferred Stock
as to amounts distributable on dissolution, liquidation or
winding up, $100,000 per share, plus an amount equal to all
dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final distribution.
(b) Neither the merger or consolidation of the
Corporation into or with any other corporation nor the
merger or consolidation of any other corporation into or
with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or
involuntary, of the Corporation for the purpose of this
Section 6.
(c) After the payment to the holders of the
shares of the Series Y Preferred Stock of the full
preferential amounts provided for in this Section 6, the
holders of the Series Y Preferred Stock as such shall
have no right or claim to any of the remaining assets of
the Corporation.
(d) In the event the assets of the Corporation
available for distribution to the holders of shares of
the Series Y Preferred Stock upon any dissolution,
liquidation or winding up of the Corporation, whether
voluntary or involuntary, shall be insufficient to pay in
full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 6, the holders
of shares of the Series Y Preferred Stock and of any
shares of Preferred Stock of any series or any other
stock of the Corporation ranking, as to the amounts
distributable upon dissolution, liquidation or winding
up, on a parity with the Series Y Preferred Stock, shall
share ratably in any distribution in proportion to the
full respective preferential amounts to which they are
entitled.
7. Ranking of Stock of the Corporation. In
respect of the Series Y Preferred Stock, any stock of any
class or classes of the Corporation shall be deemed to
rank:
(a) prior to the shares of Series Y Preferred
Stock, either as to dividends or upon liquidation, if the
holders of such stock shall be entitled to either the
receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of
shares of the Series Y Preferred Stock;
(b) on a parity with shares of the Series Y
Preferred Stock, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend
payment dates, redemption amounts per share or
liquidation values per share or sinking fund provisions,
if any, are different from those of the Series Y
Preferred Stock, if the holders of such stock shall be
entitled to either the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary, as
the case may be, in proportion to their respective
dividend rates or liquidation values, without preference
or priority, one over the other, as between the holders
of such stock and the holders of shares of the Series Y
Preferred Stock, provided in any such case such stock
does not rank prior to the Series Y Preferred Stock; and
8
<PAGE>
(c) junior to shares of the Series Y Preferred
Stock, as to dividends and upon liquidation, if such
stock shall be Common Stock or if the holders of shares
of the Series Y Preferred Stock shall be entitled to
receipt of dividends and of amounts distributable upon
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the
case may be, in preference or priority to the holders of
such stock.
The Series Y Preferred Stock is on a parity
with the 8.125% Cumulative Preferred Stock, Series A; the
5.50% Convertible Preferred Stock, Series B; the $4.53
ESOP Convertible Preferred Stock, Series C; the 9.25%
Preferred Stock, Series D; and the $45,000 Cumulative
Redeemable Preferred Stock, Series Z, of the Corporation
heretofore authorized for issuance by the Corporation.
8. Definition. When used herein, the term
"subsidiary" shall mean any corporation a majority of
whose voting stock ordinarily entitled to elect directors
is owned, directly or indirectly, by the Corporation.
9. Limitation on Dividends on Junior Stock.
So long as any shares of Series Y Preferred Stock shall
be outstanding, without the consent of the holders of
two-thirds of the shares of the Series Y Preferred Stock
then outstanding the Corporation shall not declare any
dividends on the Common Stock or any other stock of the
Corporation ranking as to dividends or distributions of
assets junior to the Series Y Preferred Stock (the Common
Stock and any such other stock being herein referred to
as "Junior Stock"), or make any payment on account of, or
set apart money for, a sinking fund or other similar fund
or agreement for the purchase, redemption or other
retirement of any shares of Junior Stock, or make any
distribution in respect thereof, whether in cash or
property or in obligations or stock of the Corporation,
other than a distribution of Junior Stock (such
dividends, payments, setting apart and distributions
being herein called "Junior Stock Payments"), unless the
following conditions shall be satisfied at the date of
such declaration in the case of any such dividend, or the
date of such setting apart in the case of any such fund,
or the date of such payment or distribution in the case
of any other Junior Stock Payment:
(a) full cumulative dividends shall have been
paid or declared and set apart for payment on all
outstanding shares of Preferred Stock other than Junior
Stock; and
(b) the Corporation shall not be in default or
in arrears with respect to any sinking fund or other
similar fund or agreement for the purchase, redemption or
other retirement of any shares of Preferred Stock other
than Junior Stock;
provided, however, that any funds theretofore deposited
in any sinking fund or other similar fund with respect to
any Preferred Stock in compliance with the provisions of
such sinking fund or other similar fund may thereafter be
applied to the purchase or redemption of such Preferred
Stock in accordance with the terms of such sinking fund
or other similar fund regardless of whether at the time
of such application full cumulative dividends upon
9
<PAGE>
shares of Series Y Preferred Stock outstanding to the last
dividend payment date shall have been paid or declared and set
apart for payment by the Corporation.
10. Waiver, Modification and Amendment.
notwithstanding any other provisions relating to the
Series Y Preferred Stock, any of the rights or benefits
of the holders of the Series Y Preferred Stock may be
waived, modified or amended with the consent of the
holders of all of the then outstanding shares of Series Y
Preferred Stock. Any such waiver, modification or
amendment shall be deemed to have the same effect as
satisfaction in full of any such right or benefit as
though actually received by such holders.
The Travelers Inc. has caused this Certificate
to be duly executed by its Senior Vice President, and attested
by its Assistant Secretary this 30th day of March, 1994.
THE TRAVELERS INC.
/s/ Charles O. Prince, III
By ______________________________
Charles O. Prince, III
Senior Vice President
Attest:
/s/ Mark J. Amrhein
______________________________
Mark J. Amrhein
Assistant Secretary
10
<PAGE>
Exhibit 10.01
AMENDMENT TO THE SALOMON INC EQUITY PARTNERSHIP PLAN FOR KEY EMPLOYEES (THE
"KEY EPP")
- -------------------------------------------------------------------------------
As of March 25, 1998, the Board of Directors of Travelers Group Inc. hereby
approves the following amendment to the Key EPP:
1. The first sentence of Section 11(c)(ii) of the Key EPP shall be amended
to read in its entirety as follows:
"Effective with respect to distributions of Salomon Stock
allocated to Participants' Accounts with respect to awards
under the Equity Partnership Plans on or after March 4,
1992, prior to receiving any distribution of such shares,
each Participant shall be required to certify in a form
acceptable to the Committee that at no time after the later
of March 4, 1992 and the date they received any Award, and
before the occurrence of the Realization Event with respect
to which the distribution is to be made has the Participant,
directly or indirectly, held: (x) any equity or derivative
security position with respect to Salomon Stock (or,
effective as of November 28, 1998, common stock of Travelers
Group Inc. ("Travelers Stock"), such as a short sale, a long
put option or a short call option, that increases in value
as the value of such Stock decreases (a "Short Position")
that was acquired before March 25, 1998; or (y) any Short
Position that was acquired on or after March 25, 1998
unless, at all times during which the Participant directly
or indirectly held such Short Position, the Participant also
held a number of shares of Travelers Stock (other than
shares of Travelers Stock that are (1) restricted as to
transferability or (2) held in any retirement plan
maintained by Travelers Group Inc. or its affiliates) at
least equal to the number of shares of Travelers Stock
underlying all Short Positions then held, directly or
indirectly, by the Participant."
<PAGE>
Exhibit 12.01
TRAVELERS GROUP INC. and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions of dollars, except for ratio)
Three months ended
March 31,
--------------------------------
1998 1997
---------- -----------
Income from continuing operations
before income taxes and minority interest $ 1,760 $1,347
Interest 3,177 2,378
Portion of rentals deemed to be interest 31 30
---------- -----------
Earnings available for fixed charges $4,968 $3,755
========== ===========
Fixed Charges
- -------------
Interest $3,177 $2,378
Portion of rentals deemed to be interest 31 30
---------- -----------
Fixed charges $3,208 $2,408
========== ===========
Ratio of earnings to fixed charges 1.55X 1.56x
========== ===========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TRAVELERS GROUP INC. AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,943
<SECURITIES> 304,659<F1>
<RECEIVABLES> 60,142<F2>
<ALLOWANCES> 0<F3>
<INVENTORY> 0<F3>
<CURRENT-ASSETS> 0<F3>
<PP&E> 0<F3>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 408,475
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 51,287<F4>
3,125
1,450
<COMMON> 12
<OTHER-SE> 20,151<F5>
<TOTAL-LIABILITY-AND-EQUITY> 408,475
<SALES> 0<F3>
<TOTAL-REVENUES> 10,368
<CGS> 0<F3>
<TOTAL-COSTS> 8,608
<OTHER-EXPENSES> 0<F3>
<LOSS-PROVISION> 87<F6>
<INTEREST-EXPENSE> 3,177<F6>
<INCOME-PRETAX> 1,760
<INCOME-TAX> 609
<INCOME-CONTINUING> 1,093
<DISCONTINUED> 0<F3>
<EXTRAORDINARY> 0<F3>
<CHANGES> 0<F3>
<NET-INCOME> 1,093
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.91<F3>
<FN>
<F1>Includes the following items from the financial statements: total investments
$64,156; securities borrowed or purchased under agreements to resell $115,936;
and trading securities and commodities owned, at market value $124,567.
<F2>Includes the following items from the financial statements: brokerage
receivables $41,303; net consumer finance receivables $11,144 and other
receivables $7,695.
<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 $18,195; short-term borrowings $3,804 and long-term
debt $29,288.
<F5>Includes the following items from the financial statements: additional paid-in
capital $5,872; retained earnings $16,369; treasury stock $(2,630); accumulated
other changes in equity from nonowner sources $1,115 and unearned compensation
$(575).
<F6>Included in total costs and expenses applicable to sales and revenues.
</FN>
</TABLE>
<PAGE>
Exhibit 99.01
Tenth and eleventh paragraphs
under the caption "Legal Proceedings"
beginning on page 13 of the Annual
Report on Form 10-K of Salomon Smith
Barney Holdings Inc. for the fiscal
year ended December 31, 1997
(File No. 1-4346)
In August 1992, EPA issued an administrative order for remedial studies and
action to be performed by Shattuck under CERCLA at a Superfund site (Denver
Radium Site, Operable Unit VIII), which includes property owned by, and a metal
processing plant previously operated by, Shattuck in Denver, Colorado. Shattuck
has since performed significant remediation activities at the site and has
maintained financial assurance of $26.6 million to guarantee performance of the
remediation, both in accordance with the order.
In July 1996, Denver enacted an ordinance imposing a substantial "fee" on any
radioactive waste or radium-contaminated material disposed of in the City of
Denver. Under this ordinance, Denver assessed Shattuck $9.35 million for certain
disposal already carried out. This "fee," and any additional "fees," if upheld,
would greatly increase remediation costs for the Denver Radium Site. Shattuck
has sued to enjoin enforcement of the "fee." The United States has also sued,
seeking to enjoin imposition of the "fee" on constitutional grounds. Denver has
counterclaimed and has moved to add SSBH as a defendant. These cases, which have
been consolidated, are now pending before the U.S. District Court in Colorado.
<PAGE>
Exhibit 99.02
Paragraph under the caption "Legal
Proceedings" on page 16 of the
Quarterly Report on Form 10-Q
of Salomon Smith Barney Holdings
Inc. for the fiscal quarter ended
March 31, 1998 (File No. 1-4346)
ITEM 1. LEGAL PROCEEDINGS
For information concerning the City of Denver's imposition of a fee relating
to a Superfund site, see the description that appears in the tenth and
eleventh paragraphs under the caption "Legal Proceedings" beginning on page
13 of the Annual Report on Form 10-K of the Company for the year ended
December 31, 1997 (File No. 1-4346), which description is incorporated by
reference herein. A copy of the foregoing description is included as an
exhibit to this Form 10-Q. In April 1998, the Court granted Shattuck's motion
for a preliminary injunction enjoining Denver from enforcing the ordinance
during the pendency of this action.
<PAGE>
Exhibit 99.03
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
THREE MONTHS
-----------------------------
(In Millions of Dollars, Except Per Share Amounts) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST REVENUE
Loans, including Fees....................................................... $4,843 $4,554
Deposits with Banks......................................................... 282 224
Federal Funds Sold and Securities Purchased Under Resale Agreements......... 242 212
Securities:
U.S. Treasury and Federal Agencies...................................... 62 70
State and Municipal..................................................... 33 32
Other, including dividends (Principally in offices outside the U.S.).... 477 417
Trading Account Assets...................................................... 255 243
Loans Held For Sale......................................................... 109 105
-----------------------------
6,303 5,857
-----------------------------
INTEREST EXPENSE
Deposits.................................................................... 2,622 2,229
Trading Account Liabilities................................................. 92 73
Purchased Funds and Other Borrowings........................................ 429 438
Long-Term Debt.............................................................. 321 313
-----------------------------
3,464 3,053
-----------------------------
NET INTEREST REVENUE........................................................ 2,839 2,804
-----------------------------
PROVISION FOR CREDIT LOSSES................................................. 507 423
-----------------------------
NET INTEREST REVENUE AFTER PROVISION FOR CREDIT LOSSES...................... 2,332 2,381
-----------------------------
FEES, COMMISSIONS, AND OTHER REVENUE
Fees and Commissions........................................................ 1,441 1,352
Foreign Exchange............................................................ 349 297
Trading Account............................................................. 236 198
Securities Transactions..................................................... 241 108
Other Revenue............................................................... 499 437
-----------------------------
2,766 2,392
-----------------------------
OPERATING EXPENSE
Salaries.................................................................... 1,355 1,264
Employee Benefits........................................................... 359 401
-----------------------------
Total Employee Expense...................................................... 1,714 1,665
Net Premises and Equipment Expense.......................................... 499 490
Other Expense............................................................... 1,181 1,014
-----------------------------
3,394 3,169
-----------------------------
INCOME BEFORE TAXES......................................................... 1,704 1,604
Income Taxes................................................................ 639 609
-----------------------------
NET INCOME.................................................................. $1,065 $995
- -------------------------------------------------------------------------------------------------------------
INCOME APPLICABLE TO COMMON STOCK........................................... $1,033 $957
-----------------------------
EARNINGS PER SHARE:
BASIC................................................................... $2.28 $2.07
DILUTED................................................................. $2.23 $2.01
- -------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
MAR. 31, Dec. 31,
(In Millions of Dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks...................................................... $ 8,090 $ 8,585
Deposits at Interest with Banks.............................................. 13,787 13,049
Securities, at Fair Value
Available for Sale....................................................... 33,065 30,762
Venture Capital.......................................................... 2,857 2,599
Trading Account Assets....................................................... 39,740 40,356
Loans Held for Sale.......................................................... 3,785 3,515
Federal Funds Sold and Securities Purchased Under Resale Agreements.......... 21,858 10,233
Loans, Net
Consumer................................................................. 105,945 108,066
Commercial............................................................... 82,655 75,947
-----------------------------
Loans, Net of Unearned Income................................................ 188,600 184,013
Allowance for Credit Losses.............................................. (5,828) (5,816)
-----------------------------
Total Loans, Net............................................................. 182,772 178,197
Customers' Acceptance Liability.............................................. 1,822 1,726
Premises and Equipment, Net.................................................. 4,545 4,474
Interest and Fees Receivable................................................. 3,272 3,288
Other Assets................................................................. 14,821 14,113
-----------------------------
TOTAL........................................................................ $330,414 $310,897
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Non-Interest-Bearing Deposits in U.S. Offices................................ $16,260 $16,901
Interest-Bearing Deposits in U.S. Offices.................................... 42,061 40,361
Non-Interest-Bearing Deposits in Offices Outside the U.S..................... 10,080 9,627
Interest-Bearing Deposits in Offices Outside the U.S......................... 146,318 132,232
-----------------------------
Total Deposits........................................................... 214,719 199,121
Trading Account Liabilities.................................................. 31,291 30,986
Purchased Funds and Other Borrowings......................................... 21,457 21,231
Acceptances Outstanding...................................................... 1,992 1,826
Accrued Taxes and Other Expense.............................................. 6,313 6,464
Other Liabilities............................................................ 13,012 10,288
Long-Term Debt............................................................... 20,159 19,785
STOCKHOLDERS' EQUITY
Preferred Stock (Without par value).......................................... 1,600 1,903
Common Stock ($1.00 par value)............................................... 506 506
Issued Shares: 506,298,235 in each period
Surplus...................................................................... 6,493 6,501
Retained Earnings............................................................ 17,564 16,789
Accumulated Other Changes in Equity from Nonowner Sources (A)................ 37 (91)
Common Stock in Treasury, at Cost............................................ (4,729) (4,412)
Shares: 54,773,606 and 52,355,947, respectively
-----------------------------
Total Stockholders' Equity................................................... 21,471 21,196
-----------------------------
TOTAL........................................................................ $330,414 $310,897
- -------------------------------------------------------------------------------------------------------------
(A) Amounts at March 31, 1998 and December 31, 1997 include net unrealized
gains on securities available for sale of $661 million and $535 million,
respectively, and foreign currency translation of ($624) million and
($626) million, respectively. See note (A) on page 37 for additional
information.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
THREE MONTHS
-----------------------------
(In Millions of Dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at Beginning of Period............................................... $21,196 $20,722
Net Income................................................................... 1,065 995
Change in Net Unrealized Gains on Securities Available for Sale.............. 126 11
Change in Foreign Currency Translation....................................... 2 (31)
-----------------------------
Total Changes in Equity from Nonowner Sources (A)........................ 1,193 975
Redemption of Perpetual Preferred Stock
Second Series............................................................ (220) -
Third Series............................................................. (83) -
Series 14................................................................ - (175)
Cash Dividends Declared
Common................................................................... (261) (243)
Preferred................................................................ (29) (38)
Repurchase of Common Shares.................................................. (483) (704)
Employee Benefit Plans and Other Activity (B)................................ 158 243
-----------------------------
BALANCE AT END OF PERIOD..................................................... $21,471 $20,780
- -------------------------------------------------------------------------------------------------------------
(A) During the 1998 first quarter, Citicorp adopted Statement of Financial
Accounting Standards No. 130, which addresses the manner in which total
changes in equity from nonowner sources are presented in the financial
statements, including unrealized gains and losses on securities available
for sale and foreign currency translation. The adoption had no effect on
reported earnings, assets, or capital.
(B) Primarily issuance of common stock (including treasury shares) under
employee benefit plans and related amortization and tax benefits.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS CITICORP AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------
THREE MONTHS
-----------------------------
(In Millions of Dollars) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME................................................................... $1,065 $ 995
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Provision for Credit Losses.................................................. 507 423
Depreciation and Amortization of Premises and Equipment...................... 188 187
Amortization of Goodwill..................................................... 10 11
Provision for Deferred Taxes................................................. 95 (91)
Venture Capital Activity..................................................... (258) (142)
Net Gain on Sale of Securities............................................... (241) (108)
Changes in Accruals and Other, Net........................................... 1,895 1,830
Net Increase in Loans Held for Sale.......................................... (270) (2,020)
Net Decrease (Increase) in Trading Account Assets............................ 616 (2,411)
Net Increase in Trading Account Liabilities.................................. 305 1,232
-----------------------------
TOTAL ADJUSTMENTS............................................................ 2,847 (1,089)
-----------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.......................... 3,912 (94)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net Increase in Deposits at Interest with Banks.............................. (738) (945)
Securities -- Available for Sale
Purchases................................................................ (15,339) (17,735)
Proceeds from Sales...................................................... 5,812 8,308
Maturities............................................................... 7,591 4,654
Net Increase in Federal Funds Sold and Securities Purchased Under Resale
Agreements................................................................... (11,625) (711)
Net Increase in Loans........................................................ (43,734) (26,846)
Proceeds from Sales of Loans................................................. 38,613 26,755
Capital Expenditures on Premises and Equipment............................... (305) (314)
Proceeds from Sales of Premises and Equipment, Subsidiaries and Affiliates,
and OREO..................................................................... 141 228
-----------------------------
NET CASH USED IN INVESTING ACTIVITIES........................................ (19,584) (6,606)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits..................................................... 15,598 3,893
Net (Decrease) Increase in Federal Funds Purchased
and Securities Sold Under Repurchase Agreements............................ (76) 3,418
Commercial Paper and Funds Borrowed with Original Maturities of Less Than One
Year
Proceeds from Issuance................................................... 245,573 177,181
Repayment................................................................ (245,269) (177,118)
Proceeds from Issuance of Long-Term Debt..................................... 1,185 1,689
Repayment of Long-Term Debt.................................................. (788) (1,568)
Redemption of Preferred Stock................................................ (303) (175)
Proceeds from Issuance of Common Stock....................................... 90 131
Treasury Stock Repurchases................................................... (483) (704)
Dividends Paid............................................................... (294) (281)
-----------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES.................................... 15,233 6,466
-----------------------------
Effect of Exchange Rate Changes on Cash and Due from Banks................... (56) (97)
-----------------------------
NET DECREASE IN CASH AND DUE FROM BANKS...................................... (495) (331)
Cash and Due from Banks at Beginning of Period............................... 8,585 6,905
-----------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD..................................... $8,090 $6,574
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
CASH PAID DURING THE PERIOD FOR
Interest..................................................................... $3,052 $2,702
Income Taxes................................................................. 310 222
NON-CASH INVESTING ACTIVITIES
Transfer from Loans to OREO.................................................. 57 93
- -------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
- -------------------------------------------------------------------------------
CALCULATION OF EARNINGS PER SHARE
- -------------------------------------------------------------------------------
FIRST QUARTER
-----------------------------
(In Millions, except Per Share Amounts) 1998 1997
- -------------------------------------------------------------------------------
NET INCOME..................................... $1,065 $995
Dividends on Preferred Stock................... (32) (38)
-----------------------------
INCOME APPLICABLE TO COMMON STOCK.............. $1,033 $957
- -------------------------------------------------------------------------------
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING..... 452.1 461.4
Dilutive Effect of Employee Stock Plans (A).... 11.1 14.3
-----------------------------
ADJUSTED FOR DILUTIVE COMPUTATION.............. 463.2 475.7
- -------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE ...................... $2.28 $2.07
DILUTIVE EARNINGS PER SHARE ................... $2.23 $2.01
- -------------------------------------------------------------------------------
(A) Includes the dilutive effect of stock options and stock purchase
agreements computed using the treasury stock method and shares issuable
under deferred stock awards.
- -------------------------------------------------------------------------------
45
<PAGE>
Exhibit 99.04
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On April 5, 1998, Travelers Group Inc. (Travelers) and Citicorp agreed
to merge (the Merger). The Merger will be effected through a merger of
Citicorp into a newly formed, wholly owned subsidiary of Travelers.
Travelers has applied to the Federal Reserve Board to become a bank holding
company. Subsequent to the Merger Travelers will become known as Citigroup.
Travelers stockholders will retain their existing shares, which will
automatically represent shares of Citigroup. Each share of Citicorp common
stock will be exchanged for 2.5 shares of Citigroup common stock. The
Merger, which is anticipated to be completed in the third quarter of 1998, is
expected to be accounted for under the "pooling of interests" method and,
accordingly, Travelers' historical consolidated financial statements
presented in future reports will be restated to include the accounts and
results of Citicorp. The Merger and/or related transactions are subject to
customary closing conditions, including regulatory approvals and the
affirmative vote of a majority of the stockholders of each of Travelers and
Citicorp.
The following unaudited pro forma condensed combined statement of financial
position combines the historical consolidated statement of financial position of
Travelers and the historical consolidated statement of financial position of
Citicorp giving effect to the Merger as if it had been consummated on March 31,
1998. The following unaudited pro forma condensed combined statements of income
combine the historical statements of income of Travelers and Citicorp giving
effect to the Merger as if it had occurred on January 1, 1997. This information
should be read in conjunction with the accompanying notes hereto, the separate
historical financial statements of Travelers as of March 31, 1998 and for the
quarters ended March 31, 1998 and 1997, respectively, which are contained in
Travelers' Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and the separate historical financial statements of Citicorp as of March 31,
1998 and for the quarters ended March 31, 1998 and 1997, respectively, which are
contained in Citicorp's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
The pro forma financial data is not necessarily indicative of the results
of operations that would have occurred had the Merger been consummated on the
date indicated or of future operations of the combined company.
<PAGE>
<TABLE>
<CAPTION>
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 1998
(in millions of dollars)
Travelers Citicorp Pro Forma Pro Forma
Assets Historical Historical Adjustments Combined
- ------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,943 $ 21,877 $ - $ 25,820
Investments 64,156 35,922 100,078
Federal funds sold and securities borrowed or
purchased under agreements to resell 115,936 21,858 137,794
Brokerage receivables 41,303 41,303
Trading account assets 124,567 39,740 164,307
Consumer loans 11,475 105,945 117,420
Commercial loans - 82,655 82,655
Allowance for credit losses (331) (5,828) (6,159)
- --------------------------------------------------------------------------------------------------
Loans, net 11,144 182,772 - 193,916
Reinsurance recoverables 9,622 9,622
Separate and variable accounts 12,943 12,943
Other assets 24,861 28,245 53,106
- --------------------------------------------------------------------------------------------------
Total assets $ 408,475 $ 330,414 $ - $ 738,889
==================================================================================================
Liabilities
- -----------
Deposits $ - $ 214,719 $ - $ 214,719
Investment banking and brokerage borrowings 18,195 18,195
Short-term borrowings 3,804 10,351 14,155
Long-term debt 29,288 19,409 48,697
Federal funds purchased and securities loaned
or sold under agreements to repurchase 118,312 11,106 129,418
Brokerage payables 56,624 56,624
Trading account liabilities 65,177 31,291 96,468
Insurance policy and claims reserves 43,766 43,766
Contractholder funds and separate and
variable accounts 28,120 28,120
Other liabilities 20,451 21,317 41,768
- --------------------------------------------------------------------------------------------------
Total liabilities 383,737 308,193 - 691,930
- --------------------------------------------------------------------------------------------------
Redeemable preferred stock - Series I 280 280
Trust preferred securities - parent obligated 1,200 750 (750) 1,200
Trust preferred securities - subsidiary obligated 1,645 750 2,395
Stockholders' equity
- --------------------
Preferred stock 1,450 1,600 3,050
Common stock 12 506 (495) 23
Additional paid-in capital 5,872 6,493 (4,234) 8,131
Retained earnings 16,369 17,564 33,933
Treasury stock, at cost (2,630) (4,729) 4,729 (2,630)
Accumulated other changes in equity from
nonowner sources 1,115 37 1,152
Unearned compensation (575) (575)
- --------------------------------------------------------------------------------------------------
Total stockholders' equity 21,613 21,471 - 43,084
- --------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 408,475 $ 330,414 $ - $ 738,889
==================================================================================================
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- --------
<S> <C> <C> <C>
Revenues:
Loan interest, including fees $ 407 $ 4,843 $ 5,250
Other interest and dividends 4,421 1,460 5,881
Insurance premiums 2,340 2,340
Commissions and fees 1,434 1,441 2,875
Principal transactions 780 585 1,365
Asset management and administration fees 498 498
Realized gains from sales of investments 144 241 385
Other income 344 499 843
- -----------------------------------------------------------------------------------------------
Total revenues 10,368 9,069 19,437
Interest expense 3,177 3,464 6,641
- -----------------------------------------------------------------------------------------------
Total revenues, net of interest expense 7,191 5,605 12,796
- -----------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 1,994 1,994
Non-insurance compensation and benefits 1,782 1,714 3,496
Insurance underwriting, acquisition and operating 812 812
Provision for credit losses 87 507 594
Other operating 756 1,680 2,436
- -----------------------------------------------------------------------------------------------
Total operating expenses 5,431 3,901 9,332
- -----------------------------------------------------------------------------------------------
Income before income taxes and minority interest 1,760 1,704 3,464
Provision for income taxes 609 639 1,248
Minority interest, net of income taxes 58 58
- -----------------------------------------------------------------------------------------------
Net income $ 1,093 $ 1,065 $ 2,158
===============================================================================================
Basic earnings per share:
Net income $ 0.95 $ 0.93
===============================================================================================
Weighted average common shares outstanding 1,116.2 2,246.5
===============================================================================================
Diluted earnings per share:
Net income $ 0.91 $ 0.90
===============================================================================================
Adjusted weighted average common shares outstanding 1,173.1 2,331.1
===============================================================================================
Supplemental information:
Net interest revenue $ 1,651 $ 2,839 $ 4,490
Net interest revenue after provision for credit losses 1,564 2,332 3,896
===============================================================================================
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
TRAVELERS GROUP INC. AND CITICORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1997
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- --------
<S> <C> <C> <C>
Revenues:
Loan interest, including fees $ 306 $ 4,554 $ 4,860
Other interest and dividends 3,498 1,303 4,801
Insurance premiums 2,224 2,224
Commissions and fees 1,206 1,352 2,558
Principal transactions 762 495 1,257
Asset management and administration fees 389 389
Realized gains from sales of investments 17 108 125
Other income 298 437 735
- -----------------------------------------------------------------------------------------------
Total revenues 8,700 8,249 16,949
Interest expense 2,378 3,053 5,431
- -----------------------------------------------------------------------------------------------
Total revenues, net of interest expense 6,322 5,196 11,518
- -----------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 1,905 1,905
Non-insurance compensation and benefits 1,548 1,665 3,213
Insurance underwriting, acquisition and operating 805 805
Provision for credit losses 72 423 495
Other operating 645 1,504 2,149
- -----------------------------------------------------------------------------------------------
Total operating expenses 4,975 3,592 8,567
- -----------------------------------------------------------------------------------------------
Income before income taxes and minority interest 1,347 1,604 2,951
Provision for income taxes 483 609 1,092
Minority interest, net of income taxes 49 49
- -----------------------------------------------------------------------------------------------
Net income $ 815 $ 995 $ 1,810
===============================================================================================
Basic earnings per share:
Net income $ 0.71 $ 0.77
===============================================================================================
Weighted average common shares outstanding 1,103.9 2,257.4
===============================================================================================
Diluted earnings per share:
Net income $ 0.67 $ 0.74
===============================================================================================
Adjusted weighted average common shares outstanding 1,182.0 2,371.3
===============================================================================================
Supplemental information:
Net interest revenue $ 1,426 $ 2,804 $ 4,230
Net interest revenue after provision for credit losses 1,354 2,381 3,735
===============================================================================================
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
TRAVELERS GROUP INC. AND CITICORP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
The Merger Agreement provides that each share of Citicorp common stock
will be exchanged for 2.5 shares of Citigroup common stock. The Merger,
which is expected to be completed in the third quarter of 1998, is expected
to be accounted for under the "pooling of interests" method and, accordingly,
Travelers' historical consolidated financial statements presented in future
reports will be restated to include the accounts and results of Citicorp. The
Merger and/or related transactions are subject to customary closing
conditions, including regulatory and Travelers and Citicorp stockholder
approval.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
Travelers and Citicorp are in the process of reviewing their accounting
policies and financial statement classifications and, as a result of this
review, it may be necessary to restate either Travelers' or Citicorp's financial
statements to conform to those accounting policies and classifications that are
determined to be most appropriate.
3. INTERCOMPANY TRANSACTIONS
Transactions between Travelers and Citicorp are not material in relation to
the pro forma combined financial statements and therefore intercompany balances
have not been eliminated from the pro forma combined accounts.
4. PRO FORMA ADJUSTMENTS
The pro forma adjustments to common stock, additional paid-in capital and
treasury stock reflect the retirement of shares of Citicorp common stock held in
treasury and the issuance at March 31, 1998 of 1,128.8 million shares of
Citigroup common stock to effect the Merger. The number of shares to be issued
at consummation of the Merger will be based on the actual number of shares of
Citicorp common stock outstanding at that time. Additionally, the pro forma
adjustments transfer Citicorp's trust preferred securities to subsidiary
obligated to reflect the merger of Citicorp into a newly formed, wholly owned
subsidiary of Travelers.
5. PRO FORMA EARNINGS PER SHARE
The pro forma combined basic and diluted earnings per share for the
respective periods presented is based on the combined weighted average number of
common shares and adjusted weighted average shares of Travelers and Citicorp.
The number of weighted average common shares and adjusted weighted average
shares of Citicorp is based on an exchange ratio of 2.5 shares of Citigroup
common stock for each issued and outstanding share of Citicorp. The pro forma
combined basic and diluted earnings per share have been calculated as follows:
<PAGE>
For the quarter ended March 31,
(in millions, except per share amounts) 1998 1997
-------- --------
Net income $ 2,158 $ 1,810
Preferred dividends (63) (74)
-------- --------
Income available to common stockholders for basic EPS 2,095 1,736
Effect of dilutive securities 6 10
-------- --------
Income available to common stockholders
for diluted EPS $2,101 $1,746
======== ========
Weighted average common shares
outstanding applicable to basic EPS 2,246.5 2,257.4
Effect of dilutive securities:
Convertible securities 13.2 26.7
Employee stock plans 65.3 80.2
Warrants 6.1 7.0
-------- --------
Adjusted weighted average common shares
outstanding applicable to diluted EPS 2,331.1 2,371.3
======== ========
Basic earnings per share $ 0.93 $ 0.77
======== ========
Diluted earnings per share $ 0.90 $ 0.74
======== ========
6. RESTRUCTURING CHARGES AND FUTURE COST SAVINGS
The pro forma financial statements do not reflect any restructuring costs
related to the Merger. Management has not yet determined the amount of such
costs; however, a restructuring charge may be required after the consummation of
the Merger.
The pro forma financial statements do not reflect any future cost savings
that may result from the reduction of overhead expenses, changes in corporate
infrastructure and the elimination of redundant expenses. Although management
expects that cost savings will result from the Merger, there can be no assurance
that cost savings will be achieved.
The statements contained in note 6 above may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate" and similar expressions.
These forward-looking statements are based largely on management's expectations
and are subject to a number of uncertainties. Actual results could differ
materially from these forward-looking statements. Travelers undertakes no
obligation to update publicly or revise any forward-looking statements.
